The way which prices are displayed on StubHub.com has drawn the ire of the National Advertising Division, which announced this week that it has referred the matter to the Federal Trade Commission (FTC) for review. According to the NAD, the company first requested that StubHub pricing be altered to include taxes, delivery and service fees. The eBay-owned (NASDAQ: EBAY) company declined, at which point NAD forwarded their concerns to the FTC as the appropriate regulatory body.
NAD is a self-regulation investigatory body within the advertising industry administered by the Council of Better Business Bureaus. It reportedly began its look at StubHub’s advertising practices as part of a routine monitoring program.
The core of the complaint is the fact that StubHub, much like the rest of the ticketing industry, both primary and secondary, lists a base price for tickets until a user has gotten to the checkout stage. At that stage, additional fees are displayed and the price goes up.
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.
In its response, StubHub argued that it follows all applicable laws related to advertising and employs industry-standard practices that include disclosure of these fees prior to a consumer making a purchase. It also cited a previous period in company history where it displayed all-in pricing for tickets, only to see its market share diminish when competing ticket sales platforms did not follow suit. It declined to comply with the recommendations put forth by the investigative body, and “respectfully disagrees with NAD’s conclusions.”
StubHub did not respond to a request for further comment from TicketNews.
NAD was apparently not satisfied by these arguments, indicating that “industry-wide practice alone will not satisfy the requirement for reliable consumer perception evidence as to what a reasonable consumer understands.” In short, just because everyone does it, doesn’t mean there aren’t consumers out there that don’t get it.
It is unclear whether or not the FTC will take up the suggested review of the business practices of this particular secondary marketplace, or the secondary marketplace as a whole. It is also unclear why the NAD chose to focus specifically on one marketplace, though the fact that StubHub has a 96% negative customer review rating on BBB.org could play a role.