When Taylor Swift fans attempted to purchase tickets for her ‘Eras’ tour, many had to wait extremely long times to access the ticketing system, issues that forced them out of the queue and delays that made it almost impossible to buy.
Ticketmaster Entertainment Inc., the ticket agent for the tour, said an unexpected volume of buyers overwhelmed its system. Following the fiasco, which was only to be open to a handful of pre-approved patronages and affinity groups, no general public ticket sales took place.
You might be wondering how this all constitutes an antitrust issue. If Ticketmaster’s system is terrible and doesn’t actually sell the product it claims to sell to the people it claims to invite to buy, how is that a competitive failure?
The answer lies in how the primary market (first event ticket sales) interacts with the secondary or resale ticket market, and how Ticketmaster plays a role in both. If antitrust law cares nothing about the performance of these markets, angry consumers have a right to ask why.
The reign of the robots
Where are those millions of tickets that were supposed to end up in the hands of TSwift’s very dedicated fans? They are in 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 big business. Sellers use bots and multiple accounts on Ticketmaster’s system to buy tickets at a speed no human can match. The tickets are then resold on online marketplaces, including Ticketmaster.
Ticketmaster doesn’t have to worry much if fans are livid or even can’t buy tickets in their system at all. Ticketmaster is by far the largest ticket seller in the United States and has negotiated long-term contracts with many venues. Customer rage need not be a major concern because whether a fan or scalper gets a ticket, Ticketmaster will collect their commission on every primary market sale through their site. Additionally, it may also generate a second higher commission on a secondary market sale of the same ticket.
According to the latest SEC filings from Ticketmaster’s parent company, giant touring promoter and venue owner Live Nation Entertainment Inc., Ticketmaster’s resale business generated more than $1.1 billion in volume. gross transactions in the third quarter of 2022 alone, more than double its resale volume in the third quarter. 2019.
If a sale to a fan generates one royalty, but a sale to a reseller generates two, why would Ticketmaster let fans buy tickets? To hear Taylor Swift fans tell it, Ticketmaster doesn’t because Ticketmaster makes more money if resellers get the tickets and resell them in a way that generates a second royalty for the company.
A story of two markets
A number of litigants have alleged that Ticketmaster’s growing position in the secondary ticket market poses competition concerns. Most of the US cases were dismissed and sent to arbitration based on the terms of Ticketmaster’s User Agreement.
However, the latest case pending in federal court in California attacks head-on Ticketmaster’s claim that the lawsuits must be arbitrated. He alleges that Ticketmaster has a new arbitration provision referring claims to an arbitrator that is so procedurally and substantively unfair that the arbitration provision itself is invalid. In addition to this claim, plaintiff alleges (as in previous cases) that Ticketmaster leverages its market power in the primary sales market to gain a dominant position in the secondary sales market.
Exploitation of the monopoly
Monopoly claims are very difficult to successfully pursue in US courts. To prove monopolistic leverage, a plaintiff must show that the defendant is dominant in a market and uses a narrow range of anti-competitive behavior to gain power in a related market. Moreover, there must be a “dangerous probability” that the monopolist will succeed in capturing the secondary market.
But especially in online marketplaces, it seems that marketplaces often don’t behave like separate silos. Markets can reinforce each other and interact in ways that distort incentives and reduce competition. And increasingly, the dysfunction of the primary ticket market seems to be a direct consequence of its integration with the secondary market. If Ticketmaster were unable to make money in the secondary market, it would at least have some incentive to run the primary market in a way that results in ticket sales to people.
We know that consumers pay higher prices. In its Form 10-Q, Live Nation said the overall price of paid tickets for the first nine months of 2022 was up 20% from 2019. What’s unclear is whether antitrust law , as currently applied in the United States, provides a remedy for Ticketmaster’s allegedly anti-competitive conduct. Since, thus far, the cases challenging this conduct have gone to arbitration, it is unclear for the public how the plaintiffs’ monopoly claims against Ticketmaster fared.
There’s a lot of commentary about the combined market power of Live Nation and Ticketmaster, and whether we should consider Taylor Swift’s spectacular ticket sales failure an antitrust issue or not. Is it simply a demand far exceeding supply? Or should regulators heed Congressional calls to divorce Live Nation from Ticketmaster (a merger authorized under a consent order in 2010)?
Considering that we are seeing ticket markets worth tens of billions of dollars collapsing, generating lawsuits and driving up prices for consumers, the question should be: why would not is the antitrust law concerned about why this market is performing so poorly? Consumers and their advocates might like an answer.
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