Bad Blood: DOJ seeks to break up Live Nation/Ticketmaster
On May 23, 2024, the U.S. Department of Justice, along with 29 state attorneys general and the District of Columbia, sent shockwaves through the live entertainment industry by filing suit against Live Nation and its wholly-owned subsidiary, Ticketmaster, seeking to break-up a merger that the DOJ originally approved back in 2010. The company is no stranger to controversy, and recently faced intense criticism from Taylor Swift and her fans arising from Ticketmaster's failure to effectively manage sales of Eras tour tickets. Asserting claims under the Sherman Antitrust Act and various state antitrust statutes, they allege that Live Nation-Ticketmaster unlawfully wields its dominant position in the live music ticketing and promotion markets to the detriment of concert-goers who are forced to pay inflated "service fees," musical artists who have less options for promoters, large venues and amphitheaters which are essentially forced to use Ticketmaster's ticketing services, and independent promoters that are driven from the market. This is sure to be a closely-watched lawsuit that will have broad implications for the live music industry in America going forward.
From the moment that Live Nation, the largest concert promoter in the U.S., announced in February 2009 that it would be acquiring Ticketmaster, the largest ticketing company in the U.S., there was skepticism and debate around the potential effect on competition in the live entertainment industry. Indeed, over the 15 years preceding the merger, Ticketmaster maintained a market share of over 80% of the primary ticketing market in the United States. However, one year later, the deal was greenlighted by the DOJ, but with conditions and restrictions.
Recognizing that this merger posed a threat to competition in the live entertainment ticketing and promotion markets, the DOJ imposed a consent decree that required Ticketmaster and Live Nation to adhere to certain structural and behavioral restrictions. Structural restrictions included requiring Ticketmaster to (i) license its ticketing platform to AEG (a rival promoter and venue owner) and (ii) divest a line of business that, at least in theory, could compete with Ticketmaster. Behavioral restrictions were aimed at preventing the post-merger company from engaging in various forms of anticompetitive conduct, and included prohibiting retaliation against venues that chose not to work with Live Nation-Ticketmaster, and not allowing the merged company to force venues to purchase bundled promotion and primary ticketing services.
In late 2019, the DOJ and Live Nation/Ticketmaster agreed to extend the consent decree until 2025 and to modify some of its terms and restrictions, with the DOJ noting at that time that Live Nation had "repeatedly" violated the behavioral restrictions included in the original agreement. The amended decree, among other things, included additional provisions (i) prohibiting Live Nation from retaliating against venues that did not use Ticketmaster's services, (ii) mandating the appointment of an independent monitor to investigate and report on Live Nation's compliance with the consent decree, and (iii) ordering Live Nation to appoint an internal antitrust compliance officer. Despite these measures, on May 23, 2024, the DOJ filed suit against Live Nation and Ticketmaster alleging anticompetitive and predatory conduct that surpass the bounds of the consent decree.
The case is now before the Honorable Judge Arun Subramanian in the Southern District of New York. Unsurprisingly, the complaint includes allegations that Live Nation-Ticketmaster violated the consent decree by using its dominant market position to coerce venues into purchasing its ticketing services using multiyear exclusivity contracts, and the threat of retaliation if the venue refused. There are also allegations that in recent years, Live Nation-Ticketmaster has harmed competition throughout the live music industry by acquiring nascent potential competitors and expanding its "flywheel" business model which "captures fees and revenue from concert fans and sponsorship, uses that revenue to lock up artists to exclusive promotion deals, and then uses its powerful cache of live content to sign venues into long-term exclusive ticketing deals, thereby starting the cycle all over again."
Indeed, the complaint goes far beyond the conduct that was intended to be reined in by the consent decree, alleging anticompetitive conduct affecting nearly every aspect of the live music industry in America. For instance, it's alleged that Live Nation-Ticketmaster has for years prevented musical artists from performing at its network of amphitheaters unless they use Live Nation's promotional services, which the DOJ argues constitutes an unlawful tying arrangement that limits the ability of artists to choose promoters when performing at amphitheaters. Further, being the dominant primary ticketer for venues hosting the most popular musical acts allows the company to charge exorbitant "service fees" on each ticket sold, as most concert-goers have likely experienced.
This case is a further indication of the DOJ's willingness to aggressively pursue monopolization cases, and not only against tech giants like Apple and Google. At the same time, the government has recently suffered high-profile loses in its antitrust actions, with Microsoft-Activision as a prime example. A DOJ loss could lead to further industry consolidation under the Live Nation-Ticketmaster umbrella, and a DOJ win could reshape how musical artists promote their shows and how concert-goers attend live performances. The stakes have never been higher, as the outcome of this case will have ripple effects throughout the live music industry. Are you ready for it?
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