March 18, 2020

Online Ticket Seller Faces the Music on Extra Fees

Lisa R. Lifshitz

On February 13, 2020, the Canadian Competition Bureau struck another blow against so-called “drip-pricing” ticket selling tactics when it slammed the deceptive online advertising, marketing, and selling practices of StubHub Canada Ltd. and StubHub Inc. (collectively “StubHub”) for failing to display the real price of the entertainment and sporting events tickets they sold upfront, instead augmenting prices through the addition of quasi-hidden mandatory fees.

The companies ultimately agreed to pay a $1.3 million administrative monetary penalty to the Canadian Commissioner of Competition as part of a Consent Agreement (“Agreement”) following the Bureau’s investigation and the determination by the Commissioner of Competition/Competition Tribunal that the companies had made representations to the public that were false and misleading in a material respect and that they had engaged in conduct reviewable under the Competition Act (Canada).

As described in The Commissioner of Competition v. StubHub Inc., Stubhub Canada Ltd. (CT-2020-002) (decided February 13, 2020), the Commissioner reviewed StubHub’s pricing for tickets advertised on its public websites and mobile applications, as well as in promotional emails. The Commissioner concluded that StubHub promoted prices for tickets that were not actually attainable and that consumers could not actually buy tickets at the advertised prices because StubHub charged consumers so-called “non-optional” fees in addition to the prices advertised. These fees included so-called “service fees,” “transactional fees,” “fulfillment fees,” “delivery fees,” “additional fees,” and just plain “fees” that were added to the prices described on checkout pages before the consumers actually purchased tickets. In fact, the prices shown on the checkout pages were often 28% higher than the advertised price because of these fees.

Interestingly, while StubHub had given consumers an option to click or tap to “show prices with estimated fees” toggle on the pages containing the advertised price, the Commissioner found that even when consumers choose to see these fees by turning the toggle on, they sometimes were still required to pay more than the price represented as inclusive of all estimated fees.

Significantly, the Commissioner concluded that even if StubHub had disclosed the amount of the “non-optional” fees later in the purchasing process (i.e. on the checkout page), such action did not mitigate StubHub’s earlier practices nor prevent the sellers from engaging in “reviewable conduct” under the Competition Act.  Overall, StubHub’s practices were found to be in contravention of paragraph 74.01(1)(a) of the Act, which states that a person engages in reviewable conduct if they, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, including making a representation to the public that is false or misleading in a material .

StubHub was also found to have used email to engage in reviewable conduct, contrary to Section 74.011 of the Act, as they sent misleading promotional email messages to consumers to promote their ticket sales, including (i) a false or misleading representation in the sender information or subject matter information of an electronic message; and (ii) a representation that is false or misleading in a material . It should be noted that the Act does not care whether the electronic address to which an electronic message is sent exists or whether an electronic message reaches its intended destination—it’s the fact that StubHub sent them that counted.

StubHub ultimately cooperated with the Commissioner and did not contest the Bureau’s findings (explicitly in exchange for more favorable terms). They agreed to execute a Consent Agreement which once registered has the same force and effect as an order of the Competition Tribunal. In the Consent Agreement, StubHub agreed to make all necessary changes with their Canadian websites, mobile applications, and emails to ensure that consumers were shown complete prices inclusive of all mandatory fees the first time that they were shown a price. StubHub was also required to intercept users identifiable as Canadians and require them at the outset to make an express choice to be redirected to Canadian stubhub.ca websites when searching for tickets on stubhub.com.

Additionally, StubHub was also required to establish a compliance program and implement new procedures to comply with the law and prevent advertising issues in the future within ninety (90) days of its execution of the Consent Agreement. Senior management of both companies, including the Chief Executive Officer, Chief Operating Officer, Chief Administrative Officer, Chief Financial Officer, Managing Directors, with responsibility for advertising and marketing tickets, must acknowledge a commitment to the compliance program by signing commitment letters. All current and future employees who are materially involved or responsible for developing, implementing, or overseeing ticket advertising or marketing will be given copies of this Agreement and are expected to sign statements acknowledging their compliance with its terms. StubHub has ten (10) days to notify the Commissioner of any breach or possible breach of any of the terms of the Consent Agreement, providing details sufficient to describe the nature, date, and effect (actual and anticipated) of the breach or possible breach, and the steps StubHub has taken to correct the breach or possible breach. The Consent Agreement is binding on StubHub for a period of 10 years following its registration.

This investigation and decision are consistent with recent Competition Bureau activity to resolve consumer concerns relating to the advertisement of unattainable online prices. As the Bureau’s website noted, various Canadian companies, including Ticketmaster and several car rental agencies, have paid a total of $11.25 million in penalties since 2016 in connection with hidden fees. On July 4, 2017 the Bureau expressly issued a warning to all ticket vendors to be upfront about the true cost of tickets available for purchase and make all necessary corrections to their existing business practices to be frank regarding any mandatory fees.

This decision serves as a costly reminder to all U.S. vendors that conduct business with Canadians online that not only is pricing transparency the hallmark of good business practice, it is also a legal requirement for doing business with Canadian consumers regardless of the media channel.  Deceptive marketing practices, including false or misleading drip pricing, will not be tolerated. As evidenced in the StubHub Consent Agreement, it also appears that the Bureau expects pricing transparency to exist throughout the purchasing experience; as discussed above, StubHub was not saved from findings of false or misleading practices or reviewable conduct by disclosing the non-optional fees at later stages of the purchasing process, including on the check-out page. U.S. vendors selling goods and services to Canadian consumers online would do well to review their marketing practices in light of this decision and take all necessary steps to bring themselves in compliance lest they risk significant penalties.

Lisa R. Lifshitz

Partner, Torkin Manes LLP Barristers & Solicitors

Lisa is a partner in Torkin Manes’ Business Law Group, specializing in the areas of information technology and business law and is the leader of the firm’s Technology, Privacy & Data Management Group and Emerging Technology Group.