TMT analysis: As the Competition and Markets Authority (CMA) prepares to take enforcement action against secondary ticketing websites suspected of breaking consumer protection law, Louise Millington-Roberts says it is quite clear that compliance with legislation and best practice will only evolve with the enforcement of consumer laws against the few that will remain defiant.

Original news

Enforcement action to be taken against secondary ticketing sites, LNB News 28 November 2017 135

The CMA has announced that secondary ticketing websites suspected of breaking consumer protection law will face enforcement action. The CMA, following an investigation of the sector, identified widespread concerns about the information people are given, and gathered evidence which it considers reveal breaches of the law.

What are the background issues and concerns surrounding secondary ticketing?

The secondary ticket market is perceived to be a necessary tool for the consumer who can no longer attend an event or may wish to attend an event which is otherwise sold out. Unfortunately, all too often the secondary market is not utilised in the main by genuine fans, but rather touts who are known to use bots to buy tickets from the primary source, distributing them within minutes onto the secondary market at extortionate mark-ups.

The opportunity was however taken by the UK government to regulate the advertisement of tickets via this platform rather than make unauthorised ticket reselling unlawful—this was due to the scale of ticket abuse impacting the consumer and the perception that the consumer requires the service.

Regulation came via consumer protections laws including the Consumer Rights Act 2015 (CRA 2015) and the Digital Economy Act 2017 (DEA 2017). Despite the attempt to combat lack of transparency in the ticket resale process, widespread concerns still remain due to secondary websites failing to provide the minimum information required as listed in CRA 2015, and surround whether legislation went far enough to tackle ticket crime.

What is the CMA proposing in its recent announcement?

In November 2017, further to a year-long enforcement investigation into the secondary ticket market, which identified widespread concerns about lack of transparency during the ticket resale process and lack of compliance with the legislation, the CMA announced that it will take enforcement action against secondary ticket websites which it considers breaking the laws put in place to protect the consumer.

What is the CMA proposing to do next in terms of broadening the scope of its original investigation?

Further to the information gathering exercise, the CMA has broadened the scope of its original investigation to not only identify non-compliance with legislation but the extent that other issues affect the transparency of the buying and selling process.

It is abundantly clear that opportunities were missed when legislating and the CMA has now identified additional issues which it will continue to assess, before it decides whether it is appropriate to obtain redress in relation to these issues. The issues include pressure selling, and speculative selling. The CMA will be investigating misleading practices including where claims are made by a secondary seller to create the impression that for example an event is sold out, and where tickets are for example, advertised by a secondary seller, ahead of being made available for sale by the event organiser.

How might the CMA go about taking enforcement action? What are the potential challenges involved?

The CMA will be considering a number of options available to it, including enforcing legislation through the courts. At present, the CMA is continuing to request that secondary websites cooperate and make changes to address their concerns, however it may be inevitable that action be taken to enforce legislation, and possibly also undertakings provided in June 2016 by secondary ticket websites who were previously committed to improving their practices.

The biggest challenge faced by the CMA and other enforcement authorities may include jurisdictional issues, as a secondary ticket website may give the impression that it is located outside of UK jurisdiction. This is an obstacle which can be overcome, particularly where the companies trade from and employ people in the UK, however it would not be straightforward and other measures would then need to be taken if a court order was not complied with, to bring an end to its trading in the UK.

It also remains to be seen how the enforcement authority will impose the financial penalty if legislation is successfully enforced. A £5000 fine for a breach of CRA 2015 is substantial if this breach relates to each individual ticket advertisement, but insubstantial if it is not retrospective and only relates to all ticket listings for one event.

It is quite clear that compliance with legislation and best practice will only evolve with the enforcement of consumer laws against the few that will remain defiant.

What can event organisers do to stop fans being disappointed by secondary ticketing issues?

An event organiser cannot stop fans from using unauthorised secondary platforms. The organiser can only publicise its sale and returns policy as widely as possible and make the process of buying and selling as transparent as possible.

Any restrictions on ticket purchase, e.g. via authorised sources only, and ticket resale, e.g. the non-transferability of or nonresale at above face value of a ticket, should be conveyed clearly via as many outlets as possible, including via the event organisers advertisement for tickets, but also the authorised primary platform selling tickets on its behalf.

All means should be utilised to publicise a ticketing policy including via social media, the official website, on the reverse of a ticket, and within any material accompanying the ticket.

The organiser where possible should consider a returns or authorised resale mechanism, which is simple and effective. A fan would be more likely to use official routes to acquire and dispose of tickets if it was hassle free and there were no hidden or exorbitant charges. By dealing directly with fans, or by authorising a secondary resale platform and, for example, capping the resale price of a ticket, the event organiser will retain an element of control, and fans will not be disappointed.

An event organiser should at all times monitor the market and encourage the reporting of and report, any unauthorised or unlawful activity to the relevant authorities including the Advertising Standards Authority and Trading Standards.

This article originally featured on Lexis®PSL TMT on 13 December 2017