Will The Antitrust Lawsuit Against Live Nation Break Its Hold On ...

Taylor Swift fans protest as ticket industry executives testify to Congress.

The U.S. Department of Justice sued concert promoter Live Nation and its ticketing company subsidiary Ticketmaster for monopolization on May 23. Thirty state and district attorneys general joined the suit.

DOJ’s complaint, filed in New York federal district court, claims that Live Nation-Ticketmaster unlawfully exercises its monopoly power in violation of Section 2 of the Sherman Antitrust Act. DOJ requests as relief that Live Nation divest itself of Ticketmaster and terminate various allegedly anticompetitive arrangements with third party businesses. In effect, DOJ is asking for a breakup of the company and a complete overhaul of its business model.

DOJ asserts that, “As a result of its conduct, music fans in the United States are deprived of ticketing innovation and forced to use outdated technology while paying more for tickets than fans in other countries. At the same time, Live Nation-Ticketmaster exercises its power over performers, venues, and independent promoters in ways that harm competition. Live Nation-Ticketmaster also imposes barriers to competition that limit the entry and expansion of its rivals.”

DOJ’s complaint may attract substantial public support. The crash of the Ticketmaster website in November 2022 that “froze out” many U.S. consumers seeking to purchase Taylor Swift concert tickets generated very bad publicity and prompted congressional hearings critical of LNT. This may be why DOJ has requested a jury trial in this case, rather than having a federal judge be sole decider.

But the lawsuit is far from a slam dunk. Monopolization cases are hard to win, and DOJ will have to overcome major hurdles to succeed.

Live Nation, the world’s largest event promoter, entered into an agreement to merge with Ticketmaster, the world’s largest ticket sales company, in 2009. At the time of the merger, the two companies held very high market shares in U.S. live events promotion and in ticketing, respectively, and they still do.

DOJ cleared the merger on antitrust grounds in 2010, subject to a 10-year consent agreement. In order to strengthen competition in ticket services, the consent required Ticketmaster to license its ticketing platform to AEG, another major promoter and owner of some of the country's most significant performance venues. The consent also required the sale of Ticketmaster’s Paciolan subsidiary (which allows venues to host their own primary ticketing service on their own websites) to Comcast-Superior.

In 2019, DOJ claimed that LNT had engaged in some consent decree violations, such as “pressuring” venue to use Ticketmaster. Nevertheless, DOJ and LNT agreed to extend the consent for an additional 6 years in 2019. The extension included new requirements that LNT not discriminate against venues that selected ticketers other than Ticketmaster.

DOJ will have to overcome multiple legal obstacles if it is to prevail in the lawsuit.

First, the fact that DOJ let the merger proceed in the first place, and then agreed to extend the initial consent decree as recently as 2019, raises “optics” problems.

Notably, the transaction was in large part a “vertical merger” between firms at different levels of the production and distribution chain.

The Organization for Economic Cooperation and Development, a leading international economic research organization, has explained that “[v]ertical mergers are traditionally presumed pro-competitive, as they are generally driven by efficiency-enhancing motives. . . . [Moreover,] [d]espite existing concerns about the anti-competitive risks of vertical mergers, empirical evidence seems to systematically support the view that vertical integration enhances consumer welfare.”

Christine Varney, assistant attorney general for antitrust during the Obama administration, explained why DOJ decided not to block the Live Nation-Ticketmaster merger in a 2010 speech. She stated:

“[W]e [DOJ] were not convinced that we could establish the existence of truly dominant firms in well-defined antitrust markets foreclosing competition in the supply chain, all of which are necessary for a sustainable challenge to a vertical transaction. We did conclude, however, that Ticketmaster was dominant in primary ticketing, and the remedies that we secured will ensure that competition is preserved in that important realm and that Ticketmaster's power in ticketing will not wend its way into other levels of the live music supply chain.”

DOJ reviews mergers under Section 7 of the Clayton Act, which prohibits transactions that threaten to “substantially lessen” competition. LNT is sure to stress that by “passing” on the initial merger and extending the consent decree, DOJ has conceded that competition has not been substantially lessened. That being the case, LNT may assert that DOJ cannot credibly argue for Sherman Act monopolization now, and is acting inequitably by trying to get an unfair “second crack at the apple.”

Second, LNT will counter DOJ assertions that it possesses monopoly power.

Illegal monopolization requires “a) the possession of monopoly power in the relevant market; and b) the willful acquisition or maintenance of that monopoly power.” Without monopoly power, there cannot be a violation.

The Federal Trade Commission explains that a monopoly is “a firm with significant and durable market power — that is, the long term ability to raise price or exclude competitors.” What’s more, a DOJ report citing case law states that “[m]onopoly power requires that the firm be able profitably to charge prices high enough to earn a supernormal return on its investment.”

LNT emphasizes that it does not possess monopoly power:

“Live Nation’s overall net profit margin [1.4% in the fiscal year ending on or before February 3, 2024] is at the low end of profitable S&P 500 companies. . . . The trendlines confirm Live Nation’s lack of market power. Every year, competition in the industry drives Live Nation to earn lower take rates from both concert promotion and ticketing. The company is profitable and growing because it helps grow the industry, not because it has market power that squeezes more profit from less output.”

DOJ will respond that LNT’s business tactics have thwarted competition in concert promotion and ticketing. It will point to the company’s long-time maintenance of extremely high market shares in ticketing and promotion. But it may have a hard time dealing with LNT’s relatively low profits.

Third, even assuming DOJ can overcome the monopoly power hurdle, LNT will argue that DOJ has not proven that it has engaged in illegal “exclusionary or predatory acts” needed to show illegal monopolization.

DOJ alleges a series of “bad acts” by LNT that it says are not legal “competition on the merits”. These include: (1) the alleged coopting of Oak View Group, a “potential competitor-turned-partner”; (2) retaliating against potential entrants; (3) threatening and retaliating against venues that work with rivals; (4) locking out competition with exclusionary contracts; (5) blocking venues from using multiple ticketers; (6) restricting artists’ access to venues; and (7) acquiring competitors and competitive threats.

LNT has already responded, however, that these actions have been mischaracterized, are not competitively problematic, and, indeed, benefit consumers.

In the landmark 2001 Microsoft monopolization case, the D.C. Circuit Court of Appeals explained that to demonstrate acts are exclusionary, plaintiff must show that they have an anticompetitive effect, that is, they “must harm the competitive process and thereby harm consumers.” Moreover, even if plaintiff meets this test, defendant may “may proffer a [nonpretextual] ‘procompetitive justification’ for its conduct." If it does, “then the plaintiff must demonstrate that the anticompetitive harm of the conduct outweighs the procompetitive benefit.”

In short, the fact that LNT’s acts may “look bad” is irrelevant, unless they also undermine the process of competition and harm consumers. If those acts are justifiable as normal competitive business practices, they may well pass muster. The argument that a number of acts that are justifiable individually may collectively constitute an illegal “monopoly broth” is legally problematic.

Fourth, absent exclusionary conduct, LNT’s ticketing fees, high pricing, and ticketing distribution breakdowns do not violate the antitrust laws.

DOJ alleges that LNT charges excessive ticketing fees that “are essentially a ‘Ticketmaster Tax’ that ultimately raise the price fans pay.” LNT has responded that “Ticketmaster retains only a modest portion [5%]of those fees”, a far lower fee level than other major digital sales platforms, such as StubHub, Airbnb, and Uber. In any event, absent bad conduct, antitrust law does not preclude monopolists from charging whatever price they wish, as the Supreme Court emphasized in the 2004 Verizon v. Trinko case. Furthermore, ticketing distribution breakdowns, such as LNT’s failure to anticipate the high demand for the Taylor Swift concert, may perhaps reflect bad corporate planning, but they are not an antitrust violation.

Finally, it will be hard to prove that consumer welfare has suffered due to LNT’s actions.

As LNT notes, DOJ has acknowledged that “‘[t]he face values of tickets are typically set or approved by artists.’” LNT adds that DOJ “ignores everything that is actually responsible for higher ticket prices, from rising production costs, to artist popularity, to 24/7 online ticket scalping that reveals the public’s willingness to pay far more than primary ticket prices.” To the extent that LNT can factually support these statements in litigation, DOJ will find it hard to show that breaking up or otherwise sanctioning the company will make consumers better off.

Whether DOJ succeeds depends upon its ability to present facts to the jury that paint LNT as a “bad actor” and to convince the court that the hard legal standards for illegal monopolization have been met.

Even if DOJ were to win in court, LNT would likely appeal, claiming that the facts presented (which are not revisited on appeal) do not meet those legal tests. Relatedly, LNT might emphasize that DOJ could not credibly show how consumer welfare was harmed by the company’s tactics. LNT could also stress the “inequitable” nature of bringing a monopolization case when a merger consent decree remains in place.

Finally, even if it found monopolization, an appeals court likely would closely examine whether DOJ had made the tough legal case for a drastic corporate breakup (as opposed to more limited behavioral remedies that forbid “bad acts”). In the 2001 Microsoft case, for example, the appeals court held that Microsoft was an illegal monopolist, but summarily slapped down the lower court’s proposal to break the company up.

These considerations all add up to one big question mark. What is quite clear, however, is that DOJ’s penchant for major monopolization prosecutions goes far beyond suing the big successful high tech companies, such as Google and Apple. This should send shivers throughout the corporate community.