3 antitrust lessons from the Taylor Swift Ticketmaster debacle

Taylor Swift’s Eras Tour got off to a rocky start. Ticketmaster, the online ticket seller part of Live Nation Entertainment, was unable to keep up with the demand for concert tickets, despite assurances to Swift that it wouldn’t be a problem. The ensuing chaos has left ticket buyers disheartened and tour venues are at risk of losing money if fans give up in frustration.

Ticketmaster was a more or less inevitable choice to sell the tickets given their dominant position in live entertainment ticket sales in the United States. Like other companies with market dominance, they are not really focused on customer needs, because they don’t have to be. While the demand for Swift’s tour would undoubtedly be extraordinary, Ticketmaster took no steps to meet that demand. In a competitive market, failure to sell would have hurt their brand and cost them future business. But since both venues and ticket buyers have few alternatives, Ticketmaster had limited incentives to get it right.

These events bring up several points about the importance of competition and the need for antitrust enforcement to preserve it:

1. Left to their own devices, monopolists will not hesitate to increase their market power

Live Nation Entertainment was formed by the merger of Live Nation and Ticketmaster in 2010. Live Nation was a major promoter of live entertainment. It also had a ticketing business that competed with Ticketmaster, which was already a major ticket seller.

The United States Department of Justice (DOJ) allowed the merger, but saw that market power in promotions could be used to increase market power in ticket sales. So the DOJ settled with terms designed to prevent the company from using Ticketmaster sales to stage a Live Nation concert.

However, in 2019, the DOJ concluded that Live Nation had violated those settlement terms. In its motion to amend the settlement, the DOJ said:

The United States has found that defendants’ executives have retaliated against or threatened locations in the United States since 2012, in violation of the provisions of the Final Judgment on Anti-Retaliation and Anti-Conditioning. These violations began shortly after the decree came into effect in 2010 and have been repeated throughout its term, with the most recent known violation not occurring until March 2019. As a result of this behavior, venues in the United States have come to expect that refusing to sign with Ticketmaster will result in the venue receiving fewer or no Live Nation concerts at all. Given the importance of live event revenue to a venue’s bottom line, this is a loss most venues can’t afford to risk. As a result, many venues are effectively required to contract with Ticketmaster to obtain Live Nation concerts on reasonable terms, limiting the ability of Ticketmaster’s competitors to compete in the primary ticketing market and venues that benefit from would have under increased competition are harmed.

So the settlement was revised and extended, this time stipulating that Live Nation pay a $1 million dollar fine per violation.

Before this latest episode, the company was reportedly under investigation by the DOJ. If the investigation shows that the violations continue, structural solutions, such as requiring Live Nation to divest Ticketmaster, may be in order.

2. Mergers should get more attention from antitrust law enforcement

It seems that the merger of Live Nation and Ticketmaster was a very bad idea, but it is not unique. For example, the takeover of WhatsApp and Instagram by Facebook enabled a dominant social network to eliminate potential competitors. And there is strong empirical evidence that market power, in many cases enhanced through mergers and acquisitions, is now a major problem in many sectors of our economy.

However, there is hope that current leadership at the Federal Trade Commission (FTC) and DOJ will tighten the standards used to judge mergers. They have already jointly announced plans to review merger guidelines to better prevent anti-competitive combinations. Stricter guidelines could make agencies more likely to block mergers like those of Live Nation and Ticketmaster. This process deserves broad support.

3. We need antitrust innovation

As the Ticketmaster debacle has shown, market power causes real problems, even if they are not obvious from day to day. Because these market power issues are significant, antitrust enforcers must be both aggressive and innovative.

Fortunately, the FTC is taking steps to innovate. For example, it proposes to use its regulatory powers to mitigate harm to consumers from commercial surveillance and data security practices. This effort deserves support because of the threats people face in the digital world – and because curbing consumer abuse can have beneficial effects on competition. Additionally, if Live Nation-esque leverage behavior is found to be a widespread problem on online selling platforms, the FTC could consider creating rules to limit it.

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Conclusion

There’s no guarantee that Taylor Swift’s ticket sales would have gone off without a hitch had Live Nation’s merger with Ticketmaster been blocked. But it is highly likely that ticket sales would be more competitive, tickets could be offered through more than one company, and those competing companies would not have made the same blunders. That’s what happens when buyers have alternatives; it keeps sellers on their toes.

It is very good that the DOJ has already launched an investigation into Live Nation. If the investigation finds antitrust violations — especially if those violations relate to actions prohibited in the 2010 and 2019 settlements — it’s time for strong action. Undoing the merger should certainly be on the table.

Of course, breaking up Live Nation wouldn’t guarantee rapid entry of new competitors, it would just make entry more likely. Given this reality, fans of Beyoncé, looking forward to her rumored tour next summer, might want to latch on to another sales disaster.

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