By Alfred Branch, Jr.
In its lawsuit filed last month against rival StubHub!, Ticketmaster will have the difficult task of proving “contract and economic interference” against a defendant for which it does not have a legal agreement, according to a law professor who is familiar with the case.
In an exclusive interview with Ticketnews.com, Marianne Jennings, professor of Legal and Ethical Studies at the W.P. Carey School of Business at Arizona State University, said Ticketmaster’s case partly hinges on whether the judge will concur with the company that it can control not only the primary ticket market in question but also the secondary one. Ticketmaster filed suit in Los Angeles against StubHub! and parent company eBay alleging StubHub! knowingly tried to circumvent contracts the ticketing giant has with several venues by selling premium seats on the current Rowdy Frynds tour that features Hank Williams Jr. and Lynyrd Skynyrd…
“The issues in this case point out the problems with a national market, one that includes eBay and StubHub! et al. We do not have any consistent view of what tickets are and how they can be regulated, controlled, or restricted,” Jennings said. “License? Property? Goods? There are different sets of state laws that apply depending on how we classify tickets — this type of case will be important not only for California, but also for other states working to regulate or encourage a ticket market (primary and secondary).”
Ticketmaster is arguing that it has exclusive ticket-selling rights at all but two of the 20 venues where the Rowdy Frynds tour is playing. StubHub! is claiming to be the tour’s “official Premium Ticket provider” by auctioning front row tickets at most of these venues, and by doing so StubHub! is allegedly violating the contracts thereby interfering with Ticketmaster’s ability to make as much money as it can. Included in the suit are unidentified parties that may have aided StubHub! in the deal.
“These theories [contract and economic interference] are generally applied in cases in which one party is in negotiations for the sale or merger with another party,” Jennings said. “A third party comes along and makes another offer for the sale or merger and the one party starts rethinking the original deal.”
When it sells a ticket, Ticketmaster would appear to have a contract with the buyer, but that person did not renege on the deal because it already bought tickets from Ticketmaster. Jennings said StubHub! is aware of the restrictions spelled out in the exclusive deals and is therefore interfering.
Even if the interference is provable, Jennings, considered an expert in ticket matters, said there are at least four legal issues that are “novel and present a uphill battles for Ticketmaster. In her exact words, those issues include:
1. If this is the sale of goods, then a seller trying to prevent resales except through them runs afoul of principles of title as well as possible antitrust issues in that it is requiring its buyers not to compete. Non-compete clauses do not fare well, particularly in California.
2. If this is a property transfer, then the restriction is one that precludes passing title to one’s own property — these types of restrictions on transfer also do not go over well.
3. If this is a license, then Ticketmaster would have the right to revoke the license at any time, including for violation of the secondary transfer restriction. However, the remedy is then not with StubHub and others, but with the parties with whom they have [privity] of contract (the ticket/license holders).
4. Regardless of what the tickets are (goods or property with title), there is the possibility that the court could find that the transfer restrictions are unnecessary to protect Ticketmaster’s economic foundation. The tickets are priced in their primary sale levels to allow recoupment of profits and are not sold with a secondary market in mind, unless the buyers elect to do so. The anticompetitive effects are obvious, and a court is likely to see the overall impact of their prevailing in the suit — there would be no secondary market for tickets other than through the one monopolist in the primary market.
Ticketmaster’s complaint with StubHub! dates back at least two years when it began writing to StubHub! about similar alleged contractual violations but StubHub! never stopped its business practices and did not respond to the letters, according to the lawsuit.