Taylor Swift’s Eras Tour has gotten off to a rocky start. Ticketmaster, the online ticket seller that is part of Live Nation Entertainment, was unable to handle the demand for concert tickets despite assurances to Swift that it would not be a problem. The ensuing chaos has left ticket buyers disheartened and tour venues at risk of losing money if fans give up in frustration.
Ticketmaster was a more or less unavoidable choice to sell the tickets, given their dominant position in live entertainment ticket sales in the United States. Like other firms with market dominance, they are not really focused on the needs of customers, because they don’t have to be. Although demand for Swift’s tour was sure to be extraordinary, Ticketmaster did not take steps to handle that demand. In a competitive market, bungling the sale would have damaged their brand and cost them future business. But since both venues and ticket buyers have few alternatives, Ticketmaster had limited incentives to get things right.
These events drive home several points about the importance of competition and the need for antitrust enforcement to maintain it:
1. Left to their own devices, monopolists won’t hesitate to increase their market power
Live Nation Entertainment was created by the merger of Live Nation and Ticketmaster in 2010. Live Nation was an important promoter of live entertainment. It also had a ticket sale business that competed with Ticketmaster, which was already an important ticket seller.
The U.S. Department of Justice (DOJ) permitted the merger but saw that market power in promotions could be leveraged to increase market power in ticket sales. So, the DOJ entered into a settlement with conditions designed to prevent the company from requiring use of Ticketmaster sales in order to host a Live Nation concert.
However, by 2019, the DOJ concluded that Live Nation had violated those settlement terms. In its motion to modify the settlement, the DOJ said:
The United States has found that, since 2012, Defendants’ executives have retaliated against or threatened venues throughout the United States in violation of the Final Judgment’s Anti-Retaliation and Anti-Conditioning Provisions. These violations began shortly after the decree was entered in 2010 and have recurred throughout its term, with the most recent known violation occurring as late as March 2019. As a result of this conduct, venues throughout the United States have come to expect that refusing to contract with Ticketmaster will result in the venue receiving fewer Live Nation concerts or none at all. Given the paramount importance of live event revenues to a venue’s bottom line, this is a loss that most venues can ill-afford to risk. As a result, many venues are effectively required to contract with Ticketmaster to obtain Live Nation concerts on reasonable terms, limiting the ability of Ticketmaster’s competitors to compete in the primary ticketing market and harming venues that would benefit from increased competition.
So, the settlement was revised and extended, this time with the provision that Live Nation would pay a fine of $1 million dollars per violation.
Before this latest episode, the company was reportedly under investigation by the DOJ. If the investigation shows that violations continued, structural remedies, such as requiring Live Nation to divest Ticketmaster, might be in order.
2. Mergers should receive more scrutiny from antitrust enforcers
It looks like the merger of Live Nation and Ticketmaster was a really bad idea, but it is not unique. Facebook’s acquisitions of WhatsApp and Instagram, for example, allowed a dominant social network to eliminate potential competitors. And there is strong empirical evidence that market power, in many cases increased through mergers and acquisitions, is now a significant problem in many sectors of our economy.
There is, however, hope that the current leadership at the Federal Trade Commission (FTC) and DOJ will toughen the standards used to review mergers. Already, they have jointly announced plans to revise the merger guidelines to better prevent anti-competitive combinations. Stronger guidelines could make the agencies more likely to block mergers such as that of Live Nation and Ticketmaster. This process deserves widespread support.
3. We need antitrust innovation
As the Ticketmaster debacle has shown, market power causes real problems, even if they are not obvious day to day. Because these market power issues are substantial, antitrust enforcers need to be both aggressive and innovative.
Fortunately, the FTC is taking steps to innovate. For instance, it is proposing to use it rulemaking authority to mitigate consumer harms from commercial surveillance and data security practices. This effort deserves support because of the threats people face in the digital world—and because reining in abuse of consumers could have beneficial effects on competition. Moreover, if it turns out that Live Nation-like leveraging behavior is a widespread problem across online sales platforms, the FTC might consider rulemaking to limit it.
There is no guarantee that Taylor Swift ticket sales would have gone without a hitch if Live Nation’s merger with Ticketmaster had been blocked. But it is very likely that ticket selling would be more competitive, that tickets could have been offered through more than one company, and that those competing companies would not have made the same blunders. That’s what happens when buyers have alternatives; it keeps sellers on their toes.
It is a very good thing that the DOJ has already started an investigation into Live Nation. If the investigation finds violations of antitrust law—especially if those violations involve actions prohibited in the 2010 and 2019 settlements—it is time for strong measures. Rescinding the merger should definitely be on the table.
Of course, breaking up Live Nation would not guarantee rapid entry of new competitors, only that entry would be more likely. Given this reality, fans of Beyoncé, who are looking forward to her rumored tour next summer, might want to buckle up for another sales disaster.