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Breaking News: United States v. Ticketmaster

Qiuyang Wang and Alexandria S Kim

Breaking News: United States v. Ticketmaster
Cavan Images / Javi Muñoz via Getty Images

On June 6, 2024, the Unilateral Conduct Committee sponsored a webinar called “Breaking News: U.S. v. Ticketmaster.” Speakers David Kully (Holland & Knight) and Kathleen O’Neill (Cooley), in evaluating the strengths and weaknesses in the May 23 complaint against Live Nation and its subsidiary Ticketmaster, discussed whether Live Nation-Ticketmaster’s alleged conduct may justify a breakup remedy in the case.


Overview of Allegations in the Complaint

The complaint filed by the U.S. Department of Justice (DOJ) and 30 states draws concerns from Live Nation’s three live entertainment businesses: primary ticketing, concert promotion, and venue ownership or management. The complaint further alleges that Live Nation holds a monopoly in each business.

  • Primary ticketing refers to the initial point of ticket sales to the public. Live Nation participates in this business through Ticketmaster, which Live Nation acquired in 2010. Secondary ticketing, in contrast, refers to ticket resales by initial purchasers. In primary ticketing, Ticketmaster controls 80% of primary ticketing at major concert venues and 70% at arenas and large amphitheaters. The complaint does not allege that Live Nation is a monopolist in secondary ticketing, but it notes that Live Nation’s activities in this space, including disabling secondary ticket sales on a rival ticketer’s platform, have contributed to its anticompetitive behavior.
  • Concert promotion is the service of arranging concerts or tours for artists. Concert promoters work with venues to host concerts and provide cash guarantees to artists, thus assuming the risk of not attracting enough fans at an event. As a promoter, Live Nation accounts for 60% of the total value associated with primary tickets sold at major concert venues and 70% associated with large amphitheater promotions.
  • Live Nation owns many of the venues that hold concerts. It is the largest owner of clubs and theaters, controlling more than 60% of large amphitheaters and owning or operating at least 40 of the top 50 amphitheaters in the United States.

The DOJ argues that Live Nation has violated Section 2 of the Sherman Act by, in addition to cultivating relationships with or strategically acquiring potential competitors, maintaining monopolies in primary ticketing, concert promotion, and the operation of large amphitheaters. The DOJ also argues that Live Nation has violated Section 1 of the Sherman Act by entering into long-term exclusive ticketing contracts with venues, thereby foreclosing competition from rival ticketers and tying artists’ access to Live Nation’s large amphitheaters to its concert promotion services.

Importantly, Live Nation allegedly uses its monopoly power in one business to enhance its power in another. Live Nation uses its concert promotion business to allegedly coerce venues into choosing Ticketmaster through the threat of retaliation. For example, it reduces the number of scheduled shows or books less lucrative dates if a venue chooses another ticketer. Even if Live Nation does not explicitly communicate a threat, venues are aware that Live Nation may take punitive measures against them if they choose to use a rival ticketer.

Live Nation also allegedly uses its ownership of large amphitheaters to protect its concert promotion monopoly. Live Nation requires artists seeking to perform in Live Nation’s amphitheaters to also retain the company for concert promotion services.

Evaluating the Complaint

The speakers prefaced their assessment of the complaint by remarking that Sherman Act cases can be challenging for the government to prove. Although it currently has several pending cases, the government has not brought many Sherman Act Section 2 challenges historically.

Ms. O’Neill also noted the complaint’s inclusion of powerful quotes from senior executives, which suggest that the executives took at least some action to foreclose, and insulate Live Nation from, rival competition. While the Sherman Act does not have an intent element, documents that reflect anticompetitive motives can play an important role in casting doubt on a defendant’s alternative explanations for misconduct. Ms. O’Neill added that although certain strands of evidence are stronger than others, the complaint overall is very strong.

Long-term Exclusive Agreements

According to Mr. Kully, the DOJ’s strongest argument is in the exclusive agreements’ length and prevalence. Venues’ preference for exclusive contracts should make long-term requirements—some as long as 14 years, as the complaint states—unnecessary. At the same time, with concerns including consumer confusion about the validity of the tickets purchased, Mr. Kully was not convinced by the efficacy of what would happen in the but-for world in which different ticketers worked with individual venues without exclusive agreements. Live Nation similarly argues that prior scrutiny over Ticketmaster’s exclusive agreements, which started as early as during the Clinton administration, led to the conclusion that venues prefer using a single ticketer so that there is robust competition for exclusive contracts.

On exclusive contracts, Ms. O’Neill concurred that they are not inherently unlawful; they can often incentivize capital investment and produce higher quality products and services. However, antitrust laws treat firms with dominant positions differently from other firms, and long-term exclusive contracts by monopolists that foreclose a substantial share of the market can raise antitrust concerns. With Ticketmaster allegedly occupying significant shares of the primary ticketing market, it is hard to justify the use of long-term exclusive contracts.

Ms. O’Neill highlighted that the complaint also points to markets outside the United States, like France and the United Kingdom, where long-term exclusivity in ticketing markets is not the norm and venues contract with multiple ticketers for concerts.

Divestiture of Ticketmaster as a Remedy

The DOJ has requested, at minimum, the divestiture of Ticketmaster in the complaint. The speakers agreed that a compelling record in this case could present enough good facts for the judge to consider a breakup remedy, especially against the backdrop of prior behavioral decrees —including those enacted in response to Live Nation’s 2010 acquisition of Ticketmaster—that fell short of curbing anticompetitive behavior. For example, a compelling record may be supported by third parties that previously hesitated to participate during the DOJ’s investigative phase. Since the complaint has been officially filed, those third parties may be more amenable to helping build out the record.

Ms. O’Neill went on to explain that divestiture is an extreme remedy under a Sherman Act Section 2 case. The DOJ was last granted a breakup remedy in the early 1980s, when a D.C. Circuit judge ordered the breakup of a telecommunications monopoly in United States v. Am. Tel. & Tel. Co. Famously, in United States v. Microsoft Corp., the DOJ won on liability but lost on remedy, ultimately securing a behavioral rather than a structural decree. Ms. O’Neill further explained how the courts’ reluctance in granting divestiture may stem from a generalist judge’s perspective. Generalist judges are not industry experts, and, even if there are legal violations, they may often find themselves in the uncomfortable position of deciding how to break up a profitable company into individual parts.

Potential Gaps & Mixed Signals

The complaint is not without its flaws, however. While conceding that the DOJ may have a strong argument in Live Nation’s long-term exclusive agreements with venues, Mr. Kully noted that the DOJ may need to better substantiate its claim (Paragraph 58) that Live Nation used threats to prevent venues from signing ticketing contracts with competitors. Without more evidence and identified venues, Mr. Kully questioned whether there is enough substance in this argument for a judge to rule in support of a breakup remedy. Ms. O’Neill similarly thought this was a weak part of the complaint—in a 2019 stipulated consent decree filing, the DOJ was able to cite 5-6 examples of threats Live Nation made.

The speakers also assessed the significance of Live Nation’s public acknowledgment that “we have to put the show where we make the most economics,” a statement that the DOJ cites as conveying anticompetitive intent. Contrary to the complaint’s allegation of there being no business justification for Live Nation to steer concerts to venues that use Ticketmaster, statements about profits do serve as a justification for its conduct, according to Mr. Kully.

While companies need to be positioned to make money, the question, according to Ms. O’Neill, is who makes the most economics. When Live Nation chooses a venue, it makes the choice on behalf of the artists and should be optimizing the revenue for the artists, which makes evidence such as the CEO’s statement conflicting. Moreover, Ms. O’Neill thought that the DOJ successfully used other quotes to paint a broader picture of Ticketmaster intentionally using the long-term exclusive agreements to “hedge against significant improvements by the competition or even a new competitor,” because the venues are locked into these contracts for extended time.

Putting the Complaint in Context

Rethinking Vertical Integration

The complaint alleges that ticketers that are not vertically integrated cannot compete with Live Nation on a level playing field, which led Mr. Kully to question whether vertical integration that used to be treated as pro-competitive is now problematic.

Ms. O’Neill acknowledged that there is more skepticism toward the benefits of vertical integration under the Biden administration, which marks a shift from previous consensus among economists who extolled how vertical integration could lead to the elimination of double marginalization, passing savings to the consumers.

Although this skepticism is equally salient in the merger context, with the DOJ and the FTC challenging more vertical mergers, Ms. O’Neill cautioned that the complaint does make it clear the focus is on the incremental exclusionary conduct on top of the vertically integrated structure.

Involvement of States

In high-profile cases, the DOJ or the FTC will often join the complaints with several attorney generals (AGs) from states across the country. Ms. O’Neill found it notable that, in this case, AGs from 30 states signed on to the complaint, which Mr. Kully also thought was unusual. He contended that the overwhelming involvement of the states also reflects significant bipartisan ill feeling toward Ticketmaster.

One practical implication of this phenomenon, according to Mr. Kully, is that it would be difficult for the DOJ to drop the case even with a change of administration, and the case would go on until all the states settled. Ms. O’Neill added that, with the Biden administration, settlements would be especially unlikely given the higher threshold under which the DOJ has been operating.

Jury Trial Demand

To seek a jury trial, a plaintiff generally must have claims for damages. Ms. O’Neill observed that, historically, the DOJ has focused on seeking injunctive reliefs in the form of behavioral requirements and divestitures, although this case is not the first time for the current DOJ to file a case with a jury demand.

In the Google ad tech case proceeding in the U.S. District Court for the Eastern District of Virginia, where a jury demand was made and rejected, the DOJ predicated its demand on the fact that the government was itself a victim of the anticompetitive conduct, having overpaid for advertising. Ms. O’Neill noted that the jury demand in this case is based on state damages claims, which is unusual and will certainly lead to a challenge by Live Nation due to the general animosity toward Ticketmaster and Live Nation from both within the ecosystem and consumers as potential future jurors.