Federal regulators are once again taking a tough stance, taking aim at large swathes of the American economy. This time, they are unnecessarily intervening in a financial situation that market forces are already taking care of. The biggest culprit in this latest scheme of regulatory overreach is the Federal Trade Commission.

Through that new thing, making rules, the FTC is trying to curb so-called “junk fees.” According to the European Commission, this is done to “prohibit unfair or deceptive practices relating to prices for goods and services”, which clearly amounts to “misrepresenting the nature and purpose of the charges”. . FTC receives surprising report 51,587 public comments Regarding this proposed rule. But that's not surprising. The White House boasts that The scope of this regulation applies to “industries throughout the economy.”

Now, I don't know anyone who likes being charged unexpected fees for no purpose. As an economist, I get especially upset when someone sneaks up on my final bill. However, the government is missing an important point here. This means that not all junk fees are created equal.

On the other hand, there are wireless carriers' “surge fees,” car rental companies charging extra fees for early returns, and concert ticket operators' practices similar to Taylor Swift's Elas Tour. On the other hand, fees are charged by app-based delivery providers, for example. These fees are transparent to each customer and go directly to supporting critical business services.

Therefore, a complete ban on these fees by the FTC would have many negative effects on the overall economy. Importantly, this suspension will also upset consumers.

If you've ever taken an economics course, you may have heard the term “value added.” This concept is used to measure the added value provided by a provider of goods or services. Having lectured on this subject many times, I have speculated on similar applications regarding these charges. Charges for additional services requested by the consumer are not junk charges. From this perspective, price transparency (i.e., consumers know what they are paying for) and price simplicity (i.e., consumers know what the additional charges are if they do not receive additional services). It is important to note that there is a delicate balance between .

Many of the companies targeted by the FTC are leading the way in creating a new consumer choice environment by offering consumers more choice. Consumers determine the price level that meets their specific demands. In fact, a former senior staffer at the F.T.C. I got it. “Overly broad regulatory enforcement…could undermine the market discovery process that maximizes consumer access.” Because of this trade regulation rule, the FTC would be wise to focus only on bad actors who defraud customers, rather than sweeping all companies under the same rug.

When I teach students in my MBA classes, we discuss how companies respond to market forces. The dynamic we often find is that companies are very good at being nice when customers are upset or don't want to pay for their services. When it comes to junk fees, consumers are understandably upset if they receive a surprise fee when they don't even get the extra service, compared to the price they knowingly paid to get the extra service.

The team at Applied Marketing Science has published the following paper: study As the Harvard Business Review explains, “Empathetic customer service can create more value as consumers look to a wider range of channels for help and expect faster responses.” I am. In today's economy, product and service providers are best in class on this continuum of speed and empathy. But a proposed ban on these fees altogether would actually make consumers even more angry. why? Providers of goods and services that do not address fee concealment will see significantly lower revenues. This could result in service providers being forced out or forcing higher core prices on consumers to compensate for these losses. Thanks to the FTC, pizza delivery prices are going to get more expensive, not cheaper.

Again, market participants are organically providing solutions to consumer dissatisfaction with these fees. At the end of the day, customer satisfaction and retention are what matter most. The FTC's proposed blanket ban would only thwart this progress. More importantly, Kato Institute Explanatory Materials “The key economic insight remains: Prohibition [junk] Fees primarily increase the base price and do not provide significant benefits to customers. ”

Before it's too late, the FTC should either shelve this rule or significantly modify it to account for the different parts of the economy affected by this rule. Otherwise, innovation will be stifled, small businesses will go out of business, and opportunities for workers will decline. And we all quickly end up paying higher prices when ordering our favorite foods.

Dr. Nam D. Pham is Managing Partner of ndp | George is an adjunct professor at the University of Washington School of Business, an analytics, economics and communications research firm.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.