The Department of Justice throwing a grenade at the Ticketmaster merger may backfire

As an avid live music fan and antitrust lawyer, I have a keen interest in the Department of Justice’s May 23 lawsuit seeking to break up Live Nation and Ticketmaster.

At first glance, the case of Live Nation Entertainment Inc. seems attractive to the Department of Justice. This confirms the Biden administration’s commitment to questioning the behavior of one company that, in this case, has a strong position in both ticket sales and concert promotion. Perhaps more importantly, it addresses widespread concerns from patrons, artists and Capitol Hill about ticket prices and the quality of ticket delivery technology. (Just ask the average Swiftie about the latter.)

However, cases based on this type of theory – exclusionary behavior resulting from vertical integration – can be challenging. Live Nation will point out, among other things, the benefits to consumers of having Ticketmaster and Live Nation under one roof, and the Department of Justice will be subjected to a test of the level of actual coercion that occurred.

Live Nation also seems willing to argue that competition is fierce and growing, and that others in the industry are responsible for high ticket prices and fees. And while the complaint is quite well-crafted, it does not appear to be based on hard evidence of exclusionary conduct, especially given the length of time Live Nation has been under the microscope.

Although stronger evidence may emerge over time, it should be assumed that the DOJ was encouraged to present its strongest case at this early stage.

Why? First, the Obama administration approved the merger in 2010, and the Biden administration is now trying to reverse course. Since the Justice Department quickly clarified at a May 23 press conference that the conduct at issue was broader than a merger, you would think it would pick out the best ammunition to support this thesis.

Challenging a previously blessed deal like this (as the Federal Trade Commission did with the Facebook-Instagram merger) invites criticism of fundamental fairness and effective corporate planning. It is extremely difficult to bring parties together to weave assets and strategies, knowing that they may later become separated. Perhaps that’s what the Justice Department wants – to keep some deals from leaving the boardroom.

While this issue seems serious, there is also the question of whether splitting the company is the best solution, even if the Department of Justice proves this thesis. Vertical integration can provide benefits by eliminating the friction of dealing with multiple companies. For example, artists would have to deal with a different combination of promoters, venues, ticket sellers, and other vendors for each performance on a tour.

This can result in potential mishaps, confusion, variable service levels, different audience experiences, and increased transaction costs that artists and fans would prefer to avoid. A vertical merger can also lower costs for consumers by reducing two profits made by separate companies to one.

The Justice Department has plenty of tools at its disposal, including stronger policing and deterrence mechanisms, if current efforts prove insufficient. Throwing a grenade at a merger to enforce antitrust laws may be a step too far.

I hope this action leads to what is best for this industry. However, I am afraid that by choosing the most radical antitrust measure, the noise will interfere with the music.

The case is United States v. Live Nation Entertainment Inc., SDNY, 24-cv-03973, filed 05/23/24.

This article does not necessarily reflect the opinions of Bloomberg Industry Group, Inc., publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Craig Waldman is co-chair of Jones Day’s global antitrust and competition law and technology practices.

These are the author’s personal views or opinions; do not necessarily reflect the views and opinions of Jones Day.

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