Memorandum submitted by Advanced Ticket
Systems Ltd
TICKET TOUTING
I am the chief executive of Advanced Ticket
Systems Limited, a limited liability company registered in England
and Wales in existence since 2003 (Company number 4906819).
I am an American expatriate who moved to the
United Kingdom three years ago. As a huge sport enthusiast, I
wanted to attend an English Premier League football match and
was surprised to find the only alternatives available for me to
buy tickets were through street ticket touts. I had no idea what
a "fair" market price for these tickets was and I had
no way of knowing if tickets were counterfeit. Worse yet, if anything
did go wrong, I would have no recourse. When I found out that
the practice of selling football tickets was a criminal offence,
I decided that attending a match was simply not going to happen.
I thought there must be a better way to serve consumers, which
is when I began researching the secondary ticket market (as to
which see below at 3).
I am mandated by my company to provide evidence
relating to Ticket Touting as follows:
1. What we do
1.1 We operate an open marketplace dedicated
to tickets under the brand names of "MyTicketMarket"
and "Get Me In!".
1.2 Buyers and sellers are able to avail
themselves of our internet-based services to "meet on our
marketplace" to trade their tickets in a safe and trusted
environment.
1.3 We have successfully facilitated over
30,000 ticket purchases since we launched our service offering,
providing access to tickets for live events to many thousands
of happy customers. We are based in London and employ a permanent
staff of 27.
1.4 Like most successful marketplaces, prices
for tickets bought or sold through our platform are set by the
normal market forces of supply and demand: they are usually above
face value, sometimes at face value, but often below face value
as well.
2. How do we protect buyers of tickets
2.1 Though the transactions generated on
our website based platform technically take place between third
party buyers and sellers, Advanced Ticket Systems does guarantee
that each buyer will actually receive the tickets they purchased
or they will be entitled to a refund and compensation equalling
150% of the money they spent.
2.2 Further, our business processes, whereby
we carefully vet each and every seller and withhold payment from
sellers until buyers have received tickets, allow us to confidently
provide this guarantee on all purchases we facilitate.
3. The secondary ticket market
3.1 The secondary market for tickets—like
the secondary market for any other goods and/or services in any
free economic society—exists because supply and demand demands
that it exist. [1]Consumers
that want to attend an event hard enough will always seek out
alternative purchase options that may be available to them, even
if those options exist within and lead to an establishment of
a "grey" or "black" market. Similarly, ticket
holders will also consciously seek out the options available to
them to sell surplus tickets, just as they would with any other
goods that they owned.
3.2 Historically, however, the options available
to buyers—and sellers—in the secondary ticket market
have been inadequate and the prevailing circumstances seem to
put the interests of performing artists and sports rights holders
well ahead of fan and consumer interests.
3.3 Attempts to regulate and even eliminate
the secondary ticket market (most especially as a result of Section
166 of the CJPOA in relation to football) have come at a price
by eliminating price transparency for consumers, and have forced
out many of the law-abiding consumer-focused companies from participating
in the secondary ticket market. This has sent much of the secondary
market underground and resulted in a high frequency of fraud,
a poor consumer experience, less access to tickets and even higher
ticket prices. [2]
3.4 We believe that the Internet provides
a perfect opportunity to correct the inefficiencies of the secondary
ticket market—just as it has for so many other markets—and
to greatly ameliorate the consumer experience and reduce fraud
while increasing access for consumers. That is why our business
exists and why we expect to grow very quickly to keep pace with
demand for our services.
4. Should resale be permitted?
4.1 Aside from the obvious economic fact
that a right to resell a ticket, by definition, enhances the overall
utility of both sides of the transaction (otherwise the transaction
would simply not occur), we believe it is a fundamental consumer
right to have the ability to buy and sell tickets in an open marketplace.
In fact, restrictions on ticket resale have been proven historically
to hurt consumers, and have been gradually and continually removed
from statute books in many jurisdictions, not least the US.
4.2 In the past few years, the legislatures
in New York, Minnesota, Florida, Missouri, and Illinois, have
passed bills to eliminate or ease prevailing restrictions on the
secondary ticket market, with Massachusetts and Connecticut set
to follow suit soon. During that time, not a single United States
jurisdiction has passed or approved any law which extends or implements
resale restrictions. Importantly, resale restrictions were all
lifted in the face of overwhelming resistance from leading sports
bodies, music artists and theatre promoters.
4.3 You may ask why resale restrictions
are crumbling in the United States, despite the objections of
the powerful primary industry lobby? These laws appear to be being
revoked not only because they are antiquated and encourage the
existence of a black market for tickets, but also because they
infringe significantly on a consumer's right to deal in their
private property. Furthermore, the laws were found to result in
higher prices for consumers. In fact, the only parties that benefit
from ticket resale regulations are the original ticket issuers
themselves, who may leverage such legislation to extend their
monopoly primary market position into a monopoly secondary market
position.
4.4 As an example, just last week the assembly
of New York state passed a new law which not only protects the
consumer's right to resell tickets but also explicitly bars promoters
and producers from infringing on this right. [3]
5. Competition
5.1 What is clear throughout economic history
is that competitive free markets ultimately benefit consumers.
As is illustrated by our own experience working with thousands
of customers, consumers like and value the choice that the secondary
ticket market affords them and they also value the option to be
able to sell-on tickets if they choose to. We regularly run customer
feedback surveys and find that over 90% of our customers are either
extremely satisfied or very satisfied with our services.
5.2 As more and more legitimate players
like ourselves enter the secondary ticket market, consumers will
be presented with even more options. Eventually, consumers will
gravitate to the best service providers. To be sure, price will
always be a significant factor in vendor selection, but consumers
will also demand a high level of customer service, a wide range
of inventory selection and a sensible way to address consumer
complaints when they do occur. Without competition, consumers
would be denied these benefits.
5.3 We have sought outline legal advice
in relation to the restrictions on transferability often imposed
on buyers of tickets and our conclusions suggest that current
restrictions likely infringe competition laws; being restrictions
that affect trade within the UK (and EU) and have as their object
or effect the prevention, restriction or distortion of competition.
[4]I
understand that they would only be lawful if they satisfied the
criteria for exemption set out in s9 Competition Act [Article
81(3)]. On the facts, that seems unlikely.
5.4 Further, you will, of course, be aware
that regulation must be framed to ensure compatibility with competition
laws (it is an EC Treaty obligation on Member States) and that
the Office of Fair Trading is currently investigating the effects
of anti-competitive regulation.
6. Should regulation be extended?
6.1 Aside from the anti-competition and
consumer protection issues which cry out for an open secondary
ticket market policy, further regulation of ticket resale makes
no sense from a practical perspective. To understand this, consider
the case of football, where there already exists extremely stringent
criminal regulation preventing the resale of tickets for designated
football matches.
This criminal legislation, referred to in 3.3
above, prohibiting unofficial resale of football tickets, did
not stop thousands of fans from buying tickets for the Champions
League Final between Liverpool and AC Milan, presumably from less
than reputable sources. It also did not stop thousands more fans
from flying to Athens in the hopes of obtaining tickets from someone
on the street. In fact, the very existence of the law, which prohibited
a competitive, market-driven resale system in the United Kingdom,
drove many supporters to try all means available to obtain tickets
and ultimately led to a public safety issue at the match itself
where discontented supporters showed up without tickets. What
the law did accomplish was to keep legitimate secondary ticket
market players like ourselves out of the transactions, which creates
zero opportunity for consumer redress and much less control over
potential football flashpoints. The very existence of the law,
no doubt aimed to protect consumers, ultimately puts them at a
disadvantage and in extreme cases compromises their safety.
6.3 If the ultimate issue that needs to
be addressed is general consumer access to events, than government
should define that priority and seek ways to provide access to
consumers, which begin with allocation and pricing in the primary
market. The New York bill explicitly points out the folly of attempting
to regulate the pricing of tickets by focusing on the secondary
market. [5]As
Elliott Spitzer, the Governor of the state of New York said best
in a recent interview regarding the secondary ticket market: "It's
the only product I know where we are regulating the secondary
market but we don't set a price for the primary market. It makes
no sense." [6]
7. Executive Summary
In order to focus on the particular issues raised
in the evidence request:
7.1 The underlying causes of ticket touting,
and its impact on performers, promoters and the public.
7.1.1 There is no doubt that a major underlying
cause of ticket touting is the existence of a legitimate healthy
demand for tickets often at prices above face value. In addition,
the very nature of live events, where tickets are sold many months
in advance and the value of attending will necessarily fluctuate
in price as the event nears, fuels a need for a secondary ticket
market. Finally, the inadequacy of primary distribution channels
and the existence of thousands of consumers who will pay more
for convenience and superior customer service necessitate a secondary
ticket market.
7.1.2 We believe the effect on performers
and promoters is minimal as they act in concert and are the initial
controllers of price and distribution and thus they are free to
charge what they like, allocate tickets how they choose, and distribute
tickets accordingly. Performers and promoters enjoy a monopoly
position in the primary market; to a small extent ticket touting
opens up these promoters, performers and primary ticketing companies
to competition.
7.1.3 The effect on the public of an open
secondary ticket market are increased access to tickets, increased
utility through transferability of tickets, and increased levels
of customer service through legitimate competition. Harmful consumer
practices such as fraud and the public nuisance of street touts
exists because the secondary ticket market is inefficient and
legitimate players are discouraged from participating.
7.2 Whether or not resale of a ticket, at
face value or at a higher value, should be permitted in principle;
and whether the acceptability or otherwise of resale depends on
the circumstances in which tickets are offered for resale.
7.2.1 We firmly believe resale should be
allowed within demand-driven self-regulated circumstances or environments
we and others like us offer.
7.3 The impact of the Internet upon trade
in tickets.
7.3.1 The Internet has made trade in tickets
more visible, efficient and competitive, just as it has for trade
in many other chattels or goods. Further, the Internet has also
afforded improved secondary ticket market business models, such
as our own, for consumers. The internet provides an alternative
that alleviates the public nuisance of street ticket touting and
provides a safe environment to trade with recourse for fraud.
7.4 Whether or not tickets' terms and conditions
banning transfer and onward sale are fair or enforceable.
7.4.1 For both antitrust and practical reasons
the reduction of consumer choice should not be enforceable and
is not fair in accordance with the guiding principles of the European
Union.
7.5 The merits of new approaches by ticket
agents attempting to prevent transfer of tickets, including wider
use of personal ID.
7.5.1 The wider use of ID to prevent transfer
has little merit except to delay entrance to venues, complicate
the primary purchase of tickets (which will discourage the consumer
from doing it) and unfairly limit a consumer's rights.
7.6 Whether or not the existing offences
of sale by an unauthorised person in a public place of a ticket
for a designated football match, or for events at the London 2012
Games, should be extended to cover other sporting or cultural
events.
7.6.1 We have no issue with the attempts
to stop ticket resale at the gates of the venue, however further
restricting safe and trusted resale serves no legitimate public
need and harms consumers.
7.6.2 Existing legislation related to football
exists solely for public order reasons associated with fan segregation
and would be completely illogical to extend to cover other sporting
or cultural events.
7.6.3 Extending regulation would serve no
practical purpose other than to force legitimate players out of
the market, require a large amount of enforcement resources, and
exacerbate consumer protection problems.
June 2007
1 Atkinson, James; The University of Notre Dame, Economics
of Ticket Scalping: "While some may claim that ticket scalping
is unethical and immoral, even illegal in certain states and municipalities,
it is simply a free-market transaction. Most economists avidly
oppose laws that make ticket scalping illegal." Back
2
Elfenbeim, Dan; University of California, Berkeley; Do Anti-Ticket
Scalping Laws Make A Difference?: "Stricter regulations were
associated with fewer online transactions, a greater frequency
of transactions that crossed state borders, and higher prices
and markups." Back
3
New York State Assembly, Bill 7526-A: "This legislation would
prohibit the venues from revoking season tickets [...] when such
revocation is based solely on the basis of resale." Back
4
s2 Competition Act 1998 and/or Article 81(1) EC Treaty. Back
5
Summary of New York Bill 7562-A: "Controlling the price of
tickets on the secondary market has been cited as a method of
consumer protection. However, the primary sale price of tickets
has increased to a point that many tickets are already unaffordable
for consumers. Therefore, controlling the prices on the secondary
market is not an effective consumer protection." Back
6
NME.com, 20 March 2007. Back
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