What does the FTC mean by drip pricing?

Drip pricing is a price that looks lower at first because mandatory fees do not appear until late in the shopping process. Chair Khan described it as a business practice that companies can use to try and hide junk fees.

Which law is a business actually dealing with when the FTC calls something drip pricing?

The law at issue is Section 5(a) of the FTC Act, which prohibits unfair or deceptive acts or practices, and for live-event tickets and short-term lodging there is a fees rule as well. The Commission narrowed that fees rule to specific and prevalent practices in those two industries.

Does the fees rule ban a business from charging a particular fee?

No. The fees rule does not prohibit any one type of fee or itemization of fees, but in the industries it covers it does not let a mandatory fee stay out of the price offered.

Can optional fees or shipping charges be listed separately from the price?

Yes. Under the fees rule, businesses have discretion to list optional fees selected by the consumer and government and shipping charges separately.

Does mentioning the fee somewhere in the listing fix the problem?

Not where the information is inadequate in content, presentation, proximity, prominence, or placement, which is what the FTC alleged about Invitation Homes' listings.

Is the FTC the only agency that uses the term?

No. The CFPB also uses it, and views junk fees and drip pricing as a top priority and an important feature in the auto market.

Offer StructureAgency label

Drip pricing

Also known as "Partitioned pricing"

Berkeley Robinson, Managing Attorney at Robinson Law Firm PLLC

Author

Berkeley Robinson, Esq.

Managing Attorney, Robinson Law Firm PLLC

Berkeley has served as the go-to counsel for many scaling businesses in a transactional and litigation management capacity. Before becoming an attorney, Berkeley grew sales teams, ran online marketing campaigns, and did everything else an entrepreneur does—and still does today as the founder of two online businesses.

Definition

The government has not defined "Drip pricing" in a statute or regulation.

Based on our data, the FTC uses "Drip pricing" to mean "a practice in which consumers are unable to see the true price, including mandatory fees, until late in the shopping process." Source: Concurring Statement of Acting Chairwoman Rebecca Kelly Slaughter, In the Matters of Just In Time Tickets; Cartisim Corp.; and Concert Specials, FTC File Nos. 1823115, 1923195, 1923196 (Jan. 22, 2021) Companies can use the practice to try and hide junk fees. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022)

Key legal rules

The government applies these rules to what it calls "Drip pricing":

Section 5(a) of the FTC Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief
Misrepresentations or deceptive omissions of material fact constitute deceptive acts or practices prohibited by Section 5(a) of the FTC Act. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief
Price is a material term, and it is a violation of section 5 of the FTC Act to misrepresent the price of a good or service. Source: Statement of Commissioner Melissa Holyoak, Trade Regulation Rule on Unfair or Deceptive Fees, FTC Matter No. R207011, nn.9-10, 13, 15 (Dec. 17, 2024)
Under the Trade Regulation Rule on Unfair or Deceptive Fees, omitting mandatory fees or charges from the advertised price of live-event tickets or short-term lodging is a prohibited hidden-fee practice. Source: Statement of Commissioner Melissa Holyoak, Trade Regulation Rule on Unfair or Deceptive Fees, FTC Matter No. R207011 (Dec. 17, 2024)
The Trade Regulation Rule on Unfair or Deceptive Fees also prohibits misrepresenting the nature, purpose, amount, or refundability of fees or charges for live-event tickets or short-term lodging. Source: Statement of Commissioner Melissa Holyoak, Trade Regulation Rule on Unfair or Deceptive Fees, FTC Matter No. R207011 (Dec. 17, 2024)
The fees rule does not prohibit any one type of fee or itemization of fees, and it does not require that all fees be included when offering a price, only mandatory ones. Source: Statement of Commissioner Melissa Holyoak, Trade Regulation Rule on Unfair or Deceptive Fees, FTC Matter No. R207011, nn.9-10, 13, 15 (Dec. 17, 2024)

For the sake of space, this page lists only the primary rules related to this term that most businesses should follow. More may apply to your situation, and your unique facts affect how they apply.

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Why these rules exist

A fee revealed late can mislead consumers or keep them from knowing the true cost of a purchase until they have invested substantial time and energy, and by then they may feel it is too late to walk away. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022) Because the quoted number leaves the fee out, consumers also cannot make accurate price comparisons, so they end up spending more than they expected or wanted to. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022) Honest competitors are hurt as well, since a seller that quotes a full price can lose sales to a seller whose lower price omits a fee added at the end. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022)

Underneath the label, the statute being applied is Section 5(a) of the FTC Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.” Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief In the Invitation Homes complaint, the FTC pleaded the failure to disclose mandatory monthly fees as a deceptive act or practice in violation of that section. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief For live-event tickets and short-term lodging, the Commission also issued a fees rule that promotes price transparency so consumers can easily compare offerings. Source: Statement of Commissioner Melissa Holyoak, Trade Regulation Rule on Unfair or Deceptive Fees, FTC Matter No. R207011 (Dec. 17, 2024)

Enforcement examples

Passport Auto (car sales with certification, reconditioning and inspection charges)

Statement of Chair Lina M. Khan Regarding the Unfair or Deceptive "Junk" Fees ANPR (Oct. 20, 2022)

In the Passport Auto matter, the FTC's complaint alleged that the dealer advertised a price for cars that were certified, reconditioned, and inspected. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022) Buyers who then went to buy a car were hit with charges for certification, reconditioning, and inspection, which Chair Khan described as part of a quintessential junk fee case. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022)

Outcome. The Commission announced the matter in the week of Chair Khan's October 20, 2022 statement, which called it a quintessential junk fee case. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022)

FTC v. Invitation Homes (single-family home rentals)

Complaint for Permanent Injunction, Monetary Judgment, and Other Relief

The FTC's complaint alleges that Invitation Homes advertised a "Lease for" monthly rent that left out a bundle of mandatory monthly fees, so applicants paid nonrefundable application fees and reserved homes before learning the real price. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief According to the complaint, that fee bundle can add $60 per month and $720 over a one-year lease, and it is mandatory for the substantial majority of the company's homes. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief The complaint alleges that people did not learn the total monthly cost until they received a copy of the lease. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief The fee information the company did include, the complaint alleges, was buried in gray microtext at the bottom of the listing, in confusing and conditional language. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief

Outcome. On this conduct the complaint pleads two counts under Section 5(a): that the advertised monthly leasing price was not the total monthly amount consumers would pay, and that the company failed to disclose or disclose adequately the monthly fees consumers must pay. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief For the violations it alleges, the complaint seeks relief that includes a permanent injunction, monetary relief, and other relief. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief

Exposure

In the Invitation Homes matter, the FTC's complaint seeks a permanent injunction, monetary relief, and other relief for the violations it alleges, which include the Section 5(a) counts for hidden mandatory monthly fees. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief

Where no specific rule applies, the remedies available are narrower. In October 2022, Chair Khan said that in areas with no specific rule or sector-specific law the Commission lacks authority to seek penalties against violators or readily get financial compensation for victims, and that a forward-looking rule classifying certain junk fees as unfair or deceptive could give that authority. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022) The rule the Commission later issued is narrow, focusing only on live-event ticketing and short-term lodging. Source: Statement of Commissioner Melissa Holyoak, Trade Regulation Rule on Unfair or Deceptive Fees, FTC Matter No. R207011 (Dec. 17, 2024) For sellers outside those industries, Commissioner Holyoak wrote that the Commission should not shy away from using its Section 5 enforcement authority against hidden or deceptive fees in the interim. Source: Statement of Commissioner Melissa Holyoak, Trade Regulation Rule on Unfair or Deceptive Fees, FTC Matter No. R207011 (Dec. 17, 2024)

FAQs

1.Concurring Statement of Acting Chairwoman Rebecca Kelly Slaughter. Concurring Statement of Acting Chairwoman Rebecca Kelly Slaughter, In the Matters of Just In Time Tickets; Cartisim Corp.; and Concert Specials, FTC File Nos. 1823115, 1923195, 1923196 (Jan. 22, 2021)See also Complaint for Permanent Injunction, Monetary Judgment, and Other Relief. FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief
2.Statement of Chair Lina M. Khan Regarding the Unfair or Deceptive "Junk" Fees ANPR. Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022)
3.Complaint for Permanent Injunction, Monetary Judgment, and Other Relief. FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief