On January 25, 2010, the Department of Justice entered into a settlement agreement with Ticketmaster Entertainment Inc. that allowed it to complete its acquisition of Live Nation, Inc. The settlement agreement required Ticketmaster to license its ticketing software, divest ticketing assets and subject itself to anti-retaliation provisions in order to proceed with its proposed merger with Live Nation. The proposed settlement is designed to protect competition for primary ticketing, which will in turn maintain incentives for innovation and discounting.
The Department of Justice’s Antitrust Division, along with 17 state attorneys general, filed a civil antitrust lawsuit along with the settlement agreement in the U.S. District Court in Washington, D.C., to allow the transaction to proceed. The state attorneys general offices that signed on to the settlement are: Arizona; Arkansas; California; Florida; Illinois; Iowa; Louisiana; Massachusetts; Nebraska; Nevada; Ohio; Oregon; Pennsylvania; Rhode Island; Tennessee; Texas; and Wisconsin.
The DOJ cooperated closely with the Canadian Competition Bureau throughout the course of its investigation, and the two agencies worked together to obtain the same remedy that preserves competition in both the United States and Canada.
Under the proposed settlement, Ticketmaster must license ticket software and divest ticketing assets to two different companies–Anschutz Entertainment Group (“AEG”) and either Comcast-Spectacor or another buyer suitable to the DOJ, allowing both companies to compete head-to-head with Ticketmaster. Unlike past merger remedies imposed by the DOJ, Ticketmaster will also subject itself to court-ordered restrictions on its behavior. The proposed settlement allows for strong competitors to Ticketmaster, allowing concert venues to have more and better choices for their ticketing needs, and provides for anti-retaliation provisions. As part of the proposed settlement, Ticketmaster must license a copy of its primary ticketing software to AEG, the nation’s second-largest concert promoter and operator of some of the most important concert venues in the country. With a copy of the Ticketmaster software, AEG will be able to market a ticketing system that is an attractive choice to venues. AEG will have incentives similar to Live Nation to provide better services at lower prices. Within five years, AEG can purchase the Ticketmaster ticketing software, decide to create its own software, or partner with a ticketing company other than Ticketmaster. The DOJ said that this remedy enhances short and long term competition in the primary ticketing market.
Ticketmaster must divest Paciolan Inc., a ticketing company to either Comcast-Spectacor, which has already signed a letter of intent to purchase the assets, or some other appropriate buyer. Comcast-Spectacor is a sports and entertainment company with management relationships with a number of concert venues and ticketing experience with its New Era Tickets company. Paciolan is used by hundreds of venues to sell tickets including major concert venues around the country. Venues that contract with Paciolan have greater flexibility to lower the ticket service fees that are charged to consumers who buy tickets. The DOJ said that divesting Paciolan to Comcast-Spectacor, or another buyer, in conjunction with the AEG license, will replace the competitive pressure on Ticketmaster lost as a result of the merger.
Besides the two divestitures, which are normal structural remedies, the DOJ also agreed to a behavioural remedy. Under the settlement, the merged firm will be forbidden from retaliating against any venue owner that chooses to use another company’s ticketing services or another company’s promotional services, including restrictions on anticompetitive bundling. The merged firm must also allow any client that leaves and chooses to use another primary ticketing service to take a copy of the ticketing data related to that client’s sales. The settlement also sets up firewalls that protect confidential and valuable competitor data by preventing the merged firm from using information gleaned from its ticketing business in its day-to-day operations of its promotions or artist management business. Additionally, the merged firm must provide notice of any other acquisitions of a ticketing company so that the DOJ may investigate the competitive effect of such an acquisition.
The behavioral remedy in Ticketmaster/Live Nation raises interesting policy questions. Historically, the Antitrust Division has disfavored behavioral remedies. The policy of the Antitrust Division has always been to seek structural remedies wherever possible because a behavioral remedy is difficult to enforce. Behavioral remedies are difficult to monitor and enforce. Behavioral remedies can draw the Antitrust Division and the court into regulating day-to-day operations, which isn’t beneficial to anyone. The other problem with remedies like this is that there are sure to be a number of ways of interpreting the consent order that allows bundlign but imposes limits suggesting that exclusion cannot take place. This settlement agreement will certainly lead to more questions than can be answered in the four corners of the documents.