TICKETMASTER’S SHERMAN ACT SCUFFLE (TAYLOR’S VERSION)

An analysis of Ticketmaster’s alleged monopoly and what their current legal woes could mean

By: NOELA MALECELA

INTRODUCTION

The thrill that comes with attending a live concert is one of the few experiences left that spans across all generations and geographics. Music tastes may differ, but people of all ages and nationalities can relate to the excitement that accompanies seeing your favorite musician perform their top hits live. While the live entertainment industry took a major hit during the COVID-19 pandemic, the post-lockdown increase in ticket sales has shown that the excitement surrounding concerts and music festivals is here to stay. Live Nation itself has stated that its research “consistently tells us that concerts are a top priority for discretionary spending, and one of the last experiences fans will cut back on.” 

In November 2022 when Taylor Swift announced The Eras Tour, her first tour in five years, many anticipated high ticket demand. However, no one could expect the fiasco that hoisted Ticketmaster into the legal spotlight. To help manage high-demand shows, Ticketmaster typically uses a “verified fan” registration to ensure that real humans are purchasing tickets and not bots. Over 3.5 million people pre-registered for Taylor Swift’s pre-sale through verified fan registration. The tour itself only had about 2.6 million total seats available within the 52 scheduled tour dates. Considering around 40% of invited fans will buy tickets and the average ticket purchase is three tickets, Ticketmaster released pre-sale codes to 1.5 million people and placed the other 2 million on a waiting list for the slim chance that there would be tickets remaining. Once the pre-sale began, the Ticketmaster site and app crashed for most users, leaving them either unable to access the sale or unable to purchase the tickets they managed to add to their cart if they were somehow able to make it into the site.

Almost immediately after the disastrous pre-sale, tickets became available on the secondary market. On StubHub, tickets sold for amounts way above face value with prices ranging from $5,000 to over $30,000. The average secondary market price of a ticket to the North American leg of The Eras Tour was $3,801. Meanwhile, tickets at face value cost between $49 and $449, with VIP packages priced between $199 and $899. With tickets now priced at triple the face value of the most expensive original VIP package price, one might think that this would deter fans from purchasing. Instead, fans of Swift—more commonly referred to as “Swifties”—scavenged to find tickets to see their queen by any means necessary. One fan who purchased resale tickets during the pre-sale bought two floor-seat tickets for $2,000 each. With fees, her total came out to $5,500. Another fan who bought four VIP tickets during the pre-sale for $3,472 total made $20,000 by reselling her tickets on Stubhub for $5,000 each. 

Ticketmaster contends that unprecedented traffic on their site was to blame for complications occurring during the pre-sale. A mixture of bot attacks and visits to the site by fans who didn’t have pre-sale codes resulted in Ticketmaster receiving a record high of 3.5 billion total system requests. While Ticketmaster planned on releasing more tickets following the pre-sale, they had to cancel the general public sale due to an “insufficient remaining ticket inventory to meet demand.”

At first glance, Ticketmaster seems to have tried its hardest to make The Eras Tour ticket sales as smooth as possible. The basic law of supply and demand tells us that if demand is high and supply is low, prices will rise. Both Swifties and members of the United States government would beg to differ, however, and the Department of Justice may agree with them. Both contend that the pre-sale chaos can be credited to Ticketmaster’s dominance over the live entertainment ticket sales industry. Shortly following the pre-sale, over two dozen Swifties filed suit against Live Nation, Ticketmaster’s parent company, for “unlawful conduct,” claiming that Ticketmaster violated antitrust laws and “is a monopoly that is only interested in taking every dollar it can from a captive public.” Additionally, the Department of Justice has launched an investigation into Live Nation to determine whether they have abused their power over the multibillion-dollar live music industry. This note will explore the history of Ticketmaster’s battles against antitrust law and how future litigants against the company may be able to finally bring the monopoly down. 

THE STORY OF TICKETMASTER

A review of Ticketmaster’s history provides some context as to how they’ve gotten themselves into their current legal predicament. Before the advent of the Internet, live entertainment ticket sales occurred through area retailers and box offices. Going back to the ‘50s and ‘60s, when fans wanted to see their favorite artists or sports teams in person, they lined up in large crowds outside of venues and retailers, primarily record stores, to get a chance to buy tickets for major events. Once at the front of the line, fans pointed to a spot on the venue floor plan, and a clerk would then go see if there were any tickets available in that section. Larger tours would use a mail order system where one would send a money order and return envelope and hope to be mailed back tickets. Many went to great lengths and waiting times to obtain these tickets. Some would even camp out a week in advance to ensure they had the best chance of securing their ticket.  To combat the large demand for live entertainment experiences, box offices would place ticket limits once sales started to ensure as many fans as possible could buy tickets. However, limiting ticket sales to in-person transactions enabled employees to steal and reserve tickets for personal use or to sell to friends.

The technology boom, like many industries, hit the ticket sales industry with a force. In 1966 Jack Quinn, a man looking to manage Broadway ticket sales, met computer engineer Harvey Dubner, and together they founded Ticket Reservation Systems (TRS). They developed a computerized system that allowed people to buy ready-to-print tickets from kiosks at retail locations that were all connected to one central server. Moving ticket sales online posed large logistical issues in a society that was not as consumed with capitalism and technological advancement as we are today.  Venues would have to pay a fee to have their tickets sold through TRS, and not all were willing to do so. Some opted to continue selling tickets solely through the box office or mail order, while others would allocate a very limited number of tickets to be sold through TRS. In the rare case that a venue solely sold through TRS (later renamed Ticketron), issues arose in the computer system when the service became overloaded with too many users. Though flawed, Ticketron was the first of its kind, leading it to become the sole computerized ticketing provider in the United States in 1970. It continued to expand by setting up hundreds of kiosks all over the United States and Canada throughout the ‘80s, and eventually even allowed customers to purchase tickets over the phone.

Ticketron maintained a monopoly over the ticket sales industry until Ticketmaster arrived to claim its throne. Because ticket sales were not centralized through Ticketron, consumers often faced the issue of shows registering as sold out at a kiosk when there were seats available through another seller.  In 1976, two Arizona State University staffers sought to solve the issues that Ticketron failed to address. Albert Leffler, an employee at the college’s performing arts center, and Peter Gadwa, an employee of ASU’s IT department, originally came together to create a local ticketing system for ASU’s theater. They were eventually joined by businessman Gordon Gunn III. Leffler came up with the name “Ticketmaster” for the company, and less than a year later they were in business with Electric Light Orchestra at the University of New Mexico for their first ticketed concert. In 1978 they signed their first major venue, the Louisiana Superdome, and their first major league team, the NBA’s New Orleans Jazz. 

ROSEN’S BIG REPUTATION

Much of Ticketmaster’s dominance in the industry can be accredited to the work of Fred Rosen. In 1982, Ticketmaster was purchased by Jay Pritzker, founder of the Hyatt Hotels, who appointed Fred Rosen as CEO. Rosen was a practicing attorney who believed that profit was the highest in the concert business, so he shifted Ticketmaster’s efforts to focus on live music and moved the business to Los Angeles. He built the appeal of Ticketmaster by highlighting the faults of Ticketron. He thought that the venues rather than concertgoers were Ticketmaster’s true customers and built a business strategy to reflect that. Rather than following Ticketron’s method of charging the venues to use their system, Ticketmaster paid the venues using a portion of the service charges they would make from selling a ticket and provided marketing and advertising for the events. In return, venues would designate Ticketmaster as their exclusive ticketing platform. They also required that any venue or promoter who wanted to sell tickets through the company provide them with their entire ticket inventory for the event. Lastly, they convinced venues to close their box offices on the first day of ticket sales so they could exclusively handle the ticket process, leaving consumers with no option but to buy with Ticketmaster and pay service charges. With the pockets of Pritzker by his side, Rosen was able to advance payments to venues and promoters to get them to agree to Ticketmaster’s demand.

While some viewed Rosen’s business strategies as aggressive, the strategies worked—and Ticketmaster’s revenue proved so. Before Rosen took over in 1982, Ticketmaster generated $1 million in sales.  In just three years, revenue soared to over $200 million in 1985. By 1987 the company’s sales had doubled to $400 million and finally began to exceed Ticketron’s numbers. While Ticketmaster’s popularity continued to rise, Ticketron struggled to keep up. The new business model had proven to be far too successful and eventually in 1991, Ticketmaster bought Ticketron for $11 million. At the time, Ticketron had 750 outlets in 18 states and Canada and held 40% of the market share, while Ticketmaster had 13,000 outlets across 40 states and had 50% of the market share. With Ticketron out of the way, Ticketmaster became the leader of the ticketing industry for the first time, generating $1 billion in sales that same year. 

NOW WE’VE GOT BAD BLOOD

The Taylor Swift pre-sale fiasco is not the first time consumers and the DOJ have acted against Ticketmaster’s power in the industry. While Rosen continued to generate more money for Ticketmaster, many became unsatisfied with the impact of the company’s dominance over the market. Fans complained about raised fees, promoters claimed that Ticketmaster held great power over them that was often abused, and rock bands argued that Ticketmaster purposely imposed excessive fees knowing that the bands would have no other option but to pay them. Rosen drowned out the noise and continued running his empire—but one rock band refused to lay down and accept defeat. In 1994, rock band Pearl Jam filed a memorandum with the Antitrust Division of the US Department of Justice claiming that “Ticketmaster has a virtually absolute monopoly on the distribution of tickets to concerts.” The dispute arose after Pearl Jam sought to perform a free Labor Day concert, yet Ticketmaster wanted to tack on a $1 service fee for every ticket sold. Pearl Jam proceeded to hand out tickets on their own and declared that in their upcoming tour, they would only perform at venues that sold tickets at $18 with service fees capped at $1.80 to keep tickets under $20. Considering the service fee charged by Ticketmaster is what pays promoters and venues, most turned down the request, resulting in Pearl Jam canceling their tour.

After filing the complaint, Pearl Jam went on to testify in front of Congress. Pearl Jam argued that Ticketmaster’s control and power should be limited so that younger fans who don’t have money to pay the growing price of concert tickets could still be able to attend. In their effort to get service fees reduced, they were supported by many other classic rock bands, such as The Grateful Dead and Aerosmith. Ticketmaster responded that once the numbers were crunched, their total revenue in comparison to the number of tickets sold would only amount to less than ten cents of profit per ticket sold. Rosen and his fellow business executives also contended that the industry was still competitive.

Following Pearl Jam’s testimony, the House Democrats introduced a bill named after the band that, if passed, would have mandated ticketing companies for entertainment and sports events to print service fees on the ticket or receipt. However, the bill eventually died and the DOJ feared that they would not be able to make a sustainable case against Ticketmaster which caused them to close their investigation. While some hoped that this complaint would be the beginning of Ticketmaster’s downfall, the company continued to soar. Shortly before the complaint from Pearl Jam, the controlling interest in Ticketmaster was sold to Paul Allen, co-founder of Microsoft and one of the wealthiest men in the country at the time. He purchased 80% of the company, which then fell to 54% once he decided to take the company public in 1996. At this point, Ticketmaster was generating over $1 billion in sales annually and began to acquire various companies to boost their power in the ticketing industry. They also opened an online site, Ticketmaster.com, to keep up with the technological evolution of society and ensure their consumers would have a variety of ways to purchase. 

THE TICKETING INDUSTRY’S WILDEST DREAMS

What has allowed Ticketmaster to stay in power for so long is its approach to locking in promoters and venues through ticket sales and exclusivity clauses. The most important exclusivity clause they held would turn out to be their agreement with Clear Channel Entertainment, which later rebranded to Live Nation. Clear Channel, which was at the time on track to become the largest concert promoter in the United States, gave Ticketmaster the power to perform all its ticketing services. Clear Channel also had various artists signed to them such as Jay-Z, Madonna, Miley Cyrus, and U2, and owned most major concert venues which made this deal a major revenue boost for Ticketmaster. The agreement lasted seven years, but Live Nation chose not to renew it so they could handle ticket sales in-house in 2008. Many hoped that the end of this agreement would lead to both Live Nation and Ticketmaster cutting prices to gain a competitive edge in the industry, however both companies shocked the industry with their next move. 

In 2010, Ticketmaster Entertainment and Live Nation announced they would be merging to form Live Nation Entertainment. The music industry and government fully opposed this move. Two years prior, the two companies together held more than 80% of the market share— one can only imagine what kind of monopoly the combination would lead to. This merger was viewed as a litmus test for President Obama’s stance on antitrust regulation as a president; lawmakers from both sides of the aisle met with him to block the deal from happening.  

Antitrust laws exist to protect consumers from exploitation by powerful corporations. These laws regulate anticompetitive conduct that would allow companies to capitalize on the power they hold over a certain industry and ultimately hurt consumer’s interests. Antitrust law should have been a major deterrent for the Ticketmaster-Live Nation Merger and opponents largely complained of what could come from both companies conjoining. Linda Sherry, the director of national priorities of Consumer Action, a group concerned with the merger, opined “If allowed to merge, these firms would control so much of the music marketplace that no one could stop them from raising ticket prices and service fees, meaning fans would pay. No single company should have that much control over access to live entertainment.” Live Nation and Ticketmaster claimed that “by combining they would be able to reduce inefficiencies in the marketing and presentation of live events.” Live Nation and Ticket Master also claimed that the music business was in bad shape and merging would correct issues within the industry and thus allow it to thrive.  

The DOJ conducted a yearlong investigation into the merger and ultimately agreed with those opposing the move, but still allowed it to continue, with stipulations. Their announcement stated, “the merger, as originally proposed, would have substantially lessened competition for primary ticketing in the United States, resulting in higher prices and less innovation for consumers.” Therefore, to minimize the risk of lessened competition, the DOJ placed two restrictions on the merged company. First, Ticketmaster was forced to license its ticketing software to two major competitors -- Anschutz Entertainment Group (AEG), and either Comcast Spectacor or another suitable company, so that both companies could still compete with Ticketmaster. At the time, AEG was the second-largest concert promoter and operator of major concert venues. Having access to Ticketmaster’s software would afford them a competitive edge when trying to contract with certain venues or promoters. Second, once merged, the company would be forbidden from seeking retaliation against any venue that decided to use another company’s ticketing or promotional services. The merged company was also restricted from using anticompetitive bundling tactics to try to strong-arm venues and promoters into contracting with them. The department claimed that these conditions offered comparable incentives to ensure that ticket sales were maximized for the benefit of the consumer. These terms were set to last for 10 years. Finally free of opposition, the two companies merged on January 25, 2010, and since then, have operated as Live Nation Entertainment, with Ticketmaster functioning as its subsidiary. While the restrictions imposed by the DOJ seemed to be plausible ways to keep competition in the ticketing industry afloat at first, these restrictions would only matter if they were strictly enforced. 

The restrictions placed on Live Nation were a good start to maintaining competition, but without the proper enforcement, they were useless. Live Nation was free to do as it pleased given that the DOJ did not actually ensure they were following permitted business practices. This lack of enforcement set the stage for Live Nation to transform into the industry giant it is today. Shortly after the merger, complaints arose stating that Live Nation used its control over the music industry to pressure venues into contracting with Ticketmaster. AEG reported to the DOJ that their venues in Atlanta, Las Vegas, Minneapolis, Salt Lake City, Louisville, and Oakland were all warned they would lose valuable shows if they did not use Ticketmaster. Live Nation’s attorneys claimed that AEG was simply a disgruntled competitor looking for someone to blame their loss in revenue. The complaints lead to the DOJ conducting another investigation into Live Nation in 2019, which unveiled that the company repeatedly violated the agreed upon terms. Live Nation was not fined or punished for these violations; the DOJ simply made them extend the original settlement for another five years with specified language as to what the company was allowed to do when contracting with venues, and Live Nation had to reimburse the DOJ for the costs of enforcing the regulations. The DOJ also appointed an independent monitor to investigate and report on Live Nation’s behavior and imposed an automatic penalty of $1 million for any violation of the agreement in the future. Considering that the same business practices are still being complained of in 2024, it is evident that the DOJ’s regulation of Ticketmaster, or lack thereof, has been insufficient to truly promote a competitive entertainment ticketing industry. The DOJ has blatantly allowed Live Nation to become the industry giant it is today, and consumers—like the Swifties—are now paying the price. 

I KNEW YOU WERE TROUBLE

When assessing the claims of antitrust violations made by the Swifties against Ticketmaster, there are three core federal laws at play: The Sherman Antitrust Act, The Federal Trade Commission Act, and The Clayton Act. Congress originally passed the Sherman Antitrust Act in 1890 as a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.” The act imposed specific penalties and fines on companies that contracted or conspired to restrain trade or monopolize industries to stop competitors. The Sherman Antitrust Act is also a criminal law, and intentional and clear violations of it can lead to millions in penalties for both the individual and the corporation, as well as jail time for the executives found guilty of employing business practices that violate the act. The Federal Trade Commission Act and Clayton Act came shortly after in 1914, with the former banning unfair competition methods and deceptive acts or practices, and the latter addressing specific practices that the Sherman Antitrust Act did not ban. False advertising is an example of an FTC Act violation, while predatory pricing or tying agreements, where a company forces a consumer to purchase another item in order buy the original item they desired, are violations of the Clayton Act. All violations of the Federal Trade Commission Act are also violations of the Sherman Antitrust Act and can only be enforced by the Federal Trade Commission. 

Together, the three acts serve as the major guiding principles to consider when determining whether a business or its practices are anti-competitive. The main objective of these laws is to “protect the process of competition for the benefit of consumers, make sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.” In addition to the federal laws, most states have their own antitrust laws that are enforced by the individual state attorney generals or private plaintiffs. When applied to Ticketmaster, these laws are intended to protect consumers from the industry giant being able to exercise its power to raise prices and force sales. Perhaps if the DOJ had been more stringent in their previous regulation of Live Nation’s business practices, The Eras Tour pre-sale fiasco could have been avoided. But the laissez-faire manner the DOJ approached Live Nation with has given them room to run their business however they deem appropriate without care for the law. 

COULD TICKETMASTER GET OUT OF THE WOODS?

In a January 2023 Senate hearing on potential Ticketmaster antitrust violations following The Eras Tour pre-sale, Senator Amy Klobuchar reasoned “To have a strong capitalist system, you have to have competition. You can’t have too much consolidation, something that, unfortunately for this country – as an ode to Taylor Swift – I will say we know all too well.” With so much history surrounding Live Nation Entertainment and Ticketmaster’s run-in with antitrust laws, how are we in 2024 still having the same conversations? The fault is on many individuals involved, but mainly the DOJ. The DOJ remains in denial that Live Nation Entertainment operates as a monopoly. A separate investigation conducted by the New York Times concluded that Live Nation Entertainment controls “nearly every aspect of the ticket business, producing record-high ticket prices and onerous fees.” This is the exact reason why The Eras Tour pre-sale was such a disaster. 

In a suit filed against Ticketmaster following The Eras Tour pre-sale, plaintiffs state five causes of actions: breach of contract, intentional misrepresentation, fraud, fraudulent inducement, and antitrust violations. The lawsuit alleged six antitrust violations: (1) Ticketmaster’s conduct in foreclosing competition in the Secondary Ticket Services Market for Taylor Swift’s tickets constitutes an illegal tying arrangement; (2) Ticketmaster’s power in the industry has forced fans into exclusive dealings; (3) Ticketmaster’s dynamic pricing and manipulation of the Secondary Ticket Services Market constitutes price discrimination; (4) Ticketmaster’s conduct of allying with scalpers and venues has amounted to horizontal and vertical price fixing; (5) Ticketmaster’s refusal to conduct business with any competitor who does not conform to Ticketmaster’s demand is group boycotting; and (6) Ticketmaster has engaged in a market division scheme which has divided customers into certain regions with its competitors. While these arguments may be true, they are not the strongest antitrust violation allegations that can be made against Ticketmaster. Ultimately, the complaint was dropped, so it remains undecided whether federal or state antitrust law can be used as a basis to help mitigate the monopoly that Ticketmaster and Live Nation have on consumers. However, the chances of success on this front are much higher if different legal arguments are made.

In the past, Ticketmaster’s violations of federal and state antitrust laws have been less obvious. Ticketmaster exercised power in behind-the-scenes deals and simply stopped contracting with certain venues that refused to solely contract with them, which would then run the venue out of business.  The DOJ believed that the punishment placed on the company in 2019 would suffice to deter Live Nation from employing anti-competitive business practices. However, Live Nation continues to disregard the impact of its violations. 

How do we combat this? It’s simple—we must change the basis of the legal arguments being made. Live Nation’s power in and of itself should constitute a monopoly since it holds such great power over the live entertainment ticketing industry. However, that argument has failed in the past and will most likely continue to fail. 

To prevail in antitrust claims against Ticketmaster, claimants should harp less on the company’s power and tailor strategy more to similar successful antitrust allegations. In NCAA v. Alston, the Supreme Court held that the NCAA violated federal antitrust laws, specifically the Sherman Antitrust Act, because the NCAA and its member schools collectively enjoyed monopolistic power in the relevant market (the market for student-athlete services in Division I basketball) and exercised that power to restrain compensation without risking their market dominance. Attorneys against Live Nation could use the same reasoning to place limitations Ticketmaster’s power. If one looks at the state of the ticketing industry, consumers have essentially no true alternative ticketing company to obtain tickets from tickets in the primary sales market. Ticketmaster holds a 70% share in the ticketing market and contracts with or owns most major venues that artists visit on tour, which leaves talent with no other choice but to contract through Ticketmaster. If one company holds enough power in the primary market to the point that people are left with no other option if they’d like to tour, how can one say that there is truly an alternative for consumers? As Senator Amy Klobuchar stated during Senate Judiciary Committee hearings regarding The Eras Tour pre-sale, “This is all a definition of monopoly because Live Nation is so powerful that it doesn’t even need to exert pressure, it doesn’t need to threaten, because people just fall in line.”

Additionally, Live Nation’s involvement in the resale market solidifies that there is no true alternative for consumers. When a consumer buys a ticket through Ticketmaster and resells it through the platform, they are charged separate selling fees in addition to the service fees, facility charges, and order processing fees they’ve already been charged. While the fees from the primary sale are shared with the artist, the fees from the resale are all pocketed by Ticketmaster. According to a 2022 regulatory filing, Ticketmaster handled $4.5 billion in ticket resales in 2022. This second round of fees gives Ticketmaster an incentive to not regulate bots and scalpers as they directly profit from the fees attached to the resale. This helps further the argument that Ticketmaster has no reason to truly work to eradicate the issues of bots because, at the end of the day, bots increase their bottom line. Unless litigants can mount a successful complaint against the company or the DOJ takes its investigation and consequences seriously, Ticketmaster will continue these practices without any sort of care for consumers. 

CONCLUSION

Given the publicity and widespread criticism that Ticketmaster has gained following The Eras pre-sale disaster, is it likely that we’ll see any change soon? While Ticketmaster has made small attempts to remedy the issues their business practices have brought, these attempts are the equivalent of slapping a Band-Aid on a broken leg. For Beyonce’s Renaissance Tour pre-sale, which followed Taylor Swift’s, Ticketmaster employed new tactics like staggered Verified-Fan registration deadlines and pre-sale dates. This proved to be semi-successful in the sense that a complete system meltdown was avoided, however these minimal solutions do not permanently resolve the issues surrounding Ticketmaster’s power. While the claimants have dropped their case against Ticketmaster, the DOJ is also still actively investigating Live Nation. As of April 16, 2024, the DOJ is planning to file an antitrust suit against the company. The suit is said to be coming as soon as May 2024 and could potentially open the floodgates for more creative arguments to be made against Ticketmaster. While the DOJ has let consumers down in the past, its decision to maintain its investigation provides hope that they are ready to hold Ticketmaster to the fire. It will be imperative for the DOJ to pay attention to the complaints of consumers if they wish to prevail. Ultimately, in the words of the Break Up Ticketmaster Coalition, “to build a vibrant, competitive live events market, the Department of Justice should listen to the thousands of fans, artists, independent venue owners, promoters, advocates and bipartisan members of Congress that are urging the agency to break them up.” If the DOJ finally decides to act, in the words of Taylor herself, maybe the solution is that Live Nation and Ticketmaster should never, ever, ever get back together.