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It seems it’s not only the Biden administration that believes regulating “junk fees” is popular with voters. Minnesota joins California as states that have passed their own junk fee legislation. And given the number of other states that are considering junk fee laws, a Federal Trade Commission (FTC) final rule on junk fees – if and when we get one – risks being largely superfluous.

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<a href="https://www.revisor.mn.gov/bills/text.php?number=HF3438&type=bill&version=3&session=ls93&session_year=2024&session_number=0">The new Minnesota law</a> takes effect Jan. 1, 2025. Like <a href="https://www.adventures-in-law.com/blogs/what-you-gonna-do-with-all-that-junk-fees/" target="_blank" rel="noreferrer noopener">the proposed FTC rule and the California law</a>, which is effective July 1, Minnesota’s law addresses junk fees by requiring that all mandatory fees be included in an advertised price. Notably, there are also some exemptions common to all of these laws, such as taxes and shipping fees. But despite these broad similarities, the Minnesota law does include some potential differences, particularly with respect to delivery fees and variable fees.

It had been an open question how sellers with variable fees and delivery fees would need to comply with the California statute and the FTC proposed rule. Including all mandatory fees in the advertised price doesn’t always square with the realities of the market, such as services in which there is a mandatory fee but the exact amount will vary depending on customer-specific information or preferences. For this kind of variable fee, the company knows that the consumer will have to pay a fee, but until the consumer inputs additional information, the company doesn’t know exactly how much it will be. California provided some clarity on this issue in <a href="https://oag.ca.gov/system/files/attachments/press-docs/SB%20478%20FAQ%20%28B%29.pdf" target="_blank" rel="noreferrer noopener">the FAQs issued by the office of the attorney general last month</a>. Fees that are contingent upon certain actions that may or may not take place, such as a late fee, are not “mandatory” and are not required to be included in the advertised price. Variable fees, however, which the customer will definitely pay and the only question is the amount, must be included in any advertised price. If a business doesn’t know how much it will charge a consumer, then it must not display a price. Only once the company has collected the information needed to calculate the all-in price can it advertise a price to the customer.

Minnesota differs significantly on this issue. Under its law, if a fee “is determined by consumer selections and preferences,” it only requires clear and conspicuous disclosure of the following: “(1) the factors that determine the total price, (2) any mandatory fees associated with the transaction, and (3) that the total cost of the services may vary.” Where California prohibits any price advertisement until all consumer selections are made, Minnesota permits a price to be advertised so long as the added fees are adequately disclosed.

Both laws also directly address food delivery fees, but the differences between their requirements on that issue are less stark. As with variable fees, Minnesota requires clear and conspicuous disclosure of delivery fees for food delivery platforms. It does not require that delivery fees be incorporated into food menu prices. The California statute does not have this same flexibility, but the FAQs include a significant exception for food delivery platforms as well as for “delivery of food ordered directly from a restaurant” because delivery is a “separate service.” It’s unclear whether this same analysis can be applied to delivery services outside of the restaurant industry. The same principles could clearly apply to other forms of delivery, but this exemption is expressly applied to restaurants in the FAQs and no other industries.

The most obvious problem with state-by-state regulation of junk fees is how nationwide providers of goods and services track and comply with disparate state provisions. There are already potential differences between the new Minnesota law and the California law that create different compliance regimes in each jurisdiction. The proposed FTC rule does not preempt state law, so absent significant changes in the final rule, there will not be a fix at the federal level. That rule will create a floor, but states can and almost certainly will impose stricter requirements. Companies instead will have to navigate the headache of patchwork state regulation. How big of a headache that will be remains to be seen. While there are over a dozen states with legislation pending, the fact that the California attorney general’s office released FAQs narrowing the law demonstrates some caution from policymakers in this area. We’ll keep you updated here on new state laws and the changing junk fee landscape.

Minnesota Passes Junk Fee Law and California Issues FAQs

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