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Update 28/05/09: Depeche Mode ticket re-sales banned in Germany

CMU daily (28/05/08) reports that a German court has banned a secondary ticketing website from selling tickets to the upcoming Depeche Mode tour in the country. Promoter  Marek Lieberberg,  took ticketing portal Ventic, owned by Dutch company Smartfox Media, to court after they began reselling tickets for Depeche Mode gigs which they had bought off the promoter’s company, or third parties. The lawsuit was based on the fact the terms and conditions attached to the tickets ban their resale, which, therefore, technically speaking puts Ventic, and any third parties they represent, in breach of contract and because Ventic hid their intent to re-sell when buying from official sites and so they were also guilty of “fraudulent purchase”. A Munich court backed Lieberberg’s claims this week, and served an injunction ordering Ventic to stop the resale of tickets to the German leg of the Depeche Mode tour. Welcoming the ruling, Lieberberg told Billboard: “This decision is the first small step toward the long overdue regulation of ticket sales and the restriction of black market trading. Our aim must be to prevent professional ticket auctions and unacceptable commissions that often come to a multiple of the actual price of admission. At stake here is not so much giving the artists a further share, but the protection of ticket buyers against dubious sources and excessive premiums”. Professor Johannes Kreile from VDKD, the  German live music trade body which backed Leiberberg’s lawsuit, explained to Billboard “The courts deemed it proven that Smartfox had purchased or arranged for the purchase of tickets for the Depeche Mode tour from official ticket agencies whilst concealing its intention to resell them itself or through third parties. In doing so Smartfox had deliberately obstructed the MLK sales concept in contravention of competition law”.

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In January 2008 The House of Commons Culture, Media and Sport Select Committee, chaired by MP John Whittingdale, criticised eBay’s practices in allowing the auction of charity event tickets (such as Live 8) and called for the estimated £1 billion ticketing industry to clean up its act. Event promoters have repeatedly urged MPs to recommend a change in the law to make ticket touting illegal, claiming those who sold tickets at grossly inflated prices often deprived grassroots fans of the opportunity to see their favourite bands or sports team or collaborate with criminal gangs – and promoters have tied the issue to dodgy websites selling non-existent tickets. Recently legitimate online ticketing agencies called on the UK government to clampdown on rogue online sites after a spate of cases involving bogus tickets and high profile examples of consumers being ripped off – including Reading Festival tickets, the Led Zeppelin reunion, and shows by Bruce Springsteen andthe Kings of Leon amongst others. The Association of Secondary Ticket Agents called for a kitemark scheme to reassure consumers but promoter Harvey Goldsmith said “there is a huge criminal element involved in this business – they send hundreds of people out to buy tickets, then have a cache of tickets they sell for as much as they can”.  

The UK government is already working with the Society of Ticket Agents and Retailers to draw up a new code of conduct in an attempt to soft-touch regulate ticketing. But the Select Committee cited recent polls that showed many consumers saw touts as a “godsend” to fans who were desperate to obtain tickets for oversubscribed events, or who wanted to sell on tickets they could no longer use. At present, buying and selling second-hand tickets is not illegal, except for football games in England and Wales. Under the 1994 Criminal Justice and Public Order Act, now extended by theFootball (Offences and Disorder) Act1999 and Violent Crime Reduction Act 2006 any fan selling or offering to sell, without authority, a ticket for a “designated football match” in any public place faces a fine of up to £5,000. The law was introduced after the Taylor report into the Hillsborough disaster. Its aim was to crack down on touts, and keep opposing fans segregated. David Maclean, then a Home Office minister, indicated that the law was not intended to trap the fan seeking to get rid of an unwanted match ticket (although it does and can be seen as particularly criminalising for those with innocent intentions). The Guidance for the 2006 Act, which extends the legislation to internet sites, makes it clear that the legislation is in place to preserve public order rather than for commercial considerations. Similar legislation will be introduced for the 2012 London Olympic Games, prohibiting the re-sale of tickets. The 2010 Glasgow Commonwealth Games will also have similar provisions although there may a distinction to protect fans re-selling tickets at face value.

The re-sale of other event tickets might be ‘immoral’ to some and indeed is usually in breach of the terms and conditions laid down by the event organiser – but it is not currently a criminal offence in the UK. The use of terms and conditions can give promoters a legal tool to prevent the re-sale of tickets but such terms have to be reasonable and certain in the UK when applied to consumers (under the Unfair Contracts Terms Act1977) and in the only test case this writer is aware of, the Australian Federal Court found against the promoters of the Big Day Out, Creative Festival Entertainment, who included a term prohibiting resale, as it was found to be misleading under the Australian Trade Practices Act1974. In fact one solution to touting that has been put forward is the ‘Queensland Solution’, an Australian concept that allows fans to resale tickets up to 10% over face value.

The debate on whether or not to criminalise ticket touting is hardly new. In 1989 this exchange took place in the House of Commons between conservative MP Theresa Gorman and Home Office minister John Patten: Mrs. Gorman “Will my hon. Friend agree that ticket touting is a form of brokerage between a willing seller and a willing buyer – that it is no more reprehensible when it takes place on a pavement than when it takes place in one of our City exchanges, that brokers are risk-takers and that everyone is jealous of them when they make a profit but nobody has sympathy for them when they make a loss?”.Mr. Patten:”I do not want to get into ideological trouble with my hon. Friend, but I agree with her that nobody is compelled to take part in the process, that the person who raises the price of a ticket to sell it on the street does not defraud the person who originally set the ticket price and that the person who pays the price is not unaware of the difference. I believe that it is pretty obnoxious and that it is extraordinary the prices people are prepared to pay, but it is a lawful activity”. A similar debate took place in the House of Lords in 1990 with Baroness Gardner saying “the way that the system works now it is not a free market. It is being taken over to too large an extent by a criminal element. Big money has become involved. If there were some system whereby people were licensed to sell tickets they would still be making a profit. It could still be an open market with tickets freely sold. But we would not have tickets being sold and resold for so many times their value” and calling for legislation on ticket touting which would include local authority licensing. In response Lord Monson compared ticket touting with the City of London saying “always providing that they are acting within the law, the touts fulfil the useful, indeed Thatcherite, function of bringing supply into line with demand … In a sense touts can be compared with jobbers in the City of London … Surely the solution is to let the initial price of the ticket reflect the demand just as the price of old masters, Impressionists or first, second, third, fourth or fifth growth clarets reflect the ebb and flow of demand, and let a due proportion of the additional profits made by increasing the prices be paid over to the Treasury in corporation tax to the benefit of the rest of us … Therefore if one wishes to eliminate the unsavoury type of ticket tout one must encourage the promoters to get their prices right in the first place”.

Whilst free markets are perhaps now seen as the main cause of the current global economic downturn, t icket touting wasn’t banned in 1994 and there seems little chance it will be now or in the near future. Select Committee chair John Whittingdale criticised companies and individuals selling second-hand tickets for popular events but stopped short of recommending a change in the law, saying that legislation should remain “a last resort”. Whittingdale called for a voluntary code of practice to be drawn up by the Office of Fair Trading that would block the resale of charity tickets (with perhaps a test case against secondary agents) and he gave his support to a “middle way” which would see promoters license secondary ticket sellers in return for a share of the profits adding “It would neither be practical nor in the interests of consumers to impose a ban on the onward sale of tickets to events through the secondary market“. Artist manager Petri Lunden’s view reflects this “although loud voices within the live industry scream for legislation against the touts, I am sure the industry as a whole is brighter than this” calling on the live music industry to come up with realistic solutions to ticket reselling and saying that ticket trading isn’t going to go away and adding “if you own it, you should be able to trade it if you so wish, at whatever price you can get for it”. The UK government’s position is set out in its response to the Select Committee’s report:

The Committee commented that regulation must be a last resort and the Government agrees with this. The Government does not see a case for any general restriction of ticket resale. However, the Government has listened to the arguments that some aspects of ticket resale may restrict access to sport or major cultural events; especially where these events are unique, of national or international significance and meet public interest objectives.

Now a recent survey of 5,200 predominantly UK music fans seems to support the idea that the public are reluctantly tolerant of ticket touts, often considering them a necessary evil! Results from the www.virtualfestivals.com survey of music fans on a range of matters ranging from environmental concerns to festival tourism asked fans about touting and with the question ‘what do you think about tickets being sold above face value on eBay and other sites’. Only a tiny percentage (2%) didn’t care about the issue at all, and 4% positively supported online auction sites saying it was a great way to get tickets. 10% didn’t see a real problem in a free market, leaving a finely balanced argument between those who thought the procedure was appalling – 40% saying online touting should be stopped, and 44% feeling that whilst they didn’t approve, the practice was acceptable in a demand driven marketplace and it couldn’t be stopped. In fact more fans are agitated about booking fees charged by bona-fide ticket agencies. Four out of five consumers surveyed by watchdog magazine Which? thought that booking fees from ‘official’ agents expensive and poor value for money, and many were incensed that ticketing charges and ‘credit card’ fees were not refunded in the event of a cancellation – even more wanted more transparency in pricing event tickets.

Even if promoters do secure legislation against ticket touts and touting, what shape this would take? It is important here to differentiate between selling counterfeit or non-existent tickets and touting. Counterfeiting, fraud, theft and obtaining money by deception are all charges at the disposal of the Crown Prosecution Service and the courts have a variety of disposals available for existing criminal activities. Only recently police closed down Paperticket who had advertised shows by BarryManilow and Kings of Leon amongst others and have arrested the owner, John Koukoullis who now faces charges under the Fraud Act. In another case four companies including London Ticket Shop linked to the owner of GetMeTickets, Michael Rangos (which had itself been compulsory liquidated in 2006) were wound up in the High Court with registrar John Simmonds saying that having read the evidence he was satisfied that there had “been a conspiracy to defraud the public and benefit Rangos”. And finally here, after an investigation by the Serious Fraud Office there have now been five arrests in connection with Xclusive Tickets, the operation that allegedly sold non-existent tickets to over 4,000 people for music festivals including Reading and sold out events at the 2008 Beijing Olympics. Ebay users are most certainly not exempt, a fraudster who sold counterfeit electronic goods on the internet auction site has been fined £55,000. Ebrahim Rahimtulla had previously been sentenced to 12 months in prison after being convicted in August 2007 of selling fake phone accessories and games.

Criminalising touting of legitimate tickets will produce its own ‘law of unintended consequences’ – and will the music industry end up with the same position as football where “hundreds of normally law-abiding football fans involve themselves each weekend in a criminal act because a law aimed at ticket touts can trap ordinary supporters. It is a familiar scene outside every football ground, or in nearby streets and bars. A supporter, let down by a friend who unexpectedly cannot attend a game, makes contact with someone looking for a spare ticket. they complete their seemingly innocent transaction and proceed contentedly to the match. But in the eyes of the law, their exchange amounts to illegal touting. The offence is committed even if – as generally happens – the ticket has changed hands between followers of the same club and at face value”. I for one wouldn’t want to differentiate between the fan who needs to sell a ticket and ‘any reasonable offer secures’ and the fan out to make a profit who advertises a ticket as ‘highest offer secures’. A Telegraph survey of police forces with Premiership clubs in their areas back in 1996 revealed stark differences in the way the police deal with the re-sale of football tickets. A fan arriving at Southampton’s ground, the Dell, looking to dispose of a ticket would probably be successful – police are unlikely to take action unless he offers it to a rival supporter.  However, someone attempting the same exercise outside the away end at Leeds or Bradford could expect to be arrested and charged. Remember here the police are primarily concerned with maintaining public order – something that couldn’t be levelled at music events – and even here there have been unintended and sometimes harsh consequences for fans just wanting to see on unwanted tickets – as well as empty seats at games  – when there are a willing fans wanting to see the game. Another possible unintended consequence is the potential cost to promoters (and fans) here. With the Association of Chief Police Officers (ACPO) wanting to now charge for policing large scale events, promoters will also then have to ‘pay’ to police touting and would have to pass on the cost to fans (or the artist) – otherwise they would be paying to arrest their own customers! I am not sure that making the re-sale of tickets a criminal offence would help event organisers remove tickets from being resold on eBay and other online sites. Whilst two recent French court decisions held that eBay was liable for damages after allowing the auction of counterfeit goods, the internet site’s ‘mere conduit’ defence proved successful in a US federal court when accused of allowing trade mark infringement.

So where to next in the fight against touts? Some events like Glastonbury have introduced complex registration systems to try and eliminate touting and enable real fans to buy tickets; certainly well written terms and conditions prohibiting re-sale might prove valuable in the future but the effectiveness of these have yet to be tested in a British civil court and the Glastonbury system is not fool proof – and indeed was partially abandoned in the run up to the 2008 Festival when Glastonbury almost didn’t sell out. The Resale Rights Society has been set up by the Music Managers Forum with the support of the MCPS-PRS Alliance with the role of (attempting) to regulate the secondary ticket market and impose a levy on tickets re-sold on sites like Viagogo and Seatwave. The RRS has two primary aims: first, to ensure music fans are protected from unscrupulous or bogus resellers through the introduction of a “kite-mark” scheme for ticketing sites; second to ensure that artists and the live music industry share in the proceeds of resold tickets. But there must be inherent difficulties here: Whilst the MCPS-PRS Alliance can legally collect royalties for its own members because of the statutory provisions of copyright law, tickets have no such ‘protection’. Other ideas are more pragmatic. There are the fan’s own ticket exchange sites like ScarletMist where tickets can be swapped at face value and indeed the Concert Promoters Association recently talked of setting up their own similar scheme. Some artists, like Madonna, have embraced secondary ticketing as a solution to the ‘problem’ of touting and secondary ticketing, appointing an ‘official’ premium and secondary ticketing partner. But will any of these schemes really put an end to touting? Recent headlines from world of football such as ” touts net huge profit on illegal cup final tickets” suggest not: Whilst Football League spokesman John Nagle might well say “Re-selling match tickets is a criminal offence and where tickets are made available for purchase this year action will be taken” the fact remains that there are very few prosecutions of any nature and the problem is compounded because “almost all the sites are based abroad, making it harder for the authorities to bring prosecutions . “ As the live industry (as well as the leisure sector) still comes to terms with the negative fallout from the 2003 Licensing Act, is more government legislation which may not even be effective really what the live sector needs? In the 2004-2005 football season just 146 individuals were arrested for touting football tickets and in the 20005-2006 season just 99 – and in both seasons just fourteen club grounds were affected. In 2006 eight premiership grounds had arrests – with 11 at Chelsea’s home ground, 10 at Arsenal, 7 at Liverpool and just 2 at Manchester United. The majority of Premiership clubs had no arrests and these included Tottenham Hotspur, Fulham, West Ham, Everton, Blackburn and Manchester City. Only six Championship clubs had arrests (with the highest being just 2 at Preston North End). There were no arrests in Divisions 1 and 2.

Football fans say that they “ doubted that the highly lucrative practice would ever be stamped out” and Toby Brown, editor of Chelsea fans’ online forum CFC.net, said “For every site you close down five will spring up“. Perhaps in the digital age the issue of touting is one which promoters, artists and fans will just have to live with -whether face to face or in cyberspace.

The digital age has led to significant challenges for the music industry. The recorded music sector, particularly in the USA, has provoked hostile criticism and public ridicule for brining civil and criminal actions against music fans – and for each illegal download the record labels get paid nothing. For each legitimate ticket sold on eBay the promoter has at least been paid the value they set for the ticket. If promoters and artists are concerned about the number of tickets reaching the secondary market then they should implement systems to control this – or embrace secondary ticketing. If promoters and artists are concerned about tours selling tickets at vastly inflated prices then they should look at pricing structures – the live sector already has sponsors tickets and hospitality tickets – Live 8 had a very visible golden circle for the privileged not-so-few – and at the moment it is the travel industry who have set the standard in flexible pricing balancing supply with demand. We don’t need new laws. We need new ideas.

Ben Challis is a lawyer and edits www.musiclawupdates.com. He is a visiting professor in law at Buckinghamshire New University.

 

References:

http://www.homeoffice.gov.uk/documents/VCRA-football-guidance.pdf?view=Binary

http://www.publications.parliament.uk/pa/cm198889/cmhansrd/1989-05-11/Orals-2.html

http://hansard.millbanksystems.com/lords/1990/apr/18/ticket-touts

http://www.urban75.org/football/tickets.html (Article by Colin Randall Daily Telegraph 1996)

Crackdown urged on rip-off web ticket touts   The Observer 23 December 2007

Pressure grows on the online touts dream ticket  The Observer Media  6th January 2008

Whose Ticket? (Petri Lunden)  IQ Issue 15 2007 p13

eBay International AG v Creative Festival Entertainment Pty Limited at http://www.craddock.com.au/Document/eBay-Scores-Partial-Win-in-Big-Ticket-Case.aspx and in

Legal News (Ben Challis) IQ Issue 18 2008 p10

Virtual Festival’s fan survey (European Festival Report)  IQ Issue 20  2008

http://www.nytimes.com/2008/07/15/technology/15ebay.html?em&ex=1216267200&en=4dcc0c8323ecf63b&ei=5087%0A

http://www.thisislondon.co.uk/standard/article-23437322-details/Touts+net+huge+profit+on+illegal+cup+final+tickets/article.do

Statistics on Football-Related Arrests and Banning Orders

http://www.homeoffice.gov.uk/documents/football-arrests-0506?view=Binary

Greenfield S, Osbourne G & Roberts Contradictions Within The Criminalisation Of Ticket Touting: What Should Be The Role Of The Law?http://webjcli.ncl.ac.uk/2008/issue3/greenfield3.html

Which? Survey reported in Live UK Issue 1-2 p8

Court Closes rip-off ticket website companies Live UK issue 99 p4