Ticketmaster v. Swifties

fury of swift ease all over the US. It's also drawn the attention of the US Justice Department. The government is now investigating whether Ticketmaster uses its dominance and ticket sales to drive out competitors and drive up prices. And Ticketmaster isn't the only big company in the government sites. The Biden administration has taken an activist stand against the consolidation of corporate power among tech companies, manufacturers, even book publishers.

To sort all this out, I'm joined by Sarah Ford and she leads Bloomberg's coverage of corporate influence in Washington and reporter Leah Niland. She's also in Washington and writes about anti trust Sarah Fordon and Lea and Island. Thanks so much for being here, Thanks for having us. So once again we're hearing about Ticketmaster. Um, in all my years of buying tickets, I have never met anyone who said, oh, I'm so glad I got to buy that ticket. Ticketmaster.

They seemed to be the company everybody forever has loved to complain about, and recently they've once again been in the news involving like the biggest star of all time, Taylor Swift. Leah, can you just remind us exactly what got them in the hot water this time? So ticket Master was doing the pre sale for Taylor Swift's new tour. You know, this is on her new album which just came out, which is at the top of the charts.

Everyone was super excited, you know, post pandemic, this is going to be a huge tour, and Ticketmaster completely botched the sale. The real problem for Teller Swift fans today, Ticketmaster has canceled sales to the general public for the pop stars upcoming concert tour after pre sale tickets were in such high demand. Tuesday, a crash this site. They were using this program that they have called the Ticketmaster Verified Fan program that means you had to be a person.

They were trying to get rid of bots, so they sent out these pre sale codes for people to get tickets, these kind of robots that go in and steal all the tickets before actual humans can dial fast enough. Yeah, people set up computer programs that go and buy all of the tickets so then they can resell them for even more money. But to try and get around that, Ticketmaster had this pre sale code, but it completely didn't work.

People were waiting in line for hours and hours and hours before it even asked them for their pre sale code, and lots of people could never get through to get tickets, so thousands of fans were really frustrated. They ended up selling out all of the tickets before it even open to the public, So if you weren't part of this pre sale process, you had no luck getting a ticket whatsoever.

And it's not even clear that they were able to actually stop bots because now there are tons of tickets for resale for like absurd prices like dollars a ticket. So this caused all sorts of tunnel, lots of unhappy fans, and prompts recalls from Washington to investigate Ticketmaster for being in a monopoly, for cornering the market on tickets where if you can't buy it from them, you can't buy them anywhere unless you're willing to go to a scalper and Sarah, a lot of politicians in d C have

kind of lashed onto this fight. Now, well, this has been simmering for a long time actually, ever since the DJ approved this merger back in o J. Of course, the Department of Justice, the Department of Justice let this deal through with the settlement that was supposed to resolve all concerns about competition and not playing fair with the

smaller people, and that just wasn't happening. So, in fact, Ticketmaster Live Nation has already been under investigation by the DJ before the Taylor Swift blow up, but that really just thrusted onto the stage for all to see. And what they claim is that they only represent what is all ticket sales, but when it comes to buying the

premium tickets, often times you're coming up against Ticketmaster. Yeah, and you also have the largest live entertainment events promoter combined with the largest ticket seller, and so they've been able to also sort of work the markets, so that new stars would have incentives to go with them and not go with other ticket sellers. So they've been able

to really exert power over the market. And so we have calls from Congress to investigate, and people are calling Ticketmaster of monopoly and trying to invoke anti trust laws either to discipline them, to to break them up, all kinds of things. Sarah, can you just dust off our econ one O one textbook and walk us through exactly what a monopoly is, what antitrust laws? All these terms that are kind of flying around this issue. Yeah, so our antitrust laws are rooted in the kind of pre

trust busting era. I mean, the first one started and was passed in. It's really rooted in the idea that the more competitive markets are, the better it is for consumers. So the more companies that are competing with each other to get your dollars, to get your eyeballs, to get you know, what you want, the better it's going to be, both in terms of pricing and in terms of quality of products and innovation. So that's kind of the core idea.

In terms of what is a monopoly, there's no clear definition of what exactly is a monopoly, but it's a dominant company that has some sort of exclusive power over a market. There have been examples um set by the court of companies that are you know, have six of the market, but there are also been examples of companies that have a lower percent. So there's no magic number for a monopoly. And the other really important thing to understand remembers that it's not actually illegal to be a

monopoly in the United States. So we love our big corporations. BIGA is not necessarily bad. The problem is when they start to exert illegal behavior to keep that monopoly. So if they are pushing out competitors, if they are using predatory pricing, if they are using exclusive contracts. But the way our process is set up, those cases have to actually be investigated and filed by orn i trust enforcers, and they have to be one in a court of law, So the government has to persuade a judge that a

company has been competing illegally. So it's not an easy slam dunk by any means. And LEAs here points out, you know a lot of these laws were written for a much early your time, and as so often happens, like federal government is kind of slow to keep up. And is that what we're seeing here that the you know, the idea of monopoly in the twenty one century is a whole lot different than a monopoly when we're talking about big oil bearings or steel companies. Yeah. I think

that's definitely a part of it. I mean, a lot of the monopolies that people are talking about today have to deal with digital companies or online companies, and the

situation there is a little bit different. Not necessarily a ticketmaster, but some of the other companies that have come into the any trust cross hairs, like Google um often offer products for free, and that has had a lot of difficulty for any trust enforcers because one of the hallmarks over the past thirty to forty years for any trust enforces has been how does this business conduct or merger

impact price? And when you have a company that is offering a free product, they haven't quite known what to do with that. Sarah. When we look at what politicians and Capitol Hill are asking for, what is it that they're saying about take master and what they want to do using the laws to clamp down on monopoly power and di competitive practices, they can reinvestigate that original merger, and if they find that the company is behaving in an anti competitive way, they can file a lawsuit and

try to break it up. Well, let's talk about that for a second. So we're talking about the Ticketmaster Live Nation merger, which, as you say, combined two big companies, one that sales tickets, the only one that puts on shows. And they had to agree to all kinds of things to prove that they weren't going to be pushing everybody out of the space. So what did they have to

agree to? Yea, So the Ticketmaster Live Nations settlement was unentered into by a court in two thousand and ten, and essentially they agreed that they wouldn't try and force companies to do business with their partner just because they were doing business with one. So Live Nations said, okay, venues, we're putting on the shows, but if we're acting as your event promoter, you don't have to use Ticketmaster. You

can use another ticketing company. And ticket Master is that if we're ticketing your show, you don't have to use Live Nation as the promoter. You can use a different one. But over time, there have been a lot of complaints about this. I mean, it's essentially asking the companies to not compete as vigorously as they might. So there have been, you know, just tons and tons of complaints about this

settlement almost from the beginning. So the Justice Department has actually already done one investigation into Ticketmaster in Live Nation found that they weren't abiding by this agreement, and then they change the consent decree in twenty nineteen to extend it for another five years, and they imposed a monitor on them. So there is literally a guy whose job it is to investigate complaints about Ticketmaster in Live Nation and tell the Justice Department if he finds any of

these complaints you know, are merited. And from there, the Justice Department could impose a fine on Ticketmaster for again violating the consent decree, or could potentially try and bring another case. Sarah and Leah stagram for just a second. Our conversation will continue after the break. Yeah, is this incestuous relationship and the lack of any national competition for Ticketmaster that has created the situation we're dealing with today.

As a result, our band, which is concerned about keeping the price of its tickets low, will almost always be in conflict with Ticketmaster. They go from five to six to seven to eight. Pretty soon it's all over there, what with the Ticketmaster charge, and it's gotten out of hand price of concerts, the price of entertainment period and what with Live Nation. I said, how can we just go in take everything, put it in a pot, split it up fairly based on a number of people that come.

And they're like, you're gonna take a pay cut, No problem, I'll make a lot of money. I can take a pay cut. That was Pearl Jams, Stone Gossard back in Dave grow of Nirvana and kid Rock. So lots of people upset about Ticketmaster, both customers who couldn't get their Taylor Swift tickets and members of Congress are seeing an opportunity to maybe take another look at Ticketmaster and it's practices. But aside from really messing up a giant ticket sale,

did Ticketmaster do anything wrong? Did they do anything that would point to them being a monopoly that needs to have heavy regulation on them. So there's um a lot of debate over whether Ticketmaster did anything bad. Harry, you know, they say, you know, there are just we're so many people who wanted Taylor swift tickets that they couldn't have

anticipated that level of demand. The Grammy winner finally addressing this week's Ticketmaster disaster on her Instagram, writing in part, I'm not going to make excuses for anyone because we asked them multiple times if they could handle this kind of demand, and we were assured they could. One of the hallmarks of a monopoly is a company that sort of rests on its laurels and doesn't improve its product.

And so one of the things that folks who are critical of Ticketmasters say is, you know, if it had had competition, if it actually had to try and compete for the opportunity to provide these ticketing services, they probably would have improved their servers so that they could have handled this level of demand. They probably would have come up with a better system than just emailing out these pre codes, some of which may have gone to bots.

So it's hard to know, you know, just looking on the outside, whether it was sort of Ticketmaster doing something wrong here or whether it really was demand. And what does Ticketmaster actually say in their defense about this. They do say that this is the system that they have used to do verified pre sales in the past, and it has worked. They're not even the promoter for this one.

So they alleged that all of these allegations about them trying to tie services between Live Nation and Ticketmaster is flawed because it's the other major promotion company that's actually the promoter for Taylor Swift tour well you know. West. Ticketmaster said that only verified fans were allowed to buy tickets um but the problem was at the demand far exceeded their expectations and so they had to slow down their systems and slow down the access to stabilize everything.

They also know that less than five percent of the tickets were later posted for resale, which showed that they weren't purchased by bots. Ticketmaster also says it doesn't engage in ammic competitive practices even though it is the largest primary seller of tickets. One other big part about this controversy, and one of the things that gets people really riled up about Ticketmaster, is this dynamic pricing policy that they have. Can you just explain what exactly that is and how

it works. So, dynamic pricing is where the computers are algorithms try and create an individualized price for you based on what they think that you'd be willing to pay. So whenever you're using a computer, obviously it knows a lot about your brows in history. It might know of your previous purchases, so the computer algorithm is going to try and predict how much you might be willing to pay. So you know, Sarah might only be like a little

bit of a tailor Swift fan. She might only really be willing to pay like a hundred dollars for a ticket. But because I'm like a die hard, it might try and raise by price because it knows that I really really want this ticket. And you know, this is something that you hear all the time with like airline pricing, Like that's why you're always supposed to hear your cookies and buy on a Tuesday night so that you know

you can get a cheaper price on airlines. But Ticketmaster, you know, especially because it's the only place that you can buy these tickets, it really has people over a barrel. I'll just jump in here and say this whole concept of dynamic pricing is really a terrible thing for consumers. And it really means that companies are able to assess what a person is likely to pay or able to pay. But it doesn't necessarily drive prices lower. It actually, as

we saw in this case, it drives prices higher. Well, it's an intra sam point to Leah. You had said earlier that one of the problems with the monopoly is they can rest on the laurels and not have to improve their product. And here's the case where they were actually innovating their product, but it was to their own benefit and not to the benefit of the people who

are using their service. Yeah. I mean, if there was another ticketing company that competed, or if there were more than one going at the same time, you know, you could check the prices on Ticketmaster versus the other company and maybe buy the cheaper one. But because it's the only option, you know, you really have to go with

what they're offering you. So, Sarah, this question of price is kind of an interesting one when it comes to the public push against monopoly power, and especially politicians, who of course want to look responsive to angry voters. If tickets weren't so expensive, like let's say, you know, you had more like Amazon pricing where they were driving prices down, um, putting other companies out of business, but doing it in

a way by driving prices down. Do you think people would be so upset or complaining that ticket Master was a monopoly? Well, I mean, I think this example has really put a spotlight on a lot of shoes that are getting a lot of attention right now and have become hot button sort of front page issues. And we're seeing a time of persistent inflation, and there's been a lot of reports about how, you know, the bigger the companies are, the stickier price increases get and the slower

they come down, even as you know, inflation subsides. So these are issues that are just going to people's pocketbooks and dinner tables. So I think the reason that people have become so passionate about this is because it's really hurting people at home. So what can be done about this? What is going to be done about this? We'll try to answer that question after the break lee And now we know what the complaint against Ticketmaster is. What do

you think Washington will do about this? How will this play out both politically and you know, in terms of government regulation, possible regulations of company. Well, the Senate has already said that they want to hold a hearing on Ticketmaster, so this will be the opportunity for them to rate the CEOs and everybody to have like a a nice cathartic experience. And then the Justice Department has an investigation now into ticket Master and Live Nation that is not

going to be resolved in the near term. These types of investigations can take several years or so, but we might see out of that either some kind of change to the consent to create has right now, or we could seem a move by the Justice Department to break it up. The individual right now who is in charge of the Justice Departments in a trust division is Jonathan Cantor.

He has spoken pretty aggressively about the need to bring more cases focused on monopolies like ticket Master, and he's been a big proponent of cases against the tech giants like Google and Apple, and so it wouldn't be surprising if he wanted to take on a breakup of Ticketmaster and Live Nation. Let's talk about that for a second, Sarah.

Breaking up a company is pretty much the most extreme thing the government can do, and taking action against a company day labelism, monopoly, how likely do you think that is in this case? Well, that's a really interesting question.

I think you have two different kinds of mergers. One kind of mergers where a company has pretty much the same kind of business, like let's say a supermarket chain or a drug store chain, and they merge, and you know, they all become the new you know, cel right label, And it's harder to break up a company a few

years after it's merge if it's completely integrated. You know, they talk about how difficult is it to unscramble an omelet In the Live Nation Ticketmaster example, you actually have two companies that do different things and they have different names, and so they can only integrate so much because they're

different operations. So it would be easier, you know, they may have consolidated and integrated some of the sort of executive functions and the service functions and the I T functions, but all in all, it would be easier to separate out a company like that. And one thing that you're both pointing up to here is that even though we're talking about Ticketmaster, it's really just an example of a larger activist justice departmenting the Biden administration. What other deals

mergers companies? Is the Biden administration looking at for possible action in this anti trust sverre well the first one is obviously Google. This is actually a case that started during the Trump administration. The Justice Department and a bunch of state attorneys general sued Google over the exclusive contracts it has on cell phones to ensure that it is the default search engine on every cell phone sold in the United States and that it is also has a

default search engine on most web browsers. The Justice Department said that that is really unfair because it means most of the traffic goes to Google, and they have filed a complaint in that's supposed to go to trial next year. The Justice Department also has a separate investigation into Google's power over the advertising technology market. This is all of the invisible businesses that are used to buy, sell, and

serve advertising online. They also have another investigation into Apple over its dominance in the Apple App Store, So you know, they've really even taking a hard look at a lot of the tech giants. That's just at the Justice Department.

Over at the FTC, they have a case against Facebook and which they're trying to unwind the company's acquisitions of Instagram and What's App, which happened years ago, but the FTC is now arguing we're intended to cement Facebook's monopoly position in the social networking market, and the FTC has also since been investigating Amazon over a host of issues related to its marketplace, cloud computing, and whether it's prime

subscription service is too difficult for consumers to cancel. And the FTC, of course, is the Federal Trade Commission also has a hand in all these issues. Sarah, And we're talking about a lot of tech and he's back in their previous life. I think you reported on the government's

attempt to take action against Microsoft. Well, that was really kind of the mother of all the untitrust investigations against big tech, and it's still being referred to decades later, and it was considered by many to be the reason that actually the market opened up and allowed companies like Google and Facebook and Apple to thrive, to grow and thrive. And the reason is interesting too, and I know this because I've spoken this year about this before. The government

actually didn't ultimately prevail. They came to a settlement, correct, but it had a big effect on the way Microsoft operated. Can you describe that, Yeah, I mean think of it sort of like Gulliver, you know, being tied down by all the Liliputians. I mean it really it was sort of death by a thousand cuts, and they all constantly had to go into court. They were under like a ten year court supervision protocol where they had to go in and address all the complaints that could come up

about them, and it really slowed them down. It was sort of like they became I'm a lethargic giant. And meanwhile, these little competitors like Google, which are now the giant Glass saw the opportunity to move in on Microsoft at the time when they were so distracted. This is actually an entire theory of any trust law that was proposed by Tim Woo, who is one of the President Biden's

competition advisors. The idea is that when the government goes after these big companies, that distracts them with the litigation, and then they sort of tend to miss like important moves and technology. So if you think about it, when IBM was the subject of a twenty year government antitrust case, it sort of missed the move to personal computers. When A T and T was the subject of a government antitrust litigation that led to their breakup, they missed the

move to long distance and ultimately wireless technology. And then, as Sarah mentioned, Microsoft really missed the move to the Internet. So there's this argument that by attacking a lot of the monopolis now the Justice Department is making space for some of these new innovations that might be the next wave of technology. And is the idea that they're doing this explicitly or this is a side effect of these investigations a little bit of both. You know, it tends

to be a side effect. But even if they aren't going to prevail, you know, these cases tend to take a really long time. The average anti trust litigation is like five to ten years, especially depending if there are a lot of appeals. So none of these cases are going to be resolved in the near future. And we're talking about all these tech companies. But this administration has also taking a look at like, say, the most analog thing you can do, book publishers and lacking the merger

of two big book publishers. Yeah, the Justice Department this year has challenged a record number of mergers, ten which might not sound like a lot, but oftentimes back in the day you would get like maybe one merger challenge in a year, So ton is quite the number, and while they haven't succeeded in all of them, in four of those deals, the companies walked away as soon as the suits were filed. In the book publishers deal, the was between Penguin, Random House and Simon and Schusta. They

lost at trial and they have ultimately walked away. So they have a pretty good record so far with being much more aggressive on this type of case. So, Sarah, what Lie is describing is sometimes just the threat of this investigation and the idea that they're gonna spend years or enough to make them say, yeah, it's not worth it and walk away. Well, it's interesting to see how this is actually proven to have a deterrent effect. You haven't typically thought about or seeing deterrent effects in the

antitrust enforcement. And in fact what we're seeing is this see change in the approach to antitrust enforcement. Whereas you know, before the DJ and the FDC might have been afraid to challenge a case because they're afraid of losing and they were afraid of setting a negative precedent, and this crew is saying, no, we have to challenge even the hard cases, even if we lose, because we have to let companies know we are going to fight and they

are going to have to tackle us. And the other thing they say is even if we lose, you know, if we lose enough of these cases, maybe it will finally convince Congress to change the law. So, circling back to ticket Master, keeping that in mind, what are you watching for as this story unfolds and how do you get might impact other companies, other industries and this kind

of press for anti monopoly laws or investigations. Well, as I mentioned, the Senate is going to have a big hearing on this sometime next year, so that'll be like one big thing to watch out for. And then as this case moves along, there may be some updates. It'll be pretty interesting whether the Justice Department sort of goes with the minor revisions to the consent to create already has with Ticketmaster, or if they do move for a breakup.

I mean, given the progressive folks who have been in charge so far, you know my odds are more on a breakup than like minor changes, but you never know. Sarah Fordon and Leean Island, thanks so much for joining me today. Thanks for having us, Thanks for having us. You can read more from Sarah Fordon and Lee and Eileen at Bloomberg dot com. Thanks for listening to us here at The Big Take, the daily podcast us from

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