StubHub tricks consumers into overpaying for tickets, prosecutors allege

Online events platform StubHub is using predatory sales tactics to illegally mislead consumers into shelling out more for tickets, prosecutors allege in new lawsuit. 

Washington, D.C., Attorney General Brian L. Schwalb claimed in a complaint that StubHub is tricking consumers by hiding mandatory fees until just before shoppers make a purchase. These fees can boost the total cost of a ticket by 40%, the lawsuit alleges. 

StubHub's use of so-called drip pricing — or when a company dangles an initial low price but later tacks on fees — can deceive consumers into paying more than they expected, the suit alleges. The strategy violates the District of Columbia's Consumer Protection Procedures Act, a law that requires merchants to provide truthful information about consumer goods sold in the city, the suit claims. 

The complaint, filed Tuesday, also claims StubHub is failing to provide consumers with clear and accurate information about the purpose of ticket fees or how the company calculates those charges. It also alleges that StubHub's use of a transaction countdown clock induces a false sense of urgency aimed at pressuring shoppers into making a purchase. 

StubHub said it is committed to ensuring a transparent and competitive platform for consumers. 

"We are disappointed that the DC Attorney General is targeting StubHub when our user experience is consistent with the law, our competitors' practices and the broader e-commerce sector," the company said in a statement. "We strongly support federal and state solutions that enhance existing laws to empower consumers, such as requiring all-in pricing uniformly across platforms."

Navigating "dozens of screens"

The allegations come amid growing scrutiny by lawmakers and consumer advocates of the adverse impact of drip pricing, a retail tactic that typically tacks on fees to a purchase that aren't clearly disclosed, driving up the price of a product or service. 

"Drip pricing is a phenomena where a company is trying to sell goods or services to consumers and slowly, over time, changing the terms of the transaction so that [by] the end of the transaction, it looks very different to the consumer," Schwalb told CBS News.

"StubHub intentionally misleads consumers by deceptively offering a low price at the front end, luring them into a long, protracted buying process, oftentimes running consumers through multiple dozens of screens before they're eventually given the final price," he added.

Such tactics are aimed at deterring consumers from abandoning the purchase, Schwalb said. For instance, StubHub's site shows a countdown clock that makes consumers think the tickets they are buying could disappear, while also requiring people to click through multiple screens to get to the purchase page, the suit alleges.

As a result, consumers often end up buying tickets that include fees that add 40% to the final price, the lawsuit claims. The attorney general's office estimates that consumers in Washington, D.C., have paid a total of $118 million in hidden fees to StubHub.

Schwalb's office wants to stop StubHub from using these tactics, as well as to recoup the $118 million in fees that people have paid to the company to buy tickets to D.C. events.

The Biden administration has vowed to battle junk fees, which cost shoppers $29 billion each year in excessive charges, according to the federal Consumer Financial Protection Bureau. 

How consumers are manipulated

Drip pricing can lock consumers into paying more than they had planned partly because shoppers overestimate the time they would need to start 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 it to start over again?'" Morwitz told CBS News. 

When fees are dripped, consumers are more likely to make a purchase — but they also tend to buy products that appear cheaper at first but ultimately end up being more expensive, she noted. 

"It's problematic because consumers end up buying something that they would not have perhaps intended to, or that's more expensive than they intended to," Morwitz added. "And it's not just bad for consumers — it can also be harmful for honest competitors."

Cryptic fees

Right before a purchase, StubHub tacks on "fulfillment and service fees" that the lawsuit alleges are unrelated to "fulfillment" or "service." The fees can vary significantly in price, and StubHub doesn't disclose to consumers how the charges are calculated or what they cover, the suit claims. 

For instance, the lawsuit includes the example of tickets to see an Usher concert, with each ticket initially advertised at $178 each. But by the end of the purchase, StubHub added a fulfillment and service fee of $70 per ticket, increasing the final price by about 40%, prosecutors allege.

When CBS MoneyWatch searched for a ticket on StubHub to a show starring "Crazy Ex-Girlfriend" star Rachel Bloom, the show was advertised at $92 per ticket. But at checkout, a $38 per ticket fulfillment and service fee was added, boosting the cost by 41%. The ticketing service didn't specifically disclose what the fee would pay for. 

StubHub has faced prior lawsuits about its pricing, including a January class action suit alleging that the platform hid the final cost of tickets from customers. And to be sure, StubHub isn't alone in relying on drip pricing, with hotel chains such as Marriott settling over similar lawsuits.

"At the end, consumers are paying more than they thought they were going to pay and have not had an opportunity to comparison shop along the way," Schwalb said.