Online event platform StubHub uses predatory sales tactics to illegally deceive consumers into paying more for tickets, prosecutors allege in a new lawsuit.
Washington Attorney General Brian L. Schwalb filed a lawsuit against StubHub for misleading consumers by hiding mandatory fees until buyers make a purchase. Those fees can increase the total price of a ticket by 40 percent, according to the complaint.
StubHub’s use of so-called price drop by drop — or when a business offers an initially low price but then adds a fee — can mislead consumers into paying more than they expected, the complaint says. That strategy violates the District of Columbia Consumer Protection Procedures Act, a law that requires merchants to provide truthful information about consumer goods sold in the city, the complaint says.
The complaint, filed Tuesday, also claims that StubHub fails to provide consumers with clear and accurate information about what ticketing fees are or how the company calculates those fees. It also alleges that StubHub’s use of a transaction countdown timer creates a false sense of urgency to encourage shoppers to make a purchase.
A StubHub spokesperson did not immediately respond to a request for comment.
Navigating “dozens of screens”
The allegations come amid growing scrutiny by lawmakers and consumer advocates of the negative impact of trickle pricing, a retail tactic that typically involves adding fees to a purchase that aren’t clearly disclosed, driving up the price of a product or service.
“Drip pricing is a phenomenon in which a company tries to sell goods or services to consumers and slowly, over time, changes the terms of the transaction so that [by] “At the end of the transaction, it looks very different to the consumer,” Schwalb told CBS News.
“StubHub intentionally misleads consumers by offering them a deceptively low price up front, luring them into a lengthy and protracted purchasing process, often making consumers go through dozens of screens before finally receiving the final price,” he added.
Such tactics are intended to dissuade consumers from abandoning the purchase, Schwalb said. For example, StubHub’s site displays a countdown timer that makes consumers believe the tickets they are buying might disappear, while requiring them to click through multiple screens to get to the purchase page, according to the complaint.
As a result, consumers often end up buying tickets that include fees that add 40% to the final price, according to the complaint. The attorney general’s office estimates that Washington, D.C., consumers paid a total of $118 million in hidden fees to StubHub.
Schwalb’s office wants to stop StubHub from using these tactics and recoup the $118 million in fees people paid the company to buy tickets to events in Washington.
The Biden administration has committed to battle costs for wastewhich cost consumers $29 billion each year in excessive fees, according to the federal Consumer Financial Protection Bureau.
How Consumers Are Manipulated
Drip pricing can force consumers to pay more than they expected, in part because shoppers overestimate the time they would need to launch a new search for a cheaper option, Vicki Morwitz, a marketing professor at Columbia University’s Graduate School of Business, told CBS News.
“They have to decide, ‘Is it worth starting all over again?'” Morwitz told CBS News.
When fees are reduced, consumers are more likely to make a purchase, but they also tend to buy products that seem cheaper at first but end up being more expensive, she noted.
“This is problematic because consumers end up buying something they may not have planned to buy, or that is more expensive than they expected,” Morwitz added. “And that’s not only bad for consumers, it can also be detrimental to honest competitors.”
Encrypted fees
Just before a purchase, StubHub adds a “fulfillment and service fee” that, the complaint alleges, has nothing to do with “fulfillment” or “service.” The fees can vary widely in price, and StubHub does not disclose to consumers how the fees are calculated or what they cover, the complaint alleges.
For example, the complaint includes the example of tickets to an Usher concert, each ticket initially listed at $178 each. But at the end of the purchase, StubHub added a $70 processing and service fee per ticket, increasing the final price by about 40%, according to prosecutors.
When CBS MoneyWatch searched for a ticket on StubHub for a show featuring “Crazy Ex-Girlfriend” star Rachel Bloom, the show was listed at $92 per ticket. But when it came time to check out, a $38 processing and service fee per ticket was added, increasing the cost by 41 percent. The ticketing service did not specify what the fee would be used for.
StubHub has already faced lawsuits over its pricing, including a class-action lawsuit in January alleging that the platform hid the final cost of tickets from customers. And it’s clear that StubHub isn’t alone in relying on trickle pricing, with hotel chains like Marriott settle similar disputes.
“Ultimately, consumers are paying more than they thought they would pay and haven’t had the opportunity to compare prices along the way,” Schwalb said.
