When Taylor Swift fans tried to buy tickets for her “Eras” tour, many experienced long waits to get into the ticketing system, errors that pushed them out of line, and a delay that made it nearly impossible to complete a purchase.
Ticketmaster Entertainment Inc., the ticket agent for the tour, said an unexpected volume of buyers overwhelmed its system. As a result of the fiasco, which was only supposed to be open to a select few pre-approved customer bases and membership groups, there was no general public sale of tickets.
You might wonder what the antitrust issue is about any such thing. If Ticketmaster’s system is terrible, and it really isn’t selling the product it purports to sell to the people it’s inviting to buy, how is that a failure of competition?
The answer lies in how the primary market—primary event ticket sales—interacts with the secondary or resale market for tickets and Ticketmaster’s role in both. If antitrust law doesn’t care how these markets work, angry consumers have a right to ask why not.
The Kingdom of Bots
Where are those millions of tickets that were meant to be in the hands of TSwift’s most dedicated fans? They are on the secondary ticket market, scrapped for thousands of dollars. As most of us know, scalping is no longer the guy with two tickets to the concert hall door: it’s big business. Sellers use bots and multiple accounts in Ticketmaster’s system to buy tickets at speeds that humans can’t match. Tickets are then sold through online marketplaces, including Ticketmaster.
Ticketmaster doesn’t care much if fans are obscene—or even if they can’t buy tickets in its system. Ticketmaster is by far the largest ticket seller in the US and has negotiated long-term contracts with many venues. Customer rage shouldn’t be much of a concern, because whether a fan or a scalper acquires a ticket, Ticketmaster will receive a fee on all primary market sales through its website. It can also generate a higher secondary fee on the secondary market sale of the same card.
According to recent SEC filings by Ticketmaster’s parent corporation, giant tour promoter and venue owner Live Nation Entertainment Inc., Ticketmaster’s resale business generated more than $1.1 billion in gross transaction volume in the third quarter of 2022 alone, more than doubling its resale volume in the quarter . 2019
If a sale to a fan generates a fee, but a sale to a scalper generates two, why would Ticketmaster let fans buy tickets? 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
Some plaintiffs have alleged that Ticketmaster’s growing position in the secondary ticket market raises antitrust concerns. Most of the US cases have been dismissed and referred to arbitration under the terms of Ticketmaster’s user agreement.
However, the latest lawsuit pending in federal court in California attacks Ticketmaster’s claim that the lawsuits must be arbitrated. Ticketmaster contends that a new arbitration provision that refers claims to an arbitrator that are procedurally and substantively unfair renders the arbitration provision itself unconscionable. In addition to this claim, the plaintiff alleges (as previous cases have) that Ticketmaster is using its market power in the primary sales market to gain dominance in the secondary sales market.
Taking advantage of the monopoly
Monopoly claims are extremely difficult to successfully litigate in US courts. To prove monopolistic exploitation, the plaintiff must show that the defendant has a dominant position in a 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 secondary market.
But especially in online markets, it seems that markets often do not behave like different silos. Markets can be mutually reinforcing and can interact to distort incentives and reduce competition. And increasingly, the dysfunction of the primary input market appears to be a direct consequence of the integration of the secondary market. If Ticketmaster was able to make money on the secondary market, it would at least have some incentive to run the primary market in the form of selling tickets to people.
We know consumers are paying higher prices. Live Nation said in its Form 10-Q that overall rate-paying ticket prices for the first nine months of 2022 were up 20% compared to 2019. Remedy for Ticketmaster’s alleged anticompetitive conduct. Because the cases challenging this conduct have so far gone to arbitration, it is difficult for the public to know how the plaintiffs’ monopoly claims against Ticketmaster have fared.
There is a lot of commentary about the combined market power of Live Nation and Ticketmaster, and whether or not we should consider Taylor Swift’s spectacular ticket sales failure as an antitrust problem. Is it just a case of oversupply? Or should regulators heed calls from Congress to divorce Live Nation from Ticketmaster (a merger authorized under a consent order in 2010)?
As we watch markets for cards worth tens of billions of dollars melt down, spark lawsuits and raise prices for consumers, the question should be: why? he wouldn’t Is the antitrust law concerned why this market is working so badly? Consumers and their advocates would like an answer.
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