The recent debacle that saw Taylor Swift concert tickets surge as high as $22,000 has prompted the United States Senate to join antitrust authorities in reexamining the controversial merger that created Live Nation Entertainment (LNE), the corporation that mishandled ticket sales for the event. The deal, consummated in 2010, combined two already powerful firms —Ticketmaster, which dominated ticketing services for events, and Live Nation, which was the leading event promoter — into a near monopoly.
Critics predicted that LNE would abuse its market power in ways that hurt consumers, artists, and venues, and they proved to be right. Ticket prices, for example, have nearly tripled in the last two decades. In December, the company followed up its fiasco with Taylor Swift by botching ticket sales to a Mexico City concert by Bad Bunny, one of the world’s biggest pop stars, prompting calls for an investigation by Mexico’s president, Andrés Manuel López. Meanwhile, LNE has coerced artists and venues into using its ticket-selling services exclusively — a practice known as exclusive dealing that violates antitrust law.
Fortunately, it’s not too late for the federal regulators to remedy the mess. In addition to a lawsuit being developed by the Department of Justice (DOJ), the Federal Trade Commission (FTC) can use some of its long-neglected – but recently awakened – powers to create market-wide rules targeting LNE’s use of exclusive dealing, a predatory practice that garners little attention with headlines focused on Ticketmaster’s prohibitive ticket prices and botched ticket sales.
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The story of the merger that created LNE illustrates almost every mistake the government can make in preventing monopolies. When it approved the merger twelve years ago, DOJ knew that Ticketmaster was already operating as a virtual monopoly, having captured 80 percent of the primary ticketing market.
DOJ also knew that Live Nation possessed significant power in the live entertainment industry. Live Nation was the leading concert promoter, whose role involves contracting the chosen venue, handling the advertising, and managing other production services. Live Nation managed a third of major concert events in the United States, and owned 75 concert venues.
Moreover, due to its position as the nation’s leading promoter, Live Nation was well positioned to develop its own primary ticketing service and challenge Ticketmaster. Soon after entering the primary ticketing market, Live Nation became the second most dominant firm in the industry, controlling 16.5 percent of ticketing sales.
Nonetheless, the Obama administration’s DOJ approved the merger, demanding only a consent decree (formal legal jargon for a settlement) that required LNE to agree to certain minimal conditions. LNE was required, for example, to (1) divest a small division of its company, (2) not share consumer information collected from its ticketing business, and most importantly, (3) not engage in any retaliatory or unfair practices, such as exclusive dealing. LNE would soon blatantly violate all three conditions.
Consequently, consumers, entertainers, and venue operators have had to endure the full brunt of the merged firm’s monopoly power. The New York Times detailed in 2018 how “Live Nation and its operations extend into nearly every aspect of the concert world,” further expanding its dominant position by withholding access to its events if its customers did not use Ticketmaster’s ticketing service.
LNE also uses its power to take more of a cut of the proceeds and, by virtue of shutting out venues that refuse to comply with LNE’s terms, limit an artist’s access to venues, even if that venue can offer better terms to the artist. Artists themselves are put in a position in which to avoid angering fans over unaffordable ticket prices, they have to reduce their own earned income from the event to ensure stable and fair prices.
LNE’s violations of its merger settlement were so blatant that the DOJ under Trump faced enormous political pressure to amend the consent degree with harsher terms, which it did. But these proved insufficient to infusing competition into the industry and major abuses continued.
Today, in addition to the abuses already described, LNE engages in kickback agreements to share its monopoly profits with venues to promise not to take their business elsewhere. Firms failing to submit to LNE’s demands can expect explicit or implicit retaliation against them by LNE cutting them off from all its services.
The hardball tactics have worked. As one lawsuit cogently describes, LNE has locked up over 70 percent of concert venues — numbering 12,000 individual locations — across the United States to exclusively use LNE’s Ticketmaster service, satisfying the significant foreclosure requirement in exclusive dealing law (typically at least 30-40 percent). Each contract is, on average, five to seven years long and sometimes exceeds ten years, satisfying the duration requirement in exclusive dealing law.
Exclusive dealing requirements like these are a centuries-old means of forestalling competition and building monopolies among businesses that sell to other businesses. They prevent a firm from choosing among different competing suppliers, thereby tending to make dominant suppliers still stronger. As I describe in a forthcoming law review article, exclusive dealing requirements restrict the freedom of businesses to select their suppliers or customers, as well as reduce and deter competition – making them “weapons of subjugation that allow dominant corporations to exert their power to maintain their control and be able to punish dependent firms.”
The antitrust laws, such as Section 2 of the Sherman Act, Section 5 of the FTC Act, and in some cases Section 3 of the Clayton Act, broadly prohibit exclusive dealing. LNE’s conduct also clearly violates the controlling Trump-era settlement, which explicitly restricts LNE from “Condition[ing] or threaten[ing] to Condition” its services in a manner that prevents venue owners from “contracting with a company other than [LNE] for Primary Ticketing Services[.]” Indeed, a class action lawsuit initiated in 2022 makes such assertions.
Additionally, other factors such as LNE’s monopoly power and the number of venues locked in by LNE’s exclusive arrangements make antitrust litigation likely to succeed. The ticketing and venue market has extensively high barriers to entry: there are only so many venues, and so many artists that draw massive crowds to fill up venues.
Supporters of the merger could counter by pointing to the fact that concert venues need ticketing service firms to have a proven record of reliability, experience, and scale to handle significant sales volume. Yet Ticketmaster’s recent mismanagement of Taylor Swift’s and Bad Bunny’s concert tickets show that LNE by itself could not provide the necessary level of service. Maybe if LNE faced more competition, it would improve the quality of its service.
Now that millions of Taylor Swift fans have discovered the evils of monopoly, a federal lawsuit against LNE would be bound to receive lots of press attention and wide public support. Initiating a federal lawsuit would also showcase that antitrust enforcement can directly rein in corporate power, and that it can provide tangible benefits to consumers — such as lower ticket prices, higher quality handling of ticket purchases, and increased open access to resale tickets. Moreover, a lawsuit would represent an implicit admission that settlements of the kind that was supposed to restrain LNE are not an earnest policy position that restrains dominant corporations and that litigation and remedies, such as structural breakups, should be the preferred enforcement route.
Antitrust litigation, to be sure, is costly, time consuming, and, more importantly given the current construction of the federal judiciary, unpredictable. Particularly over the last 40 years, reviewing courts have shown little hesitation in rewriting the rules to favor dominant corporations. Furthermore, because significant portions of antitrust litigation are based on a defendant-friendly burden-shifting framework known as the rule of reason, successful litigation against one company does not automatically translate into successful litigation against another corporation using similar market practices. Yet in this case, even if litigation fails, an even better solution is available.
Congress endowed the FTC with broad, delegated authority to enact economy-wide rules prohibiting unfair methods of competition. The FTC can use its power to enact a rule that would prevent the use of exclusive deals by dominant firms or when exclusive arrangements restrict access to an undue percentage of the market. A July 2020 petition to the FTC, signed by over 30 scholars and advocacy organizations, including my current employer, the Open Markets Institute, supports such a rule. The FTC’s recent proposal banning non-compete agreements using this latent power, reveals that the agency can initiate a similar proposal against exclusive deals.
A rule banning monopolistic and unfair uses of exclusive arrangements, like those employed by LNE, would have many benefits. A bright-line rule would provide exceptional clarity for businesses to know when exclusive deals are allowed. A rule would also avoid the currently onerous requirements of antitrust litigation by limiting the analysis courts would engage in.
As the Supreme Court once stated, clear rules “avoid the necessity for an incredibly complicated and prolonged economic investigation into… a particular restraint… an inquiry so often wholly fruitless when undertaken.” Clear rules also limit the unduly expansive prosecutorial discretion afforded to public enforcers. The FTC should act as quickly as possible to use it full powers. In the process it will not only uphold the role of law and fair marketplace but will win the gratitude of everyone who doesn’t want to pay monopoly prices to see their favorite entertainer.
Daniel A. Hanley is a Senior Legal Analyst at the Open Markets Institute. You can follow him on Mastodon @danielhanley@mstdn.social.
Disclosure: Daniel is employed at the Open Markets Institute, which along with 36 other organizations and scholars, petitioned the FTC to use its unfair methods of competition rulemaking powers to prohibit exclusive contracts.