Pluralistic: The airlines were patient zero in the junk-fee plague (07 Jun 2024)


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A grocery display of junk food. At its base is a pile of wrapped $100 bills.

The airlines were patient zero in the junk-fee plague (permalink)

If you ever have the misfortune to do business with Suburban Propane, double-check the price before you order. Suburban's listed prices are subject to "a safety practices and training fee, a tank rental fee, a transportation fuel surcharge, a restocking fee, a tank pickup fee, a minimum monthly purchase requirement fee, a system leak test fee, a reconnect fee, a will call fee, a forklift minimum delivery fee, a diagnostic fee, an installation fee, an early termination fee, an emergency/special delivery fee, a late fee, a returned check fee, and a meter account maintenance fee."

Suburban is a particularly egregious purveyor of junk-fees, but there's only a difference of degree between Suburban's fees and the fees charged by your landlord, hotel, bank, cable operator, ticket seller, restaurant, nightclub, food delivery app, ride-hailing app or assisted living facility – or airline.

Indeed, airlines are the cradle of junk-fees, the business that figured out how to extract 100 percent margins on "extras" that don't cost them anything to provide, like seat selection. The Big Four airlines pull down $8.3 billion/year on junk-fees, and it's all thanks to one fella: Jay Sorensen, founder of Ideaworkscompany, a consultancy that teaches airlines how to rip us off.

Writing for The American Prospect, Hassan Ali Kanu says that Sorensen should be more famous. After all, his company publishes the reports and research that makes the junk-fee epidemic possible, and Sorensen himself conducts "boot camps" to teach executives how to rip us off:

https://prospect.org/economy/2024-06-06-loaded-up-with-junk/

Sorenson has one of those billiard-ball smooth brains characteristic of neoclassical economics zombies who insist that monopolies are simultaneously beneficial and impossible. He insists that junk-fees can actually save consumers money, by "unbundling" the parts of the service you don't want or need. The airline that charges a baggage fee isn't gouging fliers who pack a bag; it's giving a discount to the fliers who don't check a bag.

This is 100% true – except for the part where it's completely false. Airlines that invent new junk-fees don't discount their tickets and then tack the fee on top of it – rather, the junk-fee is added to the existing ticket price. And that fee only goes up – and up – and up. When British Airways rolled out its $4 "fuel surcharge" in 2004, that was just the start – today, some BA flights feature a $420 fuel surcharge ($4 in 2004 is about $6.50 in 2024).

This is the same ideological disease that makes pro-monopolists insist that any company that has cornered its market is probably just the most popular company, which everyone loves the most, and if they were ever to abuse their power by raising prices, everyone would just switch to somewhere else.

No need to check that assumption, not when the mathematical model is so certain. As Ely Devons famously quipped, "If economists wished to study the horse, they wouldn’t go and look at horses. They’d sit in their studies and say to themselves, ‘What would I do if I were a horse?’"

The airlines' junk-fee spree kicked off in the 1980s, with Reagan's Airline Deregulation Act. When regulators ignored the ripoffs, the airlines grew bolder, and other industries took notice.

You may dismiss airline junk-fees as a bougie concern for well-heeled fliers. But "drip pricing" (one of many euphemisms for junk-fees, along with "ancillary revenue," "shrouded attributes," and "partitioned pricing") has metastasized out of skies and into the streets. Your landlord charges you a screening fee, a pest control fee, a maintenance fee, a fee to use the common spaces in your building. If you pay rent by check, there's a check fee. Pay by direct transfer and there's a transfer fee. Pay in cash and yup – there's a cash fee.

Landlords have taught each other to charge "January fees" (literally a fee because it is January).

The more desperate your living conditions, the more egregious the fees. The private equity fund that takes over your assisted living facility is eager to charge you a $12 blood-pressure fee, a $50 injection fee, and a $315 monthly inhaler fee:

https://www.nytimes.com/2023/11/19/health/long-term-care-assisted-living.html

The prison where they lock up your kid, uncle, parent or pal has also discovered junk-fees, cutting off in-person visits, mail and parcels in favor of services delivered on tablets with multi-thousand-percent margins:

https://pluralistic.net/2024/04/02/captive-customers/#guillotine-watch

Even death offers no escape, with the increasingly consolidated funeral home sector levying fees to both open and close your casket:

https://prospect.org/power/2024-01-24-big-funeral-exploits-consumers-inflation/

Everyone's got a junk-fee. Your bank charges you "paper statement fees" and "returned mail fees." Restaurants created "pandemic fees" to help cover their extra costs during lockdown, and continue to charge them today. Hot NYC restaurants take a $100 deposit with your reservation, and pocket it if you are one minute late showing up at the greeter's podium. Perch, a bar in LA, charges every guest a 4.5% "security fee":

https://www.latimes.com/california/story/2024-04-09/restaurant-security-surcharge-new-junk-fee-law

Anyone who's used a food delivery app knows about junk-fees – that's how your McDonald's meal deal goes from $4.99 to $25. People hate these fees. A big Yougov poll of 40 policy ideas identified banning junk-fees as the most popular idea among a representative sample of voters:

https://blueprint2024.com/polling/tlp-biden-trump-economics/

83% of voters say they'd be more likely to vote for a candidate who'd ban junk-fees:

http://www.economicliberties.us/wp-content/uploads/2024/03/LRP-AELP-National-Junk-Fee-Survey-Memo-f-2.23.2024.pdf

As Kanu notes, this raises a natural question: who likes junk-fees?

Well, Big Business and its apologists, naturally. When the CFPB introduced a rule capping just one of the credit card industry's most egregious junk-fees, the US Chamber of Commerce sued:

https://www.uschamber.com/cases/consumer-protection/cfpb-late-fees-rule

The Chamber has also warned the FTC that they'll sue over any attempt to limit junk-fees:

https://news.bloomberglaw.com/banking-law/ftcs-proposed-junk-fee-ban-draws-legal-threats-from-industry

This is predictable enough, but the wildest part is the big business has figured out how to make paying junk-fees into a culture war issue. They mounted a successful campaign to paint fights against junk-fees as "woke" and convinced low-information culture warriors that paying junk-fees was a way to own the libs:

https://pluralistic.net/2023/08/04/owning-the-libs/#swiper-no-swiping

Junk-fee cheerleaders insist that consumers are mistaken in their animosity towards junk-fees. After all, when all the fees are listed on your bill, you can see what you're paying for. Who doesn't like transparency? Here's the thing: the added complexity of junk-fees turns every transaction into a shell game where you have to spot the pea or lose out. Confusion over junk-fees can inflate prices by 70%:

https://files.consumerfinance.gov/f/documents/cfpb_price-complexity-in-laboratory-markets_2024-04.pdf

Junk-fees are part of a suite of interrelated price-gouging tactics that business has mastered over the past four decades. For example, many of the worst junk-fee purveyors also force you to sign a binding arbitration waiver as a condition of doing business with them, meaning that you also can't sue after you discover that you've been ripped off:

https://pluralistic.net/2022/02/24/uber-for-arbitration/#nibbled-to-death-by-ducks

(While Kanu doesn't mention it, I'm willing to bet that at least one of these companies charges you a "binding arbitration waiver processing fee.")

Despite big business's knack for getting America's turkeys to vote for Christmas, the Democrats are (wisely) treating the war on junk-fees as an election issue. The agencies are all in on fighting them. The DOT has banned hidden airline fees:

https://www.transportation.gov/briefing-room/biden-harris-administration-announces-final-rule-protect-consumers-surprise-airline

HUD is cracking down on landlord fees:

https://www.whitehouse.gov/briefing-room/statements-releases/2024/02/29/fact-sheet-biden-harris-administration-announces-new-actions-to-boost-housing-supply-and-lower-housing-costs/

Health and Human Services is bent on destroying "junk health insurance":

https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage

The Department of Education is going after textbook fees, student loan origination fees, and universities pocketing leftover meal plan prepayments at the end of the semester:

https://www.whitehouse.gov/briefing-room/statements-releases/2024/03/15/fact-sheet-biden-harris-administration-takes-new-action-to-crack-down-on-junk-fees-in-higher-education/

And CFPB wants to ban mortgage closing fees and has issued orders banning many common bank fees:

https://www.consumerfinance.gov/rules-policy/junk-fees/

CFPB boss Rohit Chopra told Kanu that we can all join the fight, encouraging us to file consumer complaints with state attorneys general and the CFPB itself when you encounter junk-fee scams in the wild:

https://www.consumerfinance.gov/complaint/

(Image: Flying Logos, CC BY-SA 4.0; modified)

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#5yrsago Adversarial interoperability: reviving an elegant weapon from a more civilized age to slay today’s monopolies https://www.eff.org/deeplinks/2019/06/adversarial-interoperability-reviving-elegant-weapon-more-civilized-age-slay

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