The recent lawsuit filed by Washington, D.C., Attorney General Brian Schwalb against StubHub has shed light on the alleged deceptive and unfair pricing strategies employed by the online ticket exchange platform. The lawsuit accuses StubHub of using misleading advertising tactics, specifically hiding the true price of tickets to attract consumers who end up paying significantly more during the checkout process. According to Schwalb, this is a deliberate strategy by StubHub to maximize profits at the expense of its customers.
StubHub, valued at over $16 billion, had been considering an initial public offering (IPO) for the summer. However, the company recently announced a delay in the IPO until after Labor Day due to challenging market conditions. This delay comes in the wake of the lawsuit, which has brought to light the company’s questionable pricing practices and raised concerns among consumers and lawmakers alike.
The lawsuit alleges that StubHub employs a practice known as “drip pricing,” where a countdown clock creates a false sense of urgency for consumers. As customers proceed through the checkout process, StubHub adds on significantly higher “fulfillment and services fees” without providing a clear explanation for these additional charges. This practice has drawn criticism from various quarters, with comparisons being drawn to similar deceptive pricing strategies employed by other industries, such as airlines.
The attorney general’s office pointed out that StubHub used to follow an “all-in pricing” model from 2014 to 2015, where mandatory fees were included in the advertised ticket prices. However, the company switched to the drip pricing model following a testing period that revealed higher purchase rates at inflated prices when fees were hidden until the end of the checkout process. The lawsuit stresses that consumers in Washington, D.C., spend a significant amount per capita on live entertainment and are particularly affected by StubHub’s pricing practices.
One of the key allegations in the lawsuit is the lack of transparency from StubHub regarding how fees are calculated for each ticket purchase. An example provided in the complaint shows a pair of tickets initially advertised at $178 per ticket or $356 for the pair, but the final checkout price displayed is approximately 40% higher at $497 for both tickets. Since 2015, StubHub has reportedly sold over 5.5 million tickets in the district, raking in an estimated $118 million in hidden fees. These figures emphasize the substantial impact of the company’s pricing tactics on consumers.
StubHub has been a significant player in the ticketing industry since its establishment in 2000. Co-founder Eric Baker and his company Viagogo reacquired StubHub from eBay in a $4 billion deal in 2020. Despite its prominent position in the market, StubHub has faced multiple legal challenges, including a federal class action lawsuit in January for deceptive pricing practices.
The lawsuit against StubHub highlights the importance of transparency and honesty in pricing practices, especially in industries that heavily rely on consumer trust. The case serves as a reminder for businesses to prioritize ethical conduct and fair dealings with their customers to maintain long-term relationships and credibility.