Fiverr in US legal battle over “junk fees”: what does it mean for UK freelancers?

NYSE-listed online freelance marketplace Fiverr is embroiled in a legal battle in the United States, facing a class-action lawsuit alleging the platform charged illegal fees under California law. How could this impact freelancers and the freelance jobs platform sector?

Fiverr is facing a legal challenge in the United States, accused of employing “drip pricing” tactics that have left customers feeling short-changed.

A class action lawsuit, Johnson v. Fiverr, Inc. (Case No. 3:25-cv-03303), filed in California and now moving to the U.S. District Court for the Northern District of California, alleges that the platform lures users with upfront prices only to hit them with mandatory “service fees” at the final checkout stage.

The named plaintiff in this case, California resident Marcus Johnson, claims he was unfairly stung by hidden charges when using Fiverr in August 2024.

How did this all start?

According to court filings and several news reports, Johnson sought to hire a freelancer to design a book cover and a cartoon mascot. The initial service was listed at a seemingly reasonable $35, only for a $4.93 service fee to be unexpectedly added at the checkout stage.

However, the filing states that just as the plaintiff reached the end of the transaction, Fiverr “smuggled in” a previously undisclosed $4.93 service fee, increasing the total price to $39.93.

The man claims that Fiverr’s deceptive conduct cost him time and money that he would not have spent had he known about the added service fee.

What is price dripping?

The lawsuit, as detailed in the filings, describes these service fees as a prime example of “drip pricing,” a tactic where additional, often mandatory, charges are revealed late in the purchasing process, catching consumers off guard.

“Plaintiff alleges that, had he known of the fees, he ‘would have purchased a different service on Fiverr or no services at all,’ causing him economic damage,” the lawsuit states. This highlights the core grievance: that the initial advertised price was misleading and did not represent the true cost of the service.

The lawsuit filing includes an example of a logo design service advertised at $40. The filing contends that Fiverr’s website prominently displays this $40 price no fewer than five times before a service fee of $5.20 is finally disclosed to the user. This late reveal, the lawsuit argues, deceives consumers into believing the initial price is the final price.

The lawsuit contends that this practice violates several key Californian consumer protection laws, including the Consumer Legal Remedies Act, the False Advertising Law, and the Unfair Competition Law, as well as constituting unjust enrichment.

The nitty-gritty of the allegations:

The core of the complaint lies in the assertion that Fiverr advertises attractive prices for freelance services, drawing in potential buyers. However, just before payment, a mandatory “service fee,” which can range from 5% to a hefty 20% or even higher depending on the order value, is added to the total cost. This late disclosure, the lawsuit argues, is a classic “bait-and-switch” tactic, exploiting the fact that consumers are already invested in the transaction.

Crucially, the legal action highlights California’s recently enacted “Honest Pricing Law” (Senate Bill 478), which came into effect on 1st July 2024 and specifically targets hidden fees. The plaintiff is represented by Andrew Gunem and Carly M. Roman of Strauss Borrelli PLLC; Vess A. Miller of Cohen Malad LLP; and Gerard J. Stranch, IV of Stranch, Jennings & Garvey PLLC.

The plaintiff’s legal team will argue that Fiverr’s practices fall foul of this new legislation. They are seeking a court order forcing Fiverr to be transparent about all mandatory fees upfront, as well as demanding restitution for affected consumers.

Impact of Fiverr law suit and the freelance economy

This lawsuit could have significant ramifications for Fiverr’s business model, particularly if the court rules in favour of the plaintiffs and compels a change in their pricing structure. The lack of upfront transparency could be deemed a significant detriment to consumer trust, potentially impacting the platform’s reputation and user base.

Plus, the case shines a spotlight on the pricing practices within the broader freelance marketplace. While Fiverr connects businesses with a vast pool of global talent, the way fees are presented is now under scrutiny. Should other platforms employ similar “drip pricing” strategies, they too could potentially face similar legal challenges and reputational damage.

Across the pond: UK consumer protection and hidden fees

For freelancers operating on Fiverr within the UK, and for UK consumers using the platform, this Californian legal battle raises important questions about their own rights and protections against hidden fees. While the UK legal framework differs from California’s, there are robust consumer protection laws in place designed to ensure fair trading practices.

The key legislation in the UK includes the Consumer Rights Act 2015, which requires that goods, digital content, and services are of satisfactory quality, fit for purpose, and as described. While not explicitly targeting “drip pricing” in the same way as California’s new law, the “as described” element is crucial. If a service is advertised at one price and the final cost is significantly higher due to undisclosed mandatory fees, this could be argued as a misrepresentation of the service’s price.

In addition, the Consumer Protection from Unfair Trading Regulations 2008 prohibit unfair commercial practices, including misleading actions and misleading omissions. A misleading action occurs if a trader provides false or deceptive information that is likely to cause the average consumer to take a different transactional decision. Failing to clearly present mandatory fees upfront could be considered a misleading omission if this information is crucial for the consumer’s decision-making process.

The Advertising Standards Authority (ASA) also plays a vital role in ensuring that marketing communications are honest, decent, truthful, and responsible. Their codes require that prices quoted in advertisements must clearly state whether or not they include VAT and other non-optional charges.

While this primarily applies to advertisements outside the platform itself, it sets a standard for transparent pricing that could be relevant to how Fiverr displays its fees to UK users.

While there isn’t a direct equivalent to California’s “Honest Pricing Law” currently in force across the UK, these existing regulations provide a framework for challenging hidden or unexpected mandatory fees.

Consumer advocacy groups in the UK have long campaigned for greater price transparency across various sectors, and the outcome of the Johnson v. Fiverr case in the US could add further impetus to these calls for clearer pricing practices on online platforms.

What should UK freelancers on Fiverr do?

The California lawsuit primarily focuses on the impact on consumers buying services on Fiverr. However, UK-based freelancers using the platform should be aware of these developments for several reasons:

Platform changes: If Fiverr is compelled to change its pricing display in the US, it’s possible they may implement similar changes globally to ensure consistency and avoid further legal challenges in other jurisdictions, including the UK. This could mean changes in how buyers on the platform perceive the overall cost of services, potentially influencing demand.

Reputational impact: Negative publicity surrounding Fiverr’s pricing practices could impact the platform’s overall reputation, potentially affecting the volume of work available to freelancers.

Understanding buyer perspectives: Being aware of the concerns raised by buyers regarding hidden fees can help freelancers better understand their clients’ perspectives and potentially factor this into their own pricing strategies and communication.

For UK consumers who have used Fiverr and encountered unexpected service fees, it’s advisable to:

Keep records: Retain any documentation of transactions, including initial price quotes and final charges.

Understand Your Rights: Familiarise yourself with the Consumer Rights Act 2015 and the Consumer Protection from Unfair Trading Regulations 2008.

Consider reporting: If you believe you have been misled by hidden fees, you can report your experience to Citizens Advice or the Advertising Standards Authority if the initial pricing was part of an advertisement. While a direct class action like the one in California isn’t currently underway in the UK against Fiverr, raising awareness of such practices is important.

Next steps

The Johnson v. Fiverr case is in its early stages, having just been transferred to federal court. It remains to be seen how the legal proceedings will unfold and what the ultimate outcome will be.

However, this case serves as a potent reminder of the importance of transparent pricing and the potential legal and reputational risks associated with “drip pricing” tactics in the digital marketplace.

For UK freelancers and consumers alike, staying informed about these developments is crucial in navigating the evolving landscape of online commerce and ensuring fair and transparent transactions.

While no specific UK legal cases directly mirroring the allegations against Fiverr were found in the immediate search, the existing consumer protection framework provides avenues for challenging misleading pricing practices. The outcome in California could well influence the debate and potentially lead to greater scrutiny of pricing transparency on online platforms operating in the UK.

Be informed. Freelancer informed.

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