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Eakinomics: Resort Fees, TV Cancellation
Fees, and Other Existential Crises
Sometimes the title says it all. That’s the case with President’s
Competition Council Focuses on Resort Fees, TV Cancellation Fees, and
Other Existential Crises, by AAF’s Fred Ashton, Thomas Wade,
and Jeffrey Westling. The White House’s answer to Saturday
Night Live sketch comedy – the Competition Council – met last week
and announced new assaults on junk fees and mobile applications.
Let’s begin with the junk fees, the administration’s obsession that has
puzzled Eakinomics for a long time.
This time the focus is “excessive” credit card late fees and a proposed
Consumer Financial Protection Bureau (CFPB) rule that would eliminate
fee adjustments that result from inflation (lowering the current late
fee cap from $41 down to $8) and cap fees at 25 percent of the required
minimum payment. This is nonsense. As the authors note, the fee is
"a perfectly legal and appropriate revenue stream, approved by the
bank’s own regulators.” Adding “excessive” and “junk” to the
descriptions is just political color for an empty exercise.
And it raises more fundamental issues: “If penalties for late payments
on credit cards are lowered, do they still function as penalties? How
is the government better suited than industry in determining effective
pricing structures, and can increased regulatory requirements and a
decreased profit margin spur the competition the council is designed to
inspire – or will it serve as a yet another barrier to new financial
services entrants?” When it comes to financial services policies, the
administration has firmly captured the territory from pointless to
dangerous.
Moving on, “President Biden also called
upon Congress to pass a “Junk Fee Prevention Act” that
would crack down on ticketing fees, resort and destination fees, and
certain airline fees, and would eliminate ‘exorbitant’ early
cancellation fees.” Lord have mercy on my economic soul! Such vision!
The administration blames the existence of these evils on rising
concentration – it blames everything on
rising concentration – and proposes “all-in pricing.” But all-in
pricing just obscures the cost of certain components of a bundle of
goods and services, which is information consumers value and can use.
Finally, “the National Telecommunications and Information
Administration released a report on the state of competition in the
mobile app market that argues two dominant stores harm competition by
acting as gatekeepers; this report largely downplays or simply ignores
the benefits that come with exclusive app stores and the security risks
that opening access to devices can present.” This is well-trodden territory,
with questionable logic and no congressional legislative traction.
In a world filled with serious policy issues ranging from Ukraine, to
inflation, to the federal budget, the Competition Council is an amusing
gift that keeps on giving.
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