Ticket Resale Laws Change Due to Internet

Published October 1, 2007

Sparked by the growing popularity of Internet auctions as a forum for ticketholders to find eager buyers, New York Gov. Eliot Spitzer (D) signed legislation in August relaxing restrictions on the resale of tickets to sporting and entertainment events.

The new law, closely following the passage and signing of similar bills in Connecticut, Florida, and Minnesota, cancels the state and local bans on resale of tickets, known pejoratively as scalping.

Legislatures in other states with such bans reportedly are considering comparable repeal bills, effectively taking note that Internet transactions have made existing anti-scalping, price-gouging, and price-capping measures obsolete and rendered enforcement nearly impossible.

Some 42 states have taken steps to liberalize their markets for so-called “secondary” ticket sales.

eBay Leads Drive

Internet companies, particularly eBay, are leading the drive in state capitols to open up secondary ticket markets. The auction giant has stepped up its lobbying campaign in tandem with the StubHub ticket resale company it purchased in February for about $307 million.

Lobbyists are said to be circulating academic and city government studies showing when secondary ticket markets are liberalized, prices tend to be lower than in environments where resale is banned.

“eBay and StubHub have been actively lobbying various states for deregulation, allowing for a free and open marketplace,” a StubHub spokeswoman said. “StubHub is certainly in favor of deregulation, as it in fact opens up the marketplace, meaning more tickets are available, which in turn drives down ticket prices. Often, tickets can be found for less than face value as a result.”

MLB Ends Opposition

StubHub recently cut a five-year deal with Major League Baseball (MLB) to act as a Web site middleman for fans willing to buy and sell tickets for all 30 major league teams. This represents a turnaround from MLB’s previous actions against the practice, which ranged from revoking season tickets of fans who sold tickets online and refusing advertisements by eBay, StubHub, and similar transaction companies.

Internet companies can work with law enforcement to police fraud and ticket counterfeiting, according to Braden Cox, research and policy counsel for the NetChoice Coalition and the Association for Competitive Technology, a NetChoice member.

“We’re in favor of more efforts to liberalize or entirely remove laws that restrict the resale of tickets,” said Cox. “A freer market helps consumers more than a restricted market.”

High-Profile Opposition

High-profile opposition has come from media companies such as Comcast, TimeWarner, and other entertainment conglomerates that own or have interests in sports franchises, stadiums, arenas, and other such venues.

Team and arena owners have fought vigorously to maintain control by setting terms on after-market ticket sales and potential penalties against ticket holders if transactions digress from authorized resale channels.

Nevertheless, the pressure for liberalization continues. Legislators in Massachusetts are talking about overturning the state’s anti-scalping law, but some city governments, large sports franchises, and arena owners reportedly are waging a counter-campaign buoyed in part by court decisions that have upheld ticket-revocation practices.

The National Football League’s New England Patriots, for example, claims the right to revoke season tickets of fans caught reselling tickets through outlets other than its own TeamExchange Web site. It bases the policy on a 2005 court decision that sustained its right to revoke season tickets for any reason, although the case in question did not involve ticket resale but instead was part of discrimination settlement with a former employee.

Property Rights Issues

Whether resale deregulation takes hold ultimately may depend on how courts interpret the extent that a ticket is tangible property as opposed to a representation of an otherwise proprietary contract for admission, to which a team or venue owner has the right to attach conditions governing resale or transfer.

“A ticket is a license to come into a venue and view what is someone’s intellectual property,” said Lawrence Carroll, senior manager and policy council for state government affairs at Comcast. “It’s established that there are terms and conditions team and venue owners can attach to tickets: How much you can drink, how you can behave, that you can’t videotape the event, and so on. One of the terms is under what conditions tickets can be resold.”

Comcast is not against liberalization, Carroll said, but he argues that under free-market principles, a venue owner should be permitted to designate exclusive resale partners that ticket holders may use. For emphasis he pointed out the MLB’s deal with StubHub is exclusive.

Frank Barbetta ([email protected]) writes from Little Falls, New Jersey.