The US has a pretty substantial campaign looking at junk fees right now and it is hot as hell.
🇨🇦 🇨🇦 🇨🇦 Canada? 🦗🦗🦗
A “junk fee” is defined as a fee “designed either to confuse or deceive consumers or to take advantage of lock-in or other forms of situational market power.
The White House’s Initiative on Junk Fees and Related Pricing Practices breaks out four types of fees and fee practices that fall into this category:
Mandatory fees that often hide the full price;
Surprise frees that consumers learn about after purchase;
Exploitative or predatory fees;
Fraudulent fees.
They point to the economic issue with junk fees as a sort of deceitful competition wrench, arguing that mandatory hidden fees obscure the full price and thus make it harder for consumers to accurately comparison shop. They also suggest that an unjustified junk fee is a form of “exploitative innovation,” where a firm is encouraged to develop new junk fees instead of actually improving their product.
Junk fees don’t just matter for you and me as shoppers, they also risk harming small and medium sized businesses, and hit low-income households and people of colour the hardest.
Canada (despite my excessive use of the crickets emoji) has gestured at junk fees by explicitly banning drip pricing as one of the initial amendments made to the Competition Act earlier this year. ‘Drip pricing’ is basically when a ‘headline’ price is advertised, but as you go through the purchasing process, additional fees/taxes/charges are “dripped” on and the price goes up. Here’s the Bureau’s summary of this change:
The US’ Competition Council has turned this call to action into a scavenger hunt of sorts - all federal agencies are looking for ways to reduce or lower junk fees. This joint, all-of-government approach diffuses responsibility for this policy goal away from just one Ministry or regulator. They’ve already taken action on eliminating unfair banking fees (something Canada has signalled it wants to echo), are taking aim at bad junk fee practices that span industries, and restricting junk fees charged by auto dealers. They’ve also proposed rules that would require internet companies to clearly disclose monthly prices, fees, and internet speeds.
‘Junk fees’ were recently back in the public consciousness thanks to Ticketmaster. We get used to these fees or don’t even notice them - sort of normalising them in the process and making us feel a bit helpless at check out.
Here at home, the Deputy Prime Minister and Minister of Finance’s mandate letter points to junk-ish fees twice:
Advance legislation to enhance the powers of the Financial Consumer Agency of Canada to review bank fees and charges and to require adjustments if they are excessive
Continue to engage with stakeholders to lower the average total cost of interchange fees for merchants, proceeding in a way that ensures small businesses benefit from this work and protects existing reward points of consumers.
So, we’ve set an intention but haven’t articulated it with a clear competition lens, linked it to consumer protection, or advanced it very much just yet.
☝️ Setting a national policy goal around reducing “junk” fees would expand Canada’s gaze away from just the banks. Setting a broader consumer-oriented national goal around minimising junk fees would be timely and galvanising - a pocketbook jackpot.
Plus, these could be crowdsourced from citizens as a civic initiative of sorts, especially during this inflationary period where people are more price conscious than ever before. It’s a pro-competitive intervention that takes place outside of the Competition Act. This would act to accelerate the role of regulators and directly engage everyday people in tidying up these junk fees. It might even be a tiny bit FUN.
In a weird way, labels are a powerful policy lever. They introduce a simple transparency for the consumer. I think we should be thinking of them more often as a vehicle to improve the consumer experience. People should continue to push for price explainability.
‘Tis the season. Maybe Canada can also turn getting dinged into a ding ding ding. 🔔
PS. I will include this opportunity in my submission on the Future of Competition Policy in Canada, minus emojis and stuff. Anyone can write in with ideas!
🗞️ I wrote an op-ed based on one tweet with Jennifer Quaid! 🚢
Down with junk fees! Concerts especially
Banks oligopoly is the worst (abm, nsf, transfers, stops, statements, overdraft, cash advance etc.), then ticket companies, then car dealers, "resort fees", then car rental hidden charges some flat rate delivery charges, telephone 911/LD/etc...