Political discourse surrounding “junk fees” has made headlines in recent weeks in anticipation of President Biden’s State of the Union Address on March 7. This issue has remained a long-held policy priority of the Administration, evident in a slew of regulatory proposals, executive orders, and legislative efforts aimed at prohibiting industry’s use of  back-end fees. Just this past weekend, President Biden went as far as to accuse delivery app platforms of using their fees to “rip off” consumers. 

To be sure, promoting consumer protection is complementary to a healthy and vibrant economy, and there are certainly cases where bad actors have profited from deceitful pricing. However, we believe that President Biden’s rushed effort to upend fees across the entire economy lacks the nuance and special consideration for dynamic pricing structures that are transparently disclosed to consumers. Gutting our entire economy of back-end fees will only hurt players who use fees transparently and responsibility, ultimately impacting both the economy and consumers. 

Ironically, nowhere is this clearer than in the case of delivery app platforms. These companies structure their prices to facilitate a transaction between local sellers, delivery workers, and the consumer. This means that when you buy product on a delivery app, you aren’t just paying the vendor of that good and the individual bringing it to your doorstep – you are paying for the logistics, coordination, and expediency built into a seamless customer experience. Stripping fees essential for this experience, which are transparently disclosed to consumers, means compromising the revenue streams of local businesses and workers reliant on the digital economy. 

Numerous industry representatives have also questioned the need for a one-size-fits-all approach when several actors called out by the Biden Administration have already succumbed to the demands of consumers. Last June, President Biden met with representatives of major industries who took it upon themselves to increase levels of transparency in their pricing. The result led to increased website traffic and sales, showing that consumer preference, not heavy-handed regulation, ultimately leads the way to profitability and success. 

To that end, the Frontiers of Freedom Institute urges the Biden Administration to reexamine the consequences of – and rationale for – an industry-wide prohibition on fees. Businesses and consumers alike deserve clarity as to how sweeping executive action intended for a small group of bad actors will ultimately improve all sectors of our economy. 

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