Washington, D.C., Attorney General Brian Schwalb recently took legal action against the online ticket exchange platform StubHub for its alleged deceptive and unfair pricing practices. The lawsuit claims that StubHub engages in misleading advertising by promoting low ticket prices to attract consumers, only to surprise them with significantly higher prices during the checkout process. According to Schwalb, this strategy is no accident and is designed to maximize profits at the expense of customers.
The lawsuit came at a critical time for StubHub, as the company had been planning a summer initial public offering (IPO) with a valuation of over $16 billion. However, due to challenging market conditions, StubHub decided to postpone the IPO until after Labor Day. The AG’s office revealed that StubHub employs a system known as “drip pricing,” which involves using a countdown clock to create a false sense of urgency among consumers. This tactic allows StubHub to add substantial “fulfillment and services fees” without providing a clear explanation.
The attorney general’s lawsuit highlighted StubHub’s shift from “all-in pricing” to hidden fees between 2014 and 2015. During a testing period, StubHub found that by concealing fees until the end of the checkout process, consumers were more likely to make purchases at higher prices. This discovery underscores the company’s intention to capitalize on consumers’ lack of awareness regarding additional charges. The complaint also pointed out that StubHub fails to disclose how fees are calculated throughout the purchasing journey, leaving customers in the dark about the total cost.
The AG’s office emphasized the negative impact of StubHub’s practices on Washington, D.C., where residents and visitors spend a substantial amount per capita on live entertainment. The complaint cites an example where a pair of tickets advertised at $178 each ultimately costs $497 for the pair after additional fees are revealed. Since 2015, StubHub has reportedly generated approximately $118 million in hidden fees from over 5.5 million ticket sales in the district. This pattern of hidden costs has also led to a federal class action lawsuit against the company in January for misleading customers on ticket prices.
Despite the legal scrutiny, StubHub has maintained its position as a major player in the ticketing industry since its inception in 2000. Co-founder Eric Baker and his company Viagogo repurchased StubHub from eBay in 2020 in a $4 billion deal. The ongoing legal challenges and allegations of deceptive pricing tactics suggest that the company’s market dominance may be compromised if it fails to address these issues.
The lawsuit against StubHub sheds light on the deceptive pricing strategies employed by the company to maximize profits. The legal action by the Attorney General underscores the importance of transparency and fair pricing practices in the ticketing industry. As consumers become increasingly vigilant about hidden fees and misleading advertising, companies like StubHub will need to reevaluate their business practices to maintain trust and integrity within the market.