This uptick appears to derive from litigious reactions to various factors, including the desire of initial ticket sellers to exercise more influence on sale and resale opportunities for anti-fraud and brand-related reasons, changes in initial sales methods, stadium construction and relocations. Clubs have generally had better success in defending litigation, yet disaffected parties have not been substantially dissuaded from pursuing claims.
Resale is a prime example. Technological tools through smartphone applications, online platforms and sophisticated vendors enable ticket sellers to assert what they consider their rightful control over event access — which triggers litigation flare-ups. For example, StubHub sued Ticketmaster and the Golden State Warriors when the Warriors required season tickets to be resold through a Ticketmaster exchange and threatened to withhold playoff tickets or season renewals to noncompliant holders. A disaffected season-ticket holder sued the San Francisco 49ers after the club began to use electronic tickets with barcodes released during a window of time before games to reduce fraud. A season-ticket holder sued the New Jersey Devils after the club required all secondary market transactions to occur on the NHL Ticket Exchange. The Minnesota Timberwolves faced a class action by seasonticket holders after the club required paperless tickets and secondary market transactions to occur on the Flash Seats platform. The Indianapolis Colts, in turn, were sued after they failed to provide a broker with season tickets he renewed for 2016, despite his consent to an additional resale fee.
Clubs have generally — not universally — had the upper hand. The lawsuits against the 49ers and Devils settled, while the Timberwolves case went to arbitration. Courts ruled in favor of the Warriors and the Colts on club-friendly grounds that could be harbingers. The court in the Warriors case ruled that the supposedly affected market of “secondary” tickets for Warriors games was too narrowly defined. The court determined there were not separate markets for primary versus secondary sales, nor a stand-alone market for Warriors tickets.
As for the Colts, the court’s favorable decision turned on the prevailing principle that tickets are “revocable licenses.” The holder asserted a form of property rights based on his previous tickets. The court disagreed, explaining that a holder takes the license under its terms — meaning that rights are affected by the grant language. The language there made clear that tickets could be revoked, or not renewed, at the Colts’ discretion. The court in the Warriors litigation expressed a similar view, as have courts in litigation against the Buffalo Bills, Madison Square Garden, Seattle Seahawks and others.
But just because tickets may be licenses does not mean the holder has no rights. In a somewhat rare victory for ticket holders, a court rejected a license defense that the Seattle SuperSonics asserted against claims when the club moved to Oklahoma. That court determined that ticket purchases were made via terms that did not provide sufficient disclosure of revocation rights. A less successful holder learned the importance of a ticket’s scope when claiming the New England Patriots breached his rights by videotaping game signals. The court held that the ticket only granted spectators a seat.
Governmental enforcers are showing interest in sales practices. The New York Attorney General investigated a host of practices and issued a 2016 report criticizing ticket sales approaches in multiple industries. Other state enforcers have also indicated interest, suggesting a consumerprotection appetite to examine ticketing policies. While the legal parameters to date have been reasonably clear, turmoil may be coming with this conflict of interests.
Resale price restrictions are an apt illustration of uncertainties. Some sellers have tried to impose minimum resale prices. Outdated federal law, now economically suspect, held it a “per se” antitrust violation for an upstream party to set minimum resale prices. Modern federal law removes that “per se” prohibition and affords greater flexibility and options for resale prices. Yet states may set their own rules — and some maintain greater restrictions on resale price maintenance. These differing regimes can make it difficult to determine appropriate conditions, necessitating careful review of both federal and state rules.
This column originally appeared in SportsBusiness Journal.