When the Red Tape Gets All Tangled Up With Itself

Funnily enough, the Washington, D.C. technocrats who claim to possess the vast knowledge and prophetic vision needed to micro-manage the American economy, seem unable even to keep track of what other self-congratulatory D.C. technocrats are doing. As Congress and agency bureaucrats all rush to codify their preferred policy proposals, contradictory and duplicative regulatory proposals run amok and get tangled up with one another. All this happens with little regard for the confused citizenry who must sort out the resulting confusion.

Consider clash of two recent overlapping – yet incompatible – regulatory forays, the Federal Trade Commission’s (FTC) “junk fee” proposal and the Federal Communications Commission’s (FCC) “all-in pricing” rule. Both aim to require businesses to display prominently the full price of their products, which, the agencies say, will promote transparency. The agencies worry that businesses whose advertised prices omit mandatory charges (e.g., hotels that fail to disclose resort fees from online listings until the customer is deep into the checkout process) are misleading and harmful to consumers. The FTC’s proposed rule would apply economy-wide, while the FCC’s finalized rule, adopted in March, regulates only direct broadcast satellite broadcasters and cable operators. (Note: The FCC’s rule also includes regulation of price disclosures in subscriber billing, a topic this blog does not address.)

An uncomfortable friction exists between these two actions. Their price-transparency requirements, while similar, are by no means identical. Businesses subject to FCC regulation would, if the FTC finalizes its junk fees rule, find themselves contending with both sets of mandates. The regulations’ dissimilarities would compound the burdens that each one imposes.

These dangers have not gone unnoticed. Bloomberg reports that advocates at an April hearing urged the FTC “to exclude broadband providers and cable communication services from any final rule.” Navigating between the Scylla and Charybdis of dueling regulatory regimes would likely confuse not only corporate lawyers but consumers.

Even absent parallel regulation, the theory undergirding the FTC’s junk fee regulation seems shoddy on its own merits. At the April hearing, Bloomberg writes that concerned commenters told the FTC that its proposal “could remove national price advertising due to varying fees based on consumer location, further confusing customers.” Moreover, the report continues, “They…said the regulation might burden and bewilder small businesses, especially in the fitness, restaurant, or health-care sectors.”

Regulation ineluctably involves tradeoffs. “Price transparency” is a nice-sounding phrase, but requiring it by fiat nonetheless imposes costs, which businesses must divert finite resources to pay. When policy-makers craft heavy-handed, inscrutable, or conflicting regulations, the economic burdens increase. Leave aside compliance – simply determining what compliance entails often adds significant costs for industry.

Big regulation most harms the little guy. It is ever the case that regulatory complexity subsidizes large incumbents at upstarts’ and innovators’ expense. Small businesses usually lack the large pools of on-hand cash and lawyers necessary to navigate complex regulatory waters. And average consumers, in turn, also contribute to paying these costs as businesses raise prices to offset newly imposed red tape.

Less-than-fully-upfront price disclosures can, of course, drift into material deception, meriting state intervention. But enthusiastic regulators just as often deploy the label “pro-consumer” to obscure nanny-statism.

The respective headquarters of the FTC and the FCC are separated by just a mile-and-a-half in Washington, D.C., and each building stands even closer to Capitol Hill. Nonetheless, they — and other federal agencies — often regulate as if they live in their own world, subjecting American businesses and consumers to endless streams of red tape.