'Hidden' online ticketing fees come under increased scrutiny

Of all the gripes that consumers have with the event ticketing industry—and they have many—there is no practice more universally reviled than costly “service fees” that are hidden from consumers until the very end of the purchasing process. If the FTC’s recent workshop on online ticket sales is any indicator, this pricing tactic may soon become a thing of the past.

In 2018, the National Advertising Division of the Council of Better Business Bureaus (NAD) brought a challenge against StubHub, an industry leader in after-market online ticket sales that allows consumers to resell tickets to popular concerts, sporting events, plays and other events. The NAD challenged StubHub’s practice of advertising ticket prices exclusive of its service fees.

Misleading
According to the NAD, in order to view StubHub’s service fees, which ranged from 24% - 29% of the ticket price—consumers had to sign in or sign up for a new StubHub account and advance past two additional screens to the “review and buy” page. Even then, the service fees were not identified as a separate charge. Instead, these fees were simply added to the total price of the ticket, and users had to click on a link to view the fee breakdown.

The NAD found this practice to be misleading. In arriving at this decision, the NAD looked to the FTC’s .com Disclosure Guides which specify that material information like fees should be disclosed “before consumers make a decision to buy—e.g., before they ‘add to shopping cart.’” Consistent with this guidance, the NAD concluded that StubHub’s service fees should be disclosed clearly and conspicuously when the initial price is advertised, not just at checkout. Otherwise, the NAD noted, consumers can be misled as to the total price of the tickets, and may not be able to compare prices effectively, given that different platforms charge different service fees.

Industry standard
In its written response to the decision, StubHub asserted that the challenged practices are standard in the industry and that consumers understand that they will have to pay additional fees at checkout. Moreover, according to StubHub, its previous attempts to introduce an “all-in” or fee-inclusive pricing model put the company at a competitive disadvantage, because its prices appeared to be higher than those of competing sites that charge fees at checkout. StubHub therefore declined to comply with the NAD’s recommendations, and the NAD referred the case to the FTC.

Ticket fee disclosures were once again the topic of discussion at the FTC’s June 11 workshop on online ticket sales. One of the most anticipated segments of the workshop was a panel on ticket-fee disclosures that included John Lawrence, regulatory and compliance counsel for StubHub, and Laura Brett, director of the NAD, as well as various other industry representatives (including Ticketmaster, SeatGeek and Eventbrite), an economist from MIT, and a representative from Consumer Reports.

All or none
Interestingly, the industry representatives were unanimous in their belief that fees should be disclosed up-front, rather than on a site’s check-out page. However, the representatives also agreed with StubHub’s position that individual companies cannot be expected to unilaterally change their pricing models. As Lawrence noted, “without some forcing mechanism for the rest of the industry to comply, then it just won’t work.”

In contrast, Brett referenced existing FTC guidance on material disclosures and asserted that enforcing these guidelines through self-regulation could help bring the industry into compliance without the need for additional regulation. The panel, however, was skeptical that self-regulation alone would be sufficient to force compliance. Instead, MIT’s Sara Fisher Ellison suggested that “this is a textbook place where a regulator could make a big difference.” The panel largely agreed, with every industry representative voicing support for regulations requiring online ticket sellers to disclose fees up-front.

FTC enforcement
While industry representatives appear to welcome the introduction of new, industry-specific regulations, the fact remains that the FTC can force industry-wide compliance without new regulations. As Brett noted, the FTC’s existing disclosure guidance “speaks specifically about where you have to disclose fees in the purchasing process,” and new regulations may therefore be unnecessary. If the FTC were to instead bring enforcement against key players in the industry based on its existing guidance, it could engage the industry to clean up its fee-disclosure practices without undertaking the lengthy and complicated process inherent in promulgating new regulations.

Time will only tell how the FTC may act, but if last week’s panel was any indicator, the online ticketing industry may be ripe for a shakeup.