The Obama Administration is taking a parting shot at some widely loathed “hidden fees” routinely charged to travellers and other consumers.
The National Economic Council slammed the “resort fees” tacked onto hotel bills, checked-luggage and flight-change fees charged by airlines, and a blizzard of fees added on by mobile phone companies and companies that sell concert tickets.
The report cited consumer research estimating that resort fees — add-on charges of $10 to $100 a day — accounted for $2.04 billion in revenues in 2015, or 16.6 percent of all hotel-industry revenue. Airlines raked in an estimated $22.5 billion from hidden fees in 2015, the report said.
“Accurate pricing is the backbone of an efficient and consumer-serving marketplace, and the key to a competitive economy,” the White House based Council said in releasing its Competitive Institute report, just days before President Obama is scheduled to leave office. “But in a number of consumer-facing sectors, the real prices of things are now being hidden or muddied by the addition of mandatory fees (or effectively mandatory fees). Quoted prices don’t reflect what things actually cost – the real prices are hidden by fees.”
The report said the imposition of such hidden fees is becoming increasingly common, also showing up on bills from banks, schools, and automobile dealerships.
“No longer merely a matter of annoyance, the massive revenue collected through hidden fees and their clouding effect on pricing have become a matter of broader economic concern,” the Council noted. “When consumers are induced into paying more than they would otherwise by add-on fees, several consequences follow. First, there is a systematic transfer of wealth away from consumers to the firms that rely on the fees. Second, the economy itself, to the degree it relies on accurate prices to direct resources to their highest uses, becomes less efficient. And finally, the competitive process itself is dulled, as the true price-cutters have trouble beating out rivals when everyone is hiding their real prices.”
The report did note some progress in combating hidden fees, including stronger regulation of airline ticket pricing by the U.S. Department of Transportation.
The report can be downloaded here.