Why the Justice Department wants to break up Live Nation and Ticketmaster

The Department of Justice Wants to Shorten Live Nation and Ticketmaster’s Shows. After months of waiting, the Justice Department filed an antitrust lawsuit against the companies, demanding their division. “We allege that Live Nation has illegally monopolized the concert industry markets in the United States for far too long,” Attorney General Merrick Garland said during a May 23 news conference. The lawsuit brought renewed attention to Live Nation and Ticketmaster after ticket sales issues for artists such as Beyoncé, Bruce Springsteen and, most notably, Taylor Swift. Congress also turned a bipartisan look at Live Nation.

Twenty-nine states and the District of Columbia joined the federal government in the lawsuit, providing detailed evidence that Live Nation and Ticketmaster have monopoly power in multiple markets. Meanwhile, Live Nation responded by calling the claims “absurd” and “baseless.”

Let’s be like antitrust lawyers and break cases up Down.

Live Nation and Ticketmaster merged in 2010, which was also controversial at the time. Live Nation has become the second-largest ticketing platform after Ticketmaster, and some lawyers and scholars have warned that the deal could create a monopoly on stand-alone transactions. The Obama administration sought to address this issue with a consent decree that set certain limits on Live Nation and Ticketmaster’s conduct. The executive order was intended to last for 10 years, but after Live Nation was found to have violated it in 2019, the Department of Justice and Live Nation agreed to extend it until the end of 2025. Live Nation’s violations of the order at the time included claims regarding pressure on sports venues use Ticketmaster.

At the press conference announcing the lawsuit, Garland emphasized that Live Nation’s conduct was not only anti-competitive but also illegal. “We allege that Live Nation controls the U.S. entertainment industry because it breaks the law,” Garland said. More specifically, the lawsuit alleges five violations of the Sherman Antitrust Act:

1. Live Nation has a monopoly on primary ticketing markets.
2. Ticketmaster’s long-term contracts with venues constitute exclusive transactions.
3. Live Nation has entered into a binding agreement requiring artists performing at Live Nation venues to use Live Nation as a promoter.
4. Live Nation has a monopoly on large amphitheaters.
5. Live Nation has a monopoly on concert promotion for both venues and artists.

Twenty-two states additionally allege that Live Nation violated their antitrust and antitrust laws.

It really comes down to Live Nation’s market power in ticket sales, venues and promotions. The lawsuit focuses on the “flywheel” characterization of Live Nation’s business. A flywheel is a large wheel that turns other gears or wheels. Live Nation says its driving force is concert promotion, which has a lower margin. Once that wheel turns, it will start turning the wheels of Live Nation’s other high-margin businesses: ticketing, venues and advertising. These wheels keep the flywheel of concert promotion turning, giving Live Nation strength in the live events industry. The lawsuit alleges that by doing so, Live Nation could force certain venues to use Ticketmaster or certain artists to use Live Nation to promote concerts.

The lawsuit includes several egregious alleged examples of Live Nation’s anti-competitive behavior, including:

➽ Live Nation has relaxed in the face of competition with Oak View Group, a facilities management company that is well-positioned to be its competitor. Founded by music mogul Irving Azoff (former CEO of Ticketmaster and chairman of Live Nation) and CEO Tim Leiweke (former CEO of concert promoter AEG), Oak View Group allegedly repeatedly withdrew from promoting concerts at the request of Live Nation. The senior vice president allegedly said in 2019 that Oak View Group’s “policy is to stay on the sidelines” in concert promotion to help Live Nation. Live Nation allegedly used its close relationships to promote Ticketmaster at Oak View Group properties.

➽ Live Nation threatened a promotional company owned by Silver Lake, a private equity firm that owns a controlling interest in Oak View Group. When Silver Lake-based TEG promoted a 2021 “celebrity artist” concert at the Los Angeles Memorial Coliseum, Live Nation used Ticketmaster “to thwart” ticket sales at the concert by refusing to honor tickets from StubHub, which partnered with TEG. (This sure sounds like Ye and Drake’s “Free Larry Hoover” benefit concert).

➽ Live Nation threatened the venue, which changed its ticketing system from Ticketmaster to SeatGeek in 2021. A senior Live Nation executive allegedly sent a text to the venue’s general manager saying that they “should be thinking about a closer relationship with LN, not just who writes the bigger sponsorship check,” with a winking emoji. Live Nation’s CEO also allegedly told the venue’s owner that the company would be “very concerned” about SeatGeek selling tickets to Live Nation artists. After the change, Live Nation began moving its concerts away from this location. Live Nation also allegedly caused problems with SeatGeek’s additional ticket sales to Live Nation artists. After about a year, the property was returned to Ticketmaster. (That certainly sounds like the Barclays Center in New York.)

➽ Another venue management company was concerned about losing Live Nation shows if it didn’t use Ticketmaster. Anschutz Spectator Management, or ASM Global, operates more than 30 arenas in the U.S. and is partially owned by AEG, Live Nation’s largest competitor. AEG tried to get ASM Global to use AXS, its preferred ticketing service, at its properties, but majority shareholder Onex allegedly feared that if ASM Global’s properties did not use Ticketmaster, Live Nation would halt its events.

➽ Ticketmaster used the pandemic to extend its exclusive ticketing agreements for a year and told the venue that selecting another ticketing partner during that time would be a “breach of contract.” One venue told Ticketmaster it planned to contract with another ticketing company because it had not agreed to extend its contract. Live Nation’s chief financial officer allegedly told the venue he would “abandon” the contract issue if the venue signed a new contract with Ticketmaster.

➽ Live Nation prefers to keep its best amphitheaters “blacked out” during peak hours rather than work with other promoters. The lawsuit cites 2018 Live Nation data showing that the company’s top 10 amphitheaters have no shows “on almost 50% of summer Saturdays.” A 2022 analysis allegedly found that Live Nation’s top 15 amphitheaters sit empty on an average of eight Saturdays between June and September.

➽ Live Nation regularly acquired companies that it internally deemed to be the “biggest competitive threat.” According to the lawsuit, they include AC Presents (which Live Nation bought a stake in in 2016), Frank Productions (which Live Nation acquired in 2018), National Shows 2 (Frank’s subsidiary) and ScoreMore Shows (which Live Nation Nation secured a majority stake in 2018). These are just a fraction of Live Nation’s recent acquisitions and transactions outlined in the lawsuit.

The highly criticized fees charged by Live Nation and Ticketmaster are not cited in themselves as directly anti-competitive, but rather as a symptom of Live Nation’s alleged monopoly. The lawsuit calls Live Nation’s high fees a “ticket tax” and says that in other countries where many ticketing and promotional companies thrive, concert fees are not as high. According to the lawsuit, “Live Nation’s various contracts interact with each other to increase the overall number and amount of fees paid by fans.” This means that breaking up Live Nation and Ticketmaster and opening up the market would, in turn, lower concert fees. The TICKET Act, which just passed the House of Representatives, also focuses on ticket fees.

In a fiery statement to the media, Live Nation responded to the lawsuit, saying the company “will defend itself against these baseless allegations.” “Calling Ticketmaster a monopoly may be a PR success for the Department of Justice in the short term, but it will lose in court because it ignores basic principles of the economics of live entertainment,” Live Nation said. (The company further claimed that “the majority of service fees go to venues,” but the lawsuit says venues only “superficially” base their fees on what they have to pay back to the promoter, Live Nation.)

Live Nation also published an essay in response to the lawsuit, quoting Executive Vice President of Corporate and Regulatory Affairs Dan Wall. It claims the lawsuit “will not reduce ticket prices or service fees” and that Live Nation and Ticketmaster do not have monopoly power. The website uses a lot of strange graphics comparing Live Nation to companies like Twitch, Apple and Meta. Wall then explains and denies a number of allegations in the lawsuit regarding Oak View Group, Silver Lake and other alleged anti-competitive conduct.

Wall portrays the lawsuit as the act of an overzealous Justice Department bowing to political pressure. He said Live Nation had met with the Department multiple times but “they just didn’t want to believe the numbers” Live Nation presented to disprove the monopoly claims. “DOJ is not helping consumers solve their real problems,” he adds, again arguing that the lawsuit will not lower ticket prices. “This is why the government has never been less popular – because it pretends to solve your problems when instead it panders to a narrow set of political interests.”

The lawsuit calls for Live Nation to divest Ticketmaster and end its ticketing agreement with Oak View Group, among other “anti-competitive practices.” It is also calling for monetary relief over Live Nation’s conduct. “It is necessary to separate Ticketmaster from Live Nation to reduce overall industry dominance,” Garland said during a news conference.

In practice, the case was filed in the United States District Court for the Southern District of New York. A case can take years to resolve, and even longer to obtain a resolution on appeal. The Department of Justice filed a similar antitrust lawsuit against Microsoft in 1998, but the verdict was not issued until 2000, and after an appeal, the case was not resolved until 2004. In other words, don’t count on concert ticket sales to decline significantly change in case of a moment.