Definition
Hidden costs involve obscuring or omitting additional fees, charges, or costs until the user is well into the purchasing or sign-up process. By that point, the user has already invested time and effort into the transaction and is more likely to proceed despite the unexpected costs.
Example
Ticket reseller Stubhub used hidden costs to drive revenue. Their method was to advertise a low price, draw users in through a lengthy series of steps, and then at the end immediately prior to payment, reveal a final higher price. At that point, the user had already spent time and energy, so they had to weigh up the time and energy cost of trying to find a cheaper price elsewhere (and risk of failing) versus just paying up. This is detailed in the research paper Price Salience and Product Choice (Blake et. al, 2021), who reported that users who were who weren’t shown the ticket fees upfront spent about 21% more money and were 14.1% more likely to complete a purchase.
References
Hidden costs (Brignull, 2010), Drip pricing (FTC, 2022), hidden legalese stipulations (Bösch et al, 2016), Misleading reference pricing (OECD, 2019)
Related laws
Prohibits deceptive acts or practices that misrepresent or omit material facts.
Requires financial institutions to notify customers about privacy policies, sets conditions for disclosing information to third parties, and provides opt-out rights to customers.
Requires financial institutions to protect the confidentiality and security of customers' personal information.
Requires financial institutions to provide privacy notices to customers and to safeguard nonpublic personal information.
Requires financial institutions to disclose to customers their privacy notices explaining how their personal information is collected, shared, and protected.
Promotes cooperation among EU member states to enforce consumer protection laws.
Outlines what constitutes a misleading commercial practice that could deceive the average consumer into making a transactional decision they would not have otherwise taken.
Requires traders to provide material information and not to hide or obscure it in any way, in order to avoid misleading consumers and affecting their transactional decisions.
Prohibits misleading commercial practices.
Prohibits unfair commercial practices, including misleading and aggressive practices, and provides remedies for consumers who have been harmed by such practices.
Establish the legal framework for online retailers and service providers to comply with while conducting business with consumers.
Prohibit traders across all sectors from using unfair commercial practices that hinder consumers from making informed purchasing decisions.
Grant consumers the right to cancel contracts for goods or services made through remote communication channels such as the internet, email, or telephone.
Covers various aspects of consumer transactions, including the sale of goods and services, digital content, unfair contract terms, and remedies for faulty goods.
Outlines various unfair or deceptive trade practices, including misrepresenting goods or services, falsely claiming affiliations, quality, or characteristics, and using innuendo to mislead
Related cases
$18 million settlement
In negotiations to comply
€350,000 in fines
£400,000 in fines
Changes made to website
$3.5 million in fines