Stubhub co-founder Jeff Fluhr has an interesting pitch to the Competition and Markets Authority over what the regulator should do about Viagogo’s purchase of StubHub: sell his old company back to him.
Fluhr wrote a public comment to the CMA as part of the ongoing competition probe involving Viagogo’s purchase of StubHub. The sale, closed for a reported $4 billion in February, has been held up by the CMA over its belief that the combined companies would cause a substantial lessening of competition (SLC) due to the huge market share they have when combined. Viagogo has proposed that it divest the UK portion of the StubHub business, while keeping control over the North American arm of the company – presumably allowing it to hold sway over the ticket resale market with the Viagogo brand dominant in the EU/UK while StubHub keeps its position atop the U.S. and Canadian markets.
Fluhr, who co-founded StubHub with Baker while both were graduate students at Stanford, says that won’t be enough to address the concerns laid out.
“The CMA should require a full divestiture [of StubHub] because it is the only way to achieve the CMA’s objective of addressing the SLC. By forcing a full divestiture, Viagogo and StubHub would be two distinct companies leading to optimal competition in the UK market and elsewhere,” Fluhr writes. “This competition would, in turn, lead to many advantages for consumers including lower ticket prices, more choice and access to live events, increased innovation in the mobile app and website product experience, and better customer service. The US market has more significant competition than the UK market and enjoys all of these strong customer benefits.”
Naturally, a company such as Craft Ventures, where Fluhr now serves as General Partner, would be a perfect place for StubHub to land after forced away from his onetime partner. Private equity firms, which were among the interested parties prior to Viagogo’s announcement of its agreement to purchase StubHub from eBay, wouldn’t know how to run the company, he says.
“The buyer in this transaction requires a team with deep expertise in the ticket resale industry, a willingness to navigate and uncertain climate, and a hyper focus on customer satisfaction,” he wrote. “Any such buyer would also need to be willing to put in the hard effort to get through the current COVID-19 pandemic which has devastated the live events industry.”
“It is important that the CMA take swift action in this matter. This urgency is caused by the significant challenges resulting from Covid-19: In order for StubHub to survive through the pandemic, it needs a clear Covid-19 contingency plan, decisive leadership, a lean team and an optimistic yet patient culture. The longer this process goes on without a clear decision, the harder it will be for the divested entity to pull these pieces together and ensure the availability of this ticket marketplace for UK consumers.”
How such a forced sale might progress is anybody’s guess, but it is likely that Viagogo would be taking an enormous loss on any such transaction. The $4 billion purchase from eBay took place just weeks before the pandemic brought live events to a screeching halt. Since that point, revenues for both the parent company and newly purchased subsidiary have been decimated, while layoffs and office closures have reduced existing teams to a fraction of their former size.
It is unlikely that Baker and his company will be interested in Fluhr’s pitch. Since the CMA’s initial halting of the deal, it has maintained that it will work with regulators to come up with a suitable solution to their concerns, but have no intention of selling the company outright.
“Whilst we disagree with the provisional conclusion that the deal would reduce competition, we look forward to working with the CMA to deliver a comprehensive solution which addresses their concerns,” a Viagogo spokesperson told CNN Business at the time of the provisional blocking of the transaction in October.
“We look forward to the day when the companies can combine to provide consumers wider access to their favorite events,” said a spokesperson for StubHub.