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ADventures in Law

Massachusetts Finalizes Junk Fee Regulation

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Earlier this month, Massachusetts issued regulations on two of the hottest areas for consumer protection: junk fees and subscriptions. In this blog post, we address the junk fee requirements. For more information on the subscription rules, look out for another blog post coming soon. If you want to read the full regulation, you can find it <a href="https://www.mass.gov/doc/junk-fee-regulations-940-cmr-3800-0/download" target="_blank" rel="noreferrer noopener">here</a>, and guidance via FAQs is <a href="https://www.mass.gov/doc/guidance-on-junk-fee-regulations-940-cmr-3800/download" target="_blank" rel="noreferrer noopener">here</a>.

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Massachusetts is only the third state to create a law broadly regulating “junk fees.” The other two are California and Minnesota, which both passed statutes in this area last year. Some states have similar requirements for specific industries, but only these three currently regulate all pricing practices (subject to some exceptions). As we’ve discussed previously on this blog, there is no real definition of “junk fee.” The term is associated with added fees that are not linked to any tangible service, but each consumer likely has their own specific gripe in mind when they hear the term. Lawmakers haven’t tried to define the term directly and instead regulate it by requiring that the total price be disclosed, inclusive of all mandatory fees but excluding government fees or shipping. This ends up affecting not only what may be perceived as junk fees but virtually all mandatory fees.

Massachusetts follows a similar playbook. The regulation requires that the total price be displayed every time a price representation is made. While this technically permits advertising prices that are not inclusive of fees, the total price must be displayed more prominently whenever a price is provided. Notably, the total price must be provided <em>prior to</em> requiring a consumer to provide any personal information, which expressly includes but is not limited to billing information. There are narrow exemptions for information necessary to facilitate underwriting, determine availability, determine legality (such as requiring age or address), or computing pricing previously approved by an insurance or financial regulatory agency. It’s unclear how far this provision stretches. For example, requiring consumers to create an account before reaching the part of a flow with pricing information violates this requirement.

“Total price” is defined as the maximum price for a product, including all mandatory fees and charges, except for “government charges” or “shipping charges.” As with other laws, all fees other than taxes, government fees, and shipping must be included in the advertised price. This includes any ancillary products that must be purchased as part of the same transaction. “Government charges” are defined to include all government-imposed fees, including fees imposed by a “quasi-governmental entity operating pursuant to state statute.” Massachusetts expressly excludes from this definition fees imposed by the government on the seller that are not <em>legally required</em> to be passed on to the customer. These fees must be included in the total price. “Shipping charges” is defined broadly to include all kinds of delivery, not only postal mail.

In addition to the “total price,” the seller must disclose at the “initial presentation” and the “final presentation” the disclosure of “the nature, purpose, and amount of any fees, charges, or other expenses that would be imposed on the transaction due to the purchase of that Product.” At the initial presentation, this does not include government charges or shipping fees, but at the final presentation, it does. The “initial presentation” is not defined, but presumably it refers to the purchase flow and not advertising. If any of the fees disclosed are optional, then that information also must be provided.

The regulation does provide more flexibility for “food delivery” and “grocery delivery” platforms. They’re permitted to advertise “the price of menu items set by a food store, restaurant, or grocery store.” The price does not need to include added fees, but the “maximum mandatory charges or fees” must be clearly and conspicuously disclosed whenever pricing information is displayed.

One final quirk of the Massachusetts regulation – it imposes strict disclosure requirements. It’s typical for all disclosures to be subject to a “clear and conspicuous” standard and for the disclosure to be made in any medium where the claim is made. Massachusetts has this same standard but also requires that the disclosures be made both visually and audibly in any ad using both means of communication. Even if pricing information is only made on-screen, all required disclosures, such as total price, must also be made audibly.

The good news for companies thinking about how to comply with these requirements is that they don’t go into effect until September 2. And while the junk fee regulation potentially requires significant changes from businesses, it is part of a growing trend. In addition to the three states with these laws, there are similar bills pending in nearly 10 other states. These requirements look less and less like a one-off and more like a fundamental change to how companies must conduct price advertising.

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