Update: Breaking Down The DOJ Lawsuit

This submit has now been up to date with extra evaluation…

By Dan Wall, Government Vice President, Company and Regulatory Affairs, Stay Nation Leisure, Inc

• This lawsuit towards Stay Nation and Ticketmaster received’t scale back ticket costs or service charges.

• There may be extra competitors than ever within the stay occasions market – which is why Ticketmaster’s market share has declined since 2010.

• Internet income present Stay Nation and Ticketmaster don’t wield monopoly energy.

• This lawsuit distracts from actual options that will lower costs and defend followers – like letting artists cap resale costs.

The Division of Justice and a bunch of State Attorneys Common have now filed the much-anticipated antitrust swimsuit towards Stay Nation and Ticketmaster.  This follows intense political strain on DOJ to file a lawsuit, and a long-term lobbying marketing campaign from rivals attempting to restrict competitors and ticket brokers searching for authorities safety for his or her enterprise mannequin of scooping up live performance tickets and jacking up the worth.

The grievance—and much more so the press convention asserting it—try to painting Stay Nation and Ticketmaster as the reason for fan frustration with the stay leisure trade.  Regardless of admitting that “[t]he face values of tickets are sometimes set or authorised by artists,” it blames live performance promoters and ticketing firms—neither of which management ticket costs—for top ticket costs.  It ignores all the things that’s really liable for greater ticket costs, from rising manufacturing prices, to artist recognition, to 24/7 on-line ticket scalping that reveals the general public’s willingness to pay way over major ticket costs.  It blames Stay Nation and Ticketmaster for top service prices—and simply the truth that there are charges—however ignores that Ticketmaster retains solely a modest portion of these charges. The truth is, major ticketing is without doubt one of the least costly digital distributions within the economic system.

In mild of those information, Assistant Lawyer Common Kanter’s dodge of a reporter’s query about how a lot Ticketmaster contributes to charges was telling.

It’s also absurd to assert that Stay Nation and Ticketmaster wield monopoly energy.  The defining characteristic of a monopolist is monopoly income derived from monopoly pricing.  Stay Nation under no circumstances matches the profile.  Service prices on Ticketmaster are not any greater than on SeatGeek, AXS, or different major ticketing websites, and are often decrease.  The truth is, when Ticketmaster loses a venue to SeatGeek, service prices often go up considerably.  And even accounting for sponsorship, an promoting enterprise that helps maintain ticket costs down, Stay Nation’s general internet revenue margin is on the low finish of worthwhile S&P 500 firms.

The trendlines verify Stay Nation’s lack of market energy.  Yearly, competitors within the trade drives Stay Nation to earn decrease take charges from each live performance promotion and ticketing.  The corporate is worthwhile and rising as a result of it helps develop the trade, not as a result of it has market energy that squeezes extra revenue from much less output.

Within the weeks main as much as at present, we met a number of occasions with the DOJ entrance workplace. It was evident in our discussions that they only didn’t wish to imagine the numbers.  The information conflicted an excessive amount of with their preordained narrative that Stay Nation belongs within the ranks of the opposite “tech monopolists” they’ve focused.

At backside, we’re one other casualty of this Administration’s choice to show over antitrust enforcement to a populist urge that merely rejects how antitrust legislation works.  Some name this “Anti-Monopoly”, however in actuality it’s simply anti-business.  A central tenet of this worldview is that antitrust ought to goal firms which have grown massive sufficient that in some nebulous means they “dominate” markets—even when they attained their measurement by success within the market, not practices that hurt shoppers, which is the precise focus of antitrust legal guidelines. One of the crucial jaw-dropping components of at present’s grievance is the assertion that there are “obstacles to entry”  as a result of “artists naturally desire to work with a promoter who’s profitable in selling many high-demand reveals at common venues”—particularly, Stay Nation.  That may be a supreme expression of competitors on the deserves, successful by being higher.  However to this group it’s anticompetitive.

The brand new considering can also be waging warfare on vertical integration, usually and notably within the case of so-called “dominant platform firms.”  There is no such thing as a authorized foundation for objecting to vertical integration on such grounds.  Antitrust legislation views vertical integration as procompetitive in most circumstances.  Because the main antitrust treatise states, “vertical integration is ubiquitous and … [in] the good majority of circumstances no anticompetitive penalties might be connected to it.”  And, critically, Stay Nation can supply and has provided followers, artists, venues and the remainder of the stay leisure ecosystem higher costs and higher companies than they might obtain if these complementary companies have been separated.  Ticketmaster particularly is a much better, extra artist- and fan-focused enterprise beneath Stay Nation’s possession than it ever was as a standalone firm. The grievance is fully devoid of any response to that inescapable truth—as a result of DOJ has no reply for it.

The Obama Administration noticed issues otherwise.  It allowed Stay Nation and Ticketmaster to merge, and in defending that place acknowledged that there was no authorized foundation for difficult the vertical points of the merger—particularly, permitting a big live performance promoter to mix with a big ticketing firm.  In a single submitting, it mentioned that it had “decided that it couldn’t show that the vertical integration ensuing from the merger would considerably hurt competitors within the live performance promotion market.”  There is no such thing as a factual foundation for concluding in any other case at present.

Assistant Lawyer Common Kanter’s protection of searching for a breakup at at present’s press convention offered no reasoning to help a breakup.  First, he has his antitrust legislation incorrect, as a result of the DOJ has much more energy to problem a merger, which is illegal whether it is doubtless to be anticompetitive, than beneath the monopoly customary which requires proof of precise anticompetitive results.  So the DOJ can’t shrug off the truth that it allowed Stay Nation and Ticketmaster to merge as a result of, because it admitted, it couldn’t show even a probability of anticompetitive results.  And even on this grievance, DOJ doesn’t contend the merger was illegal.  It’s simply pandering to the group with a request for aid that, for my part, it can’t probably hope to attain beneath these circumstances.

It’s also necessary that the “different conduct” on this grievance is both precisely what the Obama DOJ addressed within the 2010 Consent Decree or has nothing to do with vertical integration.   It’s, as an alternative, a seize bag of disconnected alleged practices that might by no means justify the kind structural aid DOJ seeks.

Oak View Group

The grievance makes two principal claims regarding Stay Nation’s relationship with the Oak View Group (“OVG”), a venue administration firm.  The primary qualifies as disingenuous, in that it’s premised on the concept OVG was a severe potential rival to Stay Nation in live performance promotion.  OVG owns and manages venues.  It has by no means been a live performance promoter, nor aspired to be one—which is exactly the purpose being made within the e mail DOJ quotes.  DOJ’s declare is predicated on two incidents during which Stay Nation and OVG have been discussing what to do when an OVG venue wished to guide an occasional present itself on a darkish evening.  To painting that as an settlement to not compete in live performance promotion is farcical—notably when the grievance defines the related promotions market as a marketplace for regional or nationwide excursions, and explicitly disavows the suggestion that “self-supply” of reveals from venue homeowners is a part of that market.

Regardless, OVG’s habits as a venue operator is totally per each main enviornment and stadium within the nation—they should have an in home booker who helps fill in any other case darkish nights, however they’ve little interest in systematically taking up the chance of ensures that could possibly be within the hundreds of thousands of {dollars} for a present or tens of hundreds of thousands of {dollars} for a tour.

DOJ additionally claims it was anticompetitive for Ticketmaster to compete for and win a ticketing contract OVG provided.  The idea is that the contract gave Ticketmaster an unfair benefit in securing the enterprise of impartial venues that have been managed by OVG as a result of it creates monetary incentives for OVG to “advocate for” Ticketmaster.  However there’s nothing remotely anticompetitive about that.  Business preparations that contain incentive or advertising and marketing funds are frequent all through this trade (and lots of others).  Venue administration firms like OVG and ASM are ready to advocate for quite a lot of service suppliers, together with however not at all restricted to ticketing firms.  So there’s competitors for the enterprise alternatives at each the venues they personal, which they management, and the venues they handle, which they don’t management however can probably affect.  Ticketmaster competed and received the contract on the deserves as a result of OVG decided it was one of the best ticketing system obtainable.

Threatening Silver Lake

This declare reveals not solely a disregard for the info, but in addition deep hypocrisy.  The present DOJ and FTC have been vocal critics of personal fairness firms making a number of investments in the identical trade due to aggressive “entanglements.”  So was Stay Nation CEO Michael Rapino when, after it had already made an funding in OVG, Silver Lake Companions determined to spend money on the Australian stay leisure firm, TEG.  Rapino’s grievance was basically the identical because the DOJ/FTC concern with non-public fairness rollups:  it created a battle between OVG, which had change into a detailed associate to Stay Nation, and TEG.  So, in December 2021 when a TEG worker wrote to say that it didn’t intend to compete with Stay Nation within the U.S., Rapino replied to Silver Lake’s administration that he didn’t care about TEG, however nonetheless had an issue with Silver Lake’s choice to make a number of conflicting investments within the trade.

There is no such thing as a fact that this transient trade had something to do with Silver Lake’s choice to promote its stake in TEG.

Unique Contracting

The swimsuit challenges unique ticketing contracts between venues and ticketing firms.  That may be a apply that has been prevalent within the major ticketing enterprise for many years.  The truth is, DOJ investigated it within the Clinton Administration and selected to not problem it as a result of their investigation revealed that venues—the shoppers of major ticketing companies—most popular it.

That’s nonetheless how venues see it, and for good cause.  Major ticketing techniques embody far more than what a fan experiences when shopping for a ticket on-line.  They’re complicated venue field workplace administration techniques, and every is exclusive.  Only a few live performance venues wish to have a couple of as a result of they see it as not well worth the added prices and complexity.  So, the choice for practically all live performance venues isn’t whether or not to have two or extra ticketing companies suppliers, however fairly which one supplier to decide on. And since that’s how a venue seems to be on the world, it’s no shock that they—the venues—wish to undertake the contracting construction and create the bidding dynamics that may get them the very best deal from their most desired supplier.  Aggressive bidding for unique rights is the confirmed means for venues to create bidding strain and maximize the worth of their ticketing rights.  In different phrases, exclusivity is a product of competitors for venues, not an anticompetitive apply.

Serial Promoter Acquisitions

One other a part of the Criticism asserts that Stay Nation has violated the legislation by buying, in serial style, quite a lot of different live performance promoters.  The idea is evidently that competitors has been thwarted as a result of, however for these acquisitions, the promoters would have acted as important opponents to Stay Nation’s personal live performance promotion enterprise.

That premise is factually incorrect. Through the time interval at subject (roughly the final ten years or so), Stay Nation has by no means acquired any U.S. promoter that might plausibly be considered as a significant potential competitor within the alleged nationwide touring market.  Take a look at the instance Lawyer Common Garland raised:  Stay Nation’s 2016 acquisition of AC Leisure in Knoxville, Tennessee.  This was an acquisition of 1 promoter, who was in his 60s and trying to retire.  He approached Stay Nation trying to discover a good, long-term house for his staff.  Stay Nation didn’t have a Knoxville workplace, so for $15 million it made the deal. Significantly?  The DOJ is difficult that?

The truth is, most of our M&A exercise within the U.S. has been focused at discrete areas during which we successfully had no significant presence in any respect—most notably selling festivals, fairly than customary reveals or excursions—or seizing alternatives to broaden into new geographies. Plenty of these offers, like AC Leisure, have been with promoters who have been on the cusp of retiring and have been on the lookout for a substitute for winding down the enterprise. The notion that these acquisitions one way or the other materially altered the aggressive panorama in any means that will be problematic is wholly untenable.

Amps

The Criticism has quite a lot of allegations round Stay Nation’s conduct with respect to amphitheaters it operates. Most surprisingly, the DOJ has alleged that it’s anticompetitive tying for Stay Nation to completely guide its personal amps.  That’s legally specious.  First, if that’s tying, then it’s pervasive throughout the trade.  Numerous promoters completely guide venues they personal or function.  However it’s not tying, legally; DOJ’s tying verbiage is an effort to avoid the bedrock antitrust precept that no enterprise, even a monopolist, has an obligation to take care of opponents.  The Supreme Courtroom has repeatedly affirmed this precept, and the slender exceptions to it don’t apply to this case.  Stay Nation—and each different vertically-integrated promoter/venue proprietor—has an almost unqualified proper to not take care of rivals.

The baseless nature of this declare is amplified by the truth that we now have—opposite to what DOJ alleges—allowed artists promoted by others to play our amps, and that, as we informed DOJ repeatedly, we plan on voluntarily “opening” our amps to artists promoted by others.  The declare, subsequently, isn’t solely legally groundless however virtually pointless.

Content material Leveraging and Barclays

For all of DOJ’s rhetoric about searching for “structural treatments” (i.e., a break up of the corporate), the huge bulk of the conduct the Criticism describes has nothing to do with the mixture of a live performance promoter and a ticketing firm dwelling beneath one roof. There may be one exception, nevertheless, which is the set of allegations about threatening or retaliatory conduct by Stay Nation, the live performance promoter, if venues change away from Ticketmaster.

That is among the many core habits regulated by the consent decree that DOJ agreed to in reference to the merger of Stay Nation and Ticketmaster nearly 15 years in the past. I’ve written intimately in regards to the context and background of that settlement elsewhere, and received’t reprise that historical past right here. For current functions, the important thing factor to understand is that for the previous 4 years, a Monitor appointed by DOJ itself has been protecting shut tabs on Ticketmaster’s negotiations with venues and guaranteeing that the corporate isn’t utilizing live performance “content material” to drive ticketing offers. Throughout that interval, overlaying 1000’s of such offers, precisely one occasion of potential concern has come to the Monitor’s consideration.  In any other case, the Monitor has praised Stay Nation for its compliance program and an exemplary report of compliance.

The one occasion of a possible violation is in regards to the Barclays Middle in Brooklyn (referenced however not named within the grievance).  What the Criticism alleges about that drama is usually unfaithful. The quick model of an extended story is that Barclay’s switched from Ticketmaster to SeatGeek. Six months earlier than that occurred, Barclays employed a significant New York legislation agency to threaten us with contract claims and consent decree violations for lowering Stay Nation present counts ought to Barclays change to SeatGeek. We have been scrupulously cautious about documenting the enterprise explanation why actually each present within the NY space over the related interval went to the venue it wound up at.  This contemporaneous report unequivocally disproves the rivalry that there was even a single occasion of retaliatory re-routing or something prefer it.  And as has been reported elsewhere, SeatGeek’s know-how and repair have been less than the duty of servicing main onsales, leading to Barclays firing SeatGeek, primarily for trigger.

Extra considerably, although, even when DOJ’s model of the Barclay’s story have been true (which it’s not), violating the consent decree with respect to one venue out of 1000’s wouldn’t quantity to a violation of the antitrust legal guidelines, which famously concern themselves with “competitors, not opponents.”  There’s a cause that is the one instance really recognized within the grievance: regardless of 18 months of investigation, DOJ discovered nothing else. On the finish of the day, nothing about this remoted incident (which DOJ willfully mischaracterizes) or the rest on this grievance affords any foundation for DOJ to ignore, undo and upend the deal it made approving the Stay Nation-Ticketmaster merger and its personal statements to a federal decide that complaints about that vertical mixture lacked advantage.

Concluding Ideas

Stay Nation is within the enterprise of bringing the enjoyment of stay leisure to individuals and to that finish connecting artists to followers and supporting a productive stay leisure ecosystem. That’s what we do—higher than anybody else—and what we are going to proceed to do as we problem this lawsuit.  Is the ticketing market complicated to shoppers?  Sure, it definitely is.  And we now have been very clear within the halls of Congress and on the DOJ that we favor real reforms that will really assist followers get tickets on the worth the artist has set for them to pay.  Followers wish to see the bands and sports activities groups they love, and it infuriates them that tickets promote out on Ticketmaster and are then obtainable by the tons of on secondary on-line websites at double and triple the fee.  However the Authorities has chosen to do nothing about this.  As an alternative, it has filed a case which misleads the general public into considering that ticket costs will likely be decrease if one thing is completed about Stay Nation and Ticketmaster.  DOJ isn’t serving to shoppers with their precise issues.  That is why the federal government has by no means been much less common—as a result of they faux they’re fixing your issues when as an alternative they’re pandering to a slender set of political pursuits.

For extra info and downloadable graphics please go to: livenationentertainment.com/info