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It’s Time to Ban Hidden Fees | Harvard Business Review

In the classic shell game of three-card Monte, marks are rewarded if they are able to identify the “money card” among three face-down cards that are being shuffled. In this sleight-of-hand scam, the mark is never able to choose the right card.

An increasing number of businesses are playing a version of three-card Monte with how they set their prices. “Bait-and-surcharge” involves marketing an attractive price to gain consumer interest. However, when it comes time to purchase, mandatory surcharges are tacked on. Through this sleight-of-hand, the advertised price is never the final price. This is an unethical business practice.

Bait-and-surcharge pricing is becoming the norm in many industries. Ever try to book a hotel room in a resort area? Don’t forget the hidden fees. A $25 advertised room rate at the Circus Circus hotel in Las Vegas appears to be a bargain. However, click to purchase and you are hit with an additional $36.28 nightly resort fee. An advertised $49.50 ticket price to attend a Billy Joel concert in Phoenix comes tethered with a 50% premium slapped on at checkout for service, facility, and ordering fees. Sprint has decided to add an inescapable “administrative charge” to its advertised prices, which for me adds another $5 to my monthly bill.

An emerging trend at restaurants is to have a footnoted asterisk at the bottom of menus levying an unavoidable 3% “kitchen appreciation” fee. This fee is typically accompanied with verbiage indicating that the surcharge is dedicated to providing a living wage to kitchen staff. To avoid infringing on servers, restaurants make it clear that this line item charge is not the tip. This is a sketchy practice. I’m all in favor of paying the kitchen staff living wages, but restaurants should muster the courage to be transparent and simply raise their menu prices.

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It’s Time to Ban Hidden Fees.

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