Baseball March 29, 2007
By Donald Jeremiah Trella
Some season ticket holders upset by the Angels’ new resale policy have questioned whether some of the components of the new resale restrictions are illegal. First, there’s the matter of whether there’s anything legally wrong with preventing the resale of tickets for below face value. Even though the impact of that part of the policy has been the main focus in the earlier segments of this piece, we’ll put that on hold for a moment and look at the resale of tickets for greater than face value first. And to put that part of the question in context, let us examine a similar, prior case (as that is how the law often arrives at its conclusions)….
A few years back, the Chicago Cubs alienated fans and got themselves into a hotbed of legal problems when they horded their own tickets to playoff games (tickets which otherwise might have been available to season ticket holders to purchase at face value), in order to scalp them at an exorbitant markup on secondary ticket marketing sites. The Cubs won the first clash of their ongoing legal battle with angry fans by successfully arguing that they did nothing illegal, since the Cubs did not horde the tickets themselves, but rather sold a large number of tickets to “Wrigley Field Premium Ticket Services” (or Premium, for short) who then sold the tickets on various websites – but it just so happens that Premium and the Cubs are both owned by the Tribune Company. The judge in the case ruled that it was nothing more than a legitimate sale of tickets (at face value) from one party to another (Cubs to Premium), and that the parties were indeed legally separate entities, even if they were subsidiaries of the same larger company (Tribune). The decision is currently being challenged on appeal.
But the more interesting factor at play here was how this decision affected Major League Baseball’s own efforts to make baseball more competitive and boost the popularity of the league overall via its revenue sharing program. If the Cubs and Premium are legally separate entities, then does revenue accrued to Premium = Cubs revenue (a portion of which must be shared with the other teams)? The Cubs didn’t try to go quite so far as to ignore the revenue they received from these sales (even though the judge’s decision implies that they could have). Instead, they openly disclosed the profits to the league (but mysteriously claimed that Premium actually did not make any profit and finished the year in debt). Hence, Premium owed the league nothing. What was the source of this debt? Curiously high rent paid for a building owned by Tribune, and a curiously large number of hours in accounting services – rendered by the Cubs own accountants.
Outrageous to be sure, but how do the Cubs’ shifty financial maneuvers relate to the Angels’ case? Well, while the Angels are not hording their own tickets and selling them at huge markups for financial gain, they are restricting season ticket holders to using their service, where they are taking a hefty commission out of the transaction. So rather sell for higher prices themselves, they let others do the work and take 20%. Sure it might not be as blatant (or as profitable) as the Cubs’ scheme, but functionally speaking, it is the same thing. While they adopt strict regulations on resale, they actually (ironically) want a limited, controlled amount of resale to happen, except instead of reaping all the rewards, they’ll settle for 20%, less fan outrage, and fewer lawsuits.
But if the appeals court overrules the decision of the lower court in the Cubs case, which is entirely possible, it could open the door to a lawsuit against the Angels as well. The principle that would be affirmed in a ruling against the Cubs would be that a ballclub cannot scalp its own tickets. If the Angels sell the ticket to a season ticket holder and then take a commission off the resale, they are benefiting financially beyond the initial face value amount.
And are the Angels subjecting all of the revenue from these resale commissions to the league? Or are there a lot of vague “maintenance costs” to keeping this service running, and percentages to be paid to the software company who helps run the site, etc.? I don’t mean to suggest the Angels are not entirely honest to the league, but rather that just as in the Cubs case, there exists serious potential for abuse (and we know that the Cubs exploited it). Since Bud Selig has credited revenue sharing with “saving baseball”, it is safe to say that teams profiting off of secondary ticket marketing probably gives him worries, especially if it enhances large-market teams’ advantage and the profits can be easily shielded from revenue sharing. After all, does anybody think the poor teams with few, if any, big name players can make money off of scalping *their* tickets?
To return to the issue of selling for below face value, here the legal avenues for frustrated fans seem less promising. While collusion between multiple parties to create a price floor is illegal (i.e., a city’s 10 gas stations can’t get together and say, “let’s not compete with one another, and let’s all agree to sell gas at no less than X”), the Angels controlling the prices of their own goods (tickets) is not illegal. Sure, there are other parties involved (like the software company that helps the Angels provide the service), but they are not an entity that should be, in theory, purely competitive with the Angels, since they are two different types of businesses.
The prohibition on season ticket holders reselling for less than face value is not only likely to have legal repercussions for the Angels, it may well have repercussions in the form of community backlash.
By preventing season ticket holders who already see plenty of games and are willing to sell their ticket to a lower-interest game at less than face value from actually making such a sale, the Angels cut off a potential supply of cheap tickets that might allow a greater number of people to enjoy a live slice of “America’s Pastime”. That’s particularly disheartening in light of the fact that the Angels went through so much legal trouble to change their name from “The Anaheim Angels” to “The Los Angeles Angels of Anaheim” specifically to expand their appeal beyond the picket fence-lined confines of the O.C (see City of Anaheim v. Angels Baseball LP)
When contacted for comment, Rachel Noerdlinger, speaking on behalf of Rev. Al Sharpton’s National Action Network as its Director of Communications, agreed that the Angels artificially price floor hurts low-income people and hurts minority groups, saying the policy appears to be “a quiet effort by the team to shut out low-income spectators based on the erroneous assumption that low-income people will automatically bring unwanted elements (such as more crime) along with them.” “This is not only discriminatory, this is a form of racial profiling,” she added.
Whether there will be enough pressure to lift the restriction on season ticket holders reselling for less than face value and at least give some people the chance to purchase some cheaper tickets remains to be seen, but you can be sure TicketNews will continue covering any new developments.