Bob Frankston, who co-invented the first spreadsheet program with Dan Bricklin, knows how to add up columns and rows. That’s why he was more than a little surprised when the original $36 Uber fee quoted by the app became almost $55 and was finally billed at $67, before a $10 tip brought it up to $77.
From car rental and hotel resort fees to concert ticket service charges to seat selection fees for a flight, these hidden costs have been normalized in the purchasing process, and they have a name: “junk fees.”
The Federal Trade Commission refers to “junk fees” as “drip pricing” and defines the phrase as a “technique in which firms advertise only part of a product’s price and reveal other charges later as the customer goes through the buying process. The additional charges can be mandatory charges, such as hotel resort fees, or fees for optional upgrades and add-ons.”
Dan Bricklin (l.) and Bob Frankston working on the development of VisiCalc, the world’s first killer app and first spreadsheet software
JUNK FEES INCREASE PRICES AND DISTORT COMPETITION
Junk fees earned their name quite justly. The word “junk” falls into the class of nouns referred to as attributive nouns, noun adjuncts, qualifying nouns, noun modifiers, and apposite nouns, which are defined as optional nouns that modify another noun, functioning similarly to adjectives, or, more specifically, as pre-modifiers.
As such, it can mean “worthless,” “rubbish,” “trash,” “detritus,” and “unwanted.” Another definition is “contemptible.”
Despite the presence of the ghost of William Safire that typically hovers over me when I sit at my desk and write – he did call me a “persnickety nitpicker” in one of his “On Language” columns in the New York Times Magazine a few years back – I shan’t go any further into the etymology of the word “junk,” as that will cause our head copy editor, Basilio Alferow, to come after me with the 2-by-4 that he purchased years ago at Mensch Lumber when our offices were headquartered in Flushing. I will, however, say that it was originally a nautical term for a piece of old cable, as well as a Chinese style of rigging considered by European sailors to be messy and unwieldy.
“Junk” then went the 1920s equivalent of viral as a derogatory term for unwanted deliveries of catalogs and brochures by the post office.
The word “junk” made its entrance into the world of sexual slang via the work of Ethan Mordden, an American author and musical theater researcher who wrote a series of gay-themed short stories in the 1980s. In one, “The Hustler,” which appeared in the April 1983 issue of the magazine Christopher Street, a character describes rough sex with the line, “That’s when the top man lays you face down on your junk.”
From Christopher Street, it moved into the mainstream in the 1990s, when the term “junk” began to be used as a euphemism for the “family jewels.”
The reader may recall that the Obama administration passed legislation to keep junk food out of public schools, and that scientists have found clues to the origins of diseases such as muscular dystrophy and breast cancer in the genetic detritus known as “junk DNA.”
The word “junk” as a man’s genitalia went viral in 2010 when, on November 13, a software engineer by the name of John Tyler took on the U.S. Transportation Security Administration’s new security procedures for opting out of a full-body scan. In the course of a pat-down he felt was quickly becoming too intimate, he warned the screener (and captured the warning on video, which was what made the incident so salacious and lascivious), “If you touch my junk, I’m gonna have you arrested.”
Going viral took longer back in the day, but within about 48 hours, the phrase “Don’t touch my junk” had indeed spread quickly, primarily via YouTube, since most other forms of what we now consider “social media” had yet to be invented. The phrase “Don’t touch my junk,” which isn’t quite the words that Tyler uttered, became a cri de coeur, or, perhaps better put, a “cri de crotch,” as Ruth Marcus jocularly wrote in the Washington Post.
So, there you have it: Junk fees are just as bad as junk food, perhaps worse. The long-term effects of junk food include Type 2 diabetes. heart-related problems such as cardiovascular disease, high blood pressure and cholesterol, obesity, and osteoporosis. Meanwhile, junk fees obscure the true price of a purchase, allow the seller to profit from various “gotchas,” and prevent accurate comparison shopping. At the end of the day, they can increase prices significantly and greatly distort the cost of competitive offerings.
NEW JUNK FEE RULES FOR THE AIRLINE INDUSTRY
In April of this year, the Biden administration moved to block surprise so-called “junk fees” in the airline industry. The U.S. Department of Transportation said it would not only require airlines to automatically issue refunds instead of travel credits, but it would also mandate that they clearly disclose so-called “surprise airline fees,” which some refer to as “junk fees,” at the point of sale.
“These rules will significantly expand consumer protections in air travel, provide passengers an easier pathway to refunds when owed, and save consumers over half a billion dollars every year in hidden and surprise junk fees,” the DOT said in a statement.
The new rules are part of federal and local actions intended to lower costs for consumers and take on corporate rip-offs.
Lawmakers in six states have already taken aim at drip pricing, with varying results, and New York was one of the first to do so.
In June 2022, the state legislature passed Arts and Cultural Affairs Law Section 25.07(4), which provides that “every operator . . . of a place of entertainment . . . shall disclose the total cost of the ticket, inclusive of all ancillary fees that must be paid in order to purchase the ticket.”
Most notably, the statute states that “the price of the ticket shall not increase during the purchase process,” although the bill only covers the entertainment industry, not airlines or hotels or ride-hailing services.
MORE STATES GO AFTER JUNK… FEES, THAT IS
In California, Governor Gavin Newsom signed into law SB 478, a bill that bans the fees and surcharges that businesses tack on to the cost of goods and services after the purchase process begins in order to make their prices appear lower at first than they actually are.
While SB 478 affects all companies doing business in the Golden State, the runup to the bill’s enactment focused largely on the drip pricing engaged in by car rental agencies, hotels, and concert ticket sellers. Once the bill became law, the restaurant industry was surprised to find itself listed as a category of business for which charging junk fees is prohibited. Restaurants in the state have long added a surcharge for employee health insurance, for example, and that became a no-no.
The state explains the seriousness of SB 478 in a frequently-asked questions document: “Advertising or listing a price that is less than what a consumer will eventually be charged is a form of deceptive advertising that also violates existing state and federal law.”
It adds that “[T]ruthful price advertising and listing helps businesses compete fairly on price and allows consumers to make accurate price comparisons.”
Optional fees are not covered by the law, nor are late fees or fees for, for example, deep-cleaning a hotel room after a guest smoked in it.
Businesses cannot, however, simply disclose additional required fees before a customer finalizes a transaction; they cannot advertise that a price that is less than what a customer will actually have to pay, but simultaneously disclose that additional fees will be added; and they cannot list or advertise one price and separately state that an additional percentage fee will apply.
When it comes to restaurant delivery, a delivery service such as Uber Eats must advertise the price of the delivery service that it provides, in full, although the cost of the food may vary by restaurant and what the diner orders.
Furthermore, a business or restaurant cannot add a mandatory fee of its own that is not included in the advertised price, and the bill eliminates the “Healthy SF mandate” under which San Francisco restaurants were adding health insurance fees to diner’s bills.
Just this week, Minnesota joined California when its governor, Tim Walz, signed into a law a price-transparency bill promising “an end to junk fees on everything from food and entertainment to hotels and credit card fees.” The law will go into effect on January 1, 2025.
In the Prairie State, nearly two dozen Illinois lawmakers have sponsored HB 4629, the Junk Fee Ban Act, a bill that more or less mirrors California’s SB 478. As of press time, HB 4629 has already passed the state House of Representatives and awaits action in the Senate.
When it comes to banking, as of the end of 2023, the Consumer Financial Protection Bureau reported that it had eliminated the vast majority of NSF or not-sufficient-funds fees, saving consumers an estimated $2 billion on an annual basis.
Bob Frankston on his infamous Uber ride from Boston Logan
It is unquestionably the case that ride-hailing services are engaging in drip pricing. What isn’t as clear is whether companies such as Uber and Lyft are covered by current rules and regulations. What will directly affect them, however, is the Biden’ administration’s new labor rule to cut down on the misclassification of workers as independent contractors. If this move is successful, and it stands a good chance of succeeding, it will bolster both legal protections and compensation for the millions of gig workers in the U.S. economy.
THE VISICALC ANALYSIS
But now back to Bob Frankston, as he’s still waiting to finalize his spreadsheet analysis of his airport pickup.
As he put it, “[T]he hidden fees came out of the woodwork like cockroaches swarming out of a kitchen drawer.”
Here’s the spreadsheet analysis:
Mr. Frankston explains the bill thus: “The tolls were known in advance, so these are the classic hidden fees that should’ve been disclosed. And two charges for the Brighton Allston Toll?”
Had the price not changed from $36 to $55, however, the total price would have been more than $19 less. The booking fee, Uber says on its website, covers “safety, regulatory, and operational costs such as insurance.”
“Since the price is so volatile, there should be a requirement that the price be displayed on the app,” Frankston said. “I shouldn’t have to capture a screen shot to know the price that was offered when my finger moved to accept the ride and the price that it had changed to when my finger landed. It makes me think of high-speed trading at a microsecond scale – humans don’t stand a chance.
To show how drip pricing can go unnoticed by even those with knowledge of finance and accounting, and even the person responsible for developing the first spreadsheet program, Frankston told a reporter that this had not been the first time his wallet was plundered by junk fees.
“In checking other receipts, I find that these fees are not new, but we need to require Uber to disclose them beforehand when presenting me with the fare,” Frankston said. “It’s not as if they are a surprise to Uber, so it’s misrepresenting the cost to me.”
Putting the appropriate spin on junk fees, Mr. Frankston ended his message to me with the remark, “I’m surprised there is no ‘tire wear’ or ‘fuel’ surcharge.”
(Photos and images: Accura Media Group)
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