NAD Refers StubHub Pricing Claims to FTC for Further Review After Advertiser Declines to Comply with NAD Decision on Disclosures

New York, NY – Jan. 16, 2018 – The National Advertising Division has referred pricing claims made at StubHub.com, an online ticket exchange, to the Federal Trade Commission (FTC) after the company declined to comply with NAD’s recommendations to more clearly disclose the additional taxes and fees applied to each ticket purchase.

NAD is an investigative unit of the advertising industry’s system of self-regulation and is administered by the Council of Better Business Bureaus.

StubHub.com is one of many online ticket exchange websites that offer consumers the ability to purchase tickets for sports, concerts, theater and other live entertainment events.

The key issue before NAD is whether consumers could be misled about the total cost of the tickets, including the pricing details of all fees, because the fees are not disclosed when the initial ticket price is displayed.

NAD noted in its decision that the same standards of truthfulness and accuracy pertaining to all advertising claims apply to pricing claims.  “Similarly, the initial advertising interaction between a consumer and an advertiser should be truthful as this initial contact affects consumer behavior and determines whether the consumer will choose to learn more about the product and ultimately make a purchase,” the decision states.

NAD considered but was not persuaded by the advertiser’s argument that because all major online ticket vendors and resellers have the same or similar fee-disclosure practices, consumers generally understand that fees will be added at the end of the purchasing process.

As proof of consumer expectation, the advertiser recounted that in the past it had listed prices inclusive of fees before the customer reached the check-out page and as a result it lost market share because consumers assumed that its prices were higher than competitor ticket sellers whose prices added fees at check-out.

NAD noted in its decision that an “industry-wide practice alone will not satisfy the requirement for reliable consumer perception evidence as to what a reasonable consumer understands.”

On the StubHub website, ticket pricing is advertised during the consumer’s initial search for tickets. Only after a purchaser clicks through to the final check-out page, is the total price – including service fees and taxes – displayed. Adding to the potential for consumer confusion, the service fees are added to the total price of the ticket purchase and are not separately itemized.  Only purchasers who click on a hyperlink labeled “pricing details” view the breakdown in fees charged.   The service fee, unlike taxes or standard shipping fees, is not a set fee or a set percentage on every purchase and can range from 24 percent to 29 percent of the ticket cost.

Ticket prices also vary among different online ticket vendors.  Consumers seeking to compare prices before making a purchase will not have material information about the fees charged from competing online ticket vendors until after they move from the webpage displaying the ticket price claims to the check-out page.

NAD has routinely held that information that is material to a claim must be clearly disclosed in close proximity to the claim. If material fees are added to the ticket price at check-out, these fees should be disclosed clearly and conspicuously when the initial price is advertised.

Further, NAD noted, the FTC has made it clear that when advertising and selling are combined on a website or mobile application, and the consumer will be completing the transaction online, disclosures should be provided before the consumer makes the decision to buy – before clicking on an “order now” button, for example, or a link that says “add to shopping cart.”

Following its review, NAD recommended that the advertiser modify its advertising to clearly and conspicuously disclose its service fees when it provides ticket prices on the StubHub website.

StubHub has declined to comply with NAD’s recommendations and said it will not appeal.

The company, in its advertiser’s statement, said “StubHub thanks NAD for its review of the company’s fee-disclosure practices but respectfully disagrees with NAD’s conclusions.”

Pursuant to its procedures, NAD has referred this case to the attention of the appropriate government agency for possible enforcement action.