The Journal. - The Trustbuster Taking on Ticketmaster

Episode Date: May 29, 2024

Assistant Attorney General Jonathan Kanter heads the Department of Justice’s Antitrust Division. He speaks with Ryan Knutson about the DOJ’s lawsuit against Live Nation and Ticketmaster, and why the government says the business is an illegal monopoly which the company denies. Further Reading: - Justice Department to Sue Live Nation, Seek Breakup of Concert and Ticketing Giant  - Justice Department Sues to Break Up Live Nation-Ticketmaster  Further Listening: - The Taylor Swift Ticketmaster Debacle  Learn more about your ad choices. Visit megaphone.fm/adchoices

The Department of Justice is taking on Ticketmaster. The Department of Justice, joined by 29 states and the District of Columbia, sued Live Nation Entertainment and its wholly owned subsidiary, Ticketmaster, for violating the Sherman Antitrust Act. Last week, the government filed a lawsuit against Ticketmaster's parent company, Live Nation. We are not here today because Live Nation Ticketmaster's conduct

is inconvenient or frustrating. We are here because, as we allege, that conduct is anti-competitive and illegal. The lawsuit is the latest in a string of major antitrust cases brought by the Justice Department, like against JetBlue. The Biden administration's Justice Department has filed a lawsuit to stop JetBlue

from buying Spirit Airlines. And Google. We allege that Google has used anti-competitive, exclusionary and unlawful conduct... And Apple. They argue that the tech giant has created an illegal monopoly in the smartphone market... Yesterday, I spoke with the head of the DOJ's antitrust division,

Jonathan Cantor, about his department's most recent case against Live Nation. People love music, and people hate monopolies. And this case is about both. And Live Nation Ticketmaster has either a monopoly position or significant control over so many different portions of the ecosystem. And we talked about why the DOJ has become so much more aggressive. Antitrust is undergoing a revival.

There was a time not too long ago where antitrust was sort of taking the back seat and not getting as much attention. And we are, I think, entering or in a new golden age of antitrust enforcement, one that enforces the law so that our markets work and so that people across the country can get the benefits of a competitive, healthy economy.

Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson. It's Wednesday, May 29th. Coming up on the show, a conversation with the DOJ's head of antitrust about Live Nation, Ticketmaster, and a new era of trust busting. Your teen requested a ride, but this time, not from you it's through their uber teen account it's an uber account that allows your teen to request a ride under your supervision with live trip tracking and highly rated drivers add your team to your uber account today Back in 2022, Ticketmaster and its parent company, Live Nation, came under fire. But not from the Justice Department. From Swifties.

Fans of Taylor Swift crashed the Ticketmaster website today as pre-sale tickets to her first concert tour in five years went up for grabs. Many Taylor Swift fans are furious. Ticketmaster facing a customer backlash tonight. The debacle even landed Ticketmaster and its parent company, Live Nation, on Capitol Hill, where lawmakers alleged the service was an overpriced, hard-to-use monopoly. hard to use monopoly. For a lot of people, this story starts with the Taylor Swift era's tour and the Ticketmaster debacle that people went through when they tried to get tickets for that tour.

Is that where this started for you? So, no. This case started with a thorough, serious investigation. I can't go into the specifics about when it started and why it started, but we conducted a thorough investigation and following the facts and the law concluded

that there was a violation of the antitrust law. It was only then we took action. But I do think it's important to address one of your questions, which is the public gets this issue and it's an interesting convergence. Did what happened with Taylor Swift's Heiress tour, did that factor into the DOJ's investigation in any way? So I think it was symptomatic of issues that we were seeing across the live music ecosystem. So fans and artists have been dissatisfied with the Live Nation Ticketmaster Monopoly for a very long time now. And that came to a fever pitch, including with respect to the Taylor Swift incident, that when people wanted choice, they didn't have it. When people felt that customer

service was letting them down, they asked questions. They said, well, where are the other competitors? Why is this happening? The DOJ makes several allegations against Live Nation, all of which the company denies. The lawsuit says Live Nation has a dominant position in several areas of the live events industry, and that it uses its size to force other companies to buy its services. There are several parts to Live Nation's business. First, it's a concert promoter, meaning artists use it to help organize concert tours. Second, it sells concert tickets through Ticketmaster,

a company it acquired in 2010. It also has a big advertising operation, and it owns a lot of venues. When they own a venue, they can determine who the ticketer is, which artists get to play the venue. They can lock out artists, as we allege in our complaint, who don't use Live Nation for promotions. And then they can get a cut of a lot of different parts of revenue, including parking and concessions.

And then in all of this, there are sponsorships that is an extremely high-margin business. And one of the things that we explain in our document is how this is part of a big flywheel. And so what that means is that your strength in one market makes your strength in another stronger, which in turn makes it stronger in another. So if you have a big position in promotions, it means you can have a big position in ticketing, which means you can have a big position in amphitheaters, which in turn gives you a bigger position in promotions. And then that flywheel starts spinning. Why is that bad for consumers, though? I mean, it sounds like, you know, Live Nation has built up a successful business

where they have the ability to make money in lots of different corners of the live event space. That in and of itself may not be a violation of the antitrust laws, but when they're preserving that position through anti-competitive conduct, it absolutely is a consideration of the antitrust laws. And I think one of the reasons that this issue resonates so much is that fans are not particularly happy. They're not happy with fees. They're not happy with the innovation, their lack thereof. They're not happy with customer service. And so when one company has such a powerful position at so many levels and competition is not stepping in to meet the needs

of fans in particular, then that is really kind of a classic antitrust problem. So Live Nation has taken a very forceful response to this lawsuit. They say they're not a monopoly. They say that this case isn't going to solve any consumer pain points. I want to walk through some of the arguments that they've made, starting with the first one on prices. Live Nation says that ticket prices are primarily set by performers.

So if performers are the ones that primarily set ticket prices, how would this case result in better prices for consumers? We fundamentally disagree with that characterization. It suggests to me that Live Nation Ticketmaster is either blaming the artists or blaming someone else and not taking accountability for its own conduct. They're the promoter and the ticketer, and they're negotiating with each other for how much money is going to be extracted out of the system. Absolutely, that affects ticket prices. One aspect of the DOJ's lawsuit is the fact that Ticketmaster has exclusive contracts with venues to provide ticketing services. The DOJ says that's an example of an unfair practice.

There's a rich history of antitrust law that says when a company that has monopoly power requires someone to use their product exclusively for a long period of time, it restricts choice. It means that if either a customer or partner is unhappy with the price or the quality, they can't switch elsewhere. And ultimately, when those kinds of contracts exist, and they go not just event by event or even a few months at a time, but years at a time, it means that there's no ability for rivals to enter the market or compete either on a concert-by-concert basis or a contract-by-contract basis. So Live Nation says that it's actually the venues that

want these exclusive contracts because they say that venues see ticketing as something they just want one vendor to do. They do want it to be over a certain number of years because that makes it simple for them. And that actually creates competition because it allows different ticket providers to bid for a long-term contract. Well, I think now that's the second time in our discussion where I've heard that they were blaming somebody else for their own conduct.

The fact of the matter is these are contracts that they enter into, contracts that benefit them financially and contracts that restrict the ability of partners to choose rivals. And so this goes to the heart of antitrust law and is a classic problem in antitrust when the conduct is being engaged in by a firm with monopoly power. One of the things that I think consumers are often frustrated with in the live event space is the fact that tickets go on sale, they get bought up immediately, in many cases by bots,

and then the resale price is hundreds of dollars more than it was at the time that the tickets originally went up for sale. Does this lawsuit address that situation? sale. Does this lawsuit address that situation? This lawsuit addresses the lack of competition and innovation that consumers have experienced. And that means when you have a loss of competition and innovation, you don't have solutions to help solve these kinds of problems. And they go unaddressed. But the problem that we see and the issue that we see is the marketplace is not working in a healthy way to address these absolutely real concerns. I want to get your response to something that Dan Wall, the executive vice president of corporate and regulatory affairs for Live Nation said in their official response. He said, quote, fans want to see the bands and sports teams they love and it infuriates them that tickets sell out on Ticketmaster and are then available by the

hundreds on secondary online sites at double or triple the cost. But the government has chosen I respectfully disagree. Our case is quite clear that Live Nation Ticketmaster has engaged in an extensive pattern of conduct that's designed to harm competition, to keep rivals from offering better priced and better, more innovative solutions. They have used sharp elbow tactics, including threats of retaliation and exclusion against partners who dare to work with rivals.

These are classic antitrust violations. So the Justice Department is pushing for a breakup of Live Nation and Ticketmaster. Why a breakup? So some problems are just so deep and entrenched that the only way to address them is through what we call structural relief, which is commonly referred to as a breakup. And I think what our document indicates is that there's been, for over 10 years, a broad pattern of conduct. And a lot of that stems from conflicts of interest, if you will. And those kind of deep-seated conflicts of interest create incentives to violate the antitrust laws, and they've. And those kind of deep-seated conflicts of interest create incentives to violate the antitrust laws, and they've acted on those incentives, we argue,

for a long period of time. And at this point, we don't see any other viable alternative. Is a breakup of Live Nation and Ticketmaster the only solution here? We believe it's the right solution here, and it is the appropriate solution under the law, but ultimately that will have to be determined by a court. In a call with investors last week, a Live Nation executive said the Justice Department was calling for a breakup in order to generate headlines, not because it made legal sense. The DOJ is pushing to break up Live Nation and Ticketmaster now, but the government had a chance to prevent them from ever merging in the first place more than a decade ago.

So, why didn't they? That's after the break. Embrace the summer vibes with Summer's Be Hard Cider. Bursting with lovely aromas of apple, We'll be right back. Waterloo, Ontario. Travel better with Air Canada. You can enjoy free beer, wine, and premium snacks in economy class. Now extended to flights within Canada and the U.S. Cheers to taking off this summer. More details at aircanada.com. Live Nation agreed to acquire Ticketmaster in 2009.

Back then, the Justice Department reviewed the deal and allowed it to go forward, so long as the newly formed company agreed to a few conditions. Like, Live Nation had to promise that it would never withhold shows from venues that didn't use Ticketmaster. Why didn't the DOJ block the merger then? So I, as you know, was not there at the time. I think history can determine

whether that was the right decision or not. But in any event, ultimately, the department decided to let the merger go with conditions, hoping that those conditions would keep some of those anti-competitive acts from occurring. That's one area of law. We've got a whole separate area of law that deals with what happens after the merger. And so even after a merger, if a company engages in conduct that violates the antitrust laws,

the Sherman Act is there to step in. The Sherman Act, which was passed in 1890, outlaws monopolistic business practices. 1990, Outlaws' Monopolistic Business Practices. If a company, after it merges, engages in conduct that monopolizes or illegally monopolizes or maintains its monopoly in the market, then that is well within the bounds of the Sherman Act. And so we are not bringing a case to say that the merger itself was illegal. That was what the department looked at over 10 years ago. We are bringing a case to say that the conduct engaged in by the company after the merger was illegal. Conduct that they

controlled, they had the choice either to break the laws or not break the laws. So these mergers with conditions, or so-called consent decrees as they're known sometimes, mergers with conditions, or so-called consent decrees, as they're known sometimes, were a common way that various administrations had let mergers get approved, where like, yes, we'll let you merge, but there's a set of conditions where, you know, you can't do X, Y, or Z. Do you think that strategy has failed? So, I think the data will demonstrate that a lot of those consent decrees have failed and have not led to preserving the kind of competition that they very much intended to preserve. And so we've tried to take a real-world look at what's working and what's not.

And we will always listen. And if there's a consent decree that doesn't require the public to bear the burden of failure, we're happy to consider it and, if appropriate, enter into one. But ultimately, we are here to protect the public. And if a merger is going to harm competition, then we're going to make sure that either we block that merger or if we do, in the rare instance, enter into some sort of resolution, the public will not bear the burden of failure. So do you think the era of approving mergers with these conditions, with these consent decrees, is that era over? Are we less likely to see that going forward? Certainly we have during my tenure. Over the last two and a half years,

the frequency of merger remedies has declined significantly. We've done some. But as I said when I first started in my position, that ultimately the most reliable outcome for a merger that violates the law is to block the merger. And that's what we will do. And if companies come forward and offer a solution that meets our standards, the standards of the law, to actually protect competition and not require the public to bear the burden of failure, then consider it. There's a lot of people in America who might look at what you're doing and say, that's anti-business. It's pro-business.

What we're doing is we are creating room for new business ideas, for small businesses, for big businesses that want to enter new markets to compete on the merits. Antitrust is great for every business other than a monopoly. And it is often businesses that come to us asking us to enforce the law because they want the opportunity to compete. Ultimately, markets are good. Markets are good for companies. Markets are good for consumers.

Markets are good for workers. And so at the end of the day, we know, we want to promote good old-fashioned competitive markets, and that is good for business. If the Department of Justice loses this case against Live Nation or some of the other big cases that you've been taking on, what will that mean for the DOJ itself and for this sort of golden era of antitrust that you were talking about before? So we bring our cases to win, and we bring them when we believe we have a sound case based on the facts and the law, and we've had a lot of success. We blocked for the first time ever

an airline merger, and then we blocked another airline collaboration under the Sherman Act. We successfully blocked the merger of Penguin, Random House, Simon & Schuster, which would have created a book publisher with a significant amount of power. And that's just a drop in the bucket of what we've been doing. So the results are in, and courts agree with a lot of our cases, but we have an obligation to prove them. And so we take that obligation, that burden seriously. We investigate thoroughly.

We make sure that we are using our resources in a sound way and that we follow the facts in law and ultimately bring cases to court that will help vindicate the rights of the public. So with this Live Nation case, do you think you're going to win? We bring all of our cases because we believe we can and should win. But the burden is on us we believe we can and should win. But the burden is on us to convince a court and a jury, and that's what we plan to do. Great. All right, well, thank you so much for your time.

We really appreciate it. Thank you for having me. That's all for today. Wednesday, May 29th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Dave Michaels and Anne Steele. Thanks for listening. See you tomorrow.