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ANALYSIS: Ticketmaster, TSwift, and Antitrust’s Role in Markets

Nov. 23, 2022, 11:00 AM

When fans of Taylor Swift attempted to buy tickets for her “Eras” tour, many experienced extremely long waits to access the ticket system, glitches that kicked them out of the queue, and lagging that made it almost impossible to complete a purchase.

Ticketmaster Entertainment Inc., the ticketing agent for the tour, said that an unexpected volume of buyers overwhelmed its system. As a result of the fiasco, which was supposed to be open only to a handful of pre-approved customer bases and affinity groups, no general public sale of tickets was conducted.

You might wonder how any of this constitutes an antitrust problem. If Ticketmaster’s system is terrible, and doesn’t actually result in the sale of the product it purports to sell to the people it purports to invite to purchase, how is that a competitive failure?

The answer lies in how the primary market—first sales of event tickets—interacts with the secondary or resale market for tickets, and in how Ticketmaster has a role in both. If antitrust law doesn’t care about how these markets perform, angry consumers have a right to question why not.

Reign of the Bots

Where are those millions of tickets that were supposed to wind up in the hands of TSwift’s highly dedicated fans? They are on the secondary ticket market, being scalped for thousands of dollars. Because as most of us know, scalping is no longer a guy with two tickets at the door of a concert hall: It’s a huge business. Sellers use bots and multiple accounts on Ticketmaster’s system to purchase tickets at a speed no human can match. Tickets are then resold through online marketplaces—including Ticketmaster.

Ticketmaster doesn’t have to care much if fans are livid—or even if they can’t buy tickets in its system at all. Ticketmaster is by far the largest primary ticket seller in the US, and has negotiated long-term contracts with many venues. Customer rage needn’t be a major concern because, regardless of whether a fan or a scalper gets a ticket, Ticketmaster will get its fee on every primary market sale through its site. What’s more, it can also generate a second higher fee on a secondary market sale of the same ticket.

According to the latest SEC filings of Ticketmaster’s parent corporation, giant tour promoter and venue owner Live Nation Entertainment Inc., Ticketmaster’s resale business generated over $1.1 billion in gross transaction volume in the third quarter of 2022 alone, more than doubling its resale volume in Q3 2019.

If a sale to a fan generates one fee, but a sale to a scalper generates two, why would Ticketmaster let fans buy tickets at all? To hear Taylor Swift fans tell it, Ticketmaster basically doesn’t—because Ticketmaster makes more money if scalpers get the tickets and resell them in a way that generates a second fee for the company.

A Tale of Two Markets

A number of litigants have alleged that Ticketmaster’s growing position in the secondary ticket market poses antitrust concerns. Most of the US cases have been dismissed and sent to arbitration based on clauses in Ticketmaster’s user agreement.

However, the latest case pending in the California federal court, attacks head-on Ticketmaster’s claim that lawsuits must be arbitrated. It alleges that Ticketmaster has a new arbitration provision shunting claims to an arbitrator that is so procedurally and substantively unfair that the arbitration provision itself is unconscionable. In addition to that claim, the plaintiff alleges (as prior cases have) that Ticketmaster is leveraging its market power in the primary sales market to gain dominance in the secondary sales market.

Monopoly Leveraging

Monopoly claims are very difficult to successfully prosecute in US courts. To prove monopoly leveraging, a plaintiff has to show that the defendant has a dominant position in one market, and is using a narrow range of anticompetitive conduct to gain power in a related market. Furthermore, there must be a “dangerous probability” that the monopolist will succeed in taking over the second market.

But especially in online markets, it appears that markets often don’t behave like distinct silos. Markets can be mutually reinforcing, and can interact in ways that skew incentives and lessen competition. And increasingly, the primary ticket market’s dysfunction looks to be a direct consequence of its integration with the secondary market. If Ticketmaster were unable to make money in the secondary market, it at least would have some incentive to run the primary market in a way that results in ticket sales to people.

We know that consumers are paying higher prices. In its Form 10-Q, Live Nation said that overall pricing on fee-bearing tickets for the first nine months of 2022 was up 20% compared to 2019. What’s not clear is if antitrust law, as currently enforced in the US, provides a remedy for Ticketmaster’s allegedly anticompetitive conduct. Because, until now, cases challenging this conduct have gone to arbitration, it’s difficult for the public to know how the plaintiffs’ claims of monopoly leveraging against Ticketmaster have fared.

Trouble

There’s a lot of commentary out there about the combined market power of Live Nation and Ticketmaster, and about whether we should consider the spectacular failure of the Taylor Swift ticket sale as an antitrust problem or not. Is it just a case of demand far outstripping supply? Or should regulators heed Congressional calls to divorce Live Nation from Ticketmaster (a merger that was permitted under a consent order in 2010)?

Considering that we see ticket markets worth tens of billions of dollars melting down, generating lawsuits, and driving up prices to consumers, the question should be: Why wouldn’t antitrust law be concerned about why this market functions so badly? Consumers and their advocates might like an answer.

Bloomberg Law subscribers can find related content on our Antitrust Practice Center.

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