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Live Nation fires back at DOJ antitrust lawsuit

Live Nation’s Dan Wall has insisted there is no “good faith argument” to break up the company with Ticketmaster amid the fallout from the Department of Justice’s (DOJ) antitrust lawsuit.

Wall, the company’s EVP, regulatory affairs, joined president/CFO Joe Berchtold on a call with investors to discuss the suit, which accuses LN and Ticketmaster, who merged in 2010, of engaging “in a variety of tactics to eliminate competition and monopolise markets”.

The DOJ’s allegations include acquiring competitors and competitive threats, restricting artists’ access to venues, threatening and retaliating against venues that work with rivals, locking out competition with exclusive contracts and blocking venues from using multiple ticketing firms. It also claims the firm “exploits” its relationship with venue giant Oak View Group (OVG).

Live Nation’s share price dropped in the wake of yesterday’s (23 May) announcement but has since stabilised.

Speaking to shareholders on the regulatory update call, Berchtold said he had been optimistic of reaching a resolution with the DOJ prior to the filing in the United States District Court Southern District of New York.

“We didn’t see any of the issues to be structural or fundamental to the nature of the makeup of the company,” he said. “[We] saw them all as discrete business practices and were hopeful that, because of that, we would be able to reach a settlement. Obviously, that wasn’t their agenda, ultimately, and we are where we are today.”

“It is exactly the concerns that were considered by the Obama administration 15 years ago, and that are covered by the consent decree”

Berchtold suggested one area of “disconnect” with the DOJ centred on the definition of competition in the marketplace.

“In our mind, competition is competing in the promotion side with the artist as the consumer, and then that artist very effectively engages multiple bidders to compete for their services,” he said. “The artist takes an increasing portion of the money from the show, and they are the beneficiary of that competition.

“The DOJ has a different view in terms of holding us accountable for the service fees and the ticket prices, even though we’re not the beneficiary to the largest extent of either those numbers. We don’t unilaterally make the decision on what those numbers are going to be; they’re driven primarily by the venues and by the promoter. So we clearly don’t agree with them in terms of the fundamental of the assertions that they’re making.”

Wall, who joined Live Nation last year after more than 12 years as a key advisor to the firm, alluded to US attorney general’s Merrick Garland’s statement that it was “time to break up Live Nation-Ticketmaster”.

“It is exactly the concerns that were considered by the Obama administration 15 years ago, and that are covered by the consent decree,” he argued. “And in those circumstances, we just don’t believe that there’s really any good faith argument to be made here that there could be a breakup. However, we all know that that’s what the most effective way to get the big headlines was and I think that that’s why we’re seeing that. It’s very unfortunate.

“There’s never been a circumstance where the DOJ allowed a merger to happen under a consent decree with behavioural remedies, which it said was an effective remedy, and then came back later and tried to say that that should be broken up.”

“We will make every effort to try to get this case to trial in a year”

Addressing the likely timescale of the case, Wall said: “We will move this along as quickly as we can. We will make every effort to try to get this case to trial in a year, or if not in a year, a year and a half, and certainly not long after that. We’re committed to putting the resources in to get that done and getting this behind us because we feel very confident about about our position on these claims.”

He was also critical of the DOJ’s demand for a jury trial, dismissing the move as a “stunt”.

“This is a stunt, a strategy that the DOJ used in the Google ad-tech case, and it’s highly unusual in that antitrust cases like this, historically, have always been tried to to judges rather than juries – because when the government is the plaintiff, it is seeking injunctive relief and all claims for injunctive relief are tried by judges rather than juries.

“It seems like a pretty transparent effort to try to avoid the scrutiny of a judge. And I don’t think it’s necessarily a smart move, because the very first message that you send to the judge is that you don’t really want him or her to have control over the outcome of this, and that’s not a very smart message to send a judge at the beginning of a case.”

Wall was also asked about the implications for the lawsuit of a potential administration change, should Donald Trump return to the White House following November’s US election.

“That’s a tough one, for sure,” he said. “If we just kind of go back in time and you asked me whether I think that the first Trump administration would have brought this case, I would tell you that I don’t think that any prior administration – Republican or Democrat – would have brought this case. But the circumstances, looking to the future, it would depend a lot on who was appointed to these positions, and that just makes it kind of vulnerable.”

“Live Nation has scolded Oak View Group multiple times for trying to compete”

The 128-page filing makes reference to LN’s relationship with OVG, which it describes as a “potential-competitor-turned-partner that has described itself as a ‘hammer’ and ‘protect[or]’ for Live Nation.

“In recent years, Oak View Group has avoided bidding against Live Nation for artist talent and influenced venues to sign exclusive agreements with Ticketmaster,” it states. “For example, Live Nation has scolded Oak View Group multiple times for trying to compete. In one instance, Live Nation asked, ‘who would be so stupid to… play into [an artist agent’s] arms,’ and on another occasion, Live Nation stated, ‘let’s make sure we don’t let [the artist agency] now start playing us off.’

“Live Nation and Oak View Group have colluded and established a partnership to allocate business lines, avoid competing with each other, and chart a mutually beneficial plan to cement Live Nation’s dominance.”

Wall has contested the claims in a lengthy blog, pointing out that OVG is a venue management company rather than a concert promoter.

“DOJ’s claim is based on two incidents in which Live Nation and OVG were discussing what to do when an OVG venue wanted to book on occasional show itself on a dark night,” he continued. “To portray that as an agreement not to compete in concert promotion is farcical.

“Regardless, OVG’s behaviour as a venue operator is fully consistent with every major arena and stadium in the country – they need to have an in house booker who helps fill otherwise dark nights, but they have no interest in systematically taking on the risk of guarantees that could be in the millions of dollars for a show or tens of millions of dollars for a tour.”

“There is no truth that this brief exchange had anything to do with Silver Lake’s decision to sell its stake in TEG”

In another startling allegation, it says that LN threatened commercial retaliation against private equity firm Silver Lake in 2021, unless the latter’s subsidiary TEG stopped competing with Live Nation for artist promotion contracts in the
US. It claims that the threats “ultimately succeeded, and Silver Lake has tried to sell TEG altogether”.

“This claim reveals not only a disregard for the facts, but also deep hypocrisy,” replied Wall. “The current DOJ and FTC have been vocal critics of private equity companies making multiple investments in the same industry because of competitive ‘entanglements’. So was Live Nation CEO Michael Rapino when, after it had already made an investment in OVG, Silver Lake Partners decided to invest in the Australian live entertainment company, TEG.

“Rapino’s complaint was fundamentally the same as the DOJ/FTC concern with private equity rollups: it created a conflict between OVG, which had become a close partner to Live Nation, and TEG. So, in December 2021 when a TEG employee wrote to say that it did not intend to compete with Live Nation in the US, Rapino replied to Silver Lake’s management that he did not care about TEG, but still had a problem with Silver Lake’s decision to make multiple conflicting investments in the industry.

“There is no truth that this brief exchange had anything to do with Silver Lake’s decision to sell its stake in TEG.”

Elsewhere, Variety has published an article asking whether things would get better for fans in the event of a Live Nation-Ticketmaster breakup.

“In reality, music fans’ concerns boil down to one question: Would breaking up the two companies make the ticket-acquisition process less of a soul-crushing nightmare?” writes Jem Aswad. “In the short term anyway, the answer is pretty much no… In fact, the things that most enrage fans – cryptic ‘service’ fees, long wait times, the predatory secondary market and its bots that buy up blocks of tickets before ordinary humans can get near them – are outside the purview of the lawsuit.

“It also must be noted, as Live Nation often does, that Ticketmaster does not set ticket prices – artists or promoters do – and it does not charge the bulk of the service fees that so enrage fans (venues do).”

 


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DOJ sues Live Nation over alleged ‘monopoly’

The US Department of Justice (DOJ) has launched a lawsuit which could seek to break up Live Nation-Ticketmaster after alleging the company has violated antitrust laws.

The 128-page filing accuses LN and Ticketmaster, who merged in 2010, of using their “power and influence” to “insert themselves at the centre and the edges of virtually every aspect of the live music ecosystem”. Live Nation’s EVP, regulatory affairs, Dan Wall has issued a response, contesting the claims.

The suit, which had been expected for several weeks, was filed today (23 May) in the United States District Court Southern District of New York. It states that Live Nation directly manages more than 400 musical artists and controls around 60% of concert promotions at major venues across the country, as well as owning or controlling more than 265 concert venues in North America.

“This has given Live Nation and Ticketmaster the opportunity to freeze innovation and bend the industry to their own benefit,” it claims. “While this may be a boon to Live Nation’s bottom line, there is a real cost to Americans.

“Through a self-reinforcing ‘flywheel’ that Live Nation-Ticketmaster created to connect their multiple interconnected businesses and interests, Live Nation and Ticketmaster have engaged in numerous forms of anticompetitive conduct.”

In adds that LN controls “roughly 80% or more” of primary ticketing for major concert venues via Ticketmaster, plus a “growing share” of the resale market.

“Live Nation’s monopoly, and the anticompetitive conduct that protects and maintains its monopoly, strikes a chord precisely because the industry at stake is one that has for generations inspired, entertained, and challenged Americans,” it continues. “Conduct that subverts competition here not only harms the structure of the live music industry and the countless people that work in that industry, but also damages the foundation of creative expression and art that lies at the heart of our personal, social, and political lives.”

“We allege that Live Nation relies on unlawful, anticompetitive conduct to exercise its monopolistic control over the live events industry in the US”

Allegations include acquiring competitors and competitive threats, restricting artists’ access to venues, locking out competition with exclusive contracts and blocking venues from using multiple ticketing firms.

“We allege that Live Nation relies on unlawful, anticompetitive conduct to exercise its monopolistic control over the live events industry in the United States at the cost of fans, artists, smaller promoters, and venue operators,” says a statement from US attorney general Merrick Garland. “The result is that fans pay more in fees, artists have fewer opportunities to play concerts, smaller promoters get squeezed out, and venues have fewer real choices for ticketing services. It is time to break up Live Nation-Ticketmaster.”

Dan Wall, LN’s EVP, corporate and regulatory affairs, has penned a lengthy response to the lawsuit, which he says comes in the wake of “intense political pressure on DOJ to file a lawsuit, and a long-term lobbying campaign from rivals and ticket brokers seeking government protection for themselves”.

Furthermore, Wall describes the claim that Live Nation and Ticketmaster are wielding monopoly power as “absurd”.

“The defining feature of a monopolist is monopoly profits derived from monopoly pricing,” he says. “Live Nation in no way fits the profile. Service charges on Ticketmaster are no higher than elsewhere, and frequently lower. And even accounting for sponsorship, an advertising business that helps keep ticket prices down, the company’s overall net profit margin is at the low end of profitable S&P 500 companies.

“Every year, competition in the industry drives Live Nation to earn lower take rates from both concert promotion and ticketing. The company is profitable and growing because it helps grow the industry, not because it has market power.”

“The world is a better place because of that merger, not a worse one”

In closing, Wall insists that Ticketmaster is “a far better, more artist and fan-focused business under Live Nation’s ownership than it ever was as a standalone company”.

“But that’s not how this DOJ sees it. They are reflexively antagonistic to vertical integration,” he says. “The Obama Administration saw it differently. It allowed Live Nation and Ticketmaster to merge, and in defending that position acknowledged that there was no legal basis for challenging the vertical aspects of the merger – specifically, allowing a large concert promoter to combine with a large ticketing company.

“In one filing, it said that it had ‘determined that it could not prove that the vertical integration resulting from the merger would significantly harm competition in the concert promotion market.’ There is no factual basis for concluding otherwise today. The world is a better place because of that merger, not a worse one.”

Live Nation president/CFO Joe Berchtold also discussed the then pending lawsuit during the company’s Q1 earnings call earlier this month.

“Based on the issues we know about, we don’t believe a breakup of Live Nation and Ticketmaster would be a legally permissible remedy,” he said. “Live Nation and Ticketmaster came together lawfully through a merger that the DOJ reviewed and approved subject to divestitures and other remedies. The DOJ has repeatedly stated in court filings that the merger and settlement were in the public interest.”

 


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