The online ticket reseller StubHub UK has been fined almost £900,000 and ordered to make payments to more than 50,000 fans for not showing the full price of tickets at the time of booking, an illegal practice known as “drip pricing”.

The UK competition watchdog, which launched an investigation into the sales practices of eight companies including the rival reseller Viagogo UK last year, said StubHub must issue refunds exceeding £590,000 to customers.

The Competition and Markets Authority (CMA) said the average refund for the 51,350 customers it identified who had a “hidden fee” added at the end of the online ticket buying process was about £10.33 for each transaction.

The CMA also fined StubHub £889,200 for infringing consumer protection law.

Emma Cochrane, the executive director of consumer protection at the CMA, said: “Hitting customers with hidden fees is illegal. It’s not fair to draw people in with what looks like a good deal, only for them to find the real price is higher when they get to the checkout due to extra charges that can’t be avoided.”

The CMA investigated the experience of fans buying tickets for gigs and sports events on StubHub and found that between 6 April and 7 December last year some were required to pay mandatory costs such as delivery and service fees.

These fees were added at the final stage of the checkout process and were not included in the price shown at the start, which broke consumer law.

The competition watchdog said the penalty of almost £900,000 included a 40% reduction because StubHub admitted breaking the law and chose to settle the case.

Cochrane said: “Our message to businesses is simple: be transparent on costs or risk CMA action. Going to a live gig or sports game is an event many people save for – and our action today means thousands of fans will get back money taken unfairly through hidden fees.”

It is the second financial penalty the CMA has imposed for a breach of consumer law since it was granted new powers to enable it to decide whether to take action rather than having to go through the courts.

The CMA said that under its new consumer enforcement powers it had so far secured more than £1.95m in refunds for customers and levied fines exceeding £5.7m.

“The law is clear, hitting customers with hidden, extra fees that aren’t clearly disclosed from the start is completely unacceptable,” said Rocio Concha, the director of policy and advocacy at the consumer group Which? “So it’s good to see the CMA using its new powers to secure hard-earned money back for consumers and issue a significant fine.”

The CMA said its investigation into Viagogo was continuing and it expected to issue an update in the summer. It is also investigating Gold’s Gym over not including its one-off joining fee for its annual membership in advertised membership costs.

The homeware retailers Wayfair, Appliances Direct and Marks Electrical are being investigated to determine whether their time-limited sales ended when they said they would, or whether customers were being automatically opted in to buy additional services.

StubHub has been approached for comment.