Federal Government’s Crackdown On Broadway Ticket Service Fees Not All It’s Cracked Up To Be

The road to removing services fees on Broadway tickets is not as straightforward as it might seem.

In January, the U.S. Consumer Financial Protection Bureau announced an initiative to eliminate the so-called “junk fees” that appear on bills and increase the up-front price of products. “Service charges inflate ticket prices, resort fees hike our costs to stay in hotels, and our phone bills are often laden with mystery charges,” complained its director, Rohit Chopra. “These junk fees make it harder for us to choose the best product or service, since the true cost is hidden,” he said.

“People are getting sick and tired of this fee creep that is all over the economy,” Chopra stated, while issuing a formal request for comments from the public before introducing new rules and guidance regarding the fees.

Numerous publications reported on the federal government crackdown as though Broadway ticket sellers would soon be stopped from tacking on service fees. “If all goes according to the plans recently laid out by the Consumer Financial Protection Bureau, hotel ‘resort fees’ and concert ticket ‘convenience fees’ may soon become a thing of the past,” declared one economist in an opinion piece.

But, in reality, there is little that the government regulator can do about the services fees charged on Broadway tickets.

Created in the aftermath of the 2008 financial crisis, the Consumer Financial Protection Bureau only has legal authority to control the conduct of any person or entity that “engages in offering or providing a consumer financial product or service” and their affiliates. In other words, the agency only regulates financial institutions like banks, credit unions, and payday lenders.

“If [Broadway] ticket sellers extend credit directly, as would be the case, for example, if they issue their own credit card, then the Bureau would have jurisdiction over them,” explained St. John’s law professor Jeff Sovern. But, he said, “I can’t think of an argument for saying that that includes businesses that do no more than sell tickets in exchange for a payment via credit or debit card,” such as the Broadway ticket sellers Ticketmaster and Telecharge.

In addition, Sovern noticed that “[t]he Bureau’s Request for Information says it is ‘interested in receiving any comments relating to fees in consumer finance.’” The scope of the government’s inquiry is limited to the fees that financial institutions charge, such as penalty fees like overdraft fees and convenience fees like wire transfer fees. “Banking is a bastion of many of these fees,” commented Chopra in an interview, observing that, “in many cases, these are fees where there’s not even a service provided or where the bank or financial institution doesn’t even do any work.”

“It may be that [the Bureau’s director] mentioned ticket sellers only as an example of an industry in which there are added fees so that people would have a clearer understanding of what [he] meant, rather than as an example of a business coming within [the Bureau’s] jurisdiction,” professor Sovern stated.

“But, that doesn’t mean that ticket sellers can relax,” he warned.

“The Federal Trade Commission, where the [Bureau’s] director, Rohit Chopra, was formerly a commissioner, would have jurisdiction over unfair fees in the ticket selling industry, as would state regulators,” professor Sovern continued. “Those other entities may decide to look into the matter, especially if the Bureau receives negative comments about fees charged by ticket sellers,” he said.

According to New York law, ticket sellers with direct access to the inventory of tickets at Broadway theaters like Ticketmaster and Telecharge are permitted to impose a “reasonable service charge … for special services, including but not limited to, sales away from the box office, credit card sales or delivery.” While the amount of the service fees vary based on several factors, most of their service fees tend to be about 10 percent to 20 percent of the ticket price.

Other companies that resell Broadway tickets are not subject to the same legal restriction and often charge greater service fees. For example, one popular reseller charges an additional 35 percent service fee.

One theatergoer who purchased a pair of tickets to Wicked through the reseller in 2019 later learned that he could have saved about $60 getting them directly from the theater. “The extra I paid could have gone to dinner beforehand,” the customer complained.

“Hidden fees raise serious questions about market fairness,” stated professor Sovern.

“Classical economics presupposes that consumers will make efficient decisions if they know what prices they will pay, but hidden fees make that difficult and so may lead consumers to pay more for a product than they initially intend to,” he explained. Berkeley economics professor Steven Tadelis studied the issue with others in 2018, and found that customers presented with fees after they had already selected tickets and proceeded to the checkout page on StubHub paid, on average, 21 percent more than the customers presented with the fees upfront.

“The results are pretty clear: if those fees were not hidden, then folks would buy fewer and cheaper tickets, lowering revenues for the ticket sellers quite a bit,” professor Tadelis commented. “This is nothing less than a deceptive practice that should not, in my honest opinion, be allowed,” he said.

“Hidden fees are like a bait and switch in which a consumer is baited to buy at one price and then switched to a higher price,” added professor Sovern. “It is possible that some sellers use hidden fees precisely to attract buyers who would not purchase the product at the higher price they ultimately end up paying,” he stated.

The Consumer Financial Protection Bureau has received over 25,000 public comments to date, and recently extended the submission date to April 11, 2022. Despite the government regulator’s instructions and lack of authority over Broadway ticket sellers, many of the submitted comments complain about high service fees charged on tickets.