We should force companies to be honest about their hidden fees
Two £586 resale tickets were on sale on Ticketmaster on Thursday to see Beyoncé perform at a London stadium on her world tour in May. That’s a lot of money to look at from the top tier, even for the Queen of Pop herself, but at least the price was clear enough: it included the face value of the tickets, a £76 “service charge” and a “handling fee” from £2.75.
Concert ticket prices are less transparent in the US, where Ticketmaster and other concert sites often obscure this feeswho can add 30 percent at face value until fans make it to the online checkout. “Americans are tired of being played for chumps,” thundered President Joe Biden in his State of the Union address this week when he vowed to limit such “junk fees.”
The US is an innovation bevy when it comes to extras that customers find hard to avoid. Many hotels charging “Resort fees” for Wi-Fi and gyms, whether used or not, while colleges charge extra cost for students who are already paying a fortune to attend. Airlines don’t settle for baggage fees and make families pay more to sit together.
But America is not alone. We’re all tired of being offered what looks like an online bargain before embarking on an arduous journey through various options, add-ons and things that feel like they should be part of the original product. It can be such a relief to reach the end that we swallow the pain of the final balance rather than having to start all over again.
This is also known as “drip pricing” – the finely tuned addition of one little thing at a time, never enough to make us abandon the deal. The psychological skill that guides the customer and disguises the full price until it’s too late would be impressive if it weren’t annoying.
Some fees, like those on Beyoncé tickets, are mandatory, while others are optional. “Companies should be free to charge more to add mushrooms to their pizza,” said a group of White House economists explained solemn in October. But the visual boundary between pizza and topping is often difficult to draw: What is a side dish and what is baked in?
I was outraged to read my credit card statement recently and discovered a £19 foreign currency transaction fee when shopping in Italy. I should have used a different card that didn’t charge such fake fees, but they were both the same suit and I took out the wrong one in a hurry. That’s how demanding a consumer am.
So Biden is right: Americans fall into the trap because most of us are suckers when it comes to junk fees. There are many studies examining how people react when the full price of a product or service is temporarily hidden, and the sad conclusion is that they often fall for it. They resent the final bill, but not enough to revolt.
In my case, I vowed to call the bank that issued the card, file a principled complaint, and have the offensive fee waived. But more than a month has passed and have I done it? No. My irritation is not enough to overcome my inertia and push me to take the necessary action. The financial benefit to the bank outweighs the cost of making me and others grumpy.
Likewise, booking a US hotel at a single rate and finding the mandatory “resort fee” on the bill is clearly irritating for consumers, but it’s a worthwhile move for the hotels themselves. A study found that customers only lowered their online ratings by a small percentage in this way: not enough to make hotels change their minds.
“Competitive markets inherently breed deception and trickery,” write economists George Akerlof and Robert Shiller: When prices are pushed down by open and transparent competition, companies will immediately look for new ways of obfuscation. It’s no coincidence that junk fees have skyrocketed after the internet made comparing prices and shopping easier.
Ticketmaster hides fees in most US states because it’s legal, and the industry knows it works. In 2015, ticketing platform StubHub experimented with both all-in pricing and delayed fees to checkout and found that his earnings were 20 percent higher with the latter. Virtue does not pay unless the other competitors in an industry are equally virtuous.
Ticketmaster’s ethics are already being attacked after it wreaked havoc on tickets for Taylor Swift’s Eras tour last year. But while the company is trying to prove it’s not an abusive monopoly, it’s inviting regulators and other platforms to do the same to adopt All-in prices like they did in New York Condition and countries including the UK. Because of this, Beyoncé’s Tottenham Hotspur Stadium tickets are openly priced.
“The all-in price is the price of admission, and that should be the first thing a fan sees,” said Joe Berchtold, president of Live Nation, Ticketmaster’s parent company. told a US Senate hearing last month. That’s hard to argue with, whether it’s at a concert, in a hotel, or on a credit card ad. It might not magically drop prices, but it would at least make them honest.
https://www.ft.com/content/b7437ee6-695a-4f83-a8d5-c0d00a02a08a We should force companies to be honest about their hidden fees