Ever book a book a hotel online for a great price only to discover later there are additional “resort” or “convenience” fees added on that change the overall value proposition you thought you were getting? This is so-called “drip pricing”, which the FTC defines as a pricing technique in which a business advertises only part of a product’s price and reveals the full amount later in the buying process. In a May 2012 FTC conference on the topic many consumers complained about the frequency of the technique in the travel and hospitality industry, where additional fees were never disclosed, or not meaningfully disclosed, until the consumer showed up at the hotel after having essentially made the buy decision. Had they know an extra $25 a day or more would be added to the cost of they stay, they may have selected a different hotel. Thus the omission was of a material term that affected the consumer’s purchasing decision and thus a deceptive practice the FTC concluded. This week the FTC sent 22 warning letters to hotel operators and online travel reservation companies where the FTC found examples of drip pricing on their websites “strongly encourage[ing] [them] to review [their] website[s] to ensure [they] are not misrepresenting the total price consumers can expect to pay” and warning that a failure to do so could result in FTC action for fraudulent, deceptive and unfair business practice. The class action bar is sure to notice and lawsuits on behalf of consumers are likely to start appearing.

Drip pricing is not just a travel industry issue. All advertisers and merchants should ensure that all the material terms and conditions of an offer, particularly regarding pricing, are clearly and conspicuously disclosed with sufficient detail and in such a way that the consumer can make an informed purchasing decision.

FTC’s Press Release

An example warning letter

More FTC guidance