Memorandum submitted by eBay UK Ltd
SUMMARY
Both the Government and the OFT have recognised
that the secondary market is legitimate. For many fans, the secondary
market is the only way they can get hold of a ticket to a sporting
or cultural event—or in the absence of refunds or returns,
sell spare tickets they may have.
We are happy to engage in constructive dialogue
with the Government about options for self-regulation. However,
we believe it is wrong in principle to ban the secondary market—people
should in general be allowed to resell tickets, just like any
other property. Consumer research produced both by the Government
and eBay supports this position.
Similarly, we believe that what should determine
the price of a ticket is what someone is prepared to pay for it.
Regulation of prices in a competitive market would be a deeply
retrograde step, especially when no similar regulation is being
proposed in the primary market where prices are increasing. If
anything, the trend in the US is towards deregulation with New
York only this week joining a host of other US states in repealing
its anti-ticket "scalping" (touting) laws.
Research has shown that restrictions in the
secondary market would also be counter-productive—both in
terms of consumer protection and the effect on prices. Bans on
resale or resale above face value—whether voluntary or legislative—will
either be ineffective or simply drive the secondary market on
to the streets, where consumer protection is non-existent. And
by restricting supply in the secondary market without impacting
on demand, regulation in this area will actually drive up prices.
This is supported by evidence from the US.
Further regulation in this area would also be
disproportionate. Our own research suggests that the vast majority
of people listing these items on eBay are individuals selling
spare tickets. nine out of 10 people on eBay over the course of
a year sold five tickets or less. 60% sold just one. We believe
it would be wrong to criminalize individuals who simply want to
resell spare tickets.
The focus should instead be on measures in the
primary market to make it easier for fans to get hold of tickets
in the first place (eg by reducing corporate allocations and improving
the current primary distribution systems) and on enhanced consumer
protection in the secondary market. We believe that the consumer
will best be served by an open, transparent and competitive secondary
market, rather than further government regulation or licensing
regimes.
INTRODUCTION
eBay is the world's largest online marketplace
with over 233 million users worldwide. eBay does not sell tickets.
Nor is it a ticket agent or ticket broker. Instead, it provides
a venue where people can buy and sell tickets either at a fixed
price or a price set by competitive bidding. Moreover, as evidenced
below, eBay is just one of many channels—both offline and
online—for people to buy and sell tickets.
Generally, the resale of tickets is legal in
the UK. Where, as in the case of football tickets, the resale
of tickets is prohibited, our policies reflect this and we regularly
remove such tickets on both a proactive and reactive basis. Further
details of our policies can be found at: http://pages.ebay.co.uk
The underlying causes of ticket touting, and its
impact on performers, promoters and the public
We note that the Government has accepted on
numerous occasions that the secondary ticket market is a legitimate
one. Moreover, the OFT in its 2005 report on ticket agents found
that the secondary market provided benefits to consumers. [13]
For many ordinary fans, the only way they can
get a ticket to an event is by buying a ticket in the secondary
market. This is because many events are typically over-subscribed
with demand exceeding supply. Both eBay's and the Government's
consumer research shows that fans struggle to source tickets through
the primary distribution mechanisms. The experience is often a
frustrating one with phone lines constantly engaged and websites
crashing due to excessive demand. As a result, fans are often
forced to make multiple applications for tickets on behalf of
others and are left with spare tickets when they discover that
their friends and relatives cannot attend. With restrictions placed
on refunds, returns and transfers by event organisers, the only
way they can sell spare tickets is through online marketplaces
like eBay.
It is also often asserted that ticket sales
in the secondary market are limiting public access to sporting
events because of the premium attached to such tickets. However,
by enabling consumers to get hold of scarce tickets, the secondary
market provides a valuable service to many consumers. Moreover,
such sales represent a very small proportion of overall ticket
allocations. For example:
— Ticket sales on ebay.co.uk for the
2007 Six Nations Rugby Championship represented approximately
0.5% of all ticket sales for this event.
— The Ryder Cup 2006 saw a similar
pattern.
— Ticket sales for the 2006-07 Ashes
represented approximately 0.8% of all ticket sales.
— Ticket sales for Wimbledon 2006 represented
a mere 0.2% of all ticket sales.
This suggests that public access to sporting
and cultural events is not being adversely affected by the secondary
market on eBay.
The overwhelming majority of sellers on eBay
are individuals with spare tickets. Our own research shows that
over a one year period, 9 out of 10 users had sold 5 tickets or
less. 60% had sold just one. Given the restrictive policies of
the event organisers in relation to refunds and returns, we believe
that it is entirely right that individuals should be allowed to
resell tickets. It is also worth noting that, as in any free market,
such tickets may not always be sold at a profit. They are often
sold at a loss to the individual.
Online marketplaces provide a service to consumers
who otherwise would not be able to obtain tickets to events. It
is not unreasonable for those providing such a service to make
a profit—just as the event promoter profits from staging
a concert, and primary agents such as Ticketmaster make a profit
by charging processing and handling fees on top of the ticket
face value which can account for anywhere between 20 and 50%,
depending on the event. 14[14]
The issue then from a public policy standpoint is whether it is
appropriate to regulate the level of profit (or ban it altogether)
in a competitive marketplace. We believe that such an approach
is wrong in principle.
We do, however, believe that the market should
be subject to essential consumer protection laws. There have been
isolated cases of clear abuses in the secondary tickets market—for
example, ticket agents such as "getmetickets.com" or
"tickettout.com" selling tickets they do not have and
could not deliver—and eBay strongly supports efforts by
the Government and law enforcement to deal with this problem.
However, we note and welcome the recent Statement of Principles
agreed with the Government which states clearly that the secondary
ticket market is legitimate.
On eBay, consumers can see the feedback or virtual
reputation of the person they are buying from and in the small
number of cases where something goes wrong, they may be eligible
for our Buyer Protection Programme. We believe it is better that
people should be able to buy tickets in an environment which is
open, safe, transparent and subject to consumer redress than be
forced to purchase a ticket from a tout on the street with no
consumer protection.
It is often asserted that performers or promoters
lose out as a result of the secondary market because they do not
see the benefit of the full market value of the ticket. Yet ultimately
both retain the right to charge in the primary market whatever
price they wish for events. Indeed, the trend in the music industry
has been one of increasing ticket prices as revenues from record
sales decline (see below).
Moreover, where an individual has a spare ticket
and is unable to attend, it is better that this ticket is re-allocated
rather than have the seat remain empty because the buyer cannot
get a refund from the event organiser. Not only does someone else
get to go to an event of their choice—the event promoter
also benefits from increased spend at the concert eg on merchandise,
refreshments and other revenues.
From the promoter's perspective, if a consumer
believed that when they bought a ticket they would have to occupy
the seat or let it go empty, it would dramatically reduce the
advance demand for events, particularly for season tickets or
knock-out sporting events where tickets for future rounds are
sold in advance.
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
eBay believes that people should be allowed
to resell tickets whether at face value or a price above face
value. Ultimately, people should be entitled to sell their own
property. And we believe that what should determine the price
of a ticket is what someone is prepared to pay for it.
We believe it would be a retrograde step for
the Government to go down the path of regulating prices in a competitive
market. In particular, we would also question why prices should
be regulated in the secondary market but not in the primary market.
For example, price regulation pre-supposes that
there is such a thing as an acceptable price to pay for an event
ticket. But what is this level? It is entirely inconsistent to
cap the resale price of one concert ticket at face value in the
secondary market, but leave event promoters in the primary market
free to charge £160 face value (plus a £13 booking fee)
for a Madonna ticket or £500 face value for a Barbra Streisand
ticket.
Increasingly, as revenue from record sales decreases,
we are seeing a clear trend whereby artists are beginning to charge
more and more for concerts, yet no one is seriously suggesting
that prices in the primary market are regulated.
Indeed, we would draw the Committee's attention
to numerous examples of event promoters in the primary market
auctioning off tickets themselves eg:
— Beyonce at the MEN Arena in Manchester;
also tickets for Wembley and Nottingham;
— Justin Timberlake at the O2 arena
in Greenwich;
— Genesis concerts at Old Trafford
(with starting prices for these tickets beginning at £440)
— The Guinness Premiership Rugby Final
— The Police at Twickenham
— Barbara Streisand at the O2 arena
— Isle of Wight Festival tickets
It is worth noting here that with some of these
auctions 8-10 rows at a time are being auctioned off with auctions
now an increasing trend for event promoters. For example, Chris
Edmonds, Managing Director of Ticketmaster UK, told the Sunday
Herald last July: "Ticket auctions will increasingly become
part of our selling structure in the next few years." "Dynamic
pricing" is therefore becoming increasingly commonplace in
the primary marketplace. Just as with an airline seat, the person
sitting next to you at a concert or sporting event may have paid
much more or much less for his or her seat than you did, even
though you both bought the ticket from the original promoter in
the primary market.
Finally, no one appears to be seriously suggesting
that prices for tickets for the authorized corporate hospitality
market should be restricted, even though corporate allocations
appear to be increasing in a number of sporting events, thereby
reducing allocations for the ordinary fan. At the last World Cup,
for example, the allocations to corporate sponsors, suppliers
and the hospitality market accounted for almost 30% of all tickets.
While the issue of ticket prices is one which
arouses strong views, it is far from clear that the public is
crying out for further regulation in this area. For example, an
ICM survey of over 1,000 people conducted for eBay in 2006 found
that:
— 76% believe it shouldn't be against
the law for people to resell tickets they no longer want or can't
use.
— 87% of those surveyed believe they
should be allowed to resell tickets they can no longer use to
sporting events, concerts or other events.
— 84% believe tickets are just like
any other private property that they should be able to sell.
— Half of those surveyed (49%) that
have tried to secure refunds on tickets have not been able to
do so.
— 60% have been unable to attend events
because tickets have sold out before they could get hold of them.
— 50% have found events sold out before
they even knew they were available.
— 61% believe the sale of second-hand
tickets enables real fans to get hold of tickets they would otherwise
have missed out on.
— 54% believe the price of a ticket
should be determined by what people are willing to pay for it.
— 78% believe anyone buying a second-hand
ticket from someone else should make it their responsibility to
ensure both the seller and the ticket are legitimate.
— 66% believe individuals selling spare
tickets is not the same as ticket touting.
These conclusions are supported by consumer
research commissioned by DCMS which found inter alia:
— "[...] little or no spontaneous
complaint about pricing levels or availability of tickets."
— "[...] the vast majority of
this sample, typically, felt that the marketplace operated competitively
and fairly."
— "Many believe there is no role
for further regulation and are particularly cynical about governmental
intervention in this marketplace. Widely, people believe that
the Government is, itself, `on the make' in the sense that its
only concern would be to raise revenue and/or `hector' a beleaguered
population in a `nannyish' fashion."
— "[...] consumers are inclined
to view tickets as acceptably transferable (at least not something
you would get into trouble about), that (re) selling at a profit
is also acceptable so long as it is done in a small-scale fashion
and by `individuals.'"
— "As most consider the right
to transfer and/or sell on (small scale) as totally reasonable
and a practice many either do, or would be happy to do, it is
suggested that this should be more actively `permitted'."
— "The ticket marketplace is not
seen, as those in the industry construe it, as `primary' or `secondary'
based on authorization/regulation by promoters, but rather, more
simplistically as `honest, real, official' versus `dodgy, fake,
invalid.' Touts, agents, other individuals or classifieds can
be the source of either category of ticket, in consumer understanding
and experience." [15]
The impact of the Internet upon trade in tickets
It is often asserted that the Internet or online
marketplaces like eBay have either created or exacerbated the
"problem" of touting.
The reality, however, is that the secondary
market existed long before the Internet. What the Internet has
done is make an existing market (a) more visible (b) more transparent
and (c) more competitive. As a result, consumers are far more
aware of the going rate in the secondary market; competition and
supply has been increased; and this in turn has driven down prices
on the street and throughout the secondary market.
While eBay has been the focus of much attention
in this debate, it is worth noting that there are an almost limitless
number of alternative channels for people to buy and sell tickets.
Individuals and businesses alike are able to sell tickets in classifieds
(online and offline), individual websites, other online marketplaces,
and are now able to drive traffic to such listings using paid
search through, for example, Google Adwords or Adsense. It is
therefore wrong to focus on a few websites.
Whether or not tickets' terms and conditions banning
transfer and onward sale are fair or enforceable
We believe such terms of adhesion are an unwarranted
restraint on trade and are detrimental to consumers.
Here is a typical example of terms and conditions
applied by seetickets.com, the largest UK owned online ticket
agency which is associated with the Society of Ticket Agents and
Retailers:
"Once purchased, tickets cannot be transferred,
exchanged, refunded or returned unless the event is cancelled,
moved to another date, or if details of the event are significantly
changed after an order is placed (significant changes being a
change of headline act (concerts only), venue or show time)."
They go on to say:
"[...] all tickets are for personal use
only and cannot be resold under any circumstances. Resale or attempted
resale is grounds for seizure or cancellation without refund or
other compensation."
So if a consumer has a spare ticket, their policy
is no refund, no exchange and no resale under any circumstances;
and if the consumer tries to resell it, they will cancel the ticket
without compensation. This is clearly and demonstrably unfair
to consumers.
Similarly, the Ticketmaster Purchase Policy
says:
"Policies set forth by our clients, such
as venues, teams and theatres, prohibit us from issuing exchanges
or refunds after a purchase has been made or lost, stolen, damaged
or destroyed tickets the ticket may not be resold or offered for
resale by anyone whether at a premium or otherwise [...]"
We note that Ticketmaster now have a Ticket
Exchange where fans can sell spare tickets. However, firstly,
this does not apply to all events. Secondly, Ticketmaster charge
a seller fee. And of course, it is a long way short of a guaranteed
refund. A consumer only gets his money back if he sells it himself
and Ticketmaster get to take a cut. Ticketmaster therefore profit
twice: firstly, by charging both the Service Charge Booking Fee
and the Order Processing Delivery Fee on top of the face value
of the ticket on the original sale; and then they take a further
10% on the posting price which may either be set by the seller
or the venue/event promoter.
Where an event organizer alleges that the terms
and conditions of sale have been breached, this is a contractual
matter between them and the individual selling the ticket.
eBay already draws attention to the fact that
terms and conditions are often applied to event tickets through
its Contracts and Tickets Policy which is published on our website.
This says:
"Before listing an item on eBay, you should
carefully read any contracts that you have entered into that may
limit your right to sell your item on eBay. Some items, such as
event tickets, have terms printed on the item that may limit your
ability to sell that item [...] eBay does not search for items
that may raise these types of issues, nor can it review copies
of private contracts, or adjudicate or take sides in private contract
disputes. However, we want you to be aware that listing items
in violation of your contractual obligations could put you at
risk with third parties. eBay therefore urges that you not list
any item until you have reviewed any relevant contracts or agreements,
and are confident you can legally sell it on eBay [...]. If you
have any questions regarding your rights under a contract or agreement,
we strongly recommend that you contact the company with whom you
entered into the contract and/or consult with a solicitor."
We have recently drawn attention to this policy
with an announcement to all eBay users about our tickets policies.
However, to boost transparency further, when a seller lists a
ticket in the Tickets category on ebay.co.uk, we recently added
a clear warning which appears up front as part of the listing
process, alerting them to the Contracts and Tickets Policy and
the other Tickets policies. Sellers can then click on a link which
provides further details. A similar message is also included for
buyers in the bidding flow.
Ultimately, terms and conditions can only be
properly enforced in a court of law. And where presented with
a Court Order which finds in favour of a particular party, we
naturally respect the terms of such an Order. But we believe strongly
that eBay should not be asked to enforce contractual terms or
take sides in contractual disputes—whether they apply to
tickets or any other of the 50,000 categories of item that are
bought and sold on eBay.
Finally, leaving aside the issue of enforceability,
there is a broader issue at stake here—namely whether a
retailer should be allowed to restrict the onward resale of any
item (or alternatively, cap the price of its onward resale) simply
by attaching terms and conditions to its sale. This is a principle
which, if applied more broadly, has the potential to generate
widespread restriction of trade as retailers seek to preserve
exclusive or selective distribution channels. This is a hugely
important policy consideration with wide-ranging implications.
The merits of new approaches by ticket agents
attempting to prevent transfer of tickets, including wider use
of personal ID
We note that some event organisers now use personal
ID to prevent the transfer of tickets.
When combined with a policy of no exchanges,
returns or refunds, this limits the ability of a person to resell
the ticket in circumstances where they have paid for the ticket
but may be unable to attend the event. Moreover, it restricts
a consumer from giving away spare tickets to friends or relatives.
This is clearly unfair.
If the aim is to maximize public access to sporting
and cultural events, the answer should not be further government
regulation but to explore market-based solutions to make it easier
for real fans to get hold of tickets in the primary market.
For example, tickets are often sold in bulk
at times which are inconvenient to ordinary fans. This decreases
their likelihood of being able to get hold of a ticket in the
primary market. Alternatively, tickets could be made available
in successive tranches.
We believe event organizer should do more to
examine the balance of corporate allocations for major events,
thereby increasing the number of tickets available in both the
primary and the secondary markets. This need not impact on revenues
if event promoters simply charge more for fewer corporate tickets.
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
The Department of Culture, Media and Sport have
asked the industry to consider the case for a list of protected
cultural and sporting events as part of their ongoing discussions
about the secondary market.
eBay decided recently with Live Earth to use
our eBay for Charity and Giving Works programmes to raise more
money for good causes, particularly those environmental charities
most closely associated with the event, namely the Alliance for
Climate Protection and Stop Climate Chaos. Moreover, our decision
to ban the resale of Concert for Diana tickets demonstrates that
we are sensitive to the issues which surround certain types of
events.
We are therefore happy to engage in a constructive
dialogue with the Government about further options for self-regulation.
But we are also clear that decisions of this nature need to be
based on clear and agreed principles rather than the demands of
event organisers. Leaving aside the question of their validity,
it is worth noting the justifications which have been offered
for existing restrictions. Firstly, the existing football tickets
legislation was introduced to deal with problems of hooliganism
by maintaining strict fan segregation. In the case of the Olympics,
it was an IOC condition that the Government introduce such legislation.
Neither justification can plausibly be offered in respect of other
sporting or cultural events. Until we are clearer about both the
rationale for (and the events which would be covered by) such
a list, we will obviously wish to reserve our position.
Finally, if any additional legislation were
considered in this area, it should draw a clear distinction between
unauthorised sales on the streets, where the consumer is completely
unprotected from fraud or unfair practices, and such sales in
well-organized secondary marketplaces where transactions are transparent
and consumer protections are available.
LEGISLATION
We believe that legislation to further ban ticket
resale or resale above face value would be a retrograde step.
Legislation banning the secondary market will not end ticket resale—it
will just push it on to the streets where there is no enforcement
and no consumer protection when things go wrong. For example,
there have been laws against street touting for many years. But
this has done nothing to stop the practice.
All experience to date suggests that any legislation
is unlikely to be enforced. Given the constraints on police time
and resources, we believe the Committee should seriously question
whether law enforcement should be devoting resources to apprehending
and prosecuting people for selling tickets.
Current legislation prohibiting the resale of
football tickets is another example of ineffective legislation,
with the Champions League Final serving as a case in point. Despite
the fact that eBay removed several hundred such listings in accordance
with our Football Tickets Policy, these tickets were widely available
both in Athens and through other online ticket agencies.
Moreover, the football tickets legislation applies
only to unauthorised sellers. Authorised sellers are still able
to sell such tickets through the Internet, often with no reliable
means of maintaining fan segregation, particularly when tickets
are sold to the general public. This completely defeats the purpose
of the legislation and clearly calls into question its utility.
Nor does legislation dampen prices. In the case
of Champions League final tickets, there were widespread reports
in the media of tickets changing hands on the street for over
2000 Euros.
Experience from the US is also instructive,
with various academic studies finding that anti-scalping laws
have actually led to increased prices in the secondary market:
"By focusing on penalties for those who
engage in prohibited transactions, anti-ticket scalping regulations
seem to lead to higher prices in the resale market. In states
with resale regulations, competition in the resale market is reduced
and is pushed towards out-of-state buyers whose costs of ticket
acquisition are likely to be higher and are passed on to consumers
in the resale market. The end result of this reduction in supply
is higher ticket prices in the secondary market." [16]
A study from the University of Texas found that
anti-scalping laws increased prices in the primary market as well:
"Empirical analysis suggests that in cities
with anti-scalping laws average per-game season ticket prices
are approximately $2 greater in baseball and $10 greater in football.
Anti-scalping laws actually increase team revenues, as the laws
have no adverse effect on attendance. Thus event promoters might
have sufficient pecuniary incentive to tacitly or explicitly support
anti-scalping legislation." [17]
Other academic studies have also heavily called
into question the wisdom of anti-ticket scalping laws in the US.
[18]
In the US, the trend is now towards deregulation
with Minnesota, Florida, Louisiana, South Carolina, NY and Illinois
opening up their ticket markets in recent years. Only seven states
continue to regulate resale prices.
Restrictions in the secondary market will do
nothing to control demand. Nor will they alter the number of tickets
available in the primary market. Ultimately, this can only be
controlled at the level of the primary distributor. Instead, regulation
constrains the number of suppliers in the secondary market, thereby
driving up prices. Banning resale or resale above face value may
reduce the visibility of the secondary market, but it will not
end it.
The issue is not whether the secondary market
should exist but about what kind of secondary market we want.
We can have a secondary market which is open, competitive and
subject to consumer redress; or one controlled by event organisers
who decide which sellers gets the right to resell a ticket (and
by authorising resellers, take a percentage of the resale fee).
While the latter approach may best serve the commercial interests
of a few entities the primary market, we believe that the consumer
interest will ultimately be best served by open competition rather
than by restricting the secondary market to a few authorised resellers.
June 2007
13 "Ticket Agents in the UK", January 2005,
OFT. Back
14
"The Ticketmaster Fee-nomenon", Washington Post, June
2004. Back
15
The Secondary Market for Tickets, Qualitative Resarch Summary,
Campbell Keegan Limited, 2007. Back
16
"Do Anti-Ticket Scalping Laws Make a Difference Online?
Evidence from Internet Sales of NFL Tickets", Dan Elfenbein,
September 2004, University of California, Berkeley. Back
17
"Another Look at Anti-Scalping Laws: Theory and Evidence",
University of Texas, June 2006. Back
18
"The Folly of Anti-Scalping Laws", Stephen K Happel
and Marianne M Jennings, Arizona State University, 1996; "The
Economics of Ticket Scalping", James Atkinson, University
of Notre Dame, May 2004. Back
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