New York Attorney General Eric Schneiderman is reportedly investigating the National Football League for antitrust violations in connection with its imposition of “price floors” on tickets for resale. In a 40-page report released last week, the NYAG’s office outlined numerous concerns about the market for event tickets. Among those concerns is the practice, by some NFL teams and the New York Yankees, of imposing minimum pricing requirements (typically prohibiting sale for less than face value) on their “official” online resale platforms. According to the NYAG, such “price floors” make it “easy for buyers to be fooled into believing what they are paying is the market price for a ticket, when in fact the buyer is paying a price artificially inflated by a price floor.”
The problem is exacerbated, says the NYAG, by efforts to push consumers to the teams’ official resale platforms, such as the NFL’s “Ticket Exchange” program run by Ticketmaster. “Examples of such practices include delayed delivery of PDF versions of resold tickets, and policies that place season ticket holders at risk of cancellation of their ticket subscriptions when they sell on unofficial resale platforms.”
The NYAG’s allegations of “price floors” are interesting to consider in light of antitrust jurisprudence.
Historically, agreements between manufacturers and resellers establishing minimum prices were per se illegal under the decision in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911). Shortly after the Dr. Miles case, however, the Supreme Court clarified that a manufacturer may, without incurring antitrust liability, unilaterally refuse to deal with a reseller who fails to honor a suggested minimum price. United States v. Colgate & Co., 250 U.S. 300 (1919). More recently, Dr. Miles was overruled by Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877 (2007), in which the Court held that the rule of reason applies to minimum price agreements (also known as “retail price maintenance”).
NFL teams would likely argue that the alleged “price floors” constitute unilateral conduct falling within the Colgate doctrine. Assuming that at the time of the initial ticket sale a purchaser does not agree to any resale price restrictions, the relevant conduct lies in the policy governing online resale platforms. And those platforms, the teams may say, are provided unilaterally as a service to the secondary market; teams should be free to restrict participation to those who respect the minimum sale price, while those who wish to charge more are free to do so via other platforms.
On the other hand, the NYAG may argue that the market for secondhand tickets must be analyzed on its own and that the terms of the resale platform themselves represent an “agreement” between the team and the seller. Based on its report, the NYAG would likely say that such agreements fail the rule of reason analysis because they have little or no procompetitive justification and because of the relative importance of the “official” platforms as compared to alternatives, along with the teams’ aggressive efforts to steer consumers to them.