Late last year, the Federal Trade Commission (FTC) released a new rule on so-called “junk fees,”  which the FTC considers unnecessarily excessive. This rule applies to wide swaths of the economy, including the gig economy. Applying this top-down rule to the gig economy with little concern about how it will impact these companies’ business models could lead to higher prices for consumers.

The FTC’s new rule would force app-based companies to show the entire price of their service upfront. In practice, this would mean additional fees would either not be charged or would need to be included in the initial price of the transaction. The stated purpose of the rule is to prevent businesses from luring customers in with artificially low prices only to increase them once they are committed to the transaction. The hope is that this will improve pricing transparency. It is part of a larger effort by the Biden administration to crack down on junk fees which it argues banks, hotels, and other businesses, unfairly levy.

While on the surface, the new rule seems like a good idea, it has been rightly criticized for being overly complicated and harmful to companies that use a dynamic pricing model. Many organizations currently employ a system that adjusts prices based on supply and demand rather than a fixed price that can be easily advertised, as would be required in the rule change.

Read the full Economic Standard here.

Trey Price is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org