StubHub recently was found to be in violation of North Carolina’s former anti-scalping laws for its part in the 2007 sale of high-priced Hannah Montana tickets by a reseller on the company’s exchange.
In a ruling by Judge Ben Tennille of the North Carolina Business Court, StubHub and Massachusetts reseller Jason Holohan allegedly violated the state’s former anti-scalping laws when Holohan sold four Hannah Montana tickets to parents Jeffrey and Lisa Hill for a total of $596, plus $59.60 in service fees and $11.95 in shipping costs.
The tickets to a concert in Greensboro, NC, near where the Hills reside, carried a face value of $56 each, almost three-times less than the $149 they paid Holohan for each of the tickets. StubHub is not a ticket broker, nor does it own any inventory; the company is a marketplace where users can buy and sell tickets.
In the fall of 2007, at the time of the sale, North Carolina did not allow the resale of tickets for more than $3 above face value, a law that had been on the books for decades. A year later, the state passed legislation allowing internet resale of tickets. At the same time, the state, like many others, also outlawed the use of bot software, which are computer programs that allow users to surreptitiously circumvent internet security protocols to procure large blocks of tickets in seconds.
StubHub argued that it was protected under the Communications Decency Act (CDA), which has been used to shield Web sites from the actions of its users, but Judge Tennille did not buy the defense:
StubHub did not set the price at which Mrs. Hill purchased the tickets. It did not enter the price in the blank on its website. It used all the right disclaimers and warnings in its user agreement and on its website. However, its actions speak louder than its words. It provided, for its own profit, a means by which Mr. Holohan and other sellers, in particular LargeSellers, could scalp tickets in a manner which would have violated North Carolina law if done in person and not by use of the internet. It directly participated in developing the pricing on its system. If it did not know the face value of the tickets sold on its website — an assertion the Court would find difficult to accept — it was consciously indifferent about and willfully blind to that information. At the least, StubHub encouraged illegal content. Phrased differently, the use of its website to scalp tickets in violation of North Carolina law was a predictable consequence of its business model.
For the concert in question, StubHub “collected approximately $126,000.00 above the face value of the tickets and $41,947.25 in fees in excess of the $3.00 fee authorized by the statute,” Judge Tennille wrote.
Chicago attorney John Moore, an expert in ticket legislation and resale cases who was not involved in this case, told TicketNews that StubHub had a difficult argument to prove. “I can say that the CDA has never been a successful defense in these types of situations.”
In 2007, Hannah Montana frenzy gripped parents and their children throughout the country, and ticketing problems were rampant. Other lawsuits were filed over the exorbitant cost of tickets, and several states looked into altering their ticket resale laws to address concerns, primarily by banning bot software.
“We do plan on appealing the case in North Carolina and as such we cannot comment any further on the pending litigation,” Glenn Lehrman, spokesperson for StubHub, told TicketNews.
In other StubHub news, the company announced Wednesday, March 9 that it experienced problems with its database that affected PDF ticket orders and listings of large sellers on its marketplace.
Exact details of what caused the glitch were not disclosed, but the company said the issues were caused by a site update. As a result, an unknown number of brokers on the StubHub exchange were forced to re-upload orders — in some cases hundreds of them.
“The problem stemmed from a site update that accidentally led to the deletion of some PDF files,” Lehrman said. “This has never happened to us before and rest assured will never happen again.”
Last year, also during March, StubHub suffered problems when it installed new back office systems. The issue with the database this year is unrelated to the trouble last year, but the company was forced to notify large sellers in that instance, too.
“We are actively asking sellers that have had orders or listings affected to come back to the site and re-upload their PDF files,” Lehrman told TicketNews of the database issue. “We will be sending another email to sellers shortly offering an incentive for them to do this. This doesn’t affect any new orders or listings and is isolated to a finite group.”