The Wall Street Journal blames hidden fees on consumers. That’s bullshit.

It’s a pretty shocking article. Josh Zumbrun wrote an article in the Wall Street Journal titled “Who’s to Blame for All Those Hidden Fees? We are.” (That link should be free to read.)

Zumbrun’s article is full of accurate information about consumer studies. But to get from there to blaming the consumer, you have to blame anyone who falls for a corporate trap, not the people who set the trap. This “if you’re not careful, it’s your own fault” is a media bias you shouldn’t fall for.

Here’s the gist of what Zumbrun wrote

This article cites several consumer studies and other analysis that provides evidence that when consumers are presented with unexpected fees at the end of a transaction, they relent, but when they’re given full disclosure at the start, they’re less likely to buy.

Here are some excerpts:

Everyone says they hate these fees, but four experiments illustrate why “drip pricing,” as it’s called by researchers and regulators, is so effective at getting us to pay more. . . . The experiments explain why the fees proliferate. The conclusion: Consumers themselves are to blame. 

Why not include the sales tax with the sticker price? A 2009 paper from economist Raj Chetty, then at the University of California, Berkeley, and co-authors, showed consumers punish that sort of transparency. 

A grocery store let the authors tag some products with the familiar pretax price and some with the total price including tax. For example, a hair brush’s price tag showed $5.79 before tax, and beneath that $6.22 with the tax. Store managers predicted the transparency would be a disaster, and permitted the experiment for only three weeks and three product groups.

The managers were right. Sales volume dropped about 8% for products with price tags that included the tax than a control group without the tax.

For several years, Shannon Michelle White, a former Ph.D. candidate, and Abigail Sussman, her adviser at the University of Chicago, along with colleagues, have run a series of experiments asking participants to find the best deal for a range of purchases, such as wedding venues, prepaid cards, university tuition schedules, cellphone plans or home closing costs.

They can then choose between complex or simplified disclosures. For example, the complex disclosure for prepaid cards breaks down the final price into things such as “initial fees,” “card acquisition fees,” “card activation fees,” “service fees” and “administration fees.” The simplified disclosure combines all these fees as a single “initial fee.” 

If you realized this complexity tricks you into paying more for equivalent products, you’re in the minority. Some 70% of people preferred the complex disclosure, said Sussman. They believe that it’s more transparent and that they can calculate the total cost by themselves.

They’re wrong. Even when participants are offered cash to identify the cheaper option, people botch the math (costly complexity!) and pick more expensive options.

In 2013, the website StubHub, which resells event tickets, attempted to do away with hidden fees, citing research about how hated they are. Its new “all-in pricing” prominently displayed the total ticket cost from the beginning of searches. The strategy failed to boost business or attract more customers.

In 2015, shortly before abandoning all-in prices, StubHub did an experiment—described several years later by economists who obtained the data—where half of shoppers saw all-in pricing, and half saw the lower base price with taxes and fees only added at the end. The latter strategy boosted revenue 20%.

Shoppers didn’t just buy more tickets. When they saw lower prices initially, they opted for better seats. By the end of the checkout process, they were committed.

 “When people get to the end of the process, there’s a variety of psychological reasons they’re locked in,” said Morwitz. “They overestimate the cost of starting over, they underestimate the benefits.” Maybe they’re just excited about the purchase, or reluctant to admit they could have made a mistake, she said.

On Thursday, two of the biggest U.S. ticket sellers, Ticketmaster and SeatGeek announced a switch to more transparent pricing. Some companies in the ticketing industry have said they would support all-in prices if they were mandated for everyone. The StubHub example shows why it’s hard for one company to buck an industrywide practice.

Of course this is true

I know exactly what’s going on here, because I, like everyone else buying online, have fallen victim to it.

For example, I recently attempted to reserve a rental car for a vacation in Scotland. I went to a site that allowed rental car price comparisons and selected Avis since it looked the cheapest among reputable companies. Then I got to the end of the process and Avis tacked on a whole bunch of fees that made the price about 25% higher. I went back to the beginning and looked at the other alternatives. But I ended up booking with Avis because it seemed like all the other rental car companies would have similar extra fees and I’d already filled out all the information on the Avis site.

The same pattern happened recently when I bought tickets to a minor-league baseball game. I chose the seats that seemed like the best tradeoff between price and location in the stadium. It kept bugging me to buy now before the seats were gone. I got to the end and they’d tacked on a bunch of fees. I got angry, but I wanted those seats I’d just researched the view for, so I paid the extra.

According to Zumbrun, these events were my own fault. Since I bought despite the deceptive practices of the merchants, I am complicit. I made the merchants behave that way, since I and my fellow consumers are so stupid that we’d rather pay extra fees, and these merchants were just giving us what we deserve. Profit is profit, after all.

Why this is bullshit

Let’s unpack the logic behind this analysis. It basically says, if strategy x works better than strategy y with consumers, then a business has to do that, and all the fault lies with the consumer.

So if making a package smaller and charging the same price causes people to keep buying it, you can effective raise prices by shrinking the package, and it’s the buyer’s fault. (This is called “shrinkflation,” and it’s on the rise.)

If you set up a site so a consumer sees a certain price and then has to follow a lot of steps to actually buy (like entering an shipping address and choosing a color), and then you add fees at the end, if the consumer doesn’t want to abandon all that work in the face of a last-second fee add-on, that’s the consumer’s fault. They’re behaving irrationally, the business should of course profit from that.

Did you ever find yourself hit with surprise costs at the end of a car-buying experience? I wonder how that happens. Having gone all the way down the road of negotiating with a salesperson, they know you are reluctant to just walk away for a few hundred bucks.

If a political campaign automatically checks off the box making a donation recur monthly, and the person making the contribution doesn’t notice, that’s the contributor’s fault, right? Voter beware.

If you’re treated by an out-of-network doctor at an in-network health provider and the fee for that doctor is exorbitant, hey, you should have been paying closer attention and stayed with in-network providers (even if you were distracted by, say, having a broken leg or cardiac arrest).

If Meta makes it hard to completely get off the Facebook platform and so you decide not to leave, that’s your own fault, obviously.

If Tesla calls its product “full self-driving” but it actually requires constant supervision, and it kills you because you’re not paying close attention, that’s on you — and Tesla has no responsibility, since you should have known better.

Are you seeing the pattern here?

Ever since businesses figured out that things priced at $4.99 sell better than things priced at $5.00, they’ve presumed that not only is it allowable to manipulate consumers, it’s obligatory to do so. It is the responsibility of the business to make as much profit as possible. Since tapping into consumer psychology is profitable, businesses are forced to do it. And since it’s our own psychology that enables this (at least according to business publications like the Wall Street Journal), it’s our fault.

The regulatory solution

Businesses have an incentive to mislead consumers. Even if they want to be honest, if their competition isn’t, and it’s hard for consumers to tell the difference, there is an awful temptation to mislead people. Because the reward for honesty is loss of profit and loss of market share.

Even if you are a supporter of the free market, you know that free markets can’t safely operate without regulation that protect buyers from being misled in ways that are hard to detect.

That’s why you can buy a hot dog and be reasonably sure it hasn’t got sawdust in it. Meat content is inspected and regulated.

It’s why food packages have weights and nutrition facts listed on them.

It’s why cigarette packages have health warnings on them.

And why surprise medical billing is now illegal in many situations.

And why email lists have unsubscribe buttons.

And why publicly traded companies whose stocks you can buy have to report audited financials regularly.

You could argue caveat emptor in all of these situations. But when we regulate industries that are prone to manipulating consumers with not-fully-honest policies, we are protecting consumers from being manipulated. Such regulations create an even playing field — all the companies need to comply with them — so they remove the incentive for companies to pursue questionable tactics because “everybody else is doing it.”

Yes, you can blame the “stupid” or “credulous” consumer in such cases. But that’s misdirection. Assuming that consumers, rather than companies, are fully responsible for all the ways that they’re unwittingly manipulated is pure corporate bias. We’re all suckers at one time or another.

Fraud and deception shouldn’t be effective business models. And the Wall Street Journal should be ashamed of itself for blaming the victims. I believe in business, but I believe in fairness, too. So let’s not swallow whole every article that blames the consumer for anything that companies can get away with.

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  1. Thank you…thank you…and, did I mention, thank you? If the truth won’t sell it, don’t sell it. A friend of mine shared this WSJ article with me, and it enraged me.

  2. Thank you!!! I think I’ve written in before about “shrinkification”. I may keep buying a product because it is my pref or there is no other option. That doesn’t equate to me be OK, or complicit even, with paying more for less.