In response to the Federal Trade Commission’s announcement of proposed rulemaking on unfair and deceptive fees in online food and grocery delivery, Consumer Reports submitted comments.
Junk fees and drip pricing
CR outlined the consumer harms that arise from junk fees and drip pricing, highlighting past work on the issue and intense consumer interest in addressing junk fees. CR also shared findings from a 2020 CR report analyzing food delivery fee disclosures in Chicago, which requires companies to itemize their fees. The report found apps used a variety of strategies to hide and obscure the fees that were charged, which could include “service” and “delivery” fees, perk-based subscription fees, expedite fees and fees to pass on the cost of local legislation, among others. CR found that the four delivery apps charged 48-52% to use the delivery platform service on top of the base cost of food and taxes. CR also shared themes from the 400 consumers who submitted stories about their experiences with food app delivery fees.
On hidden fees and drip pricing, CR recommended that the Commission consider rules requiring:
- Standardized presentation of advanced estimates for delivery service costs before consumers begin shopping.
- Disclosure of the total all-in cost of the order including all mandatory fees presented as a running total, and in summary prior to checkout.
- Clear identification of all mandatory fees, including who receives them and why they vary; and standardized terminology for fees to prevent deceptive labeling.
- Disclosure of online vs. in-store price differences at the item level.
- Disclosure of available fulfillment channels (first-party vs. third-party) at the start of the shopping process.
- Prohibit misleading marketing of subscriptions and end subscription traps
Differential and personalized pricing, and fake discounts
In response to questions posed by the Commission about personalized pricing, CR also shared evidence of differential pricing in food delivery. CR explained how these tactics could constitute a deceptive practice, and also how fake discounts constitute a deceptive practice. CR also explained how differential or personalized pricing can be unfair, and can hamper competition in the market.
CR suggested that the Commission formalize its guidance on fictitious discounts. On the issue of personalized pricing, CR discouraged the Commission from pursuing a disclosure-only approach, and instead advocated for the Commission to pass a rule prohibiting the use of personal data to set a price, with reasonable and well scoped exemptions.
For more, see the full comment linked above.