Ticketmaster's Legal Woes

by Yoo Jin Jung February 13 2009, 14:37
I.  Introduction
 

For many, Ticketmaster Entertainment Inc. (Ticketmaster) is the first place that people look when they want tickets to an event.  It is the largest and most well-known broker of event tickets in the industry.  Ticketmaster sells tickets for more than 80% of the major arenas and stadiums in the U.S. [1] However, it has come recently been hit with a $500 million lawsuit in Toronto, Canada, after fans complained that Ticketmaster was deliberately directing customers into its subsidiary site, TicketsNow in violation of anti-scalping laws. [2]  Not only is Ticketmaster now facing this class-action lawsuit, but it also is in danger of being hit with charges by the Canadian as well as the U.S. government.[3]  Compounded with the recent backlash against its new merger with LiveNation, Ticketmaster is currently facing a host of legal problems.[4]
 

II.  The Canadian Class-Action Lawsuit
 

The lawsuit began with one man, Henryk Krajewski.[5]  The class-action lawsuit was filed in the Ontario Superior Court of Justice on his behalf after he was instantly redirected to higher-priced tickets on TicketsNow for a Smashing Pumpkins Concert.[6]  The number of people registering for this class-action suit is growing daily.[7]  Krajewski’s lawyer states that “Ontario law forbids selling tickets above face value” and seeks to include anyone who has purchased tickets through Ticketmaster or TicketsNow in Ontario since February 9, 2007.[8]  The lawsuit alleges that Ticketmaster is hurting consumers and breaking Ontario’s anti-scalping laws by selling tickets at higher prices in secondary markets.[9]  Ticketmaster and its TicketsNow subsidiary are accused of conspiring to require customers to pay inflated prices for event tickets.[10]  Ticketmaster is accused of “wrongfully, unlawfully (and) maliciously” conspiring to sell tickets at higher price and the lawsuit seeks $500 million in damages for the conspiracy as well as $10 million for any punitive damages.[11]  Ticketmaster claims that TicketsNow helps to protect consumers against private party scalpers who may sell counterfeit or nonexistent tickets.[12]  However, Canada’s federal competition bureau is also looking into allegations that Ticketmaster illegally redirected consumers automatically into TicketsNow.
 

III.  Canadian Law

In Ontario, the Ticket Speculation Act is in place, which aims to prevent ticket scalping.[13] The class-action lawsuit alleges that Ticketmaster’s practices violated these anti-scalping provisions by diverting consumer traffic from the original Ticketmaster site into the TicketsNow website.[14]  The Act states:

Every person who, selling (a) being the holder of a ticket, sells or disposes of the ticket at a higher price than that at which it was first issued, or endeavours or offers so to do; or purchasing as a speculation or at a higher price than advertised (b) purchases or attempts to purchase tickets with the intention of reselling them at a profit, or purchases or offers to purchase tickets at a higher price than that at which they are advertised or announced to be for sale by the owner or proprietor of any place mentioned in Section 1, is guilty of an offence…”[15]

In Canada, each of the regions including Ontario, Alberta, Saskatchewan and Manitoba have anti-scalping laws – the only region that does not is B.C.[16]  Ticketmaster may be in danger of facing similar charges or lawsuits in these other regions.
 

IV.  Implications for Ticketmaster in the U.S.
 

Ticketmaster has also been facing heat in the U.S.[17]  Many fans became angry when they tried to buy tickets from Ticketmaster for the upcoming Bruce Springsteen concert and instead were given cryptic error messages that directed them to TicketsNow.[18]  Bruce Springsteen also personally got involved and Ticketmaster has since apologized.[19]  However, this is unlikely to go quietly away.  Consumers have been complaining about Ticketmaster and the ticket-selling industry and lawmakers have been calling for investigations.[20]  New Jersey has already launched an investigation to see whether Ticketmaster has committed consumer fraud.[21]  Two New York members of Congress are also demanding an investigation.[22]
 

Ticketmaster launched its first resale market, TicketExchange in 2002.[23]  Since then, Ticketmaster has been busy buying TicketsNow as well as Get Me In.[24]  Ticketmaster seems determined to keep expanding.  Recently Ticketmaster announced their new proposed merger with Live Nation Inc.[25]  This proposed deal has come under intense scrutiny for fear of violations of anti-trust and monopoly law.[26]  Ticketmaster will most likely be facing tough antitrust reviews in both Canada and the United States.[27]  Until only a few months, ago, Live Nation seemed on track to challenge Ticketmaster for market share on several big ticket-sales contracts.[28]  Instead, this new merger would combine Ticketmaster and Live Nation into a company with a revenue of almost $6 billion dollars, making the company into the world’s largest ticket seller and reseller with more promotional clout.[29]  Critics of the proposed merger argue that these plans would essentially create an entertainment monopoly, giving Ticketmaster control and influence over almost every aspect of the entertainment business including management of artists, booking concerts, selling tickets, and even selling refreshments.[30]
 

V.  The Future?
 

The secondary market for tickets through sites such as TicketsNow, StubHub, and other mediums such as Ebay and Craigslist is growing.  In the U.S., as many as 44 states have relaxed anti-scalping laws in order to provide a free market for resellers.[31]  There are many people who are interested in seeing performances and ticket prices are not as high as their value in the open market, leading to many tickets being sold in the resale market.[32]  The problem with the resale market is simply that people are forced to pay prices far above face value, especially in the cases of certain popular events in which people may buy out many tickets and then use these resale markets in order to profit.
 

Companies like Ticketmaster only stand to gain from the growing resale market.  Ticketmaster also takes a fee from every ticket resold through TicketsNow as well as the original service charges levied when tickets are first sold, as much as a 25% profit on all tickets sold.[33]  An attorney in the class-action suit has summed up concerns well, “the mere fact that Ticketmaster has a financial interest in both retail and premium ticket sales leads to an obvious question about the process by which those tickets are sold to members of the public and how it works”.[34]
 

While the planned merger of Ticketmaster and Live Nation will not necessarily affect the lawsuit itself, its outcome and any other proposed charges against Ticketmaster will most likely have far-reaching consequences for the company as well as the future of ticket sales.  If Ticketmaster is found guilty of this suit and any future charges, the courts will have to take a closer look at what kind of monopolization that Ticketmaster may have on the industry.  Government will also have to take another look at anti-scalping laws in order to navigate the growing resale market.  Until then, consumers can only hope to be treated fairly with little choice in the market.
 

[1]Dawn Chmielsewski and Randy Lewis, Live Nation, Ticketmaster Face Hurdles, L.A. Times February 11, 2009.

[2] Ellen Roseman, Class-action Suit Targets Ticket Prices, Toronto Star, February 11, 2009.

[3] Bruce DeMara, Ticket Giant Faces Suit Over Online Prices; Ticketmaster Accused of Forcing Customers to Buy From a Subsidiary At Inflated Prices, Toronto Star, February 10, 2009.

[4] Grant Robertson, Regulators Could Bring Curtain Down On Ticketmaster Deal, Globe and Mail, February 11, 2009.

[5] Staff Reporter, Ticketmaster Faces Canadian Class-Action Lawsuit over Ticketsnow.com, National Post, February 09, 2009, http://www.nationalpost.com/news/story.html?id=1270364.

[6] Canadian Lawsuit Accuses Ticketmaster of Gouging, The Star Ledger, February 10, 2009. [hereinafter “Canadian lawsuit”]

[7] DeMara, supra note 3.

[8] Id.

[9] Roseman, supra note 2.

[10] Lawyer Behind Ticketmaster Suit Says He’s Received Hundreds of Calls, Waterloo Region Record,  February 11, 2009. [hereinafter “Waterloo”]

[11] Id.

[12] Roseman, supra note 2.

[13]Ticket Speculation Act, R.S.O. 1990 Chapter T.7  available at http://www.canadalegal.com/gosite.asp?s=1892

[14]Ticketmaster Hit with $500 Million Lawsuit, World Entertainment News Network, February 10, 2009. [hereinafter “Ticketmaster”]

[15] Id.

[16] Staff Reporter, supra note 5.

[17] Kelly Heyboer, A Chorus of Complaints about Ticketmaster, Star-Ledger, February 11, 2009.

[18] Id.

[19] Id.

[20] Id.

[21] Canadian Lawsuit, supra note 6.

[22] Id.

[23] Roseman, supra note 2.

[24] Id.

[25] Robertson, supra note 4.

[26] Id.

[27] Roseman, supra note 2.

[28] Robertson, supra note 4.

[29] Id.

[30] Dawn C. Chmielewski and Randy Lewis, Merger Plan Prompts Monopoly Fears, Los Angeles Times, February 11, 2009.

[31] Roseman, supra note 2.

[32] Id.

[33] Waterloo, supra note 10.

[34] Staff Reporter, supra note 5.

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