This week (May 12, to be exact), the Federal Trade Commission’s (“FTC”) new “Junk Fee Rule” became effective.  The final rule was released by the FTC in December 2024 in a 313 page release.  Back in post #194 (Integrity Idea 033: Provide Plain Pricing), we discussed what was then the FTC’s proposed “Rule on Unfair or Deceptive Fees” issued in October 2023.  The FTC received over 60,000 comments on its proposed rule.

Given that the final rule is much narrower in its scope than the proposed rule, this seems like a good time to revisit and refresh the idea that faithful leaders seeking to lead with faithful integrity through business a better way toward Biblical flourishing must cultivate a “should we” rather than a “can we” culture in which pricing is transparent and honest, whether or not required by law.

The “Junk Fee Rule”

In November 2022, the FTC issued an Advance Notice of Proposed Rulemaking to solicit public input and comments on the prevalence of “unfair or deceptive practices relating to fees”.  In response, they received over 12,000 comments.  Based on those comments, on October 11, 2023, the FTC issued a Notice of Proposed Rulemaking to announce a proposed “Rule on Unfair or Deceptive Fees”.  In the Notice, the FTC:

• Noted a Consumer Reports survey from 2018 that found “at least 85% of Americans have experienced a hidden or unexpected fee for a service in the previous two years, and 96% found them highly annoying.”

• Noted a source that reported hidden fees are a prevalent problem related to internet apps, automobile rentals, communication companies, event ticket sellers, carpet cleaners, auto dealers, dietary supplement sellers, restaurants, airlines, moving companies, credit unions and banks, payday lenders, gyms, hotel and travel companies, outlet stores, sports betting, and online auctions.

• Described the “unfair and deceptive fee” practices reported in several categories of organizations, including: Hotels and Short-Term Lodging Fees, Live-Event Ticket Fees, Fees Related to Restaurants and Prepared Food and Grocery Delivery Apps, Transportation Fees, Telecommunication Fees, Rental Housing Fees, Education Fees, Financial Services Fees, and even Correctional Services Fees (fee practices of private correctional facilities).

Although “unfair and deceptive practices” were identified in many industries and the proposed rule would have had broad application across industries, after analyzing over 60,000 comments and many exemption requests, the FTC decided to apply the final rule only to the live event tickets and short-term lodging.

Although all other industries are effectively “exempt” from the rule, it should be irrelevant to the faithful leader seeking to lead with faithful integrity.

Refresher: “Can We” vs “Should We” Culture

As we have described in several earlier posts, one toxic element of a business as usual culture is a “Can We” rather than a “Should We” approach to decisions.  It is an organizational culture in which ends justify means and ethics or the law are seen as the only boundaries (or even obstacles) in the pursuit of the organization’s purpose.

A “Can We” culture is, in many ways, the product of Profit as Purpose fueled by Scarcity and Self-Interest dynamics.  As we have noted in an earlier blog, Profit as Purpose does not support enduring values because it has no moral, ethical or Biblical foundation.  Although “values” may have such a foundation, values in service to Profit as Purpose become a “means” to the “end” and the “means” will always adjust to fit the “end” (never vice versa).

In a “Can We” culture:

• People are explicitly or implicitly rewarded for asking things like:

• “Is it illegal or does it violate any rule?”

• “Are our competitors doing it?”

• “Are we likely to get caught?”

• “Is it defensible if we are caught?”

• “Is our customer demanding it?”

• Competition (whether internal or external), a fear of losing business (both tied to the scarcity assumption), and a desire to increase business can lead to pushing (or even crossing) boundaries.

The problems of a “Can We” culture are many:

• Competition will drive behavior to the edges and beyond.

• It is unprincipled, condones risk-taking and has a short-term focus.

• It is toxic to the desire we believe is built into each human to do the right thing and glorify God and, because moral failures typically occur through EROSION rather than EXPLOSION, can even lead people to do things they never imagined possible and that they will ultimately regret.

By contrast, a “Should We” culture asks “Whether or not we CAN do it (or get away with it), SHOULD WE do it?” “Should We” can call people to a standard higher than merely man-made laws or the current societal ethics–it can call them to the Biblical standards that they were created to emulate, and it can call them to the organization’s values.

This kind of business a better way organizational culture only arises when there is a commitment by the most senior leaders:

• To lead the organization in pursuing a “WHY” that is bigger than maximizing profit and in living out a set of values that reflect and reinforce that mission.

• To lead the organization in pursuing that purpose by doing the right thing, in the right way, for the right reasons and by supporting all workers in doing the same.

• To maintain a long-term focus.

• To cultivate an intentional culture that reflects and reinforces those values and that purpose.

• To trust in God’s promises and sovereignty.

In a “Should We” culture, people ask things like:

• “Is it consistent with how we want to serve our stakeholders?”

• “Is it consistent with our values?””

• “Is it consistent with our intentional culture?”

• “Is it doing the right thing, in the right way, for the right reasons?”

• “Is it consistent with what we say we stand for and who we say we are?”

A faithful leader outside the narrow scope of the final Junk Fee Rule might be tempted to entertain obfuscation and deception in pricing if it is in line with industry practices, taking comfort that they would be “crossing the street in a crowd”, but that would be “Can We” thinking out of alignment with business a better way.

A Faithful Approach to Pricing

Leading with faithful integrity through business a better way toward Biblical flourishing requires transparency and honesty in pricing, whether or not required by government regulations or industry regulatory bodies.

It is not about how much the organization charges, and it is not about how simple or complicated the pricing for a product or service may need to be.  It is about how pricing is communicated to customers.  It is about transparency and honesty in pricing communication.

Here are just a few relevant Biblical verses:

So whatever you wish that others would do to you, do also to them, for this is the Law and the Prophets. (Matthew 7:12)

Therefore, having put away falsehood, let each one of you speak the truth with his neighbor. (Ephesians 4:25)

You shall not steal; you shall not deal falsely; you shall not lie to one another. (Leviticus 19:11)

You shall do no wrong in judgment, in measures of length or weight or quantity. You shall have just balances, just weights, a just ephah, and a just hin. (Leviticus 19:35)

One who is faithful in a very little is also faithful in much, and one who is dishonest in a very little is also dishonest in much. (Luke 16:10)

For our boast is this, the testimony of our conscience, that we behaved in the world with simplicity and godly sincerity, not by earthly wisdom but by the grace of God, and supremely so toward you. (2 Corinthians 1:12)

A “should we” culture in an organization flows from a commitment by faithful leaders to lead the organization in pursuing a “WHY” that is bigger than maximizing profit, to live out a set of values that reflect and reinforce that purpose, and to pursue that purpose by doing the right thing, in the right way, for the right reasons and by supporting all workers in doing the same.

In 1907, Orison Swett Marden wrote: “The golden rule for every business man is this: ‘Put yourself in your customer’s place.'”  Transparent and honest pricing puts the Golden Rule into action and reinforces to employees that integrity and honesty are core values of the organization.  It also signals those values to customers and forms the foundation for the organization and its people to be trusted.

We believe efficient commerce and customer loyalty require trust. Stephen Covey has observed:

Trust is the glue of life. It’s the most essential ingredient in effective communication. It’s the foundational principle that holds all relationships.

A faithful approach to pricing should be motivated and implemented by Biblical principles of honesty and fairness and out of obedience to God’s command to love others and not motivated by cultural or political pressures or the fear of regulatory requirements.

Transparency.

An organization operating with faithful integrity should not try to “hide” pricing in fees and charges that their customers only discover down the road in the sale process (or even after the fact when the bill arrives).  You might be saying, “But our competitors are able to advertise lower prices by using hidden fees, and we would look uncompetitive if we were transparent about total pricing.”  Perhaps, but that is the difference between a “can we” and a “should we” culture.  “Can we” can lead to a race to the bottom.

If one thing is clear from the FTC releases, hiding fees does not honor customers–it “annoys” them. “Should we” is playing the long game, trusting God with the organization the faithful leaders have been given to steward.

For most people, buying a car is a stressful negotiating experience with a car salesman who has much more experience and superior information.  People try to get smarter with buying and information services, but it is still a stressful “game”.  One great example of “should we” transparent pricing in the car dealership business is Flow Automotive in North Carolina, which has 51 dealerships.  One of their tag lines is “Easy. Transparent. Fun.”  They advertise “no-haggle” up-front pricing with transparency (“Every vehicle listing shows a full, honest pricing breakdown.”)  Don Flow is a faithful leader leading with faithful integrity.

Honesty.

The FTC releases also called out dishonesty in labeling fees.  For example, some organizations add a “shipping cost” that is more than the cost to them of shipping.  An organization operating with faithful integrity must be transparent about its pricing, but it must also be honest in that transparency.  Profit shouldn’t be hidden dishonestly behind labels that sound like out-of-pocket costs simply being passed through.

For example, in the legal profession it is the difference between “disbursements” and “other charges” on a bill.  It is unethical to call something a “disbursement” unless it is an actual cost paid by the lawyer and being passed through to the client.  An airfare is an example of a legitimate “disbursement”.  “Other charges” are those items that represent an allocated charge for an expense, such as a per-page charge for photocopying or a per-search charge for online database research that is not a direct pass-through of a third-party expense.

We believe another aspect of honesty in pricing is being honest about the “real” price.  Some organizations quote a price to existing customers that far exceeds the price charged to new customers.  While annoying to existing customers, it is usually transparent.  What they are not honest about is that existing customers can receive the lower price if they are persistent enough (including threatening to canceling in many cases).  Their calculation is that most customers will not be so persistent.  We believe that is equivalent to the use of “unequal weights” decried in various passages in the Bible:

Unequal weights are an abomination to the Lord, and false scales are not good. (Proverbs 20:23)

You shall not have in your bag two kinds of weights, a large and a small. You shall not have in your house two kinds of measures, a large and a small. A full and fair weight you shall have, a full and fair measure you shall have, that your days may be long in the land that the Lord your God is giving you. For all who do such things, all who act dishonestly, are an abomination to the Lord your God. (Deuteronomy 25:13-16)

Implementing Faithful Pricing

Every faithful leader seeking to lead with faithful integrity through business a better way should be praying and thinking about how their organization’s practices can be obedient to the Golden Rule.

One way to do that is by implementing a practice of “faithful pricing”–looking closely at the organization’s structure and communication of pricing to ensure that it is transparent and honest.  While the organization obviously must comply with legal requirements for transparency and honesty, those serve as a floor.

Faithful pricing requires prayerfully considering whether and how the organization should go above and beyond what is legally required and even above and beyond industry norms because it is the right thing to do out of obedience to how God has instructed his image-bearers to live and steward his creation.

As faithful leaders prayerfully discern if and how faithful pricing could and should be implemented in their organization, these are some questions to consider:

• Are there ways the organization can make the customer buying experience more enjoyable through greater transparency and honesty about pricing?

• Are there ways the organization can build customer trust through greater price transparency and honesty?

• Does the organization add any “hidden” fees and charges to the price advertised to prospective customers?

• If it does, how could it be more transparent with customers upfront so that they are not surprised or annoyed?  How could the organization advertise pricing in a way that allows customers to make meaningful comparisons with the prices of competitors while still being transparent about any additional fees or charges?

• If it does add fees and charges, is it labeling and portraying them in a way that honestly reflects their nature?  Do any labels or descriptions try to disguise profit or internal overhead as a passthrough third-party charge?

• Is the organization honest about the price it is willing to charge for its products and services?  Does it advertise higher pricing to existing customers in the expectation that most will simply accept the price, while quietly offering a lower price to those who complain or threaten to leave?

• Should the organization move toward the overt end of the Practices Continuum by explaining the faith-based rationale for its price transparency and honesty, particularly if it goes against industry norms?  If so, should that explanation be only internal with employees or should it be shared with customers?

Faithful integrity requires prayerfully doing the right thing, in the right way, for the right reasons, and trusting God with the outcome.  It also requires doing it now.  Oswald Chambers wrote:

We know something is right, but we try to find excuses for not doing it immediately. If we are to climb to the height God reveals, it can never be done later—it must be done now. And the sacrifice must be worked through our will before we actually perform it.

On the one hand, we are disappointed that the FTC went so far in narrowing the scope of its Junk Fee Rule.  We are even more disappointed that a Junk Fee Rule is needed for businesses to act with transparency and honesty.  On the other hand, the limited scope of the mandate leaves more industries in which faithful leaders can distinguish their organizations by doing the right thing, in the right way, for the right reasons.  Pricing is an opportunity for faithful leaders to shine a light on Biblical beliefs, principles and priorities.

PERSONAL NOTE (from PM): Pricing transparency and the practice of charging different customers different prices for the same product are two of my pet peeves.

I recently encountered the lack of transparency in hospital price transparency.  Since 2021, hospitals have been required to publish pricing information to help consumers compare prices.  When trying to understand some outrageous charges for an emergency room visit, I downloaded the pricing information for a local hospital.  It consisted of a 28,000 line Excel file.  Any particular procedural code could have dozens of prices based on the deals worked out with numerous insurers and insurance plans, and the whole file is largely in “code”.  I was able to get the massive data files for a few local hospitals and compare their “cash price”.  I was astonished to see one hospital list a cash price of $823 for a procedure that a nearby hospital listed at $134 and $245 for a blood test that a nearby hospital listed at $40.

While social media advertisement are notorious for hiding pricing until you have watched a 30-minute info-video, I recently pursued a “free” health consultation that set a new standard in price concealment.  They wanted me to engage in a 1-hour interview to determine if I was eligible for their program and would not tell me the price of the program until the end of the hour (needless to say, I hung up in minute one).

Periodically, my cable/internet bill jumps up in price without notice because the last price I negotiated had a time limit. Customer service says no promotions are available, but the “retention” department magically finds some when I say “cancel”.

Hopefully, the new FTC rule will address the difficulty in comparing hotel prices online because the “resort fee” or “facility fee” doesn’t show up until you look at the details of the property.

There is the growing practice of restaurants adding credit card fees to the menu price (I have no issue with a cash discount off the menu price) or special charges to compensate their staff instead of increasing the menu item prices enough to pay fair wages.   Some even “virtue signal” by calling it something like a “Benefits and Equity Charge” or a “Wellness Fee” and making clear it is not in lieu of a gratuity.

ESSENCE: The FTC’s new “Junk Fee Rule” went into effect this week.  Although originally proposed with a broad scope, the final rule applies only to live event tickets and short-term lodging.  Although all other industries are effectively “exempt” from the rule, it should be irrelevant to the faithful leader seeking to lead with faithful integrity.  The pursuit of faithful integrity through business a better way toward Biblical flourishing requires cultivating a “should we” rather than a “can we” organizational culture in which pricing is transparent and honest, whether or not required by law.  A “should we” culture in an organization flows from a commitment by faithful leaders to lead the organization in pursuing a “WHY” that is bigger than maximizing profit, to live out a set of values that reflect and reinforce that purpose, and to pursue that purpose by doing the right thing, in the right way, for the right reasons and by supporting all workers in doing the same.  Faithful pricing puts the Golden Rule into action and reinforces to employees that integrity and honesty are core values of the organization.  It also signals those values to customers and forms the foundation for the organization and its people to be trusted.  Faithful pricing should be motivated and implemented by Biblical principles of honesty and out of obedience to God’s command to love others and not motivated by cultural or political pressures or the fear of regulatory requirements.

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