The Four Strengths of the Government’s Live Nation-Ticketmaster Lawsuit: Part II

In Part II of a two-part series, Michael A. Carrier examines the merits and strengths of the government’s recent lawsuit against Live Nation and its subsidiary Ticketmaster for monopolizing the live entertainment market. See Part I here.

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In Part I of this series, I presented the government’s evidence in support of its lawsuit against Live Nation-Ticketmaster for monopolizing the live entertainment market. In Part II, I assess the merits of the lawsuit and discuss four elements that reveal the strength of the complaint: 1) long-standing anticompetitive harms, 2) weak procompetitive justifications, 3) a clear resolution, and 4) support from multiple antitrust perspectives.

Point 1: Long-standing anti-competitive harm

First, the complaint focuses on a series of anticompetitive conducts that sit comfortably in the middle of a long history of antitrust case law. Allegations of market-sharing, tying, and exclusivity agreements have been the bread and butter of what courts have deemed antitrust violations for decades. That’s because the harm can be severe. Market-sharing is even more troubling than price fixing, because there is no competition in any (price or nonprice) element of competition. That’s true in spades for developer and venue manager Oak View Group, a self-described “pimp” and “hammer” who “protects” Live Nation, “never wants to be a competitor,” and has split arena promotion and consulting business with Live Nation.

Exclusive deals lock a market (here, venues) out of competition for long periods of time. The tie forces artists who want to perform in Live Nation’s large amphitheaters to use the company’s promotional services. And each of these specific harms is compounded by a broader pattern of monopolization that includes direct and indirect threats, retaliation, and takeovers. While looking back, it does magnify the anticompetitive effects that many warned about when Live Nation and Ticketmaster merged in 2010, it does not negate the existence of “additional, different, and more pervasive violations” in which the company is now engaged.

Point 2: Weak pro-competitive justifications

Second, for reasons I have explained in more detail elsewhere, Live Nation is unlikely to offer a procompetitive justification that outweighs the broad anticompetitive effects. For starters, market-allocation actions like the ones described in the previous section are not justifiable under antitrust law. The same is true for threats and retaliation, such as denying admission to StubHub customers, redirecting concerts after venues switch to non-Ticketmaster ticketing, and using the “velvet gavel” to make sure a rival understands, “We’re either in this together or we’re competitors.”

The company will likely make security claims based on its SafeTix technology. But its use of that technology is part of a broad pattern that focuses on harming its rivals and the market as a whole. Moreover, as I’ve summarized elsewhere (and explained in detail), Ticketmaster makes a good point about fighting bots and protecting security. But it was caught red-handed doing exactly what it claimed to be fighting. In 2018, Canadian Broadcasting Corporation and Toronto Star sent undercover reporters to a conference where “Ticketmaster representatives introduced them to TradeDesk,” “the company’s invitation-only ticket resale platform.” Reporters “caught the representative on camera saying that Ticketmaster’s ‘buyer abuse’ team would look the other way when such practices occurred on its own platforms,” and the representative admitted that some brokers had “literally hundreds of accounts.” In reality, “(s)calpers receive preferential treatment over consumers,” and Ticketmaster provides encouragement to increase sales on a large scale by providing discounts that increase with sales.

When considering additional anticipated justifications, the typical defenses of exclusivity are not present here. One of the main justifications is to prevent “free-riding,” which occurs when one retailer benefits from another’s promotional efforts, such as knowledgeable employees demonstrating product features in a showroom. Ticketmaster, in contrast, does not spend money to promote its ticket product, and its rivals benefit from these efforts. Ticket prices also have no strong correlation with the services provided, as demonstrated by the firm’s “loss-leader” strategy, which involves undercharging on the promotional market, which is not consistent with the need to use the investment in this market.

Finally, the typical justifications for tying, according to which “artists wishing to use . . . large amphitheaters for shows” must “also purchase promotional services from Live Nation,” do not apply. A leading antitrust treatise explains that these justifications focus on: (1) protecting the quality of the product (for example, when a company’s product “works well only with a specific supply”); (2) “reducing costs or increasing value”; (3) “increasing price competition through indirect or selective price reductions”; and (4) providing “a guaranteed amount of patronage in the tied market that could aid entry into that market.”

Pricey legal counsel will have every reason to muddy the waters by throwing in benefits similar to those raised in this section. But Live Nation is likely to fail the challenge because of (1) the lack of fit between the facts here and the typical scenario that would allow for such justifications and (2) the existence of conduct such as market division, threats, and retaliation for which no justification can be provided.

Point 3: Clear medicine

The third force in the complaint is the actual demand for a robust remedy. In 2010, the Justice Department allowed Live Nation and Ticketmaster to merge on the condition that they not require venues that want to book Live Nation artists to use Ticketmaster tickets and not retaliate against venues that use other ticketing companies. But in 2020, the Justice Department took the rare action of extending the decree because the merging companies “failed to uphold their end of the bargain.” Specifically, they “repeatedly conditioned and threatened to conditioned Live Nation’s provision of live concerts on the venue’s purchase of Ticketmaster ticketing services” and “retaliated against venues that chose to use competing ticketing services—all in violation of the clear language of the decree.”

In other words, we have the evidence on a platter that the company cannot be trusted to abide by the consent decree. By including in the scope of the requested remedies—which include an injunction against anticompetitive practices and termination of the ticketing agreement with Oak View Group—the structured solution of divesting Ticketmaster promises to address the underlying harms by enabling competition in the ticketing marketplace and creating competition in many markets.

The typical challenge of splitting up a merged company—“unraveling the eggshells”—is absent here. The company is split into distinct business lines: Live Nation Concerts, Venue Nation, Ticketmaster and Live Nation Sponsorship. And Ticketmaster is organizationally separate: a subsidiary of Live Nation Entertainment.

Point 4: Support from multiple antitrust perspectives

Fourth, proponents of various antitrust schools can line up behind the complaint. Applying the traditional consumer welfare standard, fans have been harmed. “They have paid more fees that are not transparent, nonnegotiable, and cannot be compared because there are no other options.” And they have been “denied access to the benefits that a competitive process would provide, such as greater choice at concerts and innovative, fan-friendly ticketing options,” which include “more streamlined user interfaces and purchase flows, insightful presentation of ticket offerings, improved purchasing options (and) more flexible refund policies.” These harms are not theoretical, as any fan who has paid increasingly higher fees or suffered through ticket sales fiascos will attest.

The company’s tentacles throughout the ecosystem further harm other entities that a neo-brandeist perspective would appreciate. As the complaint alleges, “artists have had fewer opportunities to play shows and fewer real opportunities to promote their shows, sell tickets to their own shows, and perform at specific venues.” And venues “reasonably fear disruption, retaliation, and the complications of partnering with anyone other than Live Nation lest they lose access to culturally significant and profitable concerts.” Venues and artists “are not free to select tickets based on their own assessment of price, quality, or value.” Finally, promoters are unable to compete with Live Nation’s “loss leader” strategy of underpricing promotion and overpricing tickets and other high-margin businesses.

Focusing on the lack of solid pro-competitive justifications, Chicago School advocates would argue that there is no justification for retaliation and market partitioning, and that the typical pro-competitive explanations for exclusive dealing and tying are not at issue here. In fact, several forms of Live Nation’s conduct fail the most deferential analysis, which asks whether the conduct makes any sense without harming the rival. Such a test is not met when the company sacrifices profits by not opening its venues to non-Live Nation shows and when it pursues acquisitions to “(keep) (rival) out of the region,” “expand (the company’s) moat,” and “reduce competition.” Even the point that small-company mergers and acquisitions should not be judged with hindsight is weaker in this context, given the compelling evidence of intent, the smaller market share of entities in the ecosystem dominated by Live Nation, and the overall course of conduct.

Application

The Justice Department and 30 state attorneys general have filed a powerful complaint that highlights a wide range of anticompetitive effects across multiple markets. Success in this lawsuit promises to lower prices, improve quality, and increase choice and innovation. Consumers, artists, venues, and promoters stand to gain by escaping the grip of the Live Nation ecosystem.

Author Disclosure: The author reports no conflicts of interest in writing this article. Please see our disclosure policy here.