At some point, you have probably experienced a sticker shock during checks to pay for your concert tickets or your stay at the hotel.
This is because, too often, companies will fight against the so-called “junk food”, often labeled as “convenience costs”, “resort costs” or “service costs” for hotels reservations and live event tickets that you only see after you are about to pay down.
The reason for which many companies await payment to disclose these junk food costs is that, at this stage, you are much more likely to pay these inflated prices. In a study in 2021 published in Marketing Science, Stubhub customers who have not shown a fee to the cash register spent around 21% more.
“They select the ticket. They will check. Now, it’s 15% (more because of service costs) … But because they are attached to the ticket, they end up making a purchase that they would not have otherwise,” said Steven Tadelis, co-author of this study and economics teacher at the Haas School of Business of the University of California, Berkeley.
But from this week, some companies can no longer take advantage of our purchase biases. It is now illegal for consumers to face these undesirable surprises while they check to pay concert tickets and short -term stays.
Announced in December by the Federal Trade Commission, the prohibition of the Biden administration entered into force on May 12. The rule covers both transactions in person and online, but it does not cover all business sector. The rule prohibits only this bait and switching price for live event tickets or short -term accommodation such as an Airbnb or Resort stay – it does not apply to hidden luggage charges that airlines make and customers complain, for example.
Despite the limits, the prohibition is an important additional protection for buyers. Beyond lost money, consumers are now protected to waste unnecessary time while waiting to buy tickets that they cannot afford.
Stacy Cammarano, an FTC lawyer, in the division of advertising practices, said that during the commentary period of the proposed rule, the agency received thousands of consumer complaints saying that they “were attracted by these very low prices, then they spent all this time in the payment process, to discover at the end that the prices are much higher.”
“They were struck by expensive and often mysterious costs at the end when they were going to pay,” said Cammarano. “I really hope this rule will do a lot of work to approach these practices.”
Here is what type of hidden fees is now prohibited under the FTC.
The rule does not affect the amount of companies, but it now forces them to be honest about their costs in advance.
Before the rule, companies could invoice customers more while checking under convenience costs. “They call it convenience costs,” said Tadelis. “But in the end, all you do is to go to the website, choose a ticket, go check and buy it. So where is the service?”
From now on, under the FTC rule, companies must make “clear and visible” disclosure of the total price in advance which are “easy to understand for people to be missed”, the FTC states in its online explanator. Companies cannot use illegible policies or contradictory language to mislead customers on what they plan to buy.
“It should not be hidden in the small print. It must be as obvious as the main words you use in your advertisement,” said Cammarano. She gave the example of a compulsory cleaning expenses in a holiday home, which would be covered by the rule, and should be included in the total price you see in evidence.
Also say goodbye to surprise the treatment costs at the checkout. In its guide on the new rule, the FTC said that if a company forces people to pay with a credit card and that credit card costs are compulsory, it must be included in the total price.
On Monday, Ticketmaster, which was blamed for having done this hidden practice, said that it would start to display the full price of a ticket as soon as consumers are starting to shop, so that the price you see first is what you pay at the checkout.
What if you notice unwanted costs during shopping
If you notice hidden fees the next time you pay for a concert ticket or book a hotel room, you can report what you have found at your condition of your condition or the FTC in Reportfraud.ftc.gov. The FTC rule noted that companies were in opinion if they violate this ban and could be ordered to pay civilian penalties.
“There are several ways to carry out the FTC if we receive a complaint that we find being a solid allegation. We could contact the company directly. We could also send a civil assignment to the company to obtain more information, and possibly, we could also file a complaint before the courts,” said Cammarano.
Cammarano expects this decision to have a positive impact on consumers because “this requires honest and transparent prices for live event tickets and short -term accommodation”. Companies are now also on game rules and cannot use these hidden costs to make their tickets cheaper than competitors, she added.
Tadelis, for his part, is “extremely happy”, this decision is now in force. “There was really no commercial justification to allow compulsory hidden costs,” he said. “The only justification was that companies earned more money than they would do otherwise.”