by Andres F. Gonzalez
Antitrust Playoff Contenders: StubHub Takes on Ticketmaster
The Golden State Warriors might have won the championship on the court, but the team must now defend itself from a corporate rivalry.
On March 29, 2015, StubHub, Inc. sued Ticketmaster L.L.C. and the Golden State Warriors for California and federal antitrust violations.[1] StubHub, a well-known ticket reseller, alleges that Ticketmaster’s intimidation tactics have forced Warriors’ season ticketholders to sell their tickets on Ticketmaster’s “inferior” platform.[2]
The lawsuit is part of an ongoing feud to control professional sport leagues ticket sales. In 2007, Major League Baseball agreed to use StubHub as its ticket reseller.[3] That same year, Ticketmaster responded by partnering with the National Hockey League (NHL).[4] In 2012, Ticketmaster landed deals with the National Football League (NFL) and the National Basketball Association (NBA).[5] Together, Ticketmaster and the NBA created a comprehensive market of ticket sales called NBATickets.com, a platform which allows both entities to monitor ticket sales in the primary (first sale) and secondary markets (ticket resale).
StubHub claims that Ticketmaster used the monitoring tool to threaten ticketholders who attempted to resell their tickets in any other secondary markets, other than Ticketmaster.[6] The Warriors threatened to not sell playoff tickets or season packages to ticketholders who sold on any other platforms, such as Stubhub.[7]
Wagging the “Not in My House” Finger
On May 22, 2015, Ticketmaster and the Warriors filed the first motions to dismiss.[8] The motions claim that StubHub had not defined the relevant market and that StubHub has not pleaded facts to support any of the antitrust claims.[9] The motions also contend that sporting tickets are revocable licenses.[10] These licenses may include future restrictions. Additionally, the motions claim that under antitrust law unilateral conditions on future deals are permissible.[11]
On June 30, 2015, StubHub amended its complaint in an attempt to save some of these contentions.[12]
Defining the Market to Shape or Break Lawsuit
The lawsuit can turn on how the market is defined. The two issues presented are (1) in the relevant alternatives and (2) in the relevant primary or secondary markets.
StubHub wants to limit the relevant alternatives market to Bay Area professional basketball.[13] This narrow market would allow the company to prove that the Warriors and Ticketmaster has a monopoly over the professional basketball market. Moreover, this control over the market may allow courts to find unfair practices over the secondary market.
Additionally, StubHub alleges an antitrust tying violation, in which a desired product is tied to a less desired product to force the purchase of both. StubHub’s success depends on distinguishing the first sale from the resale.[14] If StubHub proves that distinction and proves that the defendants control the professional basketball market, then StubHub may have enough to plead an illegal tying arrangement.
In new motions to dismiss, Ticketmaster and the Warriors defined the market as entertainment in general.[15] The Warriors’ strong fan-base does not create a monopoly subject to antitrust regulations.[16] Instead, the fan-base is simply loyal customers of a brand that compete with other forms of entertainment, including two professional football teams, two professional baseball teams, and a professional hockey team.[17]
The defendants also contend that there is no distinction between primary and secondary markets because both markets sell tickets to the same event.[18] According to the defendants, buyers do not care whether the ticket they purchase comes from a reseller or the box office.[19] However, this is only true if Ticketmaster enforces price minimums that do not undercut prices from the box office.
The Real Losers: Companies or Consumers?
StubHub (at least in its own view) is standing up for consumers against the “Mafia tactics” of another corporate giant and its powerful teammate, the NBA Champions.[20] Although StubHub’s amended complaint shows the effect in increased prices for Warriors’ tickets, this result is limited to StubHub’s tickets. Still, there may be other factors influencing the price increase, such as a Championship-like season or added risk to sell through StubHub. Nonetheless, there is substantial risk that buyers will not be allowed to sell below face value, thus increasing prices on some tickets (though the exact harm on consumers is yet to be seen).
StubHub’s ulterior motive is clearly its sales, which have declined by 80 percent in the Warrriors’ market alone.[21] The NBA-Ticketmaster deal, along with the NHL and NFL deals, has brought the parties before this tribunal.
However, StubHub will have a hard time prevailing because antitrust laws protect competition, not competitors.[22] StubHub has not pled arguments to treat tickets separate from licenses. StubHub has only pled facts on how its sales have affected its customers.[23] Sports leagues must pay close attention to this lawsuit, as it has the potential to redefine ticket sales for years to come.
StubHub is expected to file a response to the motions to dismiss by the end of August 2015.
[1] See Complaint, StubHub, Inc. v. Ticketmaster L.L.C., No. 3:15-cv-01436 (N.D. Cal. filed Mar. 29, 2015) (alleging five antitrust claims and one tort claim). The complaint claims (1) Section 1 unlawful tying, (2) Section 1 restraint on trade, (3) conspiracy to monopolize, (4) violation of Cartwright Act, (5) violation of California UCL Section 17200, and (6) tortious interference with prospective economic advantage. See id.
[2] See id. at para. 46 (quoting season ticket holder’s sentiments).
[3] See Ira Boudway, StubHub v. Ticketmaster: Can a Scalper Be a Fan’s Best Friend?, Bloomberg (Apr. 2, 2015, 12:31 PM), http://www.bloomberg.com/news/articles/2015-04-02/stubhub-vs-ticketmaster-can-a-scalper-be-a-fan-s-best-friend- (describing corporate feud and stakes in litigation).
[4] See id. (discussing emergence of league deals with ticket resell giants).
[5] See id. (summarizing deals and fees paid for corporate deals in ticket resale).
[6] See Complaint, supra note 1, at para. 75 (alleging past and future harms from defendants’ “forcing of season ticket holders to use Ticketmaster exclusively for Secondary Ticket Exchange services; their monitoring of resale exchanges to ensure compliance with their exclusive arrangement; their deceptive marketing and promotion; and their exclusive marketing, promotion and technical integration”).
[7] See id. at para. 42 (providing example from specific season ticket holder).
[8] See Defendant Warriors LLC’s Motion to Dismiss the Complaint and Memorandum of Points and Authorities in Support of the Motion to Dismiss, StubHub, Inc. v. Ticketmaster L.L.C., No. 3:15-cv-01436 (N.D. Cal. filed May 22, 2015) [hereinafter Defendant Warriors’ Motion to Dismiss]; Ticketmaster L.L.C.’s Notice of Motion and Motion to Dismiss the Complaint; Memorandum of Points and Authorities in Support Thereof, StubHub, Inc. v. Ticketmaster L.L.C., No. 3:15-cv-01436 (N.D. Cal. filed May 22, 2015) [hereinafter Defendant Ticketmaster’s Motion to Dismiss] (demanding dismissal on deficiencies of pleadings and citing supporting authorities).
[9] See Defendant Warriors’ Motion to Dismiss, supra note 8, at 5 (“All of StubHub’s antitrust claims require it to identify and adequately plead the existence of a relevant antitrust market.”); Defendant Ticketmaster’s Motion to Dismiss, supra note 8, at 9 (“Failure to identify a relevant market is a proper ground for dismissing a Sherman Act claim.” (quoting Univ. of S. Cal. v. Tanaka, 252 F.3d 1059, 1063 (9th Cir. 2001)).
[10] See Defendant Warriors’ Motion to Dismiss, supra note 8, at 15 (“A ticket to a sporting event is a revocable license, and a licensor has long been permitted to impose restrictions on its licensees, including a complete restriction on transferability.” (citations omitted))
[11] See Defendant Warriors’ Motion to Dismiss, supra note 8, at 15 (“Any seller of goods or services is free to announce its policies and decline to do business with those who fail to comply with those policies; such conduct by the seller is unilateral and entirely outside the purview of Section 1 of the Sherman Act.” (citations omitted)).
[12] See First Amended Complaint, StubHub, Inc. v. Ticketmaster L.L.C., No. 3:15-cv-01436 (N.D. Cal. Mar. 29, 2015) [hereinafter FAC] (attempting to fix deficiency of pleadings and adding claim for exclusive dealing). FAC claims were re-alleged as: (1) Section 1 unlawful tying against the Warriors and Ticketmaster, (2) Section 1 restraint of trade against the Warriors and Ticketmaster, (3) conspiracy to monopolize against the Warriors and Ticketmaster, (4) attempted monopolization against Ticketmaster, (5) Section 1 exclusive dealing against the Warriors and Ticketmaster, (6) violation of Cartwright Act against the Warriors and Ticketmaster, (7) violation of California UCL Section 17200, and (8) tortious interference with prospective economic advantage against the Warriors and Ticketmaster. See id.
[13] See id. at paras. 85-89 (limiting primary market to professional basketball in Bay Area).
[14] See id. at paras. 98, 115-23 (describing distinction of markets and alleging Section 1 unlawful tying).
[15] See Defendant Golden State Warriors, LLC’s Motion to Dismiss the First Amended Complaint and Memorandum of Points and Authorities in Support of the Motion to Dismiss, StubHub, Inc. v. Ticketmaster L.L.C., No. 3:15-cv-01436 (N.D. Cal. filed July 31, 2015) [hereinafter Defendant Warriors’ Motion to Dismiss FAC] (claiming StubHub has not pled any unlawful conduct as matter of law); Ticketmaster L.L.C.’s Notice of Motion and Motion to Dismiss the First Amended Complaint; Memorandum of Points and Authorities in Support Thereof, StubHub, Inc. v. Ticketmaster L.L.C., No. 3:15-cv-01436 (N.D. Cal. filed July 31, 2015) (same).
[16] See Defendant Warriors’ Motion to Dismiss FAC, supra note 17, at 9 (stating that fan preference “does not create a separate market”).
[17] See id. at 6-8 (arguing that complaint failed to provide reasonable alternatives and “in the antitrust world, the Warriors are just another professional sports team and just another form of entertainment”).
[18] See id. at 10 (“The primary and secondary platforms for Warriors tickets cannot be legally separate ‘relevant product markets’ for antitrust purposes because tickets sold in those ‘markets’ are identical and completely interchangeable.”).
[19] See id. at 10 (citing another Ticketmaster lawsuit in which court held “[a consumer] would not care whether her ticket was purchased through Ticketmaster in the ‘retail’ market or from a ticket broker in the ‘resale’ market . . . as long as she is able to attend the [event]” (alteration in original) (quoting Ticketmaster v. RMG Technologies, Inc., 536 F. Supp. 2d 1191, 1197 (C.D. Cal. 2008)).
[20] See FAC, supra note 14, at para. 72 (quoting season ticket holder complaints on NBATickets.com).
[21] See id. at para. 12 (“[C]ausing the number of listings for Warriors tickets on StubHub to decrease by approximately 80% during the period that corresponds to and reflects the results of Defendants’ anticompetitive conduct.”).
[22] See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977) (“The antitrust laws, however, were enacted for ‘the protection of competition not competitors.’” (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)).
[23] See FAC, supra note 14, at paras. 12, 49 (illustrating price increases, sales reductions, and inventory reductions on StubHub Warriors’ market).
