Analysis & Comment

Opinion | Stop the Hidden-Fee Rip-off

Want to catch a ballgame at Yankee Stadium? Tickets for Sunday’s game against the Seattle Mariners are being advertised by Ticketmaster, the league’s preferred vendor, for as low as $15.

But tickets cannot be purchased there for that price. After you select seats and reach the payment screen, Ticketmaster notifies you of a $4.20-per-ticket “service fee,” plus a $3.30 “order processing fee.” For a single ticket, the $15 advertised price is in fact $22.50 — an increase of 50 percent.

As most consumers know, such hidden fees are common. Part of a strategy known as “drip pricing,” sellers use hidden fees to advertise a deceptively low price that lures in consumers under false pretenses, revealing the full cost — including mandatory surcharges — only once the consumer is on the verge of completing the transaction. The practice is pervasive for concerts and other events that impose ticketing charges, as well as hotel and vacation rentals that charge cleaning or resort fees. With many Americans resuming social and travel plans, their exposure to these fees is resuming as well.

The Federal Trade Commission, a government agency charged with protecting consumers from deceptive, unfair and anticompetitive trade practices, has the authority it needs to ban the practice. Drip pricing has been on the commission’s radar for years, and action is long overdue. The agency’s new Democratic majority — led by its new chairwoman, Lina Khan, an outspoken proponent of consumer rights — recently streamlined the commission’s rule-making process and now appears poised to pass regulations that protect consumers. Drip pricing should be high on its priority list.

Drip pricing has no legitimate business purpose and harms consumers in at least two key ways. First, the practice leads people to spend more money than they would if the full price were communicated upfront. While consumers can in theory walk away once the true price is revealed, studies show that many consumers complete such transactions, given the time and effort that they have already invested. Second, even for consumers who abandon a transaction, drip pricing wastes time and severely complicates efforts to compare the actual prices of competing offers.

Drip pricing can also be damaging to businesses, and it is not a problem that the market will correct on its own. Unless all sellers are required to disclose their full prices upfront, companies that opt for transparency risk losing market share to those that practice deception. After finding in 2015 that customers spent over 20 percent more on tickets on its website when mandatory fees were hidden versus when the full price was disclosed upfront, StubHub resumed its practice of concealing mandatory fees in order to keep up with the competition.

The F.T.C. has threatened action in the past. In 2012, after hosting a conference on drip pricing, the commission warned 22 hotel operators that their advertisement of incomplete prices might constitute an illegally deceptive trade practice. “Consumers are entitled to know in advance the total cost of their hotel stays,” the commission’s then-chairman, Jon Leibowitz, said at the time. But the F.T.C. did not take any enforcement action.

In 2019, at an F.T.C. workshop on online ticket sales, Commissioner Rebecca Slaughter said that “deceptive ticket pricing has passed its boiling point” and warned ticket sellers to consider themselves “on notice” of potential enforcement actions. But again the commission did not take legal action.

Still, facing this pressure from the F.T.C., StubHub and some other ticket providers now offer consumers the option of seeing full ticket prices, with mandatory surcharges included. But requiring consumers to take extra steps to find genuine pricing information is not a substitute for providing that information as the default.

In the absence of F.T.C. action, other government entities have tried to fill the void. The city of San Francisco, for example, filed suit against the online travel sites JustFly and FlightHub for “unlawful and deceptive business practices,” the District of Columbia sued Marriott, and Nebraska pursued a similar action against Hilton. At the federal level, the Department of Transportation banned drip pricing in the airline industry.

While these efforts are laudable, they are not a substitute for protecting consumers nationwide from hidden fees in all industries. With its broad mandate to regulate against unfair, deceptive and anticompetitive trade practices throughout the economy — and its previous warnings — the Federal Trade Commission is best equipped to take on that mantle.

That’s why several colleagues from the Institute for Policy Integrity at New York University School of Law and I filed a petition for rule-making last month, calling on the F.T.C. to ban the use of drip pricing. Under our proposal, all sellers would be required to disclose the full price of a product or service upfront, with any mandatory surcharges included as part of that total price.

A ban on hidden fees and drip pricing would represent a huge win for consumers and improve the functioning of markets where the practice has taken root. For the commission’s new majority that is eager to protect consumers, such a regulation should be a high priority.

Max Sarinsky is a senior attorney at the Institute for Policy Integrity at New York University School of Law.

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