The Department of Justice is stepping up antitrust enforcement in a bid to break up Live Nation

The Justice Department is stepping up its antitrust enforcement after Live Nation (LYV) filed a lawsuit Thursday seeking to break up the entertainment giant.

U.S. prosecutors and a group of states argue that Live Nation used its monopoly on Ticketmaster ticket sales to suppress competition. The lawsuit follows a two-year investigation into the company.

The case comes 14 years after the Department of Justice approved the merger of Live Nation and Ticketmaster. Ticketmaster is the dominant ticketing provider across the United States, accounting for over 80% of sales, while Live Nation owns and operates hundreds of high-profile venues and is a giant concert promoter.

The combined company has long faced criticism over what lawmakers and regulators consider excessive fees, problematic customer service and unfair practices.

Live Nation shares fell about 5% after the lawsuit was filed in the Southern District of New York.

“Live Nation relies on unlawful, anticompetitive conduct to exercise its monopoly control over the U.S. live events industry at the expense of fans, artists, smaller promoters and venue operators,” Attorney General Merrick Garland said in a statement cited by multiple media outlets.

“As a result, fans pay more in fees, artists have fewer opportunities to play shows, smaller promoters are squeezed out, and venues have fewer choices in ticketing,” Garland added. “It’s time to part ways with Live Nation.”

Live Nation immediately dismissed the lawsuit, calling the allegations “baseless.”

“The Department of Justice’s complaint attempts to paint Live Nation and Ticketmaster as the cause of fan frustration in the live entertainment industry,” said Dan Wall, Live Nation’s executive vice president of corporate and regulatory affairs.

“He blames concert promoters and ticketing companies – neither of which controls ticket prices – for high ticket prices. It ignores everything that is actually responsible for higher ticket prices, from rising production costs to the popularity of artists to the 24/7 online ticket scalping that reveals the public’s willingness to pay much more than the cost of entry-level tickets.”

The new legal action is part of a broad effort by the Biden administration to crack down on behavior perceived as anticompetitive in a wide range of industries, from health care to grocery to technology.

The administration has alleged antitrust violations by tech giants Apple (AAPL), Amazon (AMZN) and Microsoft (MSFT) as it resolves a case brought by the Trump administration against Alphabet (GOOG, GOOGL).

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It also tries to block mergers that could eliminate competition in other industries.

Since the merger of Live Nation and Ticketmaster was approved in 2010, the company has been at the center of antitrust concerns, with critics focusing on exorbitant ticket fees and accusing the entertainment giant of anti-competitive behavior.

In 2020, the Justice Department updated the company’s consent decree, an agreement that prohibited Live Nation from heavily armed venues from using Ticketmaster for its tours, and extended it through 2025.

It did so after it said it found evidence that the company had repeatedly engaged in conduct over several years that violated its prior agreement.

Meanwhile, Capitol Hill stepped up its fight against Live Nation during a Senate Judiciary Committee hearing early last year following the 2022 Taylor Swift concert ticket debacle.

Ticketmaster’s online software struggled to cope with the demand for pre-orders, and fans complained that they were denied tickets when they tried to purchase.

At the time, many senators called for the company to be dissolved, although some Wall Street analysts argued that a breakup would not necessarily solve problems related to the unregulated secondary ticket market.

Analysts also say Live Nation would be a “shell of itself” without Ticketmaster because that entity generates most of its profits.

In its latest earnings report, the company reported fiscal 2023 revenues rose 36% year-over-year to $22.7 billion, while earnings per share more than doubled to $1.37. Concert attendance increased by 20% as over 145 million fans attended over 50,000 events.

Analyst Matthew Harrigan calls the Justice Department’s lawsuit against Live Nation “significantly politicized” in the context of a U.S. election year and says the department has “generally failed to apply horizontal M&A theories.”

“We continue to maintain that any targeted termination of the 2010 Live Nation Ticketmaster merger is likely unlikely under established antitrust law, although we would be cautious about the likely initial venue in New York State Federal Court,” it said.

Meanwhile, Deutsche Bank said that “the Department of Justice’s desire to break up Live Nation is somewhat surprising and raises the stakes of the investigation.”

“We expected that Live Nation plans to defend its position in court and could still win, but this issue is likely to remain an overhang for some time,” the bank added, noting the possible impact on the share price.

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