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"Double-Dipping" Class Actions Illustrate Importance of Ticketing Compliance Programs

Piling on after undercover journalists published exposés on alleged misconduct involving Ticketmaster's TradeDesk reseller program, consumers have filed a wave of class actions against Ticketmaster, claiming that the company consciously disregards illegal conduct of brokers who resell tickets through the platform. Whether or not these allegations have any merit (Ticketmaster denies them), they underscore the need for ticketing companies, and perhaps also sports teams and event promoters who do business with them, to ensure their practices comply with applicable law.

In September 2018, the Canadian Broadcasting Corporation and Toronto Star reported on discussions between Ticketmaster representatives and journalists posing as ticket brokers at the 2018 Ticket Summit in Las Vegas. The Ticketmaster personnel were marketing TradeDesk, an online platform brokers can use to easily resell tickets in volume, including by linking their Ticketmaster purchase and reseller accounts. They allegedly told the journalists that the reseller division "turns a blind eye to scalpers who use ticket-buying bots and fake identities to snatch up tickets and then resell them on the site for inflated prices." One representative, for example, allegedly said he has "brokers that have literally a couple of hundred accounts," but "[i]t's not something that we look at or report."

By ignoring the source of tickets being resold on its platform, the reports claimed, Ticketmaster is able to earn two commissions on the same ticket: one for the original purchase and another for the resale.

Ticketing practices have faced increased scrutiny in recent years from state and federal regulators and Congress. In January 2016, for example, the New York Attorney General discussed consumer protection issues associated with ticketing in a report titled "Obstructed View: What's Blocking New Yorkers From Getting Tickets." Later that year, Congress passed the Better Online Ticket Sales Act of 2016, 15 U.S.C. § 45c, 114 P.L. 274 (BOTS Act), which sought "[t]o prohibit the circumvention of control measures used by Internet ticket sellers to ensure equitable consumer access to tickets for any given event . . . ." Specifically, the BOTS Act prohibits circumvention of a "security measure, access control system, or other technology" used to enforce an online service's posted ticket purchasing limit; and it prohibits selling or offering to sell tickets where the seller participated in, or had the ability to control, a ticket purchase that circumvented a ticket limit, or where the seller knew or should have known that the ticket was purchased after ticket limits were circumvented. 15 U.S.C. § 45c(a)(1). The Federal Trade Commission, which also has been active in this area, will conduct a workshop in March 2019 to examine competition, price, and availability issues in the online ticket marketplace.

The recently filed class actions generally allege claims for unlawful, unfair, and deceptive practices under state law, arguing that Ticketmaster is essentially aiding and abetting violations of the BOTS Act, and also harming consumers by charging two commissions on the same tickets. Notably, however, reseller programs are not inherently unlawful or harmful to consumers. For example, events with no ticket quantity limits can be resold without fear of violating the BOTS Act. The concern is that Ticketmaster's resale division allegedly knew that its broker customers were using multiple accounts to circumvent ticket limits, and ignored that knowledge to earn double commissions.

In order to protect themselves in this environment, ticketing companies should revisit all aspects of their sales practice compliance programs, including employee training and monitoring. They should also ensure that arbitration provisions in their consumer contracts have been updated to ensure enforceability.

Copyright © by Ballard Spahr LLP

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About this Author

Scott Pearson, Ballard Spahr Law Firm, Los Angeles, Business Litigation Attorney
Partner

Scott Pearson focuses his practice on the defense of regulatory enforcement actions and class actions, other complex business litigation, and regulatory compliance counseling. Martindale-Hubbell rates Mr. Pearson "at the highest level of professional excellence." He has been called "a true expert in complex litigation and consumer class actions" and "a no-nonsense bulldog lawyer who is highly respected by his peers and the judiciary."

Prominent companies regularly entrust Mr. Pearson with matters involving bet-the-company exposure or extreme...

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Stephanie Awanyai, Ballard Spahr Law Firm, Los Angeles, Litigation Law Attorney
Associate

Stephanie Awanyai is an associate in the Litigation Department. While in law school, Stephanie interned at Liberty Mutual Insurance Group where she drafted pleadings and motions and assisted attorneys in preparing for depositions, mediations, and trials in federal and state court. Prior to joining the firm full time, Stephanie also was a summer associate at Ballard Spahr. She assisted with a variety of research projects involving commercial litigation and employment litigation. After law school, Stephanie served as a law clerk for the U.S. District Court for the Northern District of Ohio, conducting legal research, preparing summaries, and drafting orders and opinions on a wide variety of civil and criminal litigation, discovery, habeas corpus, and social security matters.

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