United States et al. v. Ticketmaster Entertainment, Inc. et al.; Public Comments and Response on Proposed Final Judgment, 37652-37706 [2010-15686]

Download as PDF 37652 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices (h), for entry of the proposed Final Judgment after the public comments and this Response have been published.1 DEPARTMENT OF JUSTICE Antitrust Division United States et al. v. Ticketmaster Entertainment, Inc. et al.; Public Comments and Response on Proposed Final Judgment Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)–(h), the United States hereby publishes below the comments (without attachments) received on the proposed Final Judgment in United States et al. v. Ticketmaster Entertainment, Inc. et al., Civil Action No. 1:10–CV–00139–RMC, which were filed in the United States District Court for the District of Columbia on June 17, 2010, together with the response of the United States to the comments. Complete copies of the comments with attachments, and the United States’ response, are available for inspection at the Department of Justice Antitrust Division, 450 Fifth Street, NW., Suite 1010, Washington, DC 20530 (telephone: 202–514–2481), on the Department of Justice’s Web site at http://www.justice.gov/atr/cases/ ticket.htm, and at the Office of the Clerk of the United States District Court for the District of Columbia, 333 Constitution Avenue, NW., Washington, DC 20001. Copies of any of these materials may be obtained upon request and payment of a copying fee. J. Robert Kramer II, Director of Operations and Civil Enforcement. sroberts on DSKD5P82C1PROD with NOTICES United States District Court for the District of Columbia United States of America, et al., Plaintiffs, v. Ticketmaster Entertainment, Inc., et al., Defendants. Case: 1:10–cv–00139. Assigned to: Collyer, Rosemary M. Assign. Date: 1/25/2010. Description: Antitrust. II. The Investigation and Proposed Resolution Plaintiff United States’ Response to Public Comments Pursuant to the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)–(h) (‘‘APPA’’ or ‘‘Tunney Act’’), the United States hereby files the public comments concerning the proposed Final Judgment in this case and the United States’ response to those comments. After careful consideration of the comments, the United States continues to believe that the proposed Final Judgment will provide an effective and appropriate remedy for the antitrust violations alleged in the Amended Complaint. The United States will move the Court, pursuant to 15 U.S.C. 16(b)– VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 I. Procedural History On January 25, 2010, the United States and the States of Arizona, Arkansas, California, Florida, Illinois, Iowa, Louisiana, Nebraska, Nevada, Ohio, Oregon, Rhode Island, Tennessee, Texas, and Wisconsin, and the Commonwealths of Massachusetts and Pennsylvania (the ‘‘States’’) filed the Complaint in this matter, alleging that the merger of Ticketmaster Entertainment, Inc. (‘‘Ticketmaster’’) and Live Nation, Inc. (‘‘Live Nation’’), if permitted to proceed, would substantially lessen competition in the market for primary ticketing services to major concert venues in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.2 Simultaneously, the United States filed a Competitive Impact Statement (‘‘CIS’’), a proposed Final Judgment, and a Hold Separate Stipulation and Order signed by the United States, the States, and the defendants consenting to the entry of the proposed Final Judgment after compliance with the requirements of the APPA. The proposed Final Judgment and CIS were published in the Federal Register on February 10, 2010. See 75 FR 6,709 (2010). A summary of the terms of the proposed Final Judgment and CIS, together with directions for the submission of written comments relating to the proposed Final Judgment, were published for seven days in The Washington Post from February 26, 2010, through March 4, 2010. The Defendants filed the statement required by 15 U.S.C. 16(g) on February 12, 2010. The 60-day period for public comments ended on May 3, 2010, and twelve comments were received as described below and attached hereto. A. Investigation On February 10, 2009, Ticketmaster and Live Nation entered into a definitive merger agreement. Over the following eleven and a half months, the United States Department of Justice (‘‘Department’’) conducted an extensive, 1 As approved by the Court in a Minute Order dated June 15, 2010, the United States will publish the Response and the comments without attachments or exhibits in the Federal Register. The United States will post complete versions of the comments with attachments and exhibits on the Antitrust Division’s Web site at: http:// www.justice.gov/atr/cases/ticket.htm. 2 An Amended Complaint was filed on January 28, 2010, solely to add the States of New Jersey and Washington as plaintiffs. PO 00000 Frm 00002 Fmt 4701 Sfmt 4703 detailed investigation into the potential competitive effects of the proposed merger. As part of the investigation, the Department issued Second Requests and twelve Civil Investigative Demands (‘‘CIDs’’) to the merging parties, as well as more than fifty CIDs to third parties. The Department considered more than 2.5 million documents received in response to the Second Requests and CIDs. More than 250 interviews were conducted with customers, competitors, and other individuals with knowledge of the industry, including two commenters here—Jam Productions, Ltd. and the group led by It’s My Party, Inc.—which are competitors and complainants about the proposed transaction. The investigative team analyzed their concerns, as well as the views and data presented by hundreds of others. While the Department was reviewing this transaction, a group of state Attorneys General and the Canadian competition authorities conducted their own antitrust investigations. Nineteen states joined the United States’ Amended Complaint and the proposed Final Judgment resolving the Amended Complaint; no state has filed a separate lawsuit to block the merger or has opposed the proposed Final Judgment before this Court. At the conclusion of its investigation, Canada imposed parallel relief that is substantively identical to that contained in the proposed Final Judgment.3 As part of its investigation, the Department considered the potential competitive effects of the merger on numerous products and services, customer groups, and geographic areas. For the vast majority of these, including the provision of services to promote live entertainment events, the Department determined that the proposed merger was unlikely to reduce competition substantially. Because Ticketmaster and Live Nation were the two largest providers of primary ticketing services, the Department appropriately devoted significant time and resources to analyzing whether the combination of the parties’ primary ticketing services would likely reduce competition. The United States concluded that the combination of Ticketmaster and Live Nation likely would lessen competition in the provision and sale of primary ticketing services for major concert venues in the United States. 3 Competition authorities in the United Kingdom also reviewed the transaction and ultimately cleared the merger without imposing any conditions; market conditions in the United Kingdom, however, differ substantially from those prevailing in the United States and Canada. E:\FR\FM\29JNN2.SGM 29JNN2 sroberts on DSKD5P82C1PROD with NOTICES Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices Primary ticketing is the initial distribution of tickets to an event. Ticketing companies are responsible for distributing primary ticket inventory through channels such as the Internet, call centers, and retail outlets and for enabling the venue to sell tickets at its box office. The primary ticketing company provides the technology infrastructure for ticket distribution. Primary ticketing firms also may provide technology and hardware that allow venues to manage fan entry at the event, including everything from handheld scanners that ushers use to check fans’ tickets to the bar codes on the tickets themselves. The overall price a consumer pays for a ticket generally includes the face value of the ticket and a variety of service fees above the face value of the ticket. Such fees are most often charged by the provider of primary ticketing services. The primary ticketing provider, however, does not set the face value of the ticket. It is set by the promoter and artist. The complexity and demands of selling tickets to major concert venues requires sophisticated primary ticketing services. A major concert venue’s primary ticketing provider must be able to withstand the heavy transaction volume associated with the first hours when tickets to popular concerts become available to concert-goers, offer integrated marketing capabilities, and otherwise have a proven track record of high quality service. As such, major concert venues have had few choices for primary ticketing providers. Ticketmaster had a long-standing track record of filling these needs. When Ticketmaster and Live Nation announced their merger, Live Nation had recently begun engaging in primary ticketing services, primarily selling tickets to concerts at its own venues as a way to demonstrate to other venues that its primary ticketing platform performed well. No primary ticketing company other than Ticketmaster and Live Nation had amassed or likely could have amassed in the near term sufficient scale to develop a reputation for successfully delivering similarly sophisticated primary ticketing services. Primary ticketing services are sold pursuant to contracts individually negotiated with venues. Because primary ticketing companies can price discriminate among different venues, the Department determined that the proposed transaction could affect different classes of venues differently. Specifically, the Department found that major concert venues, because of their need for the most sophisticated ticketing services, have few ticketing options. These venues can be readily identified, VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 and market power can be selectively exercised against them. Furthermore, the Department determined that because the merged firm could price discriminate, any effects of the proposed transaction on foreign venues would be distinct from any effects on domestic venues, and thus it was appropriate to include only major concert venues located in the United States within the relevant market. After its investigation, the United States determined that the proposed merger would likely substantially lessen competition for primary ticketing services to major concert venues in the United States. As explained more fully in the Amended Complaint and CIS, this loss of competition would eliminate financial benefits that venues enjoyed during the period when Live Nation exerted competitive pressure against Ticketmaster, and would reduce incentives to innovate and improve primary ticketing services.1 As alleged in the Amended Complaint, the proposed merger of Ticketmaster and Live Nation would remove Live Nation’s competitive presence from an already highly concentrated and difficult-toenter market.2 The resulting increase in concentration, loss of competition, and absence of any reasonable prospect of significant new entry or expansion by market incumbents likely would result in higher prices for major concert venues and reduce innovation in primary ticketing services.3 B. Proposed Final Judgment The proposed Final Judgment is designed to preserve competition in the market for primary ticketing services to major concert venues in the United States by requiring divestitures of assets and mandating certain conduct remedies. First, the proposed Final Judgment creates a new, vertically integrated primary ticketing company and bolsters another company to compete against Live Nation Entertainment.4 Second, the conduct restraints in the proposed Final Judgment supplement these divestitures to ensure that competitive ticketing firms will not be improperly foreclosed from the market by the merged firm’s conduct. 1 Amended 2 Amended Complaint ¶ 40 et seq.; CIS § II(D). Complaint ¶¶ 38, 40, 43, 44; CIS § II(D). 3 Amended Complaint ¶ 40 et seq.; CIS § II(D). 4 Live Nation Entertainment is the name of the newly merged entity. Throughout this Response, the historical Ticketmaster ticketing operation is referred to as ‘‘Ticketmaster,’’ the artist management business is referred to as ‘‘Front Line,’’ and the promotions and venue management business is referred to as ‘‘Live Nation.’’ PO 00000 Frm 00003 Fmt 4701 Sfmt 4703 37653 The proposed Final Judgment establishes Anschutz Entertainment Group, Inc. (‘‘AEG’’) as an entrant into primary ticketing services. AEG is the second largest promoter in the United States (behind Live Nation). AEG also owns, operates, or manages more than 30 major concert venues in the United States, owns part of an artist management firm, and owns the Los Angeles Kings hockey franchise. Entry will occur via a two-stage process. In the first part of the process, the merged firm must provide AEG with an AEGbranded ticketing website based on the Ticketmaster Host platform, Ticketmaster’s primary platform for selling tickets.5 AEG has the right to use the AEG-branded ticketing website to sell tickets at venues it owns, operates, or manages as well as to events at any other venues from which AEG secures the right to provide primary ticketing services. AEG has the freedom to compete with Ticketmaster on the prices it charges to venues for ticketing services and on the service fees that are added to a ticket’s price.6 In the second part of the process, AEG may exercise an already negotiated right to acquire a perpetual, fully paid-up license to the then-current version of the Ticketmaster Host platform, including a copy of the source code, which the merged firm must install.7 The agreement between AEG and the merged firm contains financial incentives for AEG to exercise the right. Finally, the proposed Final Judgment prohibits the merged firm from providing primary ticketing services to AEG’s venues after AEG’s right to use the AEG-branded ticketing website expires, which will take place five years after execution of the license.8 This provision is critical to preserving competition in the primary ticketing services market, because it guarantees that within five years, AEG will have to either remain a full fledged primary ticketing services competitor or bolster another primary ticketing competitor by using them to meet its ticketing needs. The proposed Final Judgment also requires the merged firm to divest Ticketmaster’s entire Paciolan line of business 9 to an independent and economically viable competitor in the market for primary ticketing services to 5 Proposed Final Judgment § IV.A.2. 6 Id. 7 Id. § IV.A.1. § XIII.B. 9 In 2008, Paciolan directly handled the sale for more than 9 million concert and sporting tickets. It also provided in-house ticketing solutions for more than 250 clients, including Tickets West, ComcastSpectacor’s ticketing solution New Era, and numerous colleges, universities and performing arts centers throughout the U.S. 8 Id. E:\FR\FM\29JNN2.SGM 29JNN2 sroberts on DSKD5P82C1PROD with NOTICES 37654 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices major concert venues.10 The merged firm has already divested this business to Comcast-Spectacor, LP (‘‘ComcastSpectacor’’), a vertically-integrated company whose subsidiary New Era Tickets (‘‘New Era’’) was one of many licensees of the Paciolan platform prior to the divestiture. In addition to its interest in New Era, Comcast-Spectacor owns two major U.S. concert venues, a venue management firm that manages fifteen other major concert venues, the Philadelphia Flyers, the Philadelphia 76ers, a venue/sports marketing company, and a food services company whose clients include major concert venues. Comcast-Spectacor’s ticketing business model is different from Ticketmaster’s in that venue clients, rather than Comcast-Spectacor, independently set service fees and venue clients maintain ownership of their ticketing data. The proposed Final Judgment also prohibits the merged firm from engaging in certain conduct that could, in theory, prevent equally efficient firms from competing effectively.11 The proposed Final Judgment proscribes retaliation against venue owners who contract or consider contracting for primary ticketing services with the merged firm’s competitors.12 The proposed Final Judgment also prohibits the merged firm from explicitly or practically requiring venues, or threatening to require venues, to take their primary ticketing services in order to be allowed to present concerts Live Nation promotes or concerts by artists Front Line manages. It likewise prohibits the merged firm from explicitly or practically requiring venues, or threatening to require venues, to take concerts the merged firm promotes or concerts by artists it manages in order to be allowed to purchase the merged firm’s primary ticketing services.13 Further, the Final Judgment prohibits the merged firm from using certain ticketing data in its non-ticketing business and from providing that data to internal promoters and artist managers.14 Finally, the proposed Final Judgment mandates that the merged firm provide any current primary ticketing client with that client’s ticketing data promptly upon request, if the client chooses not to renew its primary ticketing contract.15 In sum, the perpetual license of the Ticketmaster Host platform, the 10 Id. §§ IV.E., IV.K. § IX. 12 Id. § IX.A.1. 13 Id. §§ IX.A.2, IX.A.3. 14 Id. § IX.B. 15 Id. § IX.C. 11 Id. VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 divestiture of Paciolan, and the conduct remedies will ensure that major concert venues will continue to receive the benefits of competition in the primary ticketing services market that otherwise would be lost as a result of the merger. III. Standard of Judicial Review The APPA requires that proposed consent judgments in antitrust cases brought by the United States be subject to a sixty-day comment period, after which the court shall determine whether entry of the proposed Final Judgment ‘‘is in the public interest.’’ 15 U.S.C. 16(e)(1). In making that determination in accordance with the statute, the court is required to consider: (A) The competitive impact of such judgment, including termination of alleged violations, provisions for enforcement and modification, duration of relief sought, anticipated effects of alternative remedies actually considered, whether its terms are ambiguous, and any other competitive considerations bearing upon the adequacy of such judgment that the court deems necessary to a determination of whether the consent judgment is in the public interest; and (B) The impact of entry of such judgment upon competition in the relevant market or markets, upon the public generally and individuals alleging specific injury from the violations set forth in the complaint including consideration of the public benefit, if any, to be derived from a determination of the issues at trial. 15 U.S.C. 16(e)(1)(A)–(B). In considering these statutory factors, the court’s inquiry is necessarily a limited one as the government is entitled to ‘‘broad discretion to settle with the defendant within the reaches of the public interest.’’ United States v. Microsoft Corp., 56 F.3d 1448, 1461 (DC Cir. 1995); see generally United States v. SBC Commc’ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public interest standard under the Tunney Act); United States v. InBev N.V./S.A., 2009–2 Trade Cas. (CCH) ¶76,736, No. 08–1965 (JR), 2009 U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that the court’s review of a consent judgment is limited and only inquires ‘‘into whether the government’s determination that the proposed remedies will cure the antitrust violations alleged in the complaint was reasonable, and whether the mechanisms to enforce the Final Judgment are clear and manageable’’). As the United States Court of Appeals for the District of Columbia Circuit has held, under the APPA, a court considers, among other things, the relationship between the remedy secured and the specific allegations set forth in the government’s complaint, PO 00000 Frm 00004 Fmt 4701 Sfmt 4703 whether the decree is sufficiently clear, whether enforcement mechanisms are sufficient, and whether the decree may positively harm third parties. See Microsoft, 56 F.3d at 1458–62. With respect to the adequacy of the relief secured by the decree, a court may not ‘‘engage in an unrestricted evaluation of what relief would best serve the public.’’ United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460–62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have held that: [t]he balancing of competing social and political interests affected by a proposed antitrust consent decree must be left, in the first instance, to the discretion of the Attorney General. The court’s role in protecting the public interest is one of insuring that the government has not breached its duty to the public in consenting to the decree. The court is required to determine not whether a particular decree is the one that will best serve society, but whether the settlement is ‘‘within the reaches of the public interest.’’ More elaborate requirements might undermine the effectiveness of antitrust enforcement by consent decree. Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).16 In determining whether a proposed settlement is in the public interest, the court ‘‘must accord deference to the government’s predictions about the efficacy of its remedies, and may not require that the remedies perfectly match the alleged violations.’’ SBC Commc’ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need for courts to be ‘‘deferential to the government’s predictions as to the effect of the proposed remedies’’); United States v. Archer-DanielsMidland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court should grant due respect to the United States’ prediction as to the effect of proposed remedies, its perception of the market structure, and its views of the nature of the case). Courts have greater flexibility in approving proposed consent decrees than in crafting their own decrees following a finding of liability in a 16 Cf. BNS, 858 F.2d at 464 (holding that the court’s ‘‘ultimate authority under the [APPA] is limited to approving or disapproving the consent decree’’); United States vs. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the court is constrained to ‘‘look at the overall picture not hypercritically, nor with a microscope, but with an artist’s reducing glass’’). See generally Microsoft, 56 F.3d at 1461 (discussing whether ‘‘the remedies [obtained in the decree are] so inconsonant with the allegations charged as to fall outside of the ‘reaches of the public interest’ ’’. E:\FR\FM\29JNN2.SGM 29JNN2 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices sroberts on DSKD5P82C1PROD with NOTICES litigated matter. ‘‘[A] proposed decree must be approved even if it falls short of the remedy the court would impose on its own, as long as it falls within the range of acceptability or is ‘within the reaches of public interest.’’’ United States v. Am. Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff’d sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) (approving the consent decree even though the court would have imposed a greater remedy). As this Court has previously recognized, to meet this standard ‘‘[t]he government need not prove that the settlements will perfectly remedy the alleged antitrust harms, it need only provide a factual basis for concluding that the settlements are reasonably adequate remedies for the alleged harms.’’ United States v. Abitibi-Consolidated Inc., 584 F. Supp. 2d 162, 165 (D.D.C. 2008) (citing SBC Commc’ns, 489 F. Supp. 2d at 17). Therefore, the United States ‘‘need only provide a factual basis for concluding that the settlements are reasonably adequate remedies for the alleged harms.’’ SBC Commc’ns, 489 F. Supp. 2d at 17. Moreover, the Court’s role under the APPA is limited to reviewing the remedy in relationship to the violations that the United States has alleged in its complaint, rather than to ‘‘construct [its] own hypothetical case and then evaluate the decree against that case.’’ Microsoft, 56 F.3d at 1459. Because the ‘‘court’s authority to review the decree depends entirely on the government’s exercising its prosecutorial discretion by bringing a case in the first place,’’ it follows that ‘‘the court is only authorized to review the decree itself,’’ and not to ‘‘effectively redraft the complaint’’ to inquire into other matters that the United States did not pursue. Id. at 1459–60. As this Court recently confirmed in SBC Communications, courts ‘‘cannot look beyond the complaint in making the public interest determination unless the complaint is drafted so narrowly as to make a mockery of judicial power.’’ SBC Commc’ns, 489 F. Supp. 2d at 15. In its 2004 amendments to the Tunney Act,17 Congress made clear its 17 The 2004 amendments substituted the word ‘‘shall’’ for ‘‘may’’ when directing the courts to consider the enumerated factors and amended the list of factors to focus on competitive considerations and address potentially ambiguous judgment terms. Compare 15 U.S.C. 16(e) (2004) with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc’ns, 489 F. Supp. 2d at 11 (concluding that the 2004 VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 intent to preserve the practical benefits of utilizing consent decrees in antitrust enforcement, stating ‘‘[n]othing in this section shall be construed to require the court to conduct an evidentiary hearing or to require the court to permit anyone to intervene.’’ 15 U.S.C. 16(e)(2). The clause reflects what Congress intended when it enacted the Tunney Act in 1974, as Senator Tunney explained: ‘‘[t]he court is nowhere compelled to go to trial or to engage in extended proceedings which might have the effect of vitiating the benefits of prompt and less costly settlement through the consent decree process.’’ 119 Cong. Rec. 24,598 (1973) (statement of Senator Tunney). Rather, the procedure for the public-interest determination is left to the discretion of the court, with the recognition that the court’s ‘‘scope of review remains sharply proscribed by precedent and the nature of Tunney Act proceedings.’’ SBC Commc’ns, 489 F. Supp. 2d at 11. IV. Summary and Response to Public Comments During the 60-day public comment period, the United States received comments from the following firms or individuals: It’s My Party, Inc.,18 Jam Productions, Ltd., Jack Orbin, Middle East Restaurant, Inc., LIVE–FI Technologies, Inc., Kenneth de Anda, Chris Cantz, Joe Carlson, Don Crepeau, Jason Keenan, Tom Kuhr, and Gary T. Johnson. Upon review, the United States believes that nothing in the comments demonstrates that the proposed Final Judgment is not in the public interest. What follows is a summary of the comments, and the United States’ responses to the concerns raised in those comments. A. It’s My Party (‘‘IMP ’’) IMP, through its leader, Seth Hurwitz, and various affiliated companies, is the operator of the 9:30 Club in Washington, DC and the promoter at Merriwether Post Pavilion, an amphitheater in Columbia, Maryland. IMP is a competitor of Live Nation Entertainment in both the concert promotion and venue operation businesses. IMP has also filed an antitrust lawsuit against Live Nation, Inc. alleging that Live Nation’s pre-merger conduct harmed IMP. amendments ‘‘effected minimal changes’’ to Tunney Act review). 18 It’s My Party, Inc.’s (‘‘IMP’’) comment is attached as Exhibit A. The comment was filed on behalf of a number of firms, namely IMP, It’s My Amphitheatre, Inc., Seth Hurwitz (both of which are affiliated with IMP), Frank Productions, Inc., Sue McLean and Associates, and Metropolitan Talent, Inc. The National Consumers League joined IMP’s comment. See IMP Comment at 1 n.1. PO 00000 Frm 00005 Fmt 4701 Sfmt 4703 37655 IMP contends that the proposed Final Judgment will not effectively protect competition in the primary ticketing services market because the remedy does not address Live Nation Entertainment’s ‘‘domination of the promotion of popular music concerts by major artists and control of venues capable of hosting concerts by major artists.’’ 19 IMP argues that Live Nation’s vertical integration, culminating in its merger with Ticketmaster, has resulted in a firm that controls all aspects of the relationship between artists and their fans.20 IMP argues that to cement its competitive position, Live Nation has improperly expanded its promotion business by purchasing the rights to artists’ entire tours (or even several tours) in one deal, shutting out regional promoters such as IMP from the opportunity to bid on individual dates.21 IMP asserts that Live Nation’s share of the promotion market for ‘‘popular music concerts by major artists’’ is actually 70% and that Live Nation Entertainment’s dominance in promotions will therefore enable it to prevent effective competition in the primary ticketing services market, because ticketing competitors cannot promise to supply venues with the same breadth of concerts available to Live Nation Entertainment.22 IMP also argues that primary ticketing competitors cannot succeed if they cannot provide ticketing services to venues owned by Live Nation Entertainment itself.23 IMP argues that if the merger is to be allowed at all, additional remedies must be imposed to ameliorate the effect of Live Nation Entertainment’s dominance of the concert business.24 IMP’s allegations are not new. It articulated these concerns to the United States on several occasions during the investigation of the defendants’ merger. The United States believes that the proposed Final Judgment will remedy any loss of competition in primary ticketing services that would result from the merger. The United States did not find that, based on the evidence uncovered in the Department’s investigation, the merger would result in harm to any other relevant market, such as concert promotion, venue services, or venue management, and therefore does not believe that remedies in such markets are appropriate. 19 Id., at 2. id., at 8–9. 21 See id., at 9. 22 See e.g., id., at 14, 19–20. 23 See id., at 24. 24 See id., at 26–27. 20 See E:\FR\FM\29JNN2.SGM 29JNN2 37656 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices sroberts on DSKD5P82C1PROD with NOTICES 1. Effect of Vertical Integration on Primary Ticketing Services Market Contrary to IMP’s assertion, the United States is well aware of the potential competitive impact of vertical integration on the primary ticketing services market and designed its remedy with that potential effect in mind. It is well recognized that vertical integration can produce procompetitive benefits.25 In the present case, vertical integration of complementary businesses in the live entertainment industry reduces the number of firms that must be compensated for a concert. This creates incentives for the vertically integrated entity to reduce primary ticketing services prices and service fees. The United States, however, was well aware of the concern that it may become more important for ticketing service companies to also provide live entertainment content in order to compete in primary ticketing for major concert venues. Accordingly, the proposed Final Judgment establishes AEG—Live Nation’s largest competitor in the concert promotion business—as a credible, vertically integrated competitor in the primary ticketing services market.26 Therefore, to the extent it becomes important over the next several years for ticketing companies to provide access to content in order to compete in primary ticketing, AEG’s established concert promotion business will make it wellpositioned to provide a viable competitive alternative to the merged firm. AEG will also benefit from its long-standing relationships with venues developed through its concert promotion business and through its venue management operations. Its venues and its concert promotion business will also provide scale to AEG’s own ticketing business or to another ticketing rival to Live Nation Entertainment. The availability of AEG’s concerts to its own primary ticketing 25 See Fruehauf Corp. v. FTC, 603 F.2d 345, 351– 52 (2d Cir. 1979) (‘‘A vertical merger * * * does not * * * automatically have an anticompetitive effect * * * or reduce competition * * * ’’ and ‘‘may even operate to increase competition’’); see also, Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law; An Analysis of Antitrust Principles and Their Application ¶ 1020 (3d ed. 2009) (‘‘Antitrust Law’’) (‘‘Most instances of vertical integration, including those that result from mergers, are economically beneficial.’’)’’; Michael Riordan & Steven C. Salop, Evaluating Vertical Mergers; A Post-Chicago Approach, 63 Antitrust L.J. 513, 522–27 (1995) (discussing a variety efficiency benefits from vertical mergers, and summarizing that ‘‘[a] variety of efficiency benefits that can reduce costs, improve product quality, and reduce prices may ensue from vertical mergers’’). 26 IMP itself acknowledges that AEG is Live Nation’s most significant competitor in the concert promotion business. Id. at 21. VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 business or to another primary ticketer undermines IMP’s argument 27 that the merged firm will control so much content that venues will be forced to use Ticketmaster’s ticketing services. The United States was also well aware that there are other avenues venues may pursue for ticketing services. Venues may increasingly look to venue management companies to provide a range of services, including primary ticketing. The sale of the Paciolan ticketing business to Comcast-Spectacor creates significant additional competitive stimulus to the ticketing market that will, in combination with the AEG licensing agreement, ensure that the proposed Final Judgment restores the competition that may otherwise have been lost as a result of the merger. Comcast-Spectacor is wellplaced to capitalize on the venue relationships it developed as an existing provider of venue management, concessions, and fan marketing services. Paciolan and New Era have historically pursued a differentiated ticketing strategy under which their venue customers control all ticketing fees. New Era plans to continue competing using this business model. With its vertically integrated operation and venue-friendly business model, Comcast-Spectacor is well-placed to compete against Live Nation Entertainment following the merger. Comcast-Spectacor already participates in many aspects of the live entertainment business. Its willingness to invest in the ticketing business by purchasing Paciolan, and its commitment to providing a competitive alternative to Ticketmaster, again suggests that IMP’s analysis of the ticketing services market is flawed. If IMP were correct, Comcast-Spectacor as a venue owner and manager of venues for third parties, would have no choice but to acquire primary ticketing services from the merged entity, as it would risk the loss of all acts promoted by Live Nation by not selecting Live Nation Entertainment as its ticketer.28 Like AEG, Comcast-Spectacor has fundamentally pursued a competitive strategy at odds with IMP’s predictions of the future of the primary ticketing business. As described above in Part II.B, the conduct provisions in the decree will bolster the structural relief that establishes Comcast-Spectacor and AEG as primary ticketing services competitors. In particular, Section IX.A of the proposed Final Judgment ensures that the merged firm cannot retaliate against or refuse to provide concerts to 27 See 28 See PO 00000 id., at 14–15, 17–26. id., at 24–25. Frm 00006 Fmt 4701 Sfmt 4703 venues that choose an alternative to Ticketmaster for primary ticketing services. This and other provisions underscore the carefully constructed nature of the remedy contained in the proposed Final Judgment and further belie the argument presented by IMP 29 that the United States failed to account for the importance of content or vertical integration to the primary ticketing services market. 2. Effect of Vertical Integration on Concert Promotion Much of IMP’s concerns with Live Nation have nothing to do with the merger. Ticketmaster was not in the concert promotion business. As the United States discusses in more detail below in its response to Jam’s comment,30 the United States thoroughly investigated the effect of the vertical merger of Live Nation’s promotion business with Ticketmaster’s ticketing and artist management businesses. Based on the evidence uncovered in the Department’s investigation, the United States did not find that the merger would significantly harm competition in the concert promotion business. 3. The Effect of Live Nation’s Concert Promotion Business on Primary Ticketing IMP contends that Live Nation dominates concert promotion (and thus can leverage that dominance into primary ticketing), based on the allegation that Live Nation has a 70% market share in the market for the promotion of ‘‘popular music concerts’’ by ‘‘major artists.’’ 31 In the United States’ investigation of this merger, the government looked into Live Nation’s share of concert promotion. The United States used data from Pollstar, an aggregator of live entertainment data widely used by those in the industry. This data showed Live Nation with a 33% market share of concert revenue at major concert venues. The United States finds that IMP’s market share calculation is not helpful because it is based on a market definition that is not well-suited to analyzing how the merger of Ticketmaster and Live Nation would affect the ticketing business.32 First, IMP argues that the market should be restricted to ‘‘popular music’’ as distinct from gospel, jazz, blues, and 29 See id., at 14–15. infra § IV.B.1. 31 Id. at 17–21. 32 The United States expresses no view on whether the provision of promotional services to ‘‘major artists’’ for ‘‘popular music concerts’’ could be considered a proper antitrust market in other contexts. 30 See E:\FR\FM\29JNN2.SGM 29JNN2 sroberts on DSKD5P82C1PROD with NOTICES Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices other musical and entertainment genres that are reported to Pollstar as ‘‘concert revenues.’’ 33 To support this distinction, IMP refers to the crosselasticity of demand for consumers of different types of concerts.34 However, this is entirely the wrong approach for analyzing a merger in the market for the provision of primary tickets services to major concert venues. While consumers may have strong preferences for particular types of concerts—and for specific artists within a particular genre—venues purchase primary ticketing services for the distribution of tickets to concerts. From the perspective of a venue, the relevant consideration is how much revenue and profit it can earn from an event, not the genre of music the artist performs. A gospel show and rock show that earn the same revenues for a venue are in fact potential substitutes. For example, Merriweather Post Pavilion, IMP’s own venue, hosted a jazz festival the weekend of June 4 and is hosting a rock festival on June 19. Therefore, it is entirely appropriate to look at the entire set of entertainment options for venues in assessing whether Live Nation so dominates concert promotion that it will restrain competition in the market for primary ticketing services. Second, while Live Nation is clearly the largest promoter in the country, Pollstar figures include Live Nation promotions within its own venues. Live Nation is essentially the exclusive promoter within its own amphitheaters and clubs, which account for a substantial portion of the overall concert sales reported by Live Nation in Pollstar. The concerts Live Nation promotes internally have never been available to third party venues. Thus, the more relevant figures are likely to be Live Nation’s share of concert promotion outside of its own venues, as that share is a better measure of Live Nation’s significance as provider of content to independent venues, and thus of Live Nation’s ability to ‘‘force’’ venues to use Ticketmaster after the merger. According to 2008 Pollstar data, Live Nation in fact only accounts for 23% of the concerts promoted at major concert venues it does not own, measured by revenue.35 Live Nation’s leading position in the promotion market is driven to a large degree by its ownership of a number of key venues. While the relationship between Live 33 IMP Comment at 19. at 18–21. 35 Measured by number of tickets sold, which IMP claims is the superior measure, Live Nation accounts for just 18% of the concerts promoted at major concert venues not owned or operated by Live Nation. 34 Id. VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 Nation’s venues and its promotion business is relevant to a Live Nation competitor such as IMP, independent venues are not beholden to Live Nation for content to nearly the degree that IMP would suggest.36 Third, IMP contends that only tickets to ‘‘concerts by major artists (with an average attendance of between 8,000 to 30,000 fans)’’ should be counted in calculations of Live Nation’s share of the promotions market.37 According to IMP, it is appropriate to focus exclusively on these ‘‘major artists’’ because they are the ones most likely to appear in amphitheaters. This market share calculation, however, exacerbates the flaw identified in the previous paragraph by focusing in on a set of concerts where Live Nation’s market share is exceptionally high due to its ownership of venues, rather than due to its significance as a promoter for independent venues. This calculation does not shed any light on the importance of Live Nation’s promotion business to the market for providing ticketing services to non-Live Nation amphitheaters or to the many other types of concert venues such as clubs, theatres, arenas, and stadiums that also employ primary ticketing companies to sell concert tickets. Though IMP excludes tickets sold at those venues from its calculation of Live Nation’s market share, that choice obscures the relationship between Live Nation’s position as a leading concert promoter and the likely effects of its merger with Ticketmaster on buyers of primary ticketing services. In the United States’ view, IMP not only overstates the strength of Live Nation’s promotion position, but may also overstate the significance of concert promotion to the overall market for primary ticketing services. IMP provides no evidence that decisions by venues in choosing a primary ticketing company will be driven solely or primarily or even significantly by the number of concerts promoted by the merged entity. Before the merger, Live Nation based its entry strategy into the ticketing business on its ability to promise content to venues. The United States’ Amended Complaint does not argue, however, that this was or is the only possible strategy for competing in the ticketing business. For example, the ticketing needs of a venue that hosts sporting events will be likely driven as much by the needs of the teams they host as they are by their interest in filling dates between sporting events with major concerts. A major arena with 36 See 37 Id. PO 00000 IMP Comment at 24–25. at 20. Frm 00007 Fmt 4701 Sfmt 4703 37657 a professional basketball and/or hockey team will need its ticketer to handle season ticket sales of sports tickets and provide marketing support for sports ticketing sales. Indeed, this is a significant segment of the market, as sixty-six major concert venues host major league professional sports teams and many of the remaining major concert venues house other sports teams (such as minor league hockey franchises or college sports teams) which demand robust season ticketing abilities. AEG and Comcast-Spectacor own, operate, and manage professional sports teams and venues in which professional sports teams play. Given that, as noted above, many of the major concert venues also host sports teams, both AEG and Comcast-Spectacor will be wellpositioned to capitalize on their expertise in sports and venue management to compete for ticketing contracts in these venues. Paciolan’s historical strength is also in providing ticketing for sports franchises; when combined with Comcast-Spectacor’s strength in providing venue management, concession, and marketing services to arenas and other buildings, the United States believes the result is a viable competitor that, in combination with the entry of AEG into primary ticketing, will restore any competition in primary ticketing that may be lost as a result of the merger. The United States respectfully suggests that IMP’s analysis of the market is too focused on IMP’s own issues in competing with Live Nation in the amphitheater business to inform analysis of the merger’s likely effects. IMP exaggerates Live Nation’s position in the concert promotion market by ignoring many venues that purchase primary ticketing services and many artists that play at those venues. A view of Live Nation’s market position more tailored to assessing the competitive effects of the proposed merger reveals that AEG and Comcast-Spectacor can fully compete with Live Nation in the primary ticketing services market. IMP’s comment therefore casts little light on competition in the actual product market alleged in the United States’ complaint—the provision of primary ticketing services to major concert venues. 4. Ability To Provide Ticketing Services to Live Nation Venues IMP contends that Ticketmaster’s competitors, including AEG and Comcast-Spectacor, will be unable to compete in the primary ticketing market if they are unable to provide primary ticketing services to venues that are owned or operated by the merged E:\FR\FM\29JNN2.SGM 29JNN2 37658 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices firm.38 IMP provides no support for this statement other than a general assertion that without access to Live Nation’s venues, competitors will be unable to penetrate the market and will not be able to prevent Live Nation from charging ‘‘supra competitive ticket service fees.’’ 39 The United States concluded that ticketing companies do not need access to Live Nation’s own ticketing volume in order to accumulate sufficient scale in the ticketing business to provide competitive pricing to venues. AEG’s and Comcast-Spectacor’s purchases of the divestiture assets supports this conclusion. Venues not owned or operated by Live Nation— including over 400 of the 500 major concert venues—account for a substantial majority of major concert venues and revenues and provide a substantial base of business for competing ticketing companies to target. sroberts on DSKD5P82C1PROD with NOTICES 5. IMP’s Own Choice of Primary Ticketing Service Provider IMP’s own choice of ticketing provider—and its ability to choose— underscores the degree to which IMP’s concerns are overstated. Shortly after the Amended Complaint and proposed Final Judgment in this matter were filed, Seth Hurwitz, the main proprietor of IMP and its affiliates, announced that he was terminating Merriweather Post Pavilion’s ticketing contract with the local Ticketmaster affiliate and entering a contract with TicketFly, a recent entrant into the primary ticketing services market.40 At the same time that Mr. Hurwitz alleges that the merger eliminated competition for primary ticketing services, IMP left Ticketmaster for a competing ticket company: ‘‘ ‘Hopefully this move will demonstrate to people it’s possible to have a choice,’ he said. ‘We wanted to make that choice’ ’’ 41 It is precisely this choice that the Final Judgment seeks to facilitate, whether that choice is exercised to select AEG, Comcast-Spectacor, another ticketing company such as TicketFly, or even Ticketmaster. 6. Need for Additional Remedial Measures IMP asserts that additional remedial measures are required to protect competition in the primary ticketing market if the merger of Live Nation and Ticketmaster is permitted. IMP proposes that: (1) The merged firm be prevented 38 IMP Comment at 14, 24. at 24. 40 See Merriweather drops Ticketmaster, signs with Ticketfly, Feb. 18, 2010, available at http:// www.ticketfly.com/merriweather-post-pavilioncomes-to-ticketfly. 41 Id. 39 Id. VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 from either offering any inducement to artists it manages or promotes to appear at venues it controls or punishing an artist who works with a competing promoter or venue; (2) the merged firm be prevented from insisting that rival promoters and venue owners share profits with Live Nation; and (3) the merged firm be prohibited from promoting or hosting more than 75% of any artist’s tour.42 None of these proposals relate to the primary ticketing services market. Rather, all of them are designed to dramatically alter competition in the concert promotion and venue operation businesses, markets where the proposed merger was not challenged by the Department in its Amended Complaint in this case. Moreover, some of these proposals, such as the limitations on exclusive promotion contracts, would likely inhibit efficient competition in the concert promotion and venue operation markets more than enhance competition. The proposals would prohibit Live Nation from engaging in potentially efficient vertical integration or bundling without analysis of whether such conduct has an adverse effect on competition either in general or in particular circumstances. IMP also argues that the merged firm should be required ‘‘to return at the request of any promoter all data relating to concerts for which Ticketmaster provided the ticketing and to delete any such information from its electronically stored data and files.’’ 43 The United States recognizes the value of information about the price and volume of past ticket sales for making decisions about future concerts, and took this into consideration in fashioning remedies in this matter. Section IX.C of the proposed Final Judgment requires that Ticketmaster provide a copy of ticketing data to ticketing clients if they choose to leave Ticketmaster, but does not require Ticketmaster to take the additional step suggested by IMP 44 and to purge the data from its files.45 Aside from the affirmative obligation imposed by Section IX.C, each party’s rights and obligations regarding the ticketing data will be governed by the contract between Ticketmaster and the venue. The United States does not believe that IMP’s proposal 46 is necessary to ensure 42 IMP Comment at 26–27. at 27. 44 Id. at 27. 45 Instead, Section IX.B of the proposed Final Judgment protects venue owners who are also independent promoters by prohibiting the sharing of competitively sensitive client ticketing data with Live Nation promoters and Front Line artist managers. 46 IMP Comment at 27. 43 Id. PO 00000 Frm 00008 Fmt 4701 Sfmt 4703 that venues are able to leave Ticketmaster for alternative ticketing providers. So long as venues have access to their data, they will be free to switch ticketing providers. B. Jam Productions Jam Productions (‘‘Jam’’) is a concert promoter based in Chicago, Illinois, and a competitor of Live Nation. Jam’s comment contends that the merger is ‘‘vertical integration on steroids’’ and will ‘‘suppress or eliminate competition in many segments of the music industry including rival concert promoters; primary and secondary ticketing companies; artist management firms; talent agencies; venue management companies; record companies; artist merchandise, apparel and licensing companies; artist fan clubs and sponsorship/marketing companies.’’ 1. The Vertical Integration Concern While Jam’s comment provides more in the way of a list of alleged past Live Nation misconduct than a cogent analysis of the merger in light of the antitrust theory and precedent applicable to vertical mergers, the core argument advanced by Jam is nonetheless clear: instead of alleging a competitive problem from the combination of two competing ticketing companies (that is, challenging the deal as an unlawful horizontal merger), the Department should have brought a case alleging that competition in nonticketing markets would be reduced by the combination of lines of business that do not compete, but where one line supplies an input for the other (that is, challenging the deal as an unlawful vertical merger). This argument, however, is not a valid basis for rejecting a proposed remedy during Tunney Act review. As explained above, in a Tunney Act proceeding the Court must evaluate the adequacy of the remedy only for the antitrust violations alleged in the complaint. See United States v. Microsoft Corp., 56 F.3d 1448, 1459 (DC Cir. 1995). The Tunney Act does not usurp the Department’s prosecutorial discretion to choose what type of case to bring; courts ‘‘cannot look beyond the complaint * * * unless the complaint is drafted so narrowly as to make a mockery of judicial power.’’ SBC Commc’ns, 489 F. Supp. 2d at 15. Jam, however, seeks to ‘‘construct [its] own hypothetical case and then evaluate the decree against that case’’—precisely the approach specifically forbidden in Tunney Act proceedings by the DC Circuit. Microsoft, 56 F.3d at 1459. During its investigation, however, the United States did carefully consider E:\FR\FM\29JNN2.SGM 29JNN2 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices sroberts on DSKD5P82C1PROD with NOTICES Jam’s allegations 47 and determined that it could not prove that the vertical integration resulting from the merger would significantly harm competition in the concert promotion market or any market other than primary ticketing services. To be sure, vertical mergers can reduce competition under certain circumstances, for example by foreclosing rivals from access to an input critical to the ability to compete, raising the costs of rivals by preventing them from achieving efficient scale, or raising entry barriers. Vertical mergers can, however, also be procompetitive by bringing together complementary businesses and making the merged firm a more efficient competitor.48 The United States analyzed whether the addition of Ticketmaster’s ticketing business and Front Line artist management business to Live Nation’s concert promotion business would adversely effect competition in the concert promotion market. The United States concluded this was unlikely for two primary reasons. First, although the merged firm will remain an important player in the artist management business, it will not have the ability to exclude promotion competitors from the market. Even if, in theory, all artists managed by Front Line refused to work with promoters other than Live Nation, a substantial majority of the artists are not affiliated with the merged firm and will be fully available for competing concert promoters to present.49 Moreover, Front Line is unlikely to withhold all of the artists it manages from competing promoters. Front Line has no legal right to dictate to its artists which promoters they can use. In fact, Front Line has a fiduciary obligation to obtain the best deals for its artists, regardless of the interests of other Front Line-affiliated companies. In addition, artist management services are typically provided pursuant to agreements that can be terminated by the artist at will. If the merged firm acted or threatened to act contrary to the 47 See id. at 6 (acknowledging that during the investigation JAM raised the same issues with the United States that it provides in its comments). 48 Jam may have been concerned that the merger would make LiveNation a more efficient competitor to it when it says: ‘‘The critical mass created by the complete vertical integration of the live music industry by Live Nation and Ticketmaster puts all its competitors at a distinct competitive disadvantage.’’ Id. at 19. Of course, having companies become more efficient at providing their goods or services is generally procompetitive, not anticompetitive. 49 According to Pollstar data, Front Line artists accounted for just under 25% of gross sales for the top 50 tours in 2008 in North America. Including artists subject to long-term ‘‘360-degree’’ promotional agreements with Live Nation raises the merged firms’ share to approximately 30%. VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 interests of its managed artists, the artists could simply sign with another artist manager. There are countless managers capable of handling acts of all sizes; indeed, some of the largest artist management firms represent only one artist. In light of these factors, the United States concluded it was unlikely that the combination of Front Line with Live Nation restrict competition in the concert promotion business. Second, artists would have the ability and incentive to prevent the merged firm from exercising market power in concert promotion. There are two primary ways that the merged firm could attempt to exercise such market power: (1) Reducing compensation paid to artists (or otherwise adversely altering the terms on which promotional services are provided to artists); or (2) restricting output—i.e., the number of concerts—in an effort to raise prices to consumers. In both cases, artists would have the incentive to prevent the merged firm from harming their own economic interests. Artists would also have the ability to turn to a large number of competing concert promoters, including AEG and many regional promoters, who would gladly seize on the opportunity to expand their promotion business at the expense of the merged firm. In addition to considering the impact of the merger on the concert promotion market, the United States also analyzed the possibility that the merger would reduce competition in the market for operating venues. The United States did not rule out the possibility that Live Nation’s ownership of many key venues throughout the country could give the merged firm some market power. However, Ticketmaster owned no venues and therefore the merger does not result in any increase in the number of venues owned or operated by Live Nation. In other words, whatever market power Live Nation had in concert promotion or venues before the merger would not be enhanced by its merger with Ticketmaster. Therefore, the addition of Front Line and the Ticketmaster ticketing business to Live Nation seems unlikely to alter the competitive dynamics in the venue market. As noted above, Front Line artists account for a fairly modest share of the concert business, and the merged firm does not ‘‘control’’ the Front Line artists to the degree that it can prevent them from performing at competing venues. Contrary to Jam’s contention, the Supreme Court’s 1948 Paramount decision does not compel the United States to challenge this PO 00000 Frm 00009 Fmt 4701 Sfmt 4703 37659 merger under stare decisis.50 In Paramount, the Supreme Court was not determining the effects of a vertical merger. Rather it was fashioning a remedy for a long-running price fixing agreement among competing movie studios that had a vertical aspect in that the movie studies used their ownership of movie theaters to facilitate their price fix. In that context, the Supreme Court instructed that the court-ordered remedy should be tailored to the anticompetitive conduct at issue and, under the facts in that case, determined that the defendant studios had to divest themselves of their movie theaters in order to ‘‘uproot’’ the long-running price fixing agreement. In this case, consistent with Paramount, the United States fashioned a remedy that was tailored to the anticompetitive conduct alleged in the Amended Complaint.51 2. Adequacy of Consent Decree Provisions Jam contends that the anti-retaliation provision of the proposed Final Judgment, Section IX.A, will be difficult to enforce.52 The United States does not agree. Section XI of the proposed Final Judgment contains robust mechanisms enabling the United States to investigate any potential violations of the proposed Final Judgment’s terms. The United States also has significant experience in enforcing a similar anti-retaliation provision in the Final Judgment in United States v. Microsoft.53 Jam contends that AEG and ComcastSpectacor may not succeed due to Ticketmaster’s ‘‘superior technology’’ and the vertical integration of Ticketmaster and Live Nation.54 However, Ticketmaster’s software will power the AEG-branded website in the first stage of the divestiture,55 and AEG has the right to obtain a perpetual license to Ticketmaster’s software in the second stage.56 Consequently, AEG will 50 Jam Comment at 22 (‘‘So the lawyers who work for the US government are consciously choosing the [sic] forget about the Stare Decisis doctrine they are all taught in law school.’’) (citing United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948)). 51 Jam’s citations to Eastman Kodak v. Image Technical Servs., 504 U.S. 451 (1992) and Complaint, United States v. MCA, Civ. No. 62–942– WM (filed July 13, 1962) are similarly not instructive. Eastman Kodak is not a merger case and MCA was a consent decree designed to address a long-running anticompetitive conspiracy, only one part of which involved a vertical merger. 52 Jam Comment at 20. 53 Final Judgment, United States v. Microsoft, Civ. No. 1:98-cv-01232 (D.D.C.) (entered Nov. 12, 2002). The Microsoft Final Judgment prohibits the company from retaliating against any computer software or hardware company that works with a competitor to Microsoft’s Windows operating system or its related platforms. Id. §§ III.A, III.F.1. The United States has effectively enforced these provisions of the Microsoft Final Judgment with minimal difficulty and controversy. 54 Jam Comment at 21. 55 Proposed Final Judgment § IV.A.2. 56 Id. § IV.A.1. E:\FR\FM\29JNN2.SGM 29JNN2 37660 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices numerous other venues) and offers a completely different pricing model from Ticketmaster, enabling the venue to control all service fees, which will put it in a strong position to provide a competitive alternative to Ticketmaster. Orbin is also ‘‘very skeptical’’ that AEG will be able to succeed as a primary ticketer.62 Orbin contends that because the proposed Final Judgment requires Ticketmaster to license its Host platform to AEG, that AEG will be ‘‘fully beholden and dependent on Ticketmaster.’’ 63 This is not accurate. AEG has the right to obtain a copy of the Ticketmaster Host Platform and run it C. Jack Orbin on its own systems.64 During the transition period when Ticketmaster Jack Orbin is the founder and operates a private label ticketing service President of Stone City Attractions, a on behalf of AEG, the proposed Final regional concert promoter in the Judgment prohibits Ticketmaster from Southwestern United States that impeding AEG’s ability to compete. competes with Live Nation. Orbin Specifically, Section IV.A.2 requires contends that the proposed Final Ticketmaster to provide an operational Judgment will ‘‘drive independent system within six months with a concert promoters out of business’’ and website that has an AEG-determined will reduce competition in the ‘‘live entertainment industry.’’ 57 Orbin argues branding, look, and feel; compels Ticketmaster at the request of AEG to the proposed Final Judgment suffers post links on its website to events sold from three faults: (1) ‘‘It fails to secure on the private label ticketing service; relief for the consumer by eliminating and explicitly prohibits Ticketmaster competition of independent concert promoters’’; (2) ‘‘The relief fails to ensure from having any right or ability to set adequate competition for primary ticket the ticketing fees charged by AEG. If Ticketmaster does not comply, the sales and for concert promotion, and is United States can and will move the insufficient to allow entry into these Court to enforce the provisions of markets’’; and (3) ‘‘It fails to adequately Section IX.A through civil and criminal prevent [the merged firm] from contempt proceedings, as appropriate. acquiring customer data from Orbin argues that the proposed Final independent concert promoters.’’ 58 As Judgment itself facilitates additional noted above, these arguments are not a vertical integration and will make it proper subject for Tunney Act review more difficult for non-vertically because they assert that the United integrated firms to compete.65 Vertical States should have challenged the integration, however, is merely one merger on different grounds than those strategy for successful competition in alleged in the Amended Complaint.59 the primary ticketing business. The To the extent the comment relates to proposed Final Judgment ensures there the market for primary ticketing will be two significant competitors to services, it does not raise issues that Ticketmaster that offer different value suggest that entry of the proposed Final propositions through their respective Judgment would not be in the public areas of expertise. So long as interest.60 Orbin assumes, without support, that Comcast-Spectacor will be competition is restored to the primary ticketing market, ticketing companies unable to expand the use by venues of will be able to compete along a wide the Paciolan platform beyond the range of attributes. For example, some venues in which it is currently used.61 competitors may focus on the additional However, Paciolan is an existing products they can offer in conjunction successful ticketing platform that will with primary ticketing, while others now be independent of Ticketmaster may specialize in innovative ticketing and able to compete with Ticketmaster software that, standing alone, provides for primary ticketing services contracts. significant value to venues. Paciolan has a large client base that Finally, Orbin contends that the includes major concert venues (and firewall established by Section IX.B is too limited to protect the data of 57 Orbin Comment at 3 (attached as Exhibit C). sroberts on DSKD5P82C1PROD with NOTICES be well-positioned to provide a technologically competitive alternative to Ticketmaster. AEG is also a competitor in the concert promotion business with access to content, as the United States explains above in response to IMP’s comments. ComcastSpectacor, which owns and operates a number of major concert venues, will also be a vertically integrated primary ticketing competitor. For these reasons, that the proposed Final Judgment will ensure that AEG and Comcast-Spectacor will be robust competitors in the ticketing business. 58 Id. at 4. United States v. Microsoft Corp., 56 F.3d 1448, 1459 (DC Cir. 1995). 60 Orbin Comment at 5–6. 61 Id. 59 See VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 at 6. at 6. 64 Proposed Final Judgment § IV.A.1. 65 Orbin Comment at 6. independent concert promoters, especially in comparison to a firewall adopted in a recent FTC decree involving PepsiCo, Inc., and that it lacks ‘‘any mechanism [for] policing the firewall.’’ 66 As an initial matter, the firewall set forth in Section IX.B prohibits the sharing of information between Live Nation Entertainment’s ticketing business and its promotions and artist management businesses. Live Nation has technical safeguards in place to prevent the disclosure of sensitive information to those not appropriately authorized to access it. Live Nation also has created a corporate policy governing access to this information, disseminated that policy to all employees, and instituted a training program to ensure that those with access to sensitive data understand and uphold their obligations. Since the entry of the temporary order requiring the merged entity to comply with the proposed Final Judgment, the Department has been closely monitoring the merged entity and its ongoing efforts to develop methods to audit compliance and to submit to the Department detailed annual reports about such compliance. Orbin wrongly contends that the proposed Final Judgment lacks ‘‘any mechanism of policing the firewall.’’ Section XI of the proposed Final Judgment provides the United States with a full panoply of tools to ensure compliance with the firewall, including the ability to demand documents and interview or depose any employee. The United States may also require the merged firm to provide written reports, including an independent audit or analysis, on any matters relating to the proposed Final Judgment. As discussed above, the United States has already engaged with the parties on the exact mechanisms in place to ensure compliance with the firewall, and the United States is confident that the proposed Final Judgment provides it with all the tools it needs to enforce the firewall provision. A comparison of the firewall in this settlement to that in the FTC PepsiCo case is not particularly instructive. Unlike in PepsiCo, the firewall in this case is not the central relief contained in the proposed Final Judgment. The two divestitures are the core relief and the behavioral remedies are designed to supplement that relief in the proposed Final Judgment. This is a result of the fact that, unlike in PepsiCo, the United States did not allege as a theory of harm in its Amended Complaint that a 62 Id. 63 Id. PO 00000 Frm 00010 Fmt 4701 Sfmt 4703 66 Id. at 7 (citing In the Matter of PepsiCo., Inc., FTC File No. 091 0133 (Feb. 26, 2010) (attached to Orbin Comment)). E:\FR\FM\29JNN2.SGM 29JNN2 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices vertical merger would result in an anticompetitive information exchange. The Department instead alleged that the merger would eliminate direct, horizontal competition between Ticketmaster and Live Nation in the provision of primary ticketing services to major concert venues. D. Middle East Restaurant, Inc. Middle East Restaurant, Inc. (‘‘Middle East Restaurant’’) operates a restaurant and night club in Cambridge, Massachusetts, and competes against Live Nation in the Boston area.67 Ticketmaster provides primary ticketing services to the company.68 Middle East Restaurant requests that the proposed Final Judgment be modified to allow Ticketmaster’s existing ticketing clients to terminate their contract and sign with a competing ticketing company.69 Middle East Restaurant is concerned that it will be at a competitive disadvantage with its promotions/venue competitor in the concert business providing its ticketing services and therefore profiting from its concerts and potentially having access to its data.70 Middle East Restaurant does not allege that its proposal is related to competition in the ticketing market. Moreover, it is not necessary to allow existing Ticketmaster clients to terminate their contracts in order to restore competition in the primary ticketing market. Since the average ticketing contract is three to five years in length, every year there is a substantial volume of contracts up for bid and available to be pursued by AEG, Comcast-Spectacor, and other ticketing competitors. Finally, while Middle East Restaurant contends there are ‘‘no systems or penalties in place to protect The Middle East’s customer’s data,’’ 71 the firewall provision set forth in Section IX.B will prevent its ticketing data from being shared with promotions personnel within the merged entity. sroberts on DSKD5P82C1PROD with NOTICES E. Additional Comments Finally, the United States received comments from LIVE–FI Technologies, Inc. and the following individuals: Kenneth de Anda, Chris Cantz, Joe Carlson, Don Crepeau, Jason Keenan, Tom Kuhr, and Gary T. Johnson (collectively ‘‘citizen complainants’’).72 LIVE–FI’s comment argues that the proposed Final Judgment: (1) ‘‘Omit[s] 67 Middle East Restaurant Comment at 1 (attached as Exhibit D). 68 Id. 69 Id. 70 Id. 71 Id. 72 These comments are attached Exhibits E through L. VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 all discussion of the negative anticompetitive impact the merger will have upon live event and recording distribution particularly electronic broadcasts and transmissions;’’ 73 (2) hurts small companies because the divestiture assets were divested to large companies; 74 and (3) that through it this Court has ‘‘failed to adopt explicit protocols and safeguards to ensure that private litigants and smaller entities maintain equal and fair access to the Courts to protect their rights and remedies against the individual defendants and the merged entity.’’ 75 The citizen complainants generally argue that they paid high service fees, paid hidden service fees, that the merged entity does not make all seats at concerts available for purchase, that the merged entity is a monopoly, and/or that the Department of Justice generally failed to protect consumers. None of these comments raise any substantive issues regarding the efficacy of the relief contained in the proposed Final Judgment to remedy the competitive harm to the primary ticketing services market alleged in the Amended Complaint. V. Conclusion After careful consideration of the public comments, the United States concludes that entry of the proposed Final Judgment will provide an effective and appropriate remedy for the antitrust violations alleged in the Amended Complaint and is therefore in the public interest. Accordingly, after the comments and this Response are published, the United States will move this Court to enter the proposed Final Judgment. Dated: June 21, 2010. Respectfully submitted for plaintiff United States. Aaron D. Hoag, Ann Marie Blaylock (DC 967825), Attorney, U.S. Department of Justice, Antitrust Division, 450 Fifth Street, NW., Suite 4000, Washington, DC 20530. Telephone: (202) 514–5038. Fax: (202) 514–7308. E-mail: aaron.hoag@usdoj.gov. In the United States District Court for the District of Columbia United States of America, et al., Plaintiffs v. Ticketmaster Entertainment, Inc. and Live Nation, Inc., Defendants. Case: 1:10–cv–00139. Assigned to: Collyer, Rosemary M. John R. Read, Esquire, 73 LIVE–FI 74 Id. Comment at 1. at 2. 75 Id. PO 00000 Frm 00011 Fmt 4701 Sfmt 4703 37661 Chief, Litigation III Section, Antitrust Division, United States Department of Justice, 450 Fifth Street, NW., Suite 2000, Washington, DC 20530. It’s My Party, Inc. (‘‘I.M.P.’’), It’s My Amphitheatre, Inc. (‘‘I.M.A.’’), Seth Hurwitz, Frank Productions, Inc., Sue McLean and Associates, Metropolitan Talent, Inc., each of which promotes, and/or operates or books venues for, popular music concerts, and the National Consumers League 1 (collectively, the ‘‘Objectors’’) herewith object to the Proposed Consent Judgment between the plaintiffs in the above-captioned action and Live Nation, Inc. (‘‘Live Nation’’) and Ticketmaster Entertainment, Inc. (‘‘Ticketmaster’’). Preliminary Statement The Department of Justice (‘‘DOJ’’) and several state Attorneys General (collectively, the ‘‘Government’’) have challenged the merger of Live Nation and Ticketmaster to form Live Nation Entertainment, Inc. (‘‘LNE’’) on the grounds that this merger would substantially lessen competition in the market for the provision of primary, remote ticketing services in the United States. The Government has resolved this challenge by agreeing to a Proposed Consent Judgment (the ‘‘Consent Judgment’’) whose principal terms require Ticketmaster to grant a perpetual license to its ticketing software and divest its entire Paciolan 1 The National Consumers League (NCL) is part of the coalition of consumer groups, independent promoters, ticket sellers and 50 members of Congress opposing the merger between Ticketmaster and Live Nation. Despite our coalition’s efforts, the Department of Justice went forward in approving the merger. While it joins in these objections, the NCL also notes that, as a consumer organization, it believes the merger should not have been approved and that further concentration of the live performance ticketing industry will ultimately prove harmful to consumers, who will see a steady rise in the cost of concerts and other live events, an increase in vaguely defined fees and charges, which have dramatically pushed up the price of tickets over the past decade. Indeed, the average price of a ticket to one of the top 100 tours soared to $62.57 in 2009 from $25.81 in 1996, according to Pollstar, far outpacing inflation. (David Segal, Calling Almost Everyone’s Tune, N.Y. Times, April 23, 2010.) Indeed, since the merger’s approval in late January of 2010, Live Nation Entertainment, Inc. flexed its dominance. It bid on virtually every artist touring in 2010 and the booking agents for popular artists, such as Rascal Flatts, Brad Paisley, Iron Maiden, 311 and Jimmy Buffett, did not even solicit competitive offers for this 2010 summer concern season. This conduct has already impacted ticket prices and ticket servicing fees. For instance, the top ticket price for the Lady Gaga tour has increased by approximately 133% in the last three months. NCL supports efforts to stop this merger because of its contribution to the increased concentration of the live event industry in the hands of a few powerful forces and the resulting decrease in customer services and increase in prices to consumers. E:\FR\FM\29JNN2.SGM 29JNN2 sroberts on DSKD5P82C1PROD with NOTICES 37662 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices business to independent companies. The stated purpose of these divestitures is to create two independent firms capable of competing with LNE, particularly in the market for the remote, primary sale of tickets to what the Government characterizes as major concert venues. The Objectors challenge the Consent Judgment because the proposed remedial relief will not achieve the stated goal of facilitating effective competition with LNE in the primary, remote sale of tickets to popular music concerts at major concert venues. The Consent Judgment does not take into account LNE’s domination of the promotion of popular music concerts by major artists and control of venues capable of hosting concerts by major artists. The vast majority of all popular music concerts by major artists will be promoted by LNE and held at LNE controlled venues at which its remote, primary ticketing services will be utilized without violating the Consent Judgment. The companies to which Ticketmaster’s ticketing software and Paciolan business are divested will be unable to compete effectively to provide remote, primary ticketing services for popular music concerts and LNE will remain the dominant competitor in the market. LNE is already exercising this market domination to eviscerate the remedial relief imposed under the Consent Judgment. The continuation of the merged company’s dominant position in the market will have significant anticompetitive consequences, including continued supra-competitive ticketing services fees and charges. If the Government remains unwilling to challenge the merger, additional remedial measures are necessary. To create meaningful competition in the market for remote, primary sales of tickets to popular music concerts, LNE should be precluded from: (i) Promoting more than seventy-five percent (75%) of major popular music artists’ tours; (ii) tying or bundling its promotional services and venue services; (iii) tying or bundling the appearance of major popular music artists at one LNE controlled venue to the artist’s appearance in LNE controlled venues in different geographic markets; and (iv) retaliating against or penalizing any artist who elects to utilize a rival promoter or venue during the course of a LNE sponsored national or multiappearance tour. LNE should also be required to return at the request of any promoter or venue any customer or other competitive information Ticketmaster maintained from concerts for which it provided ticketing services VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 for the promoter or venue. These remedial measures will facilitate the ability of independently owned and operated venues, which will likely utilize rival ticketing companies, to compete for the artists who drive the live music industry. Supplemental Market Analysis A. The Popular Music Concert Industry While the Government’s Complaint and Competitive Impact Statement analyze the live entertainment industry, they focus upon the specific market for the remote, primary sale of tickets to music concerts. However, the implementation of effective remedial action for the anticompetitive effects the Government has recognized will result from the Live Nation—Ticketmaster merger requires a deeper analysis of the promotional and venue services markets. This analysis establishes that Live Nation had far greater pre-merger power in those markets than the Government recognizes and that the merger has enhanced LNE’s dominance in these markets. This market domination will strangle nascent competition in the market for remote primary ticketing services. The popular music concert industry has its roots in the technical innovations that led to the growth of the radio and television industry and a consumer mass market for quality recorded music. To drive record sales, record companies sponsored concert tours across the country. Radio airplay, exposure on nationally broadcast television shows, such as American Bandstand and The Ed Sullivan Show, and record sales led to nationwide notoriety for highly talented artists performing the genre of music in vogue at the time. As artists’ popularity grew, they began to attract substantial audiences for their live performances. The style of music in vogue has evolved over time. In the 1950s, popular music was evolving into ‘‘rock n’ roll’’ (or just ‘‘rock’’), a blend of rhythm and blues and country music. This musical genre became widely popular among teens and young adults in the 1950s. Rock artists became so popular that they attracted substantial audiences for their live performances and touring provided them with a significant source of revenue. As a result, artists began to tour independently of their recording companies. For several decades, only rock or folk (as this style of music gained wide popularity in the 1960s) qualified as popular music when measured by record sales, concert attendance or the amount and breath of radio play. Recently, rock music has PO 00000 Frm 00012 Fmt 4701 Sfmt 4703 splintered into different genres, including classic (of the style from the 1960s through 1970s), ‘‘hard’’ (less melodic) and alternative rock, and into a general category of ‘‘pop’’ (electric guitar and organ and drum dominated music). Additionally, country music has spread from its roots in the south and southwest of the United States to gain mainstream acceptance throughout the country (see, CNNMoney.com, Cashville USA 2 (Ex. ‘‘A’’ hereto)), and the hip-hop and rap styles of music developed and became popular among teens and preteens. Other styles or genres of music, including jazz, blues and gospel, while capable of drawing significant numbers of fans, are popular only in one region of the country or among a segment of the population, so that they draw mass audiences, at most, only in limited areas or for only a few performances a year. Similarly, symphony orchestra performances and opera appeal to a small segment of the population, require unique venues,3 and promoters are not usually involved with these events. As the Government recognizes (Complaint, ¶¶ 15–19), a separate defined market developed for what are referred to hereinafter as ‘‘popular music concerts by major artists’’ with ‘‘popular music’’ defined as that genre of music of broad popularity and ‘‘major artists’’ defined as those artists performing in a popular music genre with sufficient talent to generate a mass audience. Local entrepreneurs began to promote concerts, which entailed advertising and marketing the concert in their region or city and often assuming the financial risk of the concert. As the industry developed, artists engaged a booking agent to schedule and route a tour. Booking agents would contact local promoters in each city or region in which the artist was considering appearing and solicit bids to promote the concert in their area. Initially, concerts were held in theatres utilized for plays or other such facilities and, as rock and folk artists grew in popularity, expanded to indoor sports arenas with seating for up to 30,000 fans and, in some instances, in outdoor sports stadiums with seating capacities in excess of 60,000 fans. Independent 2 Found at http://money.cnn.com/magazines/ fortune/fortune_archive/2007/01/22/8397980/ index.htm. 3 As symphonies are generally performed with no or minimal amplification, they are generally only conducted at concert halls with highly tuned acoustics. Symphony orchestras may perform summer concerts at general music venues, usually amphitheatres, but do not have a sufficient breath of appeal to draw mass audiences to multiple performances and do not appeal to most popular music fans. E:\FR\FM\29JNN2.SGM 29JNN2 sroberts on DSKD5P82C1PROD with NOTICES Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices companies were formed to provide remote (at locations other than the venue hosting the concert) ticket sales. As the popular music concert market developed, facilities designed and intended for use solely as venues for live popular music concerts were constructed throughout the country, primarily in large urban areas. The most prevalent type of venue constructed for live popular music concerts are outdoor amphitheatres, with a seating capacity generally between 8,000 and 25,000 fans spread over designated seating areas (usually under cover) and large lawn areas. These facilities have become the dominant venues for popular music concerts because, as they are constructed to host music concerts, they have good sight lines, acoustics (although not to the level of a symphony hall) and staging. Conversely, arenas and stadiums are primarily constructed for sporting events and are generally not desirable venues in which to view a concert.4 Amphitheatres also enjoy the advantages that: (a) Fans enjoy attending concerts outdoors and mingling in the lawn section before and during the concert; (ii) they are more flexible than arenas and certainly stadiums in the size of the shows they can handle because they are less costly to operate, lawn seating allows amphitheatres to approach the seating capacity of indoor sports arenas while fans at less popular shows spread out in the lawn areas making the show seem to have a larger attendance; and (iii) attendance at amphitheatres tends to be higher because fans of limited means can purchase a lawn ticket at a reduced price and still obtain a good vantage by arriving early and are not locked into undesirable seats. The artist is the bedrock of the popular music concert industry as it is the artist that draws the fans. It is commonly recognized that there are less than one hundred artists who can attract an average of 8,000 to 30,000 fans during a national concert tour. In its World Industry Report, Promoters of Performing Arts, Sports and Similar Events with Facilities in the U.S., IBISWorld states that, in 2005, the top 100 tours comprised 67% of the total domestic concert revenues. LNE recognizes the limited number of major artists and has centered its entire business model around controlling them. As its Brad Wavra, Senior VicePresident of Live Nation’s Touring Division, stated: ‘‘[t]here are only a 4 An artist might prefer an indoor venue if the performance includes a light show or has special stage requirements. This may occur only a few times a year. VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 handful of great artists out there that can do 10,000; 12,000; 15,000 tickets in 40 cities across the country. Everybody knows who they are, they’re historic artists, legendary artists. So, when they’re on a touring cycle, you know, we all want to get them to come play for us.’’ (Transcript of Artist House Music’s Interview of Brad Wavra, Ex. ‘‘B’’ hereto.) B. Live Nation Conquerors Popular Music Concerts By Major Artists In approximately 1997, SFX Entertainment, Inc. (‘‘SFX’’) began acquiring local concert promoters to develop a promotional company of national scope. For example, SFX acquired Bill Graham Presents, Electric Factory Concerts, Fey Concerts, Pace Concerts, Cellar Door and the promotional companies of Jules Belkin and Don Law. As it expanded nationally, SFX introduced a fundamental change in the market for concert promotion by promoting multiappearance concert tours. Local promoters struggled to compete against SFX because it submitted offers for the entire tour, which promoters operating in only one city or region found difficult to match. At a competitive disadvantage, local promoters were unable to survive and became ripe for acquisition. In 2000, Clear Channel Communications, Inc. acquired SFX and changed the name of the Company to Clear Channel Entertainment. Clear Channel Entertainment continued to acquire promoters on the way to building a promotional company of national scale and expanded to the point that it could promote artists’ entire national tours. Clear Channel Entertainment also acquired control of concert venues either by purchasing them, entering into long term lease relationships or executing management and/or exclusive booking agreements. Clear Channel Entertainment directed artists that it promoted to appear at venues it owned, leased, managed or exclusively booked. This business practice placed promoters at an ever increasing competitive disadvantage because it was impossible for local promoters to bid against national tour offers. As Clear Channel Entertainment generally would not allow artists promoted by its competitors to appear at its venues, promoters were also denied access to venues at which to produce concerts. Independent venue owners and operators were placed at a competitive disadvantage as well because they were denied the ability to compete to provide venue services to artists Clear Channel PO 00000 Frm 00013 Fmt 4701 Sfmt 4703 37663 Entertainment promoted. Facing an insurmountable competitive disadvantage, many more promoters and venue owners became ripe for acquisition by Clear Channel Entertainment. Several antitrust actions were filed against Clear Channel Communications and Clear Channel Entertainment claiming that they had unlawfully acquired monopoly power in the market for the promotion of popular music concerts and engaged in numerous anticompetitive actions to maintain and exploit this power. Nobody In Particular Presents Inc v. Clear Channel Communications Inc., 311 F. Supp. 2d 1048 (D. Colo. 2004); In Re Live Concert Litigation, 247 F.R.D. 98 (C.D. Cal. 2007); JamSports & Entm’t, LLC v. Paradama Prods., 382 F. Supp. 2d 1056 (N.D. Ill. 2005). In Nobody in Particular Presents, the Court held that plaintiffs had established a genuine issue of material fact in support of their claims that Clear Channel had used its monopoly power in the market for the broadcast of rock music to force artists to utilize Clear Channel Entertainment’s promotional services. The Court found that plaintiffs had established, at least, a prima facie case that Clear Channel refused to advertise concerts promoted by anyone other than Clear Channel Entertainment and to provide crucial radio play to artists who utilized rival promoters. In the wake of these claims, Clear Channel spun Live Nation off into a separate, publicly traded company in 2005. At that time, Live Nation was the largest promoter of live popular music concerts in the United States. Recognizing the central importance of control of the artist, Live Nation soon developed a business plan of controlling the entire interface between popular music artists and their fans by integrating concert promotion, the operation of music concert venues, merchandising, sponsorships and ancillary rights. This plan is openly discussed in Live Nation internal documents, such as the attached flow chart in which Live Nation touts its ‘‘model transformation’’ as ‘‘Branded Vertically Integrated Live.’’ (Ex. ‘‘C’’ hereto.) In a separate document, Live Nation refers to its vertical integration of the concert industry as ‘‘Creating the Artist-to-Fan Platform.’’ (Ex. ‘‘D’’ hereto.) In furtherance of this business plan, Live Nation expanded the number of national tours it promotes, offering national tour deals to all or substantially all of the highest grossing artists touring in any one year. To induce artist participation in these tours, Live Nation offered supra competitive shares of the E:\FR\FM\29JNN2.SGM 29JNN2 37664 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices sroberts on DSKD5P82C1PROD with NOTICES concert revenues, at times paying artists more than 100% of the ticket sales. It insisted on control of the entire tour and that the artist appear only in venues that Live Nation controlled through ownership, lease, management or exclusive booking contracts. It was crucial for the artists to appear at Live Nation controlled venues not only to implement its plan to control the ‘‘artistto-fan’’ platform, but also because Live Nation profits only upon concession sales, parking fees and merchandising fees. Live Nation’s Chief Executive Officer admitted while testifying before the Antitrust Sub-Committee of the Senate Judiciary Committee that Live Nation loses money on concert promotion and profits only through sales at its venues. House Judiciary Subcommittee on Courts and Competition Policy Holds Hearing on the Proposed Merger Between Ticketmaster and Live Nation, Cong. p. 60 (Feb. 26, 2009) (statement of Michael Rapino, President and CEO of Live Nation Worldwide).5 To obtain further control over major artists, Live Nation has entered into multi-year agreements to manage every aspect of an artist’s career, capture all revenue streams associated therewith and control every market comprising or ancillary to the live music concert industry. Acknowledging this strategy, Live Nation Chief Executive Officer Michael Rapino stated that Live Nation was ‘‘acquiring more rights for a longer time period with locked-in pricing, cross-collateralized for risk reduction.’’ (Live Nation Q1 2008 Earnings Call Transcript.) Live Nation has entered into these ‘‘360° degree management contracts’’ with Madonna, U2, Jay-Z, Nickelback and Shakira. As part of these agreements, Live Nation assumes the management of artists’ careers and controls whatever revenues they generate, locking up the artist for a number of years. Live Nation continued Clear Channel’s acquisition spree, acquiring promoters and venues and entering into management and exclusive booking arrangements with venues. Notably, when HOB Entertainment, Inc. threatened Live Nation’s primacy by expanding its House of Blues themed dinner and music clubs nationwide and purchasing amphitheatres, Live Nation 5 ‘‘We [Live Nation] do 1,000 concerts at our 50 amphitheaters. We will lose $70 million at the door. That means the price of the talent versus the ticket price. That’s 10 million tickets being sold. So in theory, if I had any control on those ticket prices, you would assume I would charge seven more dollars a ticket to cover my $70 million loss. The artist takes the door and we end up making the money on the peanut, popcorn, parking and ticket rebates.’’ VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 acquired it. It was reported that this acquisition closed many of the gaps in Live Nation’s national tour routing. Live Nation also acquired, entered into long term leases and executed management or exclusive booking agreements at numerous amphitheatres, concert halls, music theatres and other such venues. (See, MSN.com, PR Newswire, Live Nation Continues Top 20 Market Expansion with Agreement to Operate Bayfront Amphitheater in Miami, Florida—16th Largest Market in United States (Ex. ‘‘E’’ hereto).) 6 LNE presently owns, leases, manages or exclusively books 111 venues in the United States, including some of the most prestigious, such as The Fillmore in San Francisco and the Hollywood Palladium. (See Live Nation 2009 10K.) Live Nation also expanded its reach internationally by acquiring promoters and venues in Europe. On August 21, 2008, Live Nation formed a partnership ´ with Corporacion Interamericana de Entretenimiento SAB de C.V. (‘‘CIE’’), the largest concert promoter in Latin America. CIE owns nearly all the major concert halls and arenas in Mexico, and a large percentage of those in Brazil and other large South American markets. The Wall Street Journal Online reported that this partnership gives Live Nation the exclusive right to book world tours into CIE venues. See Ethan Smith, Live Nation Reaches Deal with Big Concert Promoter, Wall St. J., Aug. 21, 2008, available at http://online.wsj.com. Live Nation’s international expansion, particularly its relationship with CIE, enhanced its control by affording it the ability to promote artists’ world tours or using the ability to play CIE venues as leverage in negotiating national tours or appearances at Live Nation venues in the United States. Live Nation now dominates the markets for promoting and providing venue services for popular music concerts by major artists. Based upon data from Pollstar, which the Government recognizes as a ‘‘leading source of concert industry information’’ (Competitive Impact Statement, p. 4 n.2), Live Nation promoted at least 70% of the live popular music concert tickets sold by major artists in the United States in 2008.7 Based on Live Nation’s public disclosures and an analysis of Pollstar data, Live Nation controls 40 of the 48 in excess of 15,000 fan capacity amphitheatres and has a monopoly of or 6 Available at http:// news.moneycentral.msn.com/ printarticle.aspx?feed=PR&date=2008812&id=9017679). 7 This analysis is based upon current information and represents Live Nation’s minimum share of this market. PO 00000 Frm 00014 Fmt 4701 Sfmt 4703 the only amphitheatre in 18 of the largest 25 designated market areas 8 in the United States. There are several areas of the country in which there are no popular music promoters other than Live Nation or appropriately sized venues other than those controlled by Live Nation. As the Government recognizes, in approximately 2007, Live Nation licensed technology to enable it to conduct the remote sale of concert and other event tickets. This action threatened Ticketmaster’s existing dominance in the market for the remote sale of event tickets because, as the Government also recognizes, Live Nation had a captive market for its remote ticketing services (the venues it controlled) and was better positioned to overcome the significant existing barriers to entry into this market. Realizing that Live Nation would compete against it in the remote sale of event tickets, Ticketmaster laid the foundation to compete against Live Nation in the market for the promotion of concerts. The obvious plan was to put Ticketmaster in position to protect its remote ticketing business by offering integrated services (at least artists, historical concert information and ticketing services) to artists and venues. A significant step in developing this capability was Ticketmaster’s acquisition of majority control of Front Line Management (‘‘Front Line’’), one of the largest artist management companies in the country, which boasts a staple of marquee artists, ranging in age from Miley Cyrus to Willie Nelson. Front Line managed artists also include Van Halen, Neil Diamond, Christina Aguilera, Kid Rock, Maroon 5, the Kings of Leon, Jimmy Buffett, Aerosmith and Guns-n-Roses. (David Siegel, Calling Almost Everyone’s Tune, N.Y. Times Reprints, April 23, 2010.) Front Line’s Chief Executive Officer is Irving Azoff, who is recognized as one of the most influential recording artist managers in the world. (Id.) Ticketmaster’s control of Front Line’s artists threatened Live Nation because it could deny Live Nation access to a substantial number of the less than a hundred artists who could command an audience large enough to sell out or fill its amphitheatres and other larger capacity venues. Within just a few months of this acquisition, Live Nation and Ticketmaster agreed to merge. While the Government characterizes this merger as a move by Ticketmaster ‘‘to eliminate Live Nation entirely as a competitor’’ 8 A designated market area, or DMA, as designated by Nielsen Media Research, Inc. E:\FR\FM\29JNN2.SGM 29JNN2 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices sroberts on DSKD5P82C1PROD with NOTICES (Competitive Impact Statement, p. 11), Live Nation, in fact, was the dominant party in the merger and it acted to eliminate Ticketmaster (as it has eliminated so many previous competitors) as a threat to its control of the interface between popular music artists and their fans. At the very least, while the merger eliminated a competitor in the market for remote ticketing services, it also eliminated a competitor in the market for promoting popular music concerts and a potential competitor in the market for providing venue services. Proposed Final Judgment On January 25, 2010, the Government filed a civil antitrust Complaint seeking to enjoin the proposed merger between Live Nation and Ticketmaster because its primary effect would be to ‘‘lessen competition substantially for primary ticketing services to major concert venues located in the United States.’’ (Competitive Impact Statement, pp. 1– 2.) In support of this claim for relief, the Government alleged that Ticketmaster ‘‘dominated primary ticketing, including primary ticketing for major concert venues, for over two decades.’’ (Amended Complaint, ¶ 21.) The Government contended that, as a result of this dominance, Ticketmaster was able to charge consumers supra competitive ticketing fees which did not decrease even though Ticketmaster’s costs were declining as a result of the introduction of selling tickets over the Internet. (Id., ¶ 22.) The Government defined the market as the ‘‘provision of primary ticketing services to major concert venues’’ even though Ticketmaster provided remote ticketing services to events other than music concerts because the ‘‘set of customers most likely to be affected by the merger of Ticketmaster and Live Nation are major concert venues.’’ (Amended Complaint, ¶ 37.) It noted that the ‘‘merged firm’s promotion and artist management businesses provide an additional challenge that small ticketing companies will now have to overcome. The ability to use its content as an inducement was the point that Live Nation touted as the basis on which Live Nation could challenge Ticketmaster in ticketing.’’ (Id., ¶ 43.) The Government simultaneously filed the Consent Judgment which would preclude Live Nation and Ticketmaster from completing their merger until they complied with the remedial action specified therein. As a general matter, Ticketmaster was required to license the Ticketmaster operational software to Anschutz Entertainment Group, Inc. (‘‘AEG’’) (or another acceptable licensee) VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 and divest Ticketmaster’s entire Paciolan business to Comcast Spectacor, LP (or another acceptable acquirer). The stated purpose of this remedial action is to create viable competitors to LNE in the market for providing primary remote ticketing services, particularly in providing these services to major music venues. The Proposed Consent Judgment also imposes remedial measures intended to assist these entities in competing against the merged entity. These measures include prohibiting the merged entity from retaliating against any venue, such as by refusing to host concerts at any venue, that selects another primary remote ticketing service. However, the Consent Judgment does not address Live Nation’s ability, as recognized in the Amended Complaint, to drive the use of its primary, remote ticketing business through the control of other markets. The prohibition of LNE retaliating against concert venues utilizing other ticketing services provides no meaningful protection because, with the exception of stadiums and arenas that are not primarily used as concert venues, Live Nation already directs the artists it promotes, and now manages, to the music venues it owns, leases, manages or exclusively books. LNE does not have to retaliate against anyone to induce those venues to utilize its (Ticketmaster’s) primary, remote ticketing service. It either controls or already has substantial influence over this decision. As Live Nation dominated, and LNE has even greater control over, the promotion of popular music concerts and venues used for popular music concerts by major artists, LNE will dominate the primary remote ticketing services market as well. LNE will have no reason to reduce the excessive service fees Ticketmaster charged. Indeed, it would appear that LNE will use supra competitive ticketing service fees as another source to off-set the supra competitive payments it makes to artists. The Proposed Consent Judgment does nothing to prohibit this conduct. To the contrary, it facilitates this action by expressly permitting LNE to bundle its services. For this reason, the remedial action the Government has negotiated will not prevent the competitive harm it sought to address. In fact, the merged entity has continued to direct artists to the venues it controls for the upcoming 2010 season. For these reasons, if the Live Nation/Ticketmaster merger is to be permitted, additional remedial action must be required. PO 00000 Frm 00015 Fmt 4701 Sfmt 4703 37665 Argument A. A Consent Order That Provides for Ineffective Remedial Action Should Not Be Approved The determination of whether the Consent Judgment should be approved will be based on whether it is in the ‘‘public interest.’’ 15 U.S.C. 16(e)(1). In making this assessment, a court may not substitute its judgment for the Government’s as to the nature or scope of the claims brought in the first instance. United States v. Microsoft Corp., 56 F.3d 1448 (DC Cir. 1995). For this reason, while the Objectors believe that the Live Nation and Ticketmaster merger will substantially reduce competition in the market for providing promotional and venue services to popular music artists, and contend that Live Nation’s conduct is independently actionable,9 they have not addressed these issues. Conversely, the court is not merely a ‘‘judicial rubber stamp[ ]’’; it is required to make ‘‘an independent determination as to whether or not entry of a proposed consent decree is in the public interest.’’ Id., at 1458 (quoting H.R.REP. NO. 1463, 93d Cong., 2d Sess. 8 (1974), and S.REP. NO. 298, 93d Cong. 1st Sess. 5 (1974), reprinted in 1974 U.S.C.C.A.N. 6535, 6538, 6539.) The independent nature of judicial review of a consent judgment is further evidenced in the Senate debate of the Tunney Act: ‘‘[The Act] will make our courts an independent force rather than a rubber stamp in reviewing consent decrees, and it will assure that the courtroom rather than the backroom becomes the final arbiter in antitrust enforcement.’’ (The Antitrust Procedures and Penalties Act of 1974: Hearings on S. 782 and S. 1088 Before the Subcomm. on Antitrust and Monopoly of the Senate Comm. on the Judiciary, 93d Cong. 1 (1973) (opening remarks of Senator Tunney).) See also, United States v. GTE, 603 F. Supp. 730, 740 n.42 (D. D.C. 1984) (‘‘([I]n light of the history and purpose of the Tunney Act, it is abundantly clear that the courts were not to be mere rubber stamps, accepting whatever the parties might present’’). In making this determination, the Tunney Act provides that the Court ‘‘may consider,’’ inter alia: ‘‘(1) The competitive impact of such judgment, including termination of alleged violations, provisions for enforcement and modification, duration 9 I.M.P. and I.M.A. have filed a Complaint against Live Nation asserting antitrust and State law unfair competition claims. It’s My Party, Inc. v. Live Nation, Inc., United States District Court for the District of Maryland, Northern Division, Civil Action No. 1:09 Civ. 00547 JFM. E:\FR\FM\29JNN2.SGM 29JNN2 37666 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices or relief sought, anticipated effects of alternative remedies actually considered, and any other considerations bearing upon the adequacy of such judgment * * * ’’ 15 U.S.C. 16(e). A court should ‘‘hesitate’’ in the face of specific objections from directly affected third parties before concluding that a proposed final judgment is in the public interest. United States v. Microsoft Corp., supra, 56 F.3d at 1462. Additionally, sroberts on DSKD5P82C1PROD with NOTICES ‘‘The court should pay ‘‘special attention’’ to the clarity of the proposed consent decree and to the adequacy of its compliance mechanisms in order to assure that the decree is sufficiently precise and the compliance mechanisms sufficiently effective to enable the court to manage the implementation of the consent decree and resolve any subsequent disputes.’’ United States v. Thompson Corp., 949 F.Supp. 907, 914 (D. D.C. 1996). In Thompson, in response to objections by competitors, the Court refused to approve a consent judgment permitting the merger of Thompson Corporation and West Publishing unless additional remedial action was implemented with respect to West’s claim of copyright protection for its star pagination system. In so ruling, the Court held the remedial actions specified in the proposed consent judgment did not adequately address the anticompetitive concerns the government raised in its complaint with West’s assertion of copyright protection for the star pagination system. The Court should give serious consideration to the position of the Objectors—competitors of Live Nation in both concert promotion and venue operation—that the government plaintiffs’ proposed remedial relief will not address the substantial reduction in competition in the market for providing primary ticketing services they have concluded will result from the merger of Live Nation and Ticketmaster. Indeed, as the Government is still permitted to demand additional remedial action, it should give serious consideration to Objections filed by entities with substantial knowledge of the relevant markets and in unique positions to assess whether anyone will be able to compete effectively against Live Nation in the primary remote ticketing market before finalizing the Proposed Consent Judgment. A consent judgment that is ineffective in remediating the competitive harm the Government sought to address is not in the public interest. VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 B. LNE’s Dominance over the Market for Concert Promotion and Venue Services Will Strangle Competition in the Market for Primary Remote Ticket Sales at Major Music Venues Even though it affirmatively alleges that the customers most directly affected by the merger are major concert venues, and that LNE’s promotion and artist management business poses an additional challenge that rival ticketing companies will have to overcome, the Government provides an, at best, perfunctory analysis of Live Nation’s pre-merger share of the market for concert promotion and venue services. It claims that Live Nation owns or operates 70 major concert facilities throughout the United States (Competitive Impact Statement, p. 5) and does not examine the extent to which Live Nation’s controls the available venues in the geographic markets in which it competes. It further claims that Live Nation promoted shows represent 33% of the concert revenues at major concert venues in 2008. However, Live Nation’s public disclosures establish that it owns, leases, manages or exclusively books at least 10 111 music concert venues. As is set forth previously, prior to the merger, Live Nation had monopoly control of amphitheatres with a more than 15,000 seating capacity in the United States and controls the only venue or a monopoly of the music venues in 18 of the largest 25 designated market areas. Given this dominance of the market, as is recognized by Trent Reznor, the lead singer for Nine Inch Nails, artists must deal with Live Nation on concert tours: ‘‘NIN [Nine Inch Nails] decides to tour this summer. We arrive at the conclusion outdoor amphitheaters are the right venue for this outing, for a variety of reasons we’ve throughly [sic] considered. In the past, NIN would sell the shows in each market to local promoters, who then ‘buy’ the show from us to sell to you. Live Nation happens to own all the amphitheaters and bought most of the local promoters—so if you want to play those venues, you’re being promoted by Live Nation.’’ The footnote provides: ‘‘I fully realize by playing those venues we are getting into bed with all these guys. I’ve learned to choose my fights and at this point in time it would be logistically too difficult to attempt to circumvent the venues/ promoter/ticketing infrastructure already in place for this type of tour.’’ Moreover, measuring Live Nation’s market power in concert promotion based on revenue generated from ticket sales from what the Government terms 10 It is unknown whether Live Nation’s public disclosures identify all venues it exclusively books. PO 00000 Frm 00016 Fmt 4701 Sfmt 4703 major concert venues is inherently flawed as market power should be measured in the number of tickets sold. Promoters are typically ranked in the industry, as is reflected in Pollstar’s rankings, based on the number of tickets sold for concerts they promote. Furthermore, as with many service providers in this industry, ticketing companies are not paid by the entity that engages them (in this case, venues owners or operators), but rather they charge concert goers service fees per ticket. It accordingly was the consumer that bore the burden of Ticketmaster’s dominance of the primary remote sale of concert tickets through the payment of supra competitive service fees per ticket. As the competitive harm is reflected in service fees per ticket, the measure of Live Nation’s market power should be the percentage of the total number of tickets sold. Even if the calculation of market power were based on revenues, the Government’s analysis substantially minimizes Live Nation’s pre-merger share of the market. Live Nation is in the business of promoting music concerts and, once again, the Government recognized that the merger will most acutely affect major concert venues. Nevertheless, the Government appears to have calculated Live Nation’s share of the promotional market by comparing the revenues it earned promoting concerts to the total revenues of the top 500 highest grossing venues. (Competitive Impact Statement, p. 4, n.2.) While the Government does not list what it considered to be the top 500 grossing venues, Pollstar data establishes that facilities clearly within the top 500 grossing venues have reported significant revenue for events that were not music concerts. Those events include circuses (both traditional [Ringling Brothers and Barnum & Bailey] and Cirque de Soleil style performances), plays, ice shows, ballet, opera and performances by comedians, magicians, symphony orchestras and the Blue Man Group. (A list of some of the events reported in Pollstar is attached hereto and marked Ex. ‘‘F’’.) These events are plainly not music concerts and are not substitutes for fans of major popular music artists. The events included within the Pollstar data also include performances by gospel, jazz, blues and other musicians, which are not fairly characterized as popular music and are also not adequate substitutes for fans of major popular music artists. The vast majority of fans only enjoy specific genres of music as is evidenced, for instance, by the segregation of radio stations among music genres. Further, E:\FR\FM\29JNN2.SGM 29JNN2 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices 37667 recognizes that music theatres typically have a seating capacity of between 1,000 and 6,500 and clubs have a seating capacity of less than 1,000 fans. With rare exceptions, artists appear at these kinds of venues because they do not have sufficient popularity, due either to their being a developing act or the genre of music they perform, to draw an audience for a larger amphitheatre, arena or stadium. Fans not only focus on the style or genre of music, but they also have favorite artists within a genre, and will generally not attend a concert by an artist they do not enjoy. By definition, artists appearing at music theatres and clubs do not have sufficient popularity to compete effectively against the substantially more popular artists appearing at amphitheatres, arenas and stadiums. On the other end of the spectrum, owners of modern arenas and stadiums prefer artists whose fan base is sufficiently affluent to pay for the expensive tickets to luxury suites. There are only a few select performers with sufficient popularity among affluent fans to draw an audience large enough for a 25,000 seating capacity arena, let alone a 60,000 seating capacity stadium, and most well recognized popular music artists appear at amphitheatres and other venues specifically designed for music concerts with seating capacities of between 8,000 and 30,000 fans. Based on Pollstar data, there were only five artists that appeared in an amphitheatre or other venue used primarily for music concerts who also appeared at a typical sports arena during the same tour (other than in a festival or multi-artist concert) in 2008. Based on this analysis, the proper measure of Live Nation’s market power in the promotion of music concerts is determined by calculating its percentage share of the tickets sold for promoting popular music concerts by major artists (with an average attendance of between 8,000 to 30,000 fans). Based upon Pollstar data, Live Nation was the promoter for 70% of the tickets sold within this market in 2008: Additionally, Live Nation dwarfs other promoters. Its most significant competitor is AEG Live, which promoted only 43% of the total amount of tickets to the events tracked by Pollstar worldwide that Live Nation promoted in 2008 and focuses primarily on arena shows. Live Nation’s next largest competitor is MSG Entertainment which promoted just 7% of the tickets for events tracked by Pollstar worldwide that Live Nation promoted in 2008 and is believed to promote only at New York’s Madison Square Gardens. Simply stated, Live Nation dominates the promotion of popular music concerts by major acts, particularly those appearing in amphitheatres. The evidence is overwhelming that Live Nation funnels the acts it promotes to the venues it controls. As set forth previously, Live Nation’s business model is to control the entire interface between the artist and their fans. Live Nation pays artists more than the entire amount of the ticket sales, loses money on concert promotion and profits only on concession, parking and merchandise sales and, therefore, requires artists it promotes to appear at its venues. Once again based upon Pollstar data and Live Nation’s publicly disclosed information, 92% of the concerts it promoted at amphitheatres were held at venues owned, leased or managed by Live Nation or at which it has exclusive booking arrangements: VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 PO 00000 Frm 00017 Fmt 4701 Sfmt 4703 E:\FR\FM\29JNN2.SGM 29JNN2 EN29JN10.019</GPH> sroberts on DSKD5P82C1PROD with NOTICES Billboard magazine ranks songs according to their genre. (See, Ex. ‘‘G’’ hereto.) Fans will generally not attend a concert featuring a genre they do not enjoy. For this reason, in Nobody in Particular Presents, supra, the court held that the plaintiffs had established a triable issue of fact as to whether there was a distinct market for rock music and concerts. 311 F.Supp.2d at 1082–83. There is not a cross-elasticity of demand between popular music and jazz, blues and particularly gospel (that are usually attended only by fans with strong religious beliefs), and the option of attending these types of concerts will not impede LNE’s ability to maintain supra competitive ticketing service fees in popular music concerts. Moreover, as the Government recognizes (Competitive Impact Statement, p. 4 n.2), the top 500 grossing venues include clubs and music theatres. These facilities have limited seating capacities. In its Annual Report on Form 10K for the year ending December 31, 2008, Live Nation Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices In defending Live Nation’s then exclusive booking arrangement with the New York State Fair, James Koplik, Chairman of Live Nation’s Northeast Region, stated that artists on Live Nation promoted national tours, who appeared at the New York State Fair, would not have done so if Live Nation did not have exclusive booking rights there. (See Jim Koplik, Live Nation is Committed to Successful State Fair, available at http:// blog.syracuse.com (posted August 26, 2008).) There are numerous examples of this conduct. In discussing whether No Doubt would play Merriweather Post Pavillion during its 2009 Summer tour, the act’s agent, Mitch Okmin, of M.O.B. Agency, stated that No Doubt could not play Merriweather because ‘‘if [it is a] L[ive] N[ation] deal, it will be at the bad traffic place.’’ (later identified as Nissan Pavilion, a Live Nation venue). (Ex. ‘‘H’’.) He similarly said in discussing the 2010 summer tour that No Doubt cannot play any other venue where there is a Live Nation amphitheatre, stating ‘‘if [there is a] LN shed we play it.’’ (Ex. ‘‘I’’.) Marty Diamond of Paradigm, expressed similar sentiment, responding that to the extent Coldplay enters into a Live Nation tour for the summer of 2009, there was no chance ‘‘whatsoever’’ that they would be able to play Merriweather. (Ex. ‘‘J’’.) Rob Beckham, from the William Morris Agency, represents Rascal Flatts and Brad Paisley, and similarly advised that with respect to ‘‘any hard ticket date, [Live Nation] has the right of first refusal. They have never not taken a date.’’ As to whether he was permitted to book in non-Live Nation venues, Mr. Beckham stated that the Live Nation contract is VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 ‘‘exclusive’’ and he is only permitted to book non-Live Nation venues in ‘‘non competitive markets.’’ (Ex. ‘‘K’’.) Mitch Okmin echoed this response, stating that, as a result of Live Nation tours, his ‘‘involvement now is markets where there are no Live nation sheds.’’ (Ex. ‘‘L’’.) Even though artists would often prefer to appear at independent venues, Live Nation makes it next to impossible for them to do so. Indeed, Steve Kaul, of the Agency Group, who promotes Nickelback, stated that, although he wanted to book the band at Merriweather, he was precluded from doing so by the terms of Nickelback’s 360 deal with Live Nation. (Ex. ‘‘M’’.) Mr. Kaul went on to acknowledge that Live Nation behaves like this in order to ‘‘cross [collateralize] the dates and protect their profits against some weak markets.’’ (Ex. ‘‘N’’.) Live Nation also utilizes its control of the market for venue services in one geographic region to compel artists to appear at a Live Nation controlled venue in an area where it faces competition. For instance, in response to solicitations for 311 to appear at Merriweather Post Pavilion during the 2008 concert season, the band’s booking agent advised that refusing to play Nissan would put the band’s Virginia Beach appearance at a Live Nation venue at risk. (Ex. ‘‘O’’.) In those few instances in which an artist nevertheless insists upon playing a competing venue, Live Nation requires the competing promoter and/or venue operator to pay a tribute in terms of sharing a percentage of the profits from this concert with Live Nation. I.M.P. was required to pay Live Nation 25% of the entire concert gross in order to PO 00000 Frm 00018 Fmt 4701 Sfmt 4703 promote the Warped Tour from 2006 through 2009, Iron Maiden in 2008 and John Mayer in 2008. (Exs. ‘‘P’’ and ‘‘Q’’.) In order for The Fray to play Merriweather in 2009, I.M.P. was required to pay Live Nation $3 per ticket, because 25% of the concert proceeds were no longer deemed sufficient. (Ex. ‘‘R’’.) Live Nation also imposes a penalty upon artists for playing another venue. It cannot reasonably be contended that Live Nation will utilize any ticketing service other than its own at the 111 music concert venues it controls. This does not violate the Consent Judgment as drafted because Live Nation is controlling or has influence over this decision at the venues it controls. It does not have to retaliate in order to implement its ticketing services for the venues it controls. Without access to Live Nation controlled venues, rival ticketing companies will not be able to penetrate the market for remote, primary ticket sales to music concert venues. As LNE controls the only or a monopoly of the venues in numerous markets, including 18 of the 25 largest designated marketing areas in the country, rival ticketing companies will not have access to venues in those markets. Whatever minimal market penetration rival ticketing companies achieve will not inhibit Live Nation’s ability to charge supra competitive ticketing service fees. Even where there is a comparable music venue in a geographic region in which Live Nation controls a venue, LNE’s control of the artists will deny a competing facility access to artists of sufficient popularity E:\FR\FM\29JNN2.SGM 29JNN2 EN29JN10.020</GPH> sroberts on DSKD5P82C1PROD with NOTICES 37668 sroberts on DSKD5P82C1PROD with NOTICES Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices to provide a meaningful alternative to artists appearing at the Live Nation venue. Fans have a limited amount to spend on concerts, generally wish to purchase tickets only to concerts featuring their favorite artists and will not usually purchase tickets for concerts by artists whose music they do not enjoy. Unless a rival venue can offer a slate of concerts by artists of sufficient popularity that fans wish to attend as much as the artists appearing at a Live Nation venue, the rival cannot provide meaningful competition. The impact of Live Nation’s market dominance on rival venues’ ability to attract artists is illustrated by comparing the difference in the nature of artists appearing at the Mann Music Center (‘‘Mann’’) in Philadelphia before and after Live Nation obtained exclusive booking rights at the Susquehanna Bank Center, a competing venue located in Camden, New Jersey. As illustrated by the attached concert schedule (Ex. ‘‘S’’), the Mann went from booking highly popular artists, such as James Taylor, who generally sold out the facility, to booking acts of limited or niche popularity. Further, Metropolitan Talent abandoned its booking arrangement at the Marvin Sands-Constellation Brands Performing Arts Center (‘‘CMAC’’) in upstate New York because it could not attract artists in competition with the Darien Lake Performing Arts Center that is booked exclusively by Live Nation. LNE will be even more dominant than Live Nation. Control of Front Line’s stable of artists gives LNE the ability to feed those artists to its promotional business. As LNE will continue to insist that the artists it promotes appear at the venues it controls, uniting Live Nation’s promotional and Front Line’s artist management businesses will deny rival venues a meaningful opportunity to compete for an even greater percentage of popular artists, and consequently further limit rival ticketing services’ ability to inhibit the merged entity’s ability to charge supra competitive service fees. Additionally, Ticketmaster has long maintained an extensive customer database that is effectively utilized to solicit fans for concerts at venues to which it provides ticketing services. As no other ticketing service has such an extensive database, the promise of access to it will be a powerful inducement for rival venues to utilize the merged entity’s ticketing services. As soon as the Proposed Consent Judgment was filed, LNE flexed its muscle. It bid on virtually every artist touring in 2010 and the booking agents for popular artists, such as Rascal Flatts, Brad Paisley, Iron Maiden, 311 and VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 Jimmy Buffett, did not even solicit competitive offers for the upcoming 2010 summer concert season. This conduct has already impacted ticket prices and ticket servicing fees. For instance, the top ticket price for the Lady Gaga tour has increased by approximately 133% in the last three months. C. The Consent Judgment Should Not Be Adopted without Further Remedial Relief Competition in the market for the primary remote ticketing of music concerts will not be restored to levels where LNE will be unable to charge supra competitive service fees unless Live Nation’s ability to funnel the concerts it promotes to the venues it controls is curtailed. While the Objectors believe that Live Nation’s tying promotional services to artists appearing at Live Nation’s venues constitute independent violations of the antitrust laws, it is well-established that antitrust remedies may prohibit conduct beyond what would necessarily violate the antitrust law. United States v. Loew’s, 371 U.S. 38, 53 (1962); X Areeda, Elhauge & Hovenkamp, Antitrust Law 1758, at 349 (1996). All that is necessary is that the relief ordered be reasonably necessary ‘‘to cure the ill effects of the illegal conduct, and assure the public freedom from its continuance, and it necessarily must fit the exigencies of the particular case.’’ Ford Motor Co. v. United States, 405 U.S. 562, 575 (1972). The DOJ’s Policy Guide to Merger Remedies provides that conduct remedies are appropriate where the merged firm must modify its behavior for any structural relief that has been ordered to be effective. (Antitrust Division Policy Guide to Merger Remedies, p. 18, U.S. Department of Justice, Antitrust Division, October 2004.) To render the divestiture remedies required by the Consent Order effective, LNE should be enjoined from in any manner requiring or inducing artists it manages or promotes to appear at venues it controls, insisting (other than in circumstances where the merged entity has entered into a legitimate copromotional arrangement) that rival promoters or venue owners share any part of the revenue or profits they earn on concerts with LNE and/or from in any manner penalizing an artist for using a rival promoter or appearing at a competing venue. This remedy will assist those remaining venues still competing with LNE to obtain artists of the same level of popularity as the artists appearing at Live Nation venues, giving consumers in those areas a PO 00000 Frm 00019 Fmt 4701 Sfmt 4703 37669 meaningful choice between concert venues—a choice that will limit LNE’s ability to charge supra competitive service charges because fans will have the ability to attend equally desirable concerts in competing venues with lower service charges. The additional remedial measure of prohibiting the merged entity from promoting or hosting more than seventy-five percent of an artist’s tour should be adopted. This additional remedy is necessary because of the subtle, often undetectable, efforts LNE may utilize to persuade or pressure Front Line’s artists and other artists it promotes to appear at the venues it controls. This is a particular concern given Irving Azoff’s power in the concert industry. Conversely, an objective standard is easily policed. LNE should also be required to return at the request of any promoter or venue owner all data relating to concerts for which Ticketmaster provided the ticketing and to delete any such information from its electronically stored data and files. This remedy will reduce the competitive advantage LNE would otherwise enjoy over rival ticketing service companies as a result of its possession of an extensive customer database. It will also deny LNE access to information provided in confidence to Ticketmaster and with the reasonable expectation that a direct competitor would not be given access to this information. Conclusion In sum, establishing additional ticketing services capabilities is meaningless unless there is someone to whom these services can be provided. This will not occur unless LNE’s control over the management and promotion of major popular music artists, and where they appear, is addressed. Otherwise, the vast majority of major popular music artists will be promoted by LNE and appear at LNE controlled venues and rival remote ticketing providers, much less, rival promoters and venue owners or operators, will not be able to compete. Fans will have to pay supra competitive ticket prices, service fees, concessions prices, parking charges and merchandising fees to attend concerts by their favorite artists at LNE venues. A wholly ineffective consent judgment is simply not in the public interest. To that end, we suggest the aforementioned remedies in order to render the consent judgment effective in the manner in which it was intended. Dated: May 3, 2010. Cozen O’Connor, Robert W. Hayes, Rachel H. Robbins, E:\FR\FM\29JNN2.SGM 29JNN2 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices sroberts on DSKD5P82C1PROD with NOTICES Abby L. Sacunas, Attorneys for It’s My Amphitheatre, Inc., d/b/a Merriweather Post Pavilion and on behalf of Frank Productions, Inc., Sue McLean and Associates, VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 Metropolitan Talent, Inc. and the National Consumers League. Note: The attachments to this comment are available on the Antitrust Division’s Web site PO 00000 Frm 00020 Fmt 4701 Sfmt 4725 at http://www.justice.gov/atr/cases/ ticket.htm. 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4701 Sfmt 4725 E:\FR\FM\29JNN2.SGM 29JNN2 EN29JN10.041</GPH> sroberts on DSKD5P82C1PROD with NOTICES 37690 VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4725 E:\FR\FM\29JNN2.SGM 29JNN2 37691 EN29JN10.042</GPH> sroberts on DSKD5P82C1PROD with NOTICES Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices VerDate Mar<15>2010 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices 19:06 Jun 28, 2010 Jkt 220001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4725 E:\FR\FM\29JNN2.SGM 29JNN2 EN29JN10.043</GPH> sroberts on DSKD5P82C1PROD with NOTICES 37692 37693 BILLING CODE C VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 PO 00000 Frm 00043 Fmt 4701 Sfmt 4703 E:\FR\FM\29JNN2.SGM 29JNN2 EN29JN10.044</GPH> sroberts on DSKD5P82C1PROD with NOTICES Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices 37694 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices In the United States District Court for the District of Columbia United States of America et al, Plaintiff v. Ticketmaster Entertainment, Inc. 8800 West Sunset Boulevard, West Hollywood, CA 90069 and Live Nation, Inc., 9348 Civic Center Drive, Beverly Hills, CA 90210, Defendants. Case: 1:10–cv–00139. Assigned to: Collyer, Rosemary M. Assign. Date: 1/25/2010. Description: Antitrust. Date filed: 1/28/2010. sroberts on DSKD5P82C1PROD with NOTICES Tunney Act Comments of Jack Orbin, President, Stone City Attractions, Inc. on the Proposed Final Judgment in the Ticketmaster/Live Nation Merger Matter On January 24, 2010 the Antitrust Division of the Department of Justice (‘‘DOJ’’) filed a complaint and proposed final judgment (‘‘PFJ’’) with the United States District Court for the District of Columbia regarding the merger of Ticketmaster Entertainment, Inc. (‘‘Ticketmaster’’) and Live Nation, Inc. (‘‘Live Nation’’), to create the merged company Live Nation Entertainment, Inc. (‘‘LNE’’). Without a reasonable doubt, the merger of Ticketmaster, the nation’s largest ticketing company, and Live Nation, by far the nation’s largest concert promoter, will further damage an already fragile live concert industry and should be disallowed. We are submitting these comments on behalf of Jack Orbin, founder and president of Stone City Attractions, one of the largest and innovative independent concert promoters in the country, to document how the PFJ fails to adequately protect competition in the live entertainment industry, specifically in the primary ticketing market for major concert venues, and to suggest more significant remedies that can be used to strengthen the PFJ.11 Any assessment of whether the PFJ adequately restores competition must begin with these simple facts: • This proposed merger faced unprecedented opposition from consumer groups, Members of the 11 Jack Orbin is the founder and President of Stone City Attractions, Inc., a well-respected, family-owned independent regional concert promoter. Jack Orbin has promoted and produced events in the Southwest for the past 38 years. Over the past 38 years, Stone City Attractions has promoted nearly every major concert act, from pop and rock-n-roll to country and jazz in venues of all sizes. Jack prides himself in the extent of his community involvement. Jack was named one of San Antonio’s ‘‘Most Influential Top 100 Leaders’’ in Arts & Entertainment. Additionally, Jack is an active member of the San Antonio Alamodome Advisory Sub-Committee, and has been awarded their prestigious Humanitarian Award multiple times. VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 United States Congress, ticket sellers, artists, managers, independent concert promoters, and actual consumers of live entertainment. The DOJ received over 25,000 direct consumer complaints urging the DOJ to block the merger.12 • Attached to these comments is a letter from 50 members of Congress to AAG Varney opposing the merger. The letter expresses concerns that the merger will eliminate the minimal competition in the ticketing market, leading to higher prices and less service. ‘‘Permitting Ticketmaster to merge with its most significant competitor effectively abandons any hope for the development of competition in the foreseeable future, and it would subject consumers to any exploitation, including higher ticket prices and fees, that the newly merged firm might wish to make of its monopoly power.’’ 13 • Congressman Bill Pascrell framed concerns of the merger in a December 16, 2009 press conference launching the merger opposition Web site, Ticketdisaster.org, that featured four members of Congress and a coalition of consumer groups, ticket sellers and concert promoters: ‘‘This merger represents the greatest and most urgent threat to music fans across the country, and if approved will have far-reaching, long-lasting negative consequences for concert goers and nearly everyone involved in the live music business.’’ 14 • The Justice Department decision to accept the PFJ was roundly criticized by the leading newspapers. The editorial board of the New York Times declared that ‘‘this kind of consolidation embodied by Live Nation Entertainment is tremendously worrisome.’’ The Times raised significant concerns over the vertical aspects of the merger noting this merger has created ‘‘Live Nation Entertainment, a juggernaut that has it all. It will be tough for a band to tour without doing business with the new firm.’’ 15 • The Washington Post called the PFJ ‘‘a terrible precedent’’ observing that ‘‘the gradual retreat from antitrust enforcement over the past 30 years has led corporate executives and their 12 Jason Schreurs, 25,000 Concertgoers Urge U.S. Justice Department to Block Ticketmaster/Live Nation Merger, Exclaim News (January 20, 2010), available at http://www.exclaim.ca/articles/general articlesynopsfullart.aspx?csid2=844&fid1=43772. 13 Letter to Assistant Attorney General Christine Varney from 50 members of the U.S. House of Representatives (July 27, 2009). Attached hereto as ‘‘Attachment A.’’ 14 Remarks of Congressman Bill Pascrell, Press Conference on Ticketmaster and Live Nation merger (December 16, 2009). 15 Editorial, Music Gets Bigger, N.Y. Times (February 9, 2010). Attached hereto as ‘‘Attachment B.’’ PO 00000 Frm 00044 Fmt 4701 Sfmt 4703 lawyers to believe that there is no merger that cannot win approval if you’re willing to make some relatively minor fixes.’’ Permitting the vertical integration of the two dominant live entertainment companies leaves no doubt that ‘‘a ticket monopolist seeking to buy the dominant concert promoter and venue operator * * * [will certainly] bundle its services and force more focused competitors out of the market.16 • Further, the DOJ’s own Competitive Impact Statement (‘‘CIS’’) provides that ‘‘[t]he proposed transaction would extinguish competition between Ticketmaster and Live Nation and thereby eliminate the financial benefits* * *enjoyed during the brief period when Live Nation was poised to challenge Ticketmaster’s dominance;’’ diminish innovation in primary ticketing services; and ‘‘result in even higher barriers to entry and expansion in the market for primary ticketing services.’’ 17 The theory that the PFJ here, by allowing the largest concert promoter (who operates at a major financial loss, to the tune of $800 million at the announcement of this merger) to combine with what is commonly known as the most despised of corporations by the ticket buying public, will restore competition in the primary ticket sales and concert promotion markets is nonsensical. The reality is that this merger further enforces the monopolistic hold of Ticketmaster on the live entertainment industry; and this merger will continue to increase ticket prices to consumers and continue to drive independent concert promoters out of business. AAG Varney stated, after the filing of the Complaint, that ‘‘we were prepared to litigate the case, and I told the parties that.’’ 18 Yet, the DOJ did not litigate, and instead chose to identify a very limited set of competitive concerns in ticketing and proposed a limited set of remedies. The prohibitions proposed by the DOJ ‘‘will prove difficult to enforce. And there is nothing to stop anticompetitive bundling of tour management, concert promotions and venues.’’ 19 This merger results in LNE dominating the live entertainment 16 Steven Pearlstein, Ticketmaster and Live Nation Merger is a Raw Deal, The Washington Post (January 29, 2010), available at http:// www.washingtonpost.com/wp-dyn/content/article/ 2010/01/28/AR2010012803710.html. 17 CIS at 11. 18 Aruna Viswanatha, Justice OKs Ticketmaster Live Nation—With Conditions, Main Justice (January 25, 2010). 19 Editorial, Music Gets Bigger, N.Y. Times (February 9, 2010). E:\FR\FM\29JNN2.SGM 29JNN2 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices industry with over an 80% market share for primary ticketing among major concert venues, and controlling 127 major concert venues in the United States, including amphitheaters and clubs. In spite of the substantial level of concentration resulting from this merger, the DOJ chose not to challenge the merger to remedy the impact on the independent concert promoters whose businesses will undoubtedly suffer as a result, nor to consider the impact to skyrocketing costs to consumers. The DOJ’s enforcement action is inadequate in several respects: • It fails to secure relief for the consumer by eliminating competition of independent concert promoters; • The relief fails to ensure adequate competition for primary ticket sales and for concert promotion, and is insufficient to allow entry into these markets; • It fails to adequately prevent LNE from acquiring customer data from independent concert promoters. As described herein, the DOJ enforcement action is insufficient to address the competitive concerns of the live entertainment industry highlighted by the widespread opposition. Because of the enormous effects on consumers and competitors that this merger will have, combined with the inadequate relief proposed in the PFJ, the DOJ should reconsider their position, amend the PFJ as suggested below, reopen the matter to fully address the competitive concerns raised by this merger, and ultimately block the merger. sroberts on DSKD5P82C1PROD with NOTICES No Relief in for Consumers due to the Elimination of Independent Concert Promoters The fact here is simple: ticket prices have skyrocketed since the roll up of concert promoters into Live Nation’s predecessors and ultimately Live Nation, and the ticketing monopoly created currently by Ticketmaster. The consumer has been taken advantage of by these two conglomerates. To believe for a moment that the combination of the two huge corporations will benefit consumers in better services or lower prices is fantasy, at best. Both Ticketmaster and Live Nation are beholden to their stockholders and those stockholders demand profits. It is safe to assume any savings from the actual integration will be swiftly swallowed by the drive for profit by these mega-conglomerates, leaving the consumer helpless. The PFJ provides no form of relief in terms of lower costs to consumers. In fact, AAG, Christine Varney, has said that the hope of the DOJ here is to provide competitive VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 choice for venues, but ‘‘whether that’ll mean lower prices for fans, we’ll see.’’ 20 The promoter principally sets ticket prices and costs have not increased relative to the ticket price increases.21 This is substantially a result of Live Nation overpaying for Artists to ensure that other promoters do not have a chance to compete with those Artists. Live Nation has ‘‘reinvented’’ itself numerous times to try to compensate for their disastrous financials. None of these reincarnations have been profitable, leading to this desperate act. Live Nation is currently being sued in various courtrooms, most of which allege anti-competitive practices and/or the inflation of ticket prices. Concerts have been used as loss leaders, not only to keep other promoters from competing, but requiring Live Nation then to try to make up some of those losses through other ancillary revenue streams, resulting in falsely inflating prices of merchandise, concessions, and parking. This merger then becomes simply Ticketmaster and Live Nation trying to complete their respective monopolies, vertically as well as horizontally. The rollup of Artist management, ticketing, venues, and concert promotion into a powerful monopoly precludes the consumer choices, as well as terminating permanently the potential of any significant entries, desperately needed, into the live concert industry. As has been commonplace for decades, the strongest protection the consumer has had has been the power to say ‘‘no’’ to a ticket purchase. The only other protective force has been the fact that a handful of independent promoters could provide an alternative—ensuring ticket prices and service charges be competitive and reasonable. However, this merger, by combining the vertical powers of the industry predominantly into the hands of this combined mega-conglomerate, destroys any sense of competitive balance provided by the existence of independent promoters. The majority of independent promoters will be squeezed from being able to compete with the already predatory practices commonplace by these two dominant corporations, who post-merger will have even greater powers—anticompetitive bundling of Artists, fan clubs, venues, ticketing, etc.—incumbent in this merger. Thus, relatively soon after the completion of this merger, if permitted, 20 David Segal, Calling Almost Everyone’s Tune, N.Y. Times (April 23, 2010). 21 The average price of a ticket to one of the top 100 tours jumped to $62.57 in 2009 from $25.81 in 1996, far outpacing inflation. Id. PO 00000 Frm 00045 Fmt 4701 Sfmt 4703 37695 the protection of the consumer by the independent promoters will disappear. It is small businesses that create the real alternative to the consumer through diversity and innovation and this merger dooms that option. Unfortunately, the PFJ does little here to protect the important role of the independent promoters. The DOJ must consider additional remedies to the PFJ to ensure competitive, non predatory pricing, designed to protect the consumer. The PFJ Fails To Ensure Adequate Competition and Actually Enhances Barriers to Entry The PFJ provides for extremely limited relief that supposedly will provide competition to the primary ticket sale and concert promotion markets. The limited relief here is insufficient to overcome the significant barriers to entry into both primary ticketing sales and concert promotion markets. LNE will control over 80% of the primary ticketing sales in the United States, yet the PFJ provides only for the divestment of Paciolan, a small ticketing platform that has been sublicensed to other primary ticket sellers barely representing 4% of the market; and for a 5-year ticket technology license to Anchutz Entertainment Group, Inc. (‘‘AEG’’), who represents about 8% of the capacity of U.S. concert venues. As the Washington Post observed troublesome here is that ‘‘in order to provide sufficient competition to a bigger and more vertically integrated Ticketmaster, the government has put itself in the position of playing midwife to two other vertical mergers—one involving Anschutz, the other Comcast—making it even more difficult for small venues and independent promoters to survive.’’ 22 While Comcast may theoretically provide for broader competition and the DOJ believes that AEG may be the ‘‘company best positioned’’ to compete for the sale of primary ticketing,23 these remedies are wholly inadequate. First, the divestment of Paciolan to Comcast fails to secure any relief in the primary ticket sales market. Paciolan now is only sub-licensed by Ticketmaster to roughly 4% of the market for primary ticketing. Assuming that the 4% benchmark is maintained under Comcast ownership, Paciolan will only be used in another 2% of concert 22 Steven Pearlstein, Ticketmaster and Live Nation Merger is a Raw Deal, The Washington Post (January 29, 2010), available at http:// www.washingtonpost.com/wp-dyn/content/article/ 2010/01/28/AR2010012803710.html. 23 CIS at 13. E:\FR\FM\29JNN2.SGM 29JNN2 37696 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices sroberts on DSKD5P82C1PROD with NOTICES venues which Comcast provides ticketing to. Second, the merger and the PFJ transform the structure of the ticketing and promotion marketplace to effectively require vertical integration in order for any firm to effectively participate in the market in the future. The merger combines the largest ticketing firm with the largest concert promoter. Although the parties may assert that vertical integration is efficient, the DOJ appropriately rejected those claims.24 Yet the DOJ then relied on AEG to attempt to restore competition, significantly increasing the level of vertical integration in the market. Post-merger if any firm would seek to enter the ticketing market in the future, it now will effectively be forced to simultaneously enter into concert promotion. Typically the antitrust enforcement agencies challenge vertical mergers because they may require twolevel entry for future entrants; 25 in this case the PFJ causes the anticompetitive effect the DOJ is supposed to try to prevent. In this case the PFJ enhances barriers to entry rather than reducing them. Third, we are very skeptical that AEG can fully restore competition through the complex limited licensing arrangement with Ticketmaster. AEG will be fully beholden and dependent on Ticketmaster. Licensing of Ticketmaster’s ticketing platform to AEG would be insufficient to prevent the destruction of any remaining consumer protections, and any competitors, in its wake as well. AEG with 30 concert venues, trails far behind with the control of LNE’s 127 venues. Moreover, the licensing of the ticketing platform still provides LNE with royalties based on each ticket sold by AEG, meaning Ticketmaster will have its hand in AEG’s pot. Fourth, even with the relief offered by the PFJ, LNE will still control over 80% of the primary ticketing and control most of the major concert venues in the United States, resulting in significant barriers to entry into these markets. Independent promoters will have to compete to book shows in LNE owned venues. And Independent promoters will most likely be forced to continue to 24 In the Competitive Impact Statement the DOJ noted that a ‘‘vertically integrated monopoly is less likely to spur innovation and efficiency than competition between vertically integrated firms, and a vertically integrated monopoly is unlikely to pass the benefits of innovation and efficiency onto consumers.’’ CIS at 12. We respectfully suggest that a vertically integrated duopoly is far less likely to spur innovation than several nonintegrated firms. 25 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1011, at 196 (rev. ed. 1998) (citing the 1984 Merger Guidelines, § 4.211). VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 utilize Ticketmaster for the majority of their shows (allowing Ticketmaster to keep its hands inside the promoters’ pockets.) Moreover, with LNE possessing majority control of venues, coupled with Ticketmaster’s ownership of Front Line Management, the barriers to entry are significant, and will become more significant post-merger. Moreover, the fact that the next largest competitors to Ticketmaster and Live Nation only represent roughly 4% of primary ticket sales and 8% of major concert venues is telling of the dominance LNE will have, and of the considerable barriers that will exist post-merger. This merger dooms any real diversity in the live concert industry. As the Editorial Board of the New York Times warned: ‘‘Live Nation could easily shut out independent promoters—who don’t have their own venues and ticket services. This could reduce diversity in the music market. The cost savings that are supposed to flow from these mergers never seem to accrue to consumers because the mergers leave so little competition.’’ 26 That is why the PFJ should be rejected. D. The PFJ Fails To Provide an Adequate Firewall The PFJ attempts to limit the anticompetitive effects of the merger by imposing certain behavioral restrictions on LNE. Even though both Ticketmaster and LiveNation have been the subject of several antitrust and consumer protection lawsuits, the PFJ imposes extremely modest restrictions at best. Ticketmaster, after all, is no model corporate citizen—during the pendency of this merger it settled Federal Trade Commission charges that it engaged in fraud and deception in the sales of tickets for Bruce Springsteen concerts.27 If Ticketmaster would engage in such brazen law violations during the pendency of a government merger investigation, certainly the most significant and iron-clad behavioral restrictions must be imposed to prevent any violations of the PFJ. Yet the PFJ does not do that. It recognizes the importance of the confidential information of independent concert promoters, but imposes an extremely limited two-paragraph firewall—one far less significant than that used by the other federal antitrust enforcer—the Federal Trade Commission. 26 Editorial, Music Gets Bigger, N.Y. Times (February 9, 2010). 27 See Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief, Federal Trade Comm’n v. Ticketmaster et al, Case No. 1:10-cv-01093 (N.D. Ill. February 18, 2010). PO 00000 Frm 00046 Fmt 4701 Sfmt 4703 Customer data is the lifeblood of the concert promotion business. Concert promoters attract customers by producing more innovative and creative shows, promoting new artists, offering reasonable ticket prices, and knowing the tastes and interests of their community. Each independent concert promoter’s list of customers is one of its most crucial assets. When an independent concert promoter puts on a show, he is able to collect customer information, including e-mail addresses, through ticket sales. This information is important for the purposes of advertising and gaining repeat customers. By permitting this merger, the independent promoters are forced to contract for primary ticketing services via its largest concert promotion rival, LNE. LNE will have the incentive and ability to quickly exploit the information to dampen competition in both promotion and ticketing. LiveNation has used information in this fashion in the past. Vertical mergers of this sort often raise the concerns that by the merging parties having access to competitors’ data, there is the potential for discrimination against competitors, or worse, exclusion of competitors from the market. The PFJ attempts to create a firewall provision to prevent LNE from obtaining the ticketing data of its competitors and using this data in its non-ticketing businesses (concert promotion and ancillary services). As the Competitive Impact Statement notes, the PFJ seeks to protect competition among promoters and artist managers ‘‘by requiring that Defendants either refrain from using certain ticketing data in their nonticketing businesses or provide that data to other promoters and artist managers.’’ 28 Yet, the PFJ seeks to limit misuse through a bare bones, twoparagraph firewall provision. To the detriment of independent concert promoters, this PFJ provision still permits a broad sharing of information among higher-level employees, including ‘‘any senior corporate officer, director or manager.’’ 29 Additionally, the provision seems to lack any mechanism of policing this firewall. Moreover, the firewall does not adequately protect the independent concert promoters. These firewall provisions will not work as planned, especially for a firm like Ticketmaster that has such overwhelming vertical control and such a poor record of corporate compliance. 28 CIS at 17. 29 Proposed E:\FR\FM\29JNN2.SGM Final Judgment at 4, 20. 29JNN2 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices The inadequacy of the PFJ is clear when it is compared to the approach of the Federal Trade Commission (‘‘FTC’’) in implementing a much stronger firewall in a vertical merger (see In the Matter of PepsiCo, Inc. (FTC File No. 091 0133, February 26, 2010)).30 Pepsi acquired its two largest bottlers Pepsi Bottling Group and Pepsi Americas. Pepsi bottlers also distribute for PepsiCo’s competitor, Dr. Pepper and Snapple Group (DPSG). This is a merger with similar vertical concerns to the Ticketmaster/Live Nation merger, in which the sharing of competitive information could be detrimental to competition. In a 14-page Consent Order the FTC lays out specific firewall provisions designed to prevent acquisition and misuse of confidential information and monitor, when necessary, the use of competitive information by the merged firm. • The FTC Order imposes a Monitor Trustee to monitor compliance with the order and the order is explicit that the Trustee is a fiduciary of the Commission. • Additionally, The Monitor has full audit rights and is paid for by Pepsi. The Monitor is effectively an employee of the FTC. • The Order designates a very limited set of Pepsi employees (the parent company) who can have access to the bottling information. • The Order narrowly defines the type of information that Pepsi (the parent company) can have access to and narrowly defines the permissible use of the information it is allowed access to. Consent Order attached hereto as ‘‘Attachment C.’’ sroberts on DSKD5P82C1PROD with NOTICES 30 FTC VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 • The Order requires reorganization of personnel in both Pepsi and the bottling companies to comply with the Order. • The Order requires Pepsi, within a certain time frame, to develop internal procedures to comply with the Order. Of course, anyone can recognize that Dr. Pepper and Snapple Group has far more power and resources to protect itself from anticompetitive conduct than the small independent concert promoters or venue owners the PFJ seeks to protect. The DOJ should reconsider the PFJ, and short of blocking the merger, should adopt additional mechanisms to strengthen the firewall provisions, similar to the FTC. For example, a Monitor Trustee, being a neutral thirdparty or a fiduciary of the Division, should be required to monitor compliance with the order; and to ensure compliance, provide the Monitor Trustee with full audit rights. Additionally, the DOJ should narrowly define the type of information that the non-ticketing businesses of LNE can have access to, and narrowly define the permissible use of the information. Finally, the DOJ should require LNE to develop internal procedures to comply with the order. The addition of such enforcement mechanisms will help strengthen what is an otherwise inadequate PFJ. 1. Conclusion After an 11-month investigation of a merger which creates a dominant firm in the broken ticketing market, posing an unprecedented level of concern by consumers and competitors, the DOJ PO 00000 Frm 00047 Fmt 4701 Sfmt 4703 37697 chose insufficient remedies to protect consumers and independent concert promoters. The remedies are inadequate to resolve the competitive concerns and the PFJ actually enhances barriers to entry. Moreover, the PFJ fails to adequately provide an effective firewall provision, which is the only provision to protect independent concert promoters and their customer base from the predatory practices of Ticketmaster and Live Nation. It is a favorite phrasing of Live Nation and Ticketmaster executives to say the music industry is ‘‘broke.’’ There is no doubt about that; however, it is these companies that have broken it. To solidify their market power makes no sense. As Congressman Pascrell declared ‘‘[t]here is little doubt that the result of this merger will be higher ticket prices, higher fees and chilling effects on consumers, business managers, artists, music fans, promoters in every state around the country.’’ 31 The PFJ should be rejected and the merger blocked. In the alternative, we strongly urge the DOJ to amend the PFJ with additional remedies to address these competitive concerns. Date: May 3, 2010. Respectfully submitted. David A. Balto, Law Offices of David A. Balto, 1350 I Street, NW., Suite 850, Washington, DC 20005. Tel: 202–789– 5424. Fax: 202–589–1819. BILLING CODE P 31 Remarks of Congressman Bill Pascrell, Press Conference on Ticketmaster and Live Nation merger (December 16, 2009). E:\FR\FM\29JNN2.SGM 29JNN2 VerDate Mar<15>2010 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices 19:06 Jun 28, 2010 Jkt 220001 PO 00000 Frm 00048 Fmt 4701 Sfmt 4725 E:\FR\FM\29JNN2.SGM 29JNN2 EN29JN10.045</GPH> sroberts on DSKD5P82C1PROD with NOTICES 37698 VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 PO 00000 Frm 00049 Fmt 4701 Sfmt 4725 E:\FR\FM\29JNN2.SGM 29JNN2 37699 EN29JN10.046</GPH> sroberts on DSKD5P82C1PROD with NOTICES Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices VerDate Mar<15>2010 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices 19:06 Jun 28, 2010 Jkt 220001 PO 00000 Frm 00050 Fmt 4701 Sfmt 4725 E:\FR\FM\29JNN2.SGM 29JNN2 EN29JN10.047</GPH> sroberts on DSKD5P82C1PROD with NOTICES 37700 VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 PO 00000 Frm 00051 Fmt 4701 Sfmt 4725 E:\FR\FM\29JNN2.SGM 29JNN2 37701 EN29JN10.048</GPH> sroberts on DSKD5P82C1PROD with NOTICES Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices VerDate Mar<15>2010 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices 19:06 Jun 28, 2010 Jkt 220001 PO 00000 Frm 00052 Fmt 4701 Sfmt 4725 E:\FR\FM\29JNN2.SGM 29JNN2 EN29JN10.049</GPH> sroberts on DSKD5P82C1PROD with NOTICES 37702 <FNP> From: Gary T. To: ATR–Antitrust—Internet Cc: sroberts on DSKD5P82C1PROD with NOTICES Subject: For Ms. Christine Varney Sent: Tue 4/13/2010 12:52 PM Ms. Varney: As you are quoted in the below article—‘‘Generally when you see robust competition, you see prices coming down,’’ Varney told reporters. ‘‘This is the right result.’’, I am writing you. VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 On April 1st, 2010 I drive 40 miles to downtown Houston, TX where the box office of Houston’s House of Blues is located in order to purchase tickets for a concert. While I had business in downtown Houston, I specifically drove to the aforementioned House of Blues to purchase the tickets so that I would NOT have to pay all the surcharges that Ticketmaster/Live Nation charge. Since the Justice Department allowed the Ticketmaster and Live Nation merger to occur, as it pertains to House of Blues venues (and about another 120 PO 00000 Frm 00053 Fmt 4701 Sfmt 4703 37703 venues): they own the venue, produce the concert and ARE THE ONLY WAY to purchase tickets directly (I.E. Not having to go through a ticket reseller [which is just another name for legalized scalping]). What occurred: The tickets were purchased at the box office. To my surprise, and AFTER my credit card was charged, I saw that I was charged a $3 ‘‘convenience charge’’ for EACH $18 ticket (and NOT told there was such a charge until AFTER the tickets were purchased). The $3 per E:\FR\FM\29JNN2.SGM 29JNN2 EN29JN10.050</GPH> Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices 37704 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices ticket convenience charge was approximately an additional 17% charge to the cost of the ticket. I was then advised that since the tickets had already been charged to my credit card and printed, there was nothing that the sales person could do at the box office and that I was stuck with the tickets. Had I known in ADVANCE OF MY CREDIT CARD BEING CHARGED that I was going to get charged a convenience charge for each ticket, I never would have made the purchase. I contacted Ticketmaster about the charges and their response was—(and the entire email is at the bottom of this email) From: Ticketmaster Customer Support <customer_support@ticketmaster.com> Reply-To: Ticketmaster Customer Support <ticketmasterus@mailca.custhelp.com> Date: Sat, 10 Apr 2010 08:31:32–0400 (EDT) To: ‘‘Gary T. * * * ‘‘There is typically no convenience charge when you drive to a box office to purchase tickets.’’ Yet, did Ticketmaster credit my credit card for the convenience charges since I purchased the tickets at the box office? No. To sum the situation up: 1. Prior to the Ticketmaster and Live Nation merger—there were no convenience charges for purchasing the tickets at the box office where the event was occurring. 2. Post-merger: Customers are charged convenience charges on tickets purchased at the box office where the event is occurring. I see the aforementioned charges as a blatant abuse of monopolistic power. Gary T. Johnson Houston, TX sroberts on DSKD5P82C1PROD with NOTICES Ticketmaster, Live Nation Merger Approved: Will It Lead To Lower Ticket Prices? RYAN NAKASHIMA | 01/25/10 08:03 PM | AP LOS ANGELES —Concert promoter Live Nation and ticket-seller Ticketmaster consummated their merger on Monday after the U.S. Justice Department approved it with conditions meant to lower ticket prices for consumers. Shares in both companies rallied by about 15 percent in trading Monday, showing that investors approved of how the Obama administration handled its first big merger with its appointee Christine Varney as assistant attorney general. Regulators required Ticketmaster to license its ticketing software to a VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 competitor and sell a subsidiary that handles tens of millions of tickets a year. That is meant to strengthen the companies that will compete for ticketing contracts and concert promotion work with Live Nation Entertainment Inc., the new company formed by the merger of Live Nation Inc. and Ticketmaster Entertainment Inc. ‘‘Generally when you see robust competition, you see prices coming down,’’ Varney told reporters. ‘‘This is the right result.’’ Consumer groups, ticket resellers and some politicians had expressed concerns that the combined company would control too much of the concert experience. Varney said the original proposal for the merger would have been ‘‘anticompetitive.’’ Both companies agreed to the conditions, but a federal court in Washington still has to approve it. Canadian regulators and 17 state attorneys general also signed on to the deal. The combined company will handle all aspects of the concert business, including promoting them, selling tickets, beer and parking, putting out albums and managing an artist roster that includes U2, Madonna, Jay-Z and the Eagles. Its operations span more than 30 countries. The companies said music fans will benefit through lower ticket prices because the merged company can earn money in ways that separate companies could not. Michael Rapino, CEO of Live Nation and the merged company, said the merger creates ‘‘a more diversified company with a great selling platform for artists and a stronger financial profile that will drive improved shareholder value over the long term.’’ Story continues below Under the Justice Department rules, Ticketmaster must license its software for five years to Anschutz Entertainment Group Inc., which owns the Staples Center and other venues. It was also directed to sell subsidiary Paciolan to Comcast-Spectator, a subsidiary of Comcast Corp. But consumers might not notice the difference right away, partly because the merger agreement preserves long-term exclusive ticketing contracts with venues. AEG and Comcast-Spectacor could take years to effectively take ticketing deals away from Ticketmaster, Gabelli & Co. analyst Brett Harriss said. Only then would ticket fees start to come down, Harriss said. Varney said about 20 percent of Ticketmaster’s deals with venues will expire in 2010. Previously the vast PO 00000 Frm 00054 Fmt 4701 Sfmt 4703 majority of Ticketmaster clients renewed their deals upon expiration. Some vocal opponents continued their attack. Rep. Bill Pascrell Jr., D–N.J., said the ruling did not address the resale market that led to consumers paying inflated prices for a Bruce Springsteen concert last February. It also did not affect the vertical integration the companies proposed— although Varney said her department would monitor the companies for 10 years to prevent anticompetitive bundling of services. Don Vaccaro, chief executive of ticket resale site TicketNetwork, said having three strong players was better than just one, but it still left small ticket retailers at a disadvantage, especially for VIP seating packages that artists sometimes release through their concert promoters. ‘‘They created a lot of little monopolies on tickets at venues,’’ Vaccaro said. ‘‘It could have gone further.’’ Under the deal, the merged entity will be under a 10-year court order prohibiting it from retaliating against venues that choose to sign ticket-selling contracts with competitors. It also must allow venues that sign deals elsewhere to take consumer ticketing data with them. Live Nation, which is based in Los Angeles, and Ticketmaster, which has headquarters nearby in West Hollywood, have said the merger will streamline their operations, allowing them to save $40 million a year. It reversed a schism that happened in 2009, when Live Nation let its ticketing deal with Ticketmaster expire and instead sold tickets to its own venues with the help of German company CTS Eventim AG. The merger closed on Monday, with Ticketmaster stockholders receiving about 1.474 Live Nation shares for every Ticketmaster share they own. Ticketmaster shares stopped trading at the end of the day. Ticketmaster shares rose $2.10, or 15.8 percent, to close at $15.40 while Live Nation shares closed up $1.35, or 14.7 percent, at $10.51. The merged company now has a market capitalization of about $889 million. Both Comcast-Spectacor and AEG hailed the ruling as an opportunity to expand their businesses. Comcast-Spectacor, which owns the Philadelphia Flyers, Philadelphia 76ers and two arenas, said it would add Paciolan’s 200 ticketing accounts and complement its capabilities as a venue manager, food and beverage seller and seller of venue-naming rights. AEG Chief Executive Timothy Leiweke said his company has a E:\FR\FM\29JNN2.SGM 29JNN2 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices commitment from Ticketmaster to run ticket-selling operations under the brands of AEG and its clients starting immediately if AEG wants, and running for five years. He said AEG will ‘‘aggressively explore’’ alternative ticketing platforms in the coming years. AEG can choose to keep Ticketmaster’s technology or develop a separate system by itself or with partners. From: Ticketmaster Customer Support <customer_support@ticketmaster.com> Reply-To: Ticketmaster Customer Support <ticketmasterus@mailca.custhelp.com> Date: Sat, 10 Apr 2010 08:31:32–0400 (EDT) To: ‘‘Gary T. Subject: To Irving Azoff and the Ticketmaster/Live Nation management: I purchased tick * * * [Incident: 100410–000351] Thank you for allowing us to be of service to you. Subject To Irving Azoff and the Ticketmaster/ Live Nation management: I purchased tick* * * sroberts on DSKD5P82C1PROD with NOTICES Discussion Thread (Somer_ZYS774)04/10/2010 08:31 AM EDT Dear Gary, Thank you for your e-mail. The convenience charge covers costs that allow Ticketmaster to provide the widest range of available tickets while giving you multiple ways to purchase. Tickets are available in many neighborhoods via local ticket outlet locations, our local charge-by-phone network and online at Ticketmaster.com. Tickets can be purchased through at least one distribution channel virtually 24 hours a day. The convenience charge varies by event and is determined by negotiations with arena operators, promoters and others based on costs for each event. Also, the convenience charge will vary depending upon where you purchase the tickets. There is typically no convenience charge when you drive to a box office to purchase tickets. A convenience charge is applied when you purchase from the Internet, phone or ticket outlet (e.g., at your local department store) and this charge may vary depending upon Ticketmaster’s local agreements with the venues, promoters and outlet partners. Thank you for using Ticketmaster, where we continually strive to provide World Class Service to every customer, every day! We really appreciate your business, and hope we were able to VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 resolve any problems or answer any questions you had. Please reply to this email if we may be of further assistance. Sincerely, Somer_ZYS774 From: Tom Kuhr To: ATR-Antitrust—Internet; Varney, Christine Cc: Subject: Ticketmaster Sent: Tue 1/26/2010 3:31 PM Dear Ms. Varney, It’s absolutely unconscionable of you to let an already monopolistic Ticketmaster acquire even more power to shut out competition. I don’t know what kind of nonsense they told you about how they play or will play nice with others during your investigation, but it’s clear that they dominate their market by a huge margin and will continue to shut out any competition with lockups on more venues. This is the worst decision for consumers in years. The ticket fees that are already too high will continue to rise, and the new combined monster of an organization with a stranglehold on both artists and venues will make cable companies look like charities in comparison. You made a bad decision this week in the name of corporate growth. —Tom Tom Kuhr Hermosa Beach, California From: Don Crepeau To: ATR-Antitrust—Internet Cc: Subject: Ticketmaster Live Nation decision. Sent: Tue 1/26/2010 3:07 PM I want to thank you for making it near imposable for me to be able to afford tickets to the concerts of my favorite musicians. Now that you have insured that the ticket prices will be too high for me to afford I can concentrate on other things important to me. Like helping the Republican Party remove the Democrats from office and maybe causing you to loose your jobs. Don Crepeau From: Jason Keenan To: ATR–OPS Citizen Complaint Center Cc: Subject: ticketmaster/live nation merger Sent: Tue 2/9/2010 8:30 AM Please reconsider your decision, as a professional musician and lifelong fan of live music, I urge you to reverse this decision. As an American, and a believer in the Constitution and PO 00000 Frm 00055 Fmt 4701 Sfmt 4703 37705 Equality of Opportunity, I simply cannot fathom how you could allow this to happen. Thank you, Jason Keenan From: Chris Cantz To: ATR–ISSG—Web Master Cc: Subject: Ticketmaster/Live Nation Merger Sent: Tue 1/26/2010 12:47 AM Attention Mr. Webmaster. Could you please ask Ms. Varney what she was smoking when she said that this merger would be beneficial and innovative to the public as I would like to order some of it. I’m not sure how someone in her position isn’t aware of the definition of a monopoly and it’s damage to the people our government is meant to represent. Does she really believe the already exorbitant service charges will go down now that there is no competition? Once again we the people get the shaft from the government and the rich corporations with deep pockets will continue to get richer. Thanks for nothing Ms. Varney (Other than increased service charges) From: joseph carlson To: Hoag, Aaron Cc: Subject: TUNNEY ACT COMMENTS RE: case 1:10-cv-00139 usa vs Tmaster Sent: Tue 1/26/2010 11:47 AM Mr. Hoag, I believe the Justice Department made a huge mistake by allowing the LN TM merger as indicated by the seats made available for their first big onsale since the merger was approved. This week James Taylor went onsale for many US cities and Livenation-Ticketmaster OFFERED NO SEATS ON THE FLOOR FOR ANY OF THE SHOWS!!!!! Furthermore the entire lower bowl for each venue had less then 40 seats available for the public onsale. This means they kept well over 4 thousand of the best seats to scalp for themselves for all of the shows. By allowing this merger you have made it impossible for the average fan to get good seats for most concerts that go onsale in America. As government officials I believe that it is important for you to look out for the average American not BIG CORPORATIONS!!! You should have never allowed this merger without mandating TM–LV to offer at least 5% of the seats for ALL sections of a given venue at the time of an onsale. The conditions set forth by the merger offered NOTHING to protect the consumers! Please call me at ***-******* for suggestions on conditions that the DOJ should’ve made when approving this merger. E:\FR\FM\29JNN2.SGM 29JNN2 37706 Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / Notices sroberts on DSKD5P82C1PROD with NOTICES Sincerely, Joe Carlson From: Kenneth de Anda To: ATR–OPS Citizen Complaint Center Cc: Subject: YOU have FAILED to protect us yet again Sent: Mon 1/25/2010 5:23 PM To Whom It May Concern: VerDate Mar<15>2010 19:06 Jun 28, 2010 Jkt 220001 By allowing the Live Nation/ Ticketmater merger to go ahead, you have failed to protect the American consumer. The very people with whom you are in charge of the task of protecting from large corporations. It is a very sad day for concert goers and consumers. Once again corporations have succeeded in blinding politicians with money and false hope for PO 00000 Frm 00056 Fmt 4701 Sfmt 9990 consumers. I am very saddened that this merger has occurred and hope for the day when the American consumer will once again be protected by the very government.agencies that were set up to protect them. Sincerely, Kenneth de Anda [FR Doc. 2010–15686 Filed 6–28–10; 8:45 am] BILLING CODE P E:\FR\FM\29JNN2.SGM 29JNN2

Agencies

[Federal Register Volume 75, Number 124 (Tuesday, June 29, 2010)]
[Notices]
[Pages 37652-37706]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-15686]



[[Page 37651]]

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Part IV





Department of Justice





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Antitrust Division



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United States et al. v. Ticketmaster Entertainment, Inc. et al.; Public 
Comments and Response on Proposed Final Judgment; Notice

Federal Register / Vol. 75, No. 124 / Tuesday, June 29, 2010 / 
Notices

[[Page 37652]]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States et al. v. Ticketmaster Entertainment, Inc. et al.; 
Public Comments and Response on Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the comments 
(without attachments) received on the proposed Final Judgment in United 
States et al. v. Ticketmaster Entertainment, Inc. et al., Civil Action 
No. 1:10-CV-00139-RMC, which were filed in the United States District 
Court for the District of Columbia on June 17, 2010, together with the 
response of the United States to the comments.
    Complete copies of the comments with attachments, and the United 
States' response, are available for inspection at the Department of 
Justice Antitrust Division, 450 Fifth Street, NW., Suite 1010, 
Washington, DC 20530 (telephone: 202-514-2481), on the Department of 
Justice's Web site at http://www.justice.gov/atr/cases/ticket.htm, and 
at the Office of the Clerk of the United States District Court for the 
District of Columbia, 333 Constitution Avenue, NW., Washington, DC 
20001. Copies of any of these materials may be obtained upon request 
and payment of a copying fee.

J. Robert Kramer II,
Director of Operations and Civil Enforcement.

United States District Court for the District of Columbia

United States of America, et al., Plaintiffs, v. Ticketmaster 
Entertainment, Inc., et al., Defendants.
Case: 1:10-cv-00139.
Assigned to: Collyer, Rosemary M.
Assign. Date: 1/25/2010.
Description: Antitrust.

Plaintiff United States' Response to Public Comments

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA'' or ``Tunney Act''), the 
United States hereby files the public comments concerning the proposed 
Final Judgment in this case and the United States' response to those 
comments. After careful consideration of the comments, the United 
States continues to believe that the proposed Final Judgment will 
provide an effective and appropriate remedy for the antitrust 
violations alleged in the Amended Complaint. The United States will 
move the Court, pursuant to 15 U.S.C. 16(b)-(h), for entry of the 
proposed Final Judgment after the public comments and this Response 
have been published.\1\
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    \1\ As approved by the Court in a Minute Order dated June 15, 
2010, the United States will publish the Response and the comments 
without attachments or exhibits in the Federal Register. The United 
States will post complete versions of the comments with attachments 
and exhibits on the Antitrust Division's Web site at: http://www.justice.gov/atr/cases/ticket.htm.
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I. Procedural History

    On January 25, 2010, the United States and the States of Arizona, 
Arkansas, California, Florida, Illinois, Iowa, Louisiana, Nebraska, 
Nevada, Ohio, Oregon, Rhode Island, Tennessee, Texas, and Wisconsin, 
and the Commonwealths of Massachusetts and Pennsylvania (the 
``States'') filed the Complaint in this matter, alleging that the 
merger of Ticketmaster Entertainment, Inc. (``Ticketmaster'') and Live 
Nation, Inc. (``Live Nation''), if permitted to proceed, would 
substantially lessen competition in the market for primary ticketing 
services to major concert venues in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18.\2\ Simultaneously, the United States filed a 
Competitive Impact Statement (``CIS''), a proposed Final Judgment, and 
a Hold Separate Stipulation and Order signed by the United States, the 
States, and the defendants consenting to the entry of the proposed 
Final Judgment after compliance with the requirements of the APPA.
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    \2\ An Amended Complaint was filed on January 28, 2010, solely 
to add the States of New Jersey and Washington as plaintiffs.
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    The proposed Final Judgment and CIS were published in the Federal 
Register on February 10, 2010. See 75 FR 6,709 (2010). A summary of the 
terms of the proposed Final Judgment and CIS, together with directions 
for the submission of written comments relating to the proposed Final 
Judgment, were published for seven days in The Washington Post from 
February 26, 2010, through March 4, 2010. The Defendants filed the 
statement required by 15 U.S.C. 16(g) on February 12, 2010. The 60-day 
period for public comments ended on May 3, 2010, and twelve comments 
were received as described below and attached hereto.

II. The Investigation and Proposed Resolution

A. Investigation

    On February 10, 2009, Ticketmaster and Live Nation entered into a 
definitive merger agreement. Over the following eleven and a half 
months, the United States Department of Justice (``Department'') 
conducted an extensive, detailed investigation into the potential 
competitive effects of the proposed merger. As part of the 
investigation, the Department issued Second Requests and twelve Civil 
Investigative Demands (``CIDs'') to the merging parties, as well as 
more than fifty CIDs to third parties. The Department considered more 
than 2.5 million documents received in response to the Second Requests 
and CIDs. More than 250 interviews were conducted with customers, 
competitors, and other individuals with knowledge of the industry, 
including two commenters here--Jam Productions, Ltd. and the group led 
by It's My Party, Inc.--which are competitors and complainants about 
the proposed transaction. The investigative team analyzed their 
concerns, as well as the views and data presented by hundreds of 
others. While the Department was reviewing this transaction, a group of 
state Attorneys General and the Canadian competition authorities 
conducted their own antitrust investigations. Nineteen states joined 
the United States' Amended Complaint and the proposed Final Judgment 
resolving the Amended Complaint; no state has filed a separate lawsuit 
to block the merger or has opposed the proposed Final Judgment before 
this Court. At the conclusion of its investigation, Canada imposed 
parallel relief that is substantively identical to that contained in 
the proposed Final Judgment.\3\
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    \3\ Competition authorities in the United Kingdom also reviewed 
the transaction and ultimately cleared the merger without imposing 
any conditions; market conditions in the United Kingdom, however, 
differ substantially from those prevailing in the United States and 
Canada.
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    As part of its investigation, the Department considered the 
potential competitive effects of the merger on numerous products and 
services, customer groups, and geographic areas. For the vast majority 
of these, including the provision of services to promote live 
entertainment events, the Department determined that the proposed 
merger was unlikely to reduce competition substantially. Because 
Ticketmaster and Live Nation were the two largest providers of primary 
ticketing services, the Department appropriately devoted significant 
time and resources to analyzing whether the combination of the parties' 
primary ticketing services would likely reduce competition. The United 
States concluded that the combination of Ticketmaster and Live Nation 
likely would lessen competition in the provision and sale of primary 
ticketing services for major concert venues in the United States.

[[Page 37653]]

    Primary ticketing is the initial distribution of tickets to an 
event. Ticketing companies are responsible for distributing primary 
ticket inventory through channels such as the Internet, call centers, 
and retail outlets and for enabling the venue to sell tickets at its 
box office. The primary ticketing company provides the technology 
infrastructure for ticket distribution. Primary ticketing firms also 
may provide technology and hardware that allow venues to manage fan 
entry at the event, including everything from handheld scanners that 
ushers use to check fans' tickets to the bar codes on the tickets 
themselves. The overall price a consumer pays for a ticket generally 
includes the face value of the ticket and a variety of service fees 
above the face value of the ticket. Such fees are most often charged by 
the provider of primary ticketing services. The primary ticketing 
provider, however, does not set the face value of the ticket. It is set 
by the promoter and artist.
    The complexity and demands of selling tickets to major concert 
venues requires sophisticated primary ticketing services. A major 
concert venue's primary ticketing provider must be able to withstand 
the heavy transaction volume associated with the first hours when 
tickets to popular concerts become available to concert-goers, offer 
integrated marketing capabilities, and otherwise have a proven track 
record of high quality service. As such, major concert venues have had 
few choices for primary ticketing providers. Ticketmaster had a long-
standing track record of filling these needs. When Ticketmaster and 
Live Nation announced their merger, Live Nation had recently begun 
engaging in primary ticketing services, primarily selling tickets to 
concerts at its own venues as a way to demonstrate to other venues that 
its primary ticketing platform performed well. No primary ticketing 
company other than Ticketmaster and Live Nation had amassed or likely 
could have amassed in the near term sufficient scale to develop a 
reputation for successfully delivering similarly sophisticated primary 
ticketing services.
    Primary ticketing services are sold pursuant to contracts 
individually negotiated with venues. Because primary ticketing 
companies can price discriminate among different venues, the Department 
determined that the proposed transaction could affect different classes 
of venues differently. Specifically, the Department found that major 
concert venues, because of their need for the most sophisticated 
ticketing services, have few ticketing options. These venues can be 
readily identified, and market power can be selectively exercised 
against them. Furthermore, the Department determined that because the 
merged firm could price discriminate, any effects of the proposed 
transaction on foreign venues would be distinct from any effects on 
domestic venues, and thus it was appropriate to include only major 
concert venues located in the United States within the relevant market.
    After its investigation, the United States determined that the 
proposed merger would likely substantially lessen competition for 
primary ticketing services to major concert venues in the United 
States. As explained more fully in the Amended Complaint and CIS, this 
loss of competition would eliminate financial benefits that venues 
enjoyed during the period when Live Nation exerted competitive pressure 
against Ticketmaster, and would reduce incentives to innovate and 
improve primary ticketing services.\1\ As alleged in the Amended 
Complaint, the proposed merger of Ticketmaster and Live Nation would 
remove Live Nation's competitive presence from an already highly 
concentrated and difficult-to-enter market.\2\ The resulting increase 
in concentration, loss of competition, and absence of any reasonable 
prospect of significant new entry or expansion by market incumbents 
likely would result in higher prices for major concert venues and 
reduce innovation in primary ticketing services.\3\
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    \1\ Amended Complaint ] 40 et seq.; CIS Sec.  II(D).
    \2\ Amended Complaint ]] 38, 40, 43, 44; CIS Sec.  II(D).
    \3\ Amended Complaint ] 40 et seq.; CIS Sec.  II(D).
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B. Proposed Final Judgment

    The proposed Final Judgment is designed to preserve competition in 
the market for primary ticketing services to major concert venues in 
the United States by requiring divestitures of assets and mandating 
certain conduct remedies. First, the proposed Final Judgment creates a 
new, vertically integrated primary ticketing company and bolsters 
another company to compete against Live Nation Entertainment.\4\ 
Second, the conduct restraints in the proposed Final Judgment 
supplement these divestitures to ensure that competitive ticketing 
firms will not be improperly foreclosed from the market by the merged 
firm's conduct.
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    \4\ Live Nation Entertainment is the name of the newly merged 
entity. Throughout this Response, the historical Ticketmaster 
ticketing operation is referred to as ``Ticketmaster,'' the artist 
management business is referred to as ``Front Line,'' and the 
promotions and venue management business is referred to as ``Live 
Nation.''
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    The proposed Final Judgment establishes Anschutz Entertainment 
Group, Inc. (``AEG'') as an entrant into primary ticketing services. 
AEG is the second largest promoter in the United States (behind Live 
Nation). AEG also owns, operates, or manages more than 30 major concert 
venues in the United States, owns part of an artist management firm, 
and owns the Los Angeles Kings hockey franchise. Entry will occur via a 
two-stage process. In the first part of the process, the merged firm 
must provide AEG with an AEG-branded ticketing website based on the 
Ticketmaster Host platform, Ticketmaster's primary platform for selling 
tickets.\5\ AEG has the right to use the AEG-branded ticketing website 
to sell tickets at venues it owns, operates, or manages as well as to 
events at any other venues from which AEG secures the right to provide 
primary ticketing services. AEG has the freedom to compete with 
Ticketmaster on the prices it charges to venues for ticketing services 
and on the service fees that are added to a ticket's price.\6\ In the 
second part of the process, AEG may exercise an already negotiated 
right to acquire a perpetual, fully paid-up license to the then-current 
version of the Ticketmaster Host platform, including a copy of the 
source code, which the merged firm must install.\7\ The agreement 
between AEG and the merged firm contains financial incentives for AEG 
to exercise the right. Finally, the proposed Final Judgment prohibits 
the merged firm from providing primary ticketing services to AEG's 
venues after AEG's right to use the AEG-branded ticketing website 
expires, which will take place five years after execution of the 
license.\8\ This provision is critical to preserving competition in the 
primary ticketing services market, because it guarantees that within 
five years, AEG will have to either remain a full fledged primary 
ticketing services competitor or bolster another primary ticketing 
competitor by using them to meet its ticketing needs.
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    \5\ Proposed Final Judgment Sec.  IV.A.2.
    \6\ Id.
    \7\ Id. Sec.  IV.A.1.
    \8\ Id. Sec.  XIII.B.
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    The proposed Final Judgment also requires the merged firm to divest 
Ticketmaster's entire Paciolan line of business \9\ to an independent 
and economically viable competitor in the market for primary ticketing 
services to

[[Page 37654]]

major concert venues.\10\ The merged firm has already divested this 
business to Comcast-Spectacor, LP (``Comcast-Spectacor''), a 
vertically-integrated company whose subsidiary New Era Tickets (``New 
Era'') was one of many licensees of the Paciolan platform prior to the 
divestiture. In addition to its interest in New Era, Comcast-Spectacor 
owns two major U.S. concert venues, a venue management firm that 
manages fifteen other major concert venues, the Philadelphia Flyers, 
the Philadelphia 76ers, a venue/sports marketing company, and a food 
services company whose clients include major concert venues. Comcast-
Spectacor's ticketing business model is different from Ticketmaster's 
in that venue clients, rather than Comcast-Spectacor, independently set 
service fees and venue clients maintain ownership of their ticketing 
data.
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    \9\ In 2008, Paciolan directly handled the sale for more than 9 
million concert and sporting tickets. It also provided in-house 
ticketing solutions for more than 250 clients, including Tickets 
West, Comcast-Spectacor's ticketing solution New Era, and numerous 
colleges, universities and performing arts centers throughout the 
U.S.
    \10\ Id. Sec. Sec.  IV.E., IV.K.
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    The proposed Final Judgment also prohibits the merged firm from 
engaging in certain conduct that could, in theory, prevent equally 
efficient firms from competing effectively.\11\ The proposed Final 
Judgment proscribes retaliation against venue owners who contract or 
consider contracting for primary ticketing services with the merged 
firm's competitors.\12\ The proposed Final Judgment also prohibits the 
merged firm from explicitly or practically requiring venues, or 
threatening to require venues, to take their primary ticketing services 
in order to be allowed to present concerts Live Nation promotes or 
concerts by artists Front Line manages. It likewise prohibits the 
merged firm from explicitly or practically requiring venues, or 
threatening to require venues, to take concerts the merged firm 
promotes or concerts by artists it manages in order to be allowed to 
purchase the merged firm's primary ticketing services.\13\ Further, the 
Final Judgment prohibits the merged firm from using certain ticketing 
data in its non-ticketing business and from providing that data to 
internal promoters and artist managers.\14\ Finally, the proposed Final 
Judgment mandates that the merged firm provide any current primary 
ticketing client with that client's ticketing data promptly upon 
request, if the client chooses not to renew its primary ticketing 
contract.\15\
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    \11\ Id. Sec.  IX.
    \12\ Id. Sec.  IX.A.1.
    \13\ Id. Sec. Sec.  IX.A.2, IX.A.3.
    \14\ Id. Sec.  IX.B.
    \15\ Id. Sec.  IX.C.
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    In sum, the perpetual license of the Ticketmaster Host platform, 
the divestiture of Paciolan, and the conduct remedies will ensure that 
major concert venues will continue to receive the benefits of 
competition in the primary ticketing services market that otherwise 
would be lost as a result of the merger.

III. Standard of Judicial Review

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty-day comment 
period, after which the court shall determine whether entry of the 
proposed Final Judgment ``is in the public interest.'' 15 U.S.C. 
16(e)(1).
    In making that determination in accordance with the statute, the 
court is required to consider:

    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) The impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

15 U.S.C. 16(e)(1)(A)-(B). In considering these statutory factors, the 
court's inquiry is necessarily a limited one as the government is 
entitled to ``broad discretion to settle with the defendant within the 
reaches of the public interest.'' United States v. Microsoft Corp., 56 
F.3d 1448, 1461 (DC Cir. 1995); see generally United States v. SBC 
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public 
interest standard under the Tunney Act); United States v. InBev N.V./
S.A., 2009-2 Trade Cas. (CCH) ]76,736, No. 08-1965 (JR), 2009 U.S. 
Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that the 
court's review of a consent judgment is limited and only inquires 
``into whether the government's determination that the proposed 
remedies will cure the antitrust violations alleged in the complaint 
was reasonable, and whether the mechanisms to enforce the Final 
Judgment are clear and manageable'').
    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA, a court considers, among other 
things, the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See 
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the 
relief secured by the decree, a court may not ``engage in an 
unrestricted evaluation of what relief would best serve the public.'' 
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing 
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see 
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 
F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, 
at *3. Courts have held that:

    [t]he balancing of competing social and political interests 
affected by a proposed antitrust consent decree must be left, in the 
first instance, to the discretion of the Attorney General. The 
court's role in protecting the public interest is one of insuring 
that the government has not breached its duty to the public in 
consenting to the decree. The court is required to determine not 
whether a particular decree is the one that will best serve society, 
but whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\16\ In 
determining whether a proposed settlement is in the public interest, 
the court ``must accord deference to the government's predictions about 
the efficacy of its remedies, and may not require that the remedies 
perfectly match the alleged violations.'' SBC Commc'ns, 489 F. Supp. 2d 
at 17; see also Microsoft, 56 F.3d at 1461 (noting the need for courts 
to be ``deferential to the government's predictions as to the effect of 
the proposed remedies''); United States v. Archer-Daniels-Midland Co., 
272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court should grant 
due respect to the United States' prediction as to the effect of 
proposed remedies, its perception of the market structure, and its 
views of the nature of the case).
---------------------------------------------------------------------------

    \16\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States vs. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass''). See generally Microsoft, 56 F.3d at 1461 
(discussing whether ``the remedies [obtained in the decree are] so 
inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest' ''.
---------------------------------------------------------------------------

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a

[[Page 37655]]

litigated matter. ``[A] proposed decree must be approved even if it 
falls short of the remedy the court would impose on its own, as long as 
it falls within the range of acceptability or is `within the reaches of 
public interest.''' United States v. Am. Tel. & Tel. Co., 552 F. Supp. 
131, 151 (D.D.C. 1982) (citations omitted) (quoting United States v. 
Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd sub nom. 
Maryland v. United States, 460 U.S. 1001 (1983); see also United States 
v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) 
(approving the consent decree even though the court would have imposed 
a greater remedy). As this Court has previously recognized, to meet 
this standard ``[t]he government need not prove that the settlements 
will perfectly remedy the alleged antitrust harms, it need only provide 
a factual basis for concluding that the settlements are reasonably 
adequate remedies for the alleged harms.'' United States v. Abitibi-
Consolidated Inc., 584 F. Supp. 2d 162, 165 (D.D.C. 2008) (citing SBC 
Commc'ns, 489 F. Supp. 2d at 17). Therefore, the United States ``need 
only provide a factual basis for concluding that the settlements are 
reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 489 
F. Supp. 2d at 17.
    Moreover, the Court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its complaint, rather than to ``construct [its] own 
hypothetical case and then evaluate the decree against that case.'' 
Microsoft, 56 F.3d at 1459. Because the ``court's authority to review 
the decree depends entirely on the government's exercising its 
prosecutorial discretion by bringing a case in the first place,'' it 
follows that ``the court is only authorized to review the decree 
itself,'' and not to ``effectively redraft the complaint'' to inquire 
into other matters that the United States did not pursue. Id. at 1459-
60. As this Court recently confirmed in SBC Communications, courts 
``cannot look beyond the complaint in making the public interest 
determination unless the complaint is drafted so narrowly as to make a 
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
    In its 2004 amendments to the Tunney Act,\17\ Congress made clear 
its intent to preserve the practical benefits of utilizing consent 
decrees in antitrust enforcement, stating ``[n]othing in this section 
shall be construed to require the court to conduct an evidentiary 
hearing or to require the court to permit anyone to intervene.'' 15 
U.S.C. 16(e)(2). The clause reflects what Congress intended when it 
enacted the Tunney Act in 1974, as Senator Tunney explained: ``[t]he 
court is nowhere compelled to go to trial or to engage in extended 
proceedings which might have the effect of vitiating the benefits of 
prompt and less costly settlement through the consent decree process.'' 
119 Cong. Rec. 24,598 (1973) (statement of Senator Tunney). Rather, the 
procedure for the public-interest determination is left to the 
discretion of the court, with the recognition that the court's ``scope 
of review remains sharply proscribed by precedent and the nature of 
Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at 11.
---------------------------------------------------------------------------

    \17\ The 2004 amendments substituted the word ``shall'' for 
``may'' when directing the courts to consider the enumerated factors 
and amended the list of factors to focus on competitive 
considerations and address potentially ambiguous judgment terms. 
Compare 15 U.S.C. 16(e) (2004) with 15 U.S.C. 16(e)(1) (2006); see 
also SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004 
amendments ``effected minimal changes'' to Tunney Act review).
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IV. Summary and Response to Public Comments

    During the 60-day public comment period, the United States received 
comments from the following firms or individuals: It's My Party, 
Inc.,\18\ Jam Productions, Ltd., Jack Orbin, Middle East Restaurant, 
Inc., LIVE-FI Technologies, Inc., Kenneth de Anda, Chris Cantz, Joe 
Carlson, Don Crepeau, Jason Keenan, Tom Kuhr, and Gary T. Johnson. Upon 
review, the United States believes that nothing in the comments 
demonstrates that the proposed Final Judgment is not in the public 
interest. What follows is a summary of the comments, and the United 
States' responses to the concerns raised in those comments.
---------------------------------------------------------------------------

    \18\ It's My Party, Inc.'s (``IMP'') comment is attached as 
Exhibit A. The comment was filed on behalf of a number of firms, 
namely IMP, It's My Amphitheatre, Inc., Seth Hurwitz (both of which 
are affiliated with IMP), Frank Productions, Inc., Sue McLean and 
Associates, and Metropolitan Talent, Inc. The National Consumers 
League joined IMP's comment. See IMP Comment at 1 n.1.
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A. It's My Party (``IMP '')

    IMP, through its leader, Seth Hurwitz, and various affiliated 
companies, is the operator of the 9:30 Club in Washington, DC and the 
promoter at Merriwether Post Pavilion, an amphitheater in Columbia, 
Maryland. IMP is a competitor of Live Nation Entertainment in both the 
concert promotion and venue operation businesses. IMP has also filed an 
antitrust lawsuit against Live Nation, Inc. alleging that Live Nation's 
pre-merger conduct harmed IMP.
    IMP contends that the proposed Final Judgment will not effectively 
protect competition in the primary ticketing services market because 
the remedy does not address Live Nation Entertainment's ``domination of 
the promotion of popular music concerts by major artists and control of 
venues capable of hosting concerts by major artists.'' \19\ IMP argues 
that Live Nation's vertical integration, culminating in its merger with 
Ticketmaster, has resulted in a firm that controls all aspects of the 
relationship between artists and their fans.\20\ IMP argues that to 
cement its competitive position, Live Nation has improperly expanded 
its promotion business by purchasing the rights to artists' entire 
tours (or even several tours) in one deal, shutting out regional 
promoters such as IMP from the opportunity to bid on individual 
dates.\21\ IMP asserts that Live Nation's share of the promotion market 
for ``popular music concerts by major artists'' is actually 70% and 
that Live Nation Entertainment's dominance in promotions will therefore 
enable it to prevent effective competition in the primary ticketing 
services market, because ticketing competitors cannot promise to supply 
venues with the same breadth of concerts available to Live Nation 
Entertainment.\22\ IMP also argues that primary ticketing competitors 
cannot succeed if they cannot provide ticketing services to venues 
owned by Live Nation Entertainment itself.\23\ IMP argues that if the 
merger is to be allowed at all, additional remedies must be imposed to 
ameliorate the effect of Live Nation Entertainment's dominance of the 
concert business.\24\
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    \19\ Id., at 2.
    \20\ See id., at 8-9.
    \21\ See id., at 9.
    \22\ See e.g., id., at 14, 19-20.
    \23\ See id., at 24.
    \24\ See id., at 26-27.
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    IMP's allegations are not new. It articulated these concerns to the 
United States on several occasions during the investigation of the 
defendants' merger. The United States believes that the proposed Final 
Judgment will remedy any loss of competition in primary ticketing 
services that would result from the merger. The United States did not 
find that, based on the evidence uncovered in the Department's 
investigation, the merger would result in harm to any other relevant 
market, such as concert promotion, venue services, or venue management, 
and therefore does not believe that remedies in such markets are 
appropriate.

[[Page 37656]]

1. Effect of Vertical Integration on Primary Ticketing Services Market
    Contrary to IMP's assertion, the United States is well aware of the 
potential competitive impact of vertical integration on the primary 
ticketing services market and designed its remedy with that potential 
effect in mind. It is well recognized that vertical integration can 
produce procompetitive benefits.\25\ In the present case, vertical 
integration of complementary businesses in the live entertainment 
industry reduces the number of firms that must be compensated for a 
concert. This creates incentives for the vertically integrated entity 
to reduce primary ticketing services prices and service fees. The 
United States, however, was well aware of the concern that it may 
become more important for ticketing service companies to also provide 
live entertainment content in order to compete in primary ticketing for 
major concert venues. Accordingly, the proposed Final Judgment 
establishes AEG--Live Nation's largest competitor in the concert 
promotion business--as a credible, vertically integrated competitor in 
the primary ticketing services market.\26\ Therefore, to the extent it 
becomes important over the next several years for ticketing companies 
to provide access to content in order to compete in primary ticketing, 
AEG's established concert promotion business will make it well-
positioned to provide a viable competitive alternative to the merged 
firm. AEG will also benefit from its long-standing relationships with 
venues developed through its concert promotion business and through its 
venue management operations. Its venues and its concert promotion 
business will also provide scale to AEG's own ticketing business or to 
another ticketing rival to Live Nation Entertainment. The availability 
of AEG's concerts to its own primary ticketing business or to another 
primary ticketer undermines IMP's argument \27\ that the merged firm 
will control so much content that venues will be forced to use 
Ticketmaster's ticketing services.
---------------------------------------------------------------------------

    \25\ See Fruehauf Corp. v. FTC, 603 F.2d 345, 351-52 (2d Cir. 
1979) (``A vertical merger * * * does not * * * automatically have 
an anticompetitive effect * * * or reduce competition * * * '' and 
``may even operate to increase competition''); see also, Phillip E. 
Areeda & Herbert Hovenkamp, Antitrust Law; An Analysis of Antitrust 
Principles and Their Application ] 1020 (3d ed. 2009) (``Antitrust 
Law'') (``Most instances of vertical integration, including those 
that result from mergers, are economically beneficial.'')''; Michael 
Riordan & Steven C. Salop, Evaluating Vertical Mergers; A Post-
Chicago Approach, 63 Antitrust L.J. 513, 522-27 (1995) (discussing a 
variety efficiency benefits from vertical mergers, and summarizing 
that ``[a] variety of efficiency benefits that can reduce costs, 
improve product quality, and reduce prices may ensue from vertical 
mergers'').
    \26\ IMP itself acknowledges that AEG is Live Nation's most 
significant competitor in the concert promotion business. Id. at 21.
    \27\ See id., at 14-15, 17-26.
---------------------------------------------------------------------------

    The United States was also well aware that there are other avenues 
venues may pursue for ticketing services. Venues may increasingly look 
to venue management companies to provide a range of services, including 
primary ticketing. The sale of the Paciolan ticketing business to 
Comcast-Spectacor creates significant additional competitive stimulus 
to the ticketing market that will, in combination with the AEG 
licensing agreement, ensure that the proposed Final Judgment restores 
the competition that may otherwise have been lost as a result of the 
merger. Comcast-Spectacor is well-placed to capitalize on the venue 
relationships it developed as an existing provider of venue management, 
concessions, and fan marketing services. Paciolan and New Era have 
historically pursued a differentiated ticketing strategy under which 
their venue customers control all ticketing fees. New Era plans to 
continue competing using this business model. With its vertically 
integrated operation and venue-friendly business model, Comcast-
Spectacor is well-placed to compete against Live Nation Entertainment 
following the merger. Comcast-Spectacor already participates in many 
aspects of the live entertainment business. Its willingness to invest 
in the ticketing business by purchasing Paciolan, and its commitment to 
providing a competitive alternative to Ticketmaster, again suggests 
that IMP's analysis of the ticketing services market is flawed. If IMP 
were correct, Comcast-Spectacor as a venue owner and manager of venues 
for third parties, would have no choice but to acquire primary 
ticketing services from the merged entity, as it would risk the loss of 
all acts promoted by Live Nation by not selecting Live Nation 
Entertainment as its ticketer.\28\ Like AEG, Comcast-Spectacor has 
fundamentally pursued a competitive strategy at odds with IMP's 
predictions of the future of the primary ticketing business.
---------------------------------------------------------------------------

    \28\ See id., at 24-25.
---------------------------------------------------------------------------

    As described above in Part II.B, the conduct provisions in the 
decree will bolster the structural relief that establishes Comcast-
Spectacor and AEG as primary ticketing services competitors. In 
particular, Section IX.A of the proposed Final Judgment ensures that 
the merged firm cannot retaliate against or refuse to provide concerts 
to venues that choose an alternative to Ticketmaster for primary 
ticketing services. This and other provisions underscore the carefully 
constructed nature of the remedy contained in the proposed Final 
Judgment and further belie the argument presented by IMP \29\ that the 
United States failed to account for the importance of content or 
vertical integration to the primary ticketing services market.
---------------------------------------------------------------------------

    \29\ See id., at 14-15.
---------------------------------------------------------------------------

2. Effect of Vertical Integration on Concert Promotion
    Much of IMP's concerns with Live Nation have nothing to do with the 
merger. Ticketmaster was not in the concert promotion business. As the 
United States discusses in more detail below in its response to Jam's 
comment,\30\ the United States thoroughly investigated the effect of 
the vertical merger of Live Nation's promotion business with 
Ticketmaster's ticketing and artist management businesses. Based on the 
evidence uncovered in the Department's investigation, the United States 
did not find that the merger would significantly harm competition in 
the concert promotion business.
---------------------------------------------------------------------------

    \30\ See infra Sec.  IV.B.1.
---------------------------------------------------------------------------

3. The Effect of Live Nation's Concert Promotion Business on Primary 
Ticketing
    IMP contends that Live Nation dominates concert promotion (and thus 
can leverage that dominance into primary ticketing), based on the 
allegation that Live Nation has a 70% market share in the market for 
the promotion of ``popular music concerts'' by ``major artists.'' \31\ 
In the United States' investigation of this merger, the government 
looked into Live Nation's share of concert promotion. The United States 
used data from Pollstar, an aggregator of live entertainment data 
widely used by those in the industry. This data showed Live Nation with 
a 33% market share of concert revenue at major concert venues. The 
United States finds that IMP's market share calculation is not helpful 
because it is based on a market definition that is not well-suited to 
analyzing how the merger of Ticketmaster and Live Nation would affect 
the ticketing business.\32\
---------------------------------------------------------------------------

    \31\ Id. at 17-21.
    \32\ The United States expresses no view on whether the 
provision of promotional services to ``major artists'' for ``popular 
music concerts'' could be considered a proper antitrust market in 
other contexts.
---------------------------------------------------------------------------

    First, IMP argues that the market should be restricted to ``popular 
music'' as distinct from gospel, jazz, blues, and

[[Page 37657]]

other musical and entertainment genres that are reported to Pollstar as 
``concert revenues.'' \33\ To support this distinction, IMP refers to 
the cross-elasticity of demand for consumers of different types of 
concerts.\34\ However, this is entirely the wrong approach for 
analyzing a merger in the market for the provision of primary tickets 
services to major concert venues. While consumers may have strong 
preferences for particular types of concerts--and for specific artists 
within a particular genre--venues purchase primary ticketing services 
for the distribution of tickets to concerts. From the perspective of a 
venue, the relevant consideration is how much revenue and profit it can 
earn from an event, not the genre of music the artist performs. A 
gospel show and rock show that earn the same revenues for a venue are 
in fact potential substitutes. For example, Merriweather Post Pavilion, 
IMP's own venue, hosted a jazz festival the weekend of June 4 and is 
hosting a rock festival on June 19. Therefore, it is entirely 
appropriate to look at the entire set of entertainment options for 
venues in assessing whether Live Nation so dominates concert promotion 
that it will restrain competition in the market for primary ticketing 
services.
---------------------------------------------------------------------------

    \33\ IMP Comment at 19.
    \34\ Id. at 18-21.
---------------------------------------------------------------------------

    Second, while Live Nation is clearly the largest promoter in the 
country, Pollstar figures include Live Nation promotions within its own 
venues. Live Nation is essentially the exclusive promoter within its 
own amphitheaters and clubs, which account for a substantial portion of 
the overall concert sales reported by Live Nation in Pollstar. The 
concerts Live Nation promotes internally have never been available to 
third party venues. Thus, the more relevant figures are likely to be 
Live Nation's share of concert promotion outside of its own venues, as 
that share is a better measure of Live Nation's significance as 
provider of content to independent venues, and thus of Live Nation's 
ability to ``force'' venues to use Ticketmaster after the merger. 
According to 2008 Pollstar data, Live Nation in fact only accounts for 
23% of the concerts promoted at major concert venues it does not own, 
measured by revenue.\35\ Live Nation's leading position in the 
promotion market is driven to a large degree by its ownership of a 
number of key venues. While the relationship between Live Nation's 
venues and its promotion business is relevant to a Live Nation 
competitor such as IMP, independent venues are not beholden to Live 
Nation for content to nearly the degree that IMP would suggest.\36\
---------------------------------------------------------------------------

    \35\ Measured by number of tickets sold, which IMP claims is the 
superior measure, Live Nation accounts for just 18% of the concerts 
promoted at major concert venues not owned or operated by Live 
Nation.
    \36\ See IMP Comment at 24-25.
---------------------------------------------------------------------------

    Third, IMP contends that only tickets to ``concerts by major 
artists (with an average attendance of between 8,000 to 30,000 fans)'' 
should be counted in calculations of Live Nation's share of the 
promotions market.\37\ According to IMP, it is appropriate to focus 
exclusively on these ``major artists'' because they are the ones most 
likely to appear in amphitheaters. This market share calculation, 
however, exacerbates the flaw identified in the previous paragraph by 
focusing in on a set of concerts where Live Nation's market share is 
exceptionally high due to its ownership of venues, rather than due to 
its significance as a promoter for independent venues. This calculation 
does not shed any light on the importance of Live Nation's promotion 
business to the market for providing ticketing services to non-Live 
Nation amphitheaters or to the many other types of concert venues such 
as clubs, theatres, arenas, and stadiums that also employ primary 
ticketing companies to sell concert tickets. Though IMP excludes 
tickets sold at those venues from its calculation of Live Nation's 
market share, that choice obscures the relationship between Live 
Nation's position as a leading concert promoter and the likely effects 
of its merger with Ticketmaster on buyers of primary ticketing 
services.
---------------------------------------------------------------------------

    \37\ Id. at 20.
---------------------------------------------------------------------------

    In the United States' view, IMP not only overstates the strength of 
Live Nation's promotion position, but may also overstate the 
significance of concert promotion to the overall market for primary 
ticketing services. IMP provides no evidence that decisions by venues 
in choosing a primary ticketing company will be driven solely or 
primarily or even significantly by the number of concerts promoted by 
the merged entity.
    Before the merger, Live Nation based its entry strategy into the 
ticketing business on its ability to promise content to venues. The 
United States' Amended Complaint does not argue, however, that this was 
or is the only possible strategy for competing in the ticketing 
business. For example, the ticketing needs of a venue that hosts 
sporting events will be likely driven as much by the needs of the teams 
they host as they are by their interest in filling dates between 
sporting events with major concerts. A major arena with a professional 
basketball and/or hockey team will need its ticketer to handle season 
ticket sales of sports tickets and provide marketing support for sports 
ticketing sales. Indeed, this is a significant segment of the market, 
as sixty-six major concert venues host major league professional sports 
teams and many of the remaining major concert venues house other sports 
teams (such as minor league hockey franchises or college sports teams) 
which demand robust season ticketing abilities.
    AEG and Comcast-Spectacor own, operate, and manage professional 
sports teams and venues in which professional sports teams play. Given 
that, as noted above, many of the major concert venues also host sports 
teams, both AEG and Comcast-Spectacor will be well-positioned to 
capitalize on their expertise in sports and venue management to compete 
for ticketing contracts in these venues. Paciolan's historical strength 
is also in providing ticketing for sports franchises; when combined 
with Comcast-Spectacor's strength in providing venue management, 
concession, and marketing services to arenas and other buildings, the 
United States believes the result is a viable competitor that, in 
combination with the entry of AEG into primary ticketing, will restore 
any competition in primary ticketing that may be lost as a result of 
the merger.
    The United States respectfully suggests that IMP's analysis of the 
market is too focused on IMP's own issues in competing with Live Nation 
in the amphitheater business to inform analysis of the merger's likely 
effects. IMP exaggerates Live Nation's position in the concert 
promotion market by ignoring many venues that purchase primary 
ticketing services and many artists that play at those venues. A view 
of Live Nation's market position more tailored to assessing the 
competitive effects of the proposed merger reveals that AEG and 
Comcast-Spectacor can fully compete with Live Nation in the primary 
ticketing services market. IMP's comment therefore casts little light 
on competition in the actual product market alleged in the United 
States' complaint--the provision of primary ticketing services to major 
concert venues.
4. Ability To Provide Ticketing Services to Live Nation Venues
    IMP contends that Ticketmaster's competitors, including AEG and 
Comcast-Spectacor, will be unable to compete in the primary ticketing 
market if they are unable to provide primary ticketing services to 
venues that are owned or operated by the merged

[[Page 37658]]

firm.\38\ IMP provides no support for this statement other than a 
general assertion that without access to Live Nation's venues, 
competitors will be unable to penetrate the market and will not be able 
to prevent Live Nation from charging ``supra competitive ticket service 
fees.'' \39\ The United States concluded that ticketing companies do 
not need access to Live Nation's own ticketing volume in order to 
accumulate sufficient scale in the ticketing business to provide 
competitive pricing to venues. AEG's and Comcast-Spectacor's purchases 
of the divestiture assets supports this conclusion. Venues not owned or 
operated by Live Nation--including over 400 of the 500 major concert 
venues--account for a substantial majority of major concert venues and 
revenues and provide a substantial base of business for competing 
ticketing companies to target.
---------------------------------------------------------------------------

    \38\ IMP Comment at 14, 24.
    \39\ Id. at 24.
---------------------------------------------------------------------------

5. IMP's Own Choice of Primary Ticketing Service Provider
    IMP's own choice of ticketing provider--and its ability to choose--
underscores the degree to which IMP's concerns are overstated. Shortly 
after the Amended Complaint and proposed Final Judgment in this matter 
were filed, Seth Hurwitz, the main proprietor of IMP and its 
affiliates, announced that he was terminating Merriweather Post 
Pavilion's ticketing contract with the local Ticketmaster affiliate and 
entering a contract with TicketFly, a recent entrant into the primary 
ticketing services market.\40\ At the same time that Mr. Hurwitz 
alleges that the merger eliminated competition for primary ticketing 
services, IMP left Ticketmaster for a competing ticket company: `` 
`Hopefully this move will demonstrate to people it's possible to have a 
choice,' he said. `We wanted to make that choice' '' \41\ It is 
precisely this choice that the Final Judgment seeks to facilitate, 
whether that choice is exercised to select AEG, Comcast-Spectacor, 
another ticketing company such as TicketFly, or even Ticketmaster.
---------------------------------------------------------------------------

    \40\ See Merriweather drops Ticketmaster, signs with Ticketfly, 
Feb. 18, 2010, available at http://www.ticketfly.com/merriweather-post-pavilion-comes-to-ticketfly.
    \41\ Id.
---------------------------------------------------------------------------

6. Need for Additional Remedial Measures
    IMP asserts that additional remedial measures are required to 
protect competition in the primary ticketing market if the merger of 
Live Nation and Ticketmaster is permitted. IMP proposes that: (1) The 
merged firm be prevented from either offering any inducement to artists 
it manages or promotes to appear at venues it controls or punishing an 
artist who works with a competing promoter or venue; (2) the merged 
firm be prevented from insisting that rival promoters and venue owners 
share profits with Live Nation; and (3) the merged firm be prohibited 
from promoting or hosting more than 75% of any artist's tour.\42\ None 
of these proposals relate to the primary ticketing services market. 
Rather, all of them are designed to dramatically alter competition in 
the concert promotion and venue operation businesses, markets where the 
proposed merger was not challenged by the Department in its Amended 
Complaint in this case. Moreover, some of these proposals, such as the 
limitations on exclusive promotion contracts, would likely inhibit 
efficient competition in the concert promotion and venue operation 
markets more than enhance competition. The proposals would prohibit 
Live Nation from engaging in potentially efficient vertical integration 
or bundling without analysis of whether such conduct has an adverse 
effect on competition either in general or in particular circumstances.
---------------------------------------------------------------------------

    \42\ IMP Comment at 26-27.
---------------------------------------------------------------------------

    IMP also argues that the merged firm should be required ``to return 
at the request of any promoter all data relating to concerts for which 
Ticketmaster provided the ticketing and to delete any such information 
from its electronically stored data and files.'' \43\ The United States 
recognizes the value of information about the price and volume of past 
ticket sales for making decisions about future concerts, and took this 
into consideration in fashioning remedies in this matter. Section IX.C 
of the proposed Final Judgment requires that Ticketmaster provide a 
copy of ticketing data to ticketing clients if they choose to leave 
Ticketmaster, but does not require Ticketmaster to take the additional 
step suggested by IMP \44\ and to purge the data from its files.\45\ 
Aside from the affirmative obligation imposed by Section IX.C, each 
party's rights and obligations regarding the ticketing data will be 
governed by the contract between Ticketmaster and the venue. The United 
States does not believe that IMP's proposal \46\ is necessary to ensure 
that venues are able to leave Ticketmaster for alternative ticketing 
providers. So long as venues have access to their data, they will be 
free to switch ticketing providers.
---------------------------------------------------------------------------

    \43\ Id. at 27.
    \44\ Id. at 27.
    \45\ Instead, Section IX.B of the proposed Final Judgment 
protects venue owners who are also independent promoters by 
prohibiting the sharing of competitively sensitive client ticketing 
data with Live Nation promoters and Front Line artist managers.
    \46\ IMP Comment at 27.
---------------------------------------------------------------------------

B. Jam Productions

    Jam Productions (``Jam'') is a concert promoter based in Chicago, 
Illinois, and a competitor of Live Nation. Jam's comment contends that 
the merger is ``vertical integration on steroids'' and will ``suppress 
or eliminate competition in many segments of the music industry 
including rival concert promoters; primary and secondary ticketing 
companies; artist management firms; talent agencies; venue management 
companies; record companies; artist merchandise, apparel and licensing 
companies; artist fan clubs and sponsorship/marketing companies.''
1. The Vertical Integration Concern
    While Jam's comment provides more in the way of a list of alleged 
past Live Nation misconduct than a cogent analysis of the merger in 
light of the antitrust theory and precedent applicable to vertical 
mergers, the core argument advanced by Jam is nonetheless clear: 
instead of alleging a competitive problem from the combination of two 
competing ticketing companies (that is, challenging the deal as an 
unlawful horizontal merger), the Department should have brought a case 
alleging that competition in non-ticketing markets would be reduced by 
the combination of lines of business that do not compete, but where one 
line supplies an input for the other (that is, challenging the deal as 
an unlawful vertical merger).
    This argument, however, is not a valid basis for rejecting a 
proposed remedy during Tunney Act review. As explained above, in a 
Tunney Act proceeding the Court must evaluate the adequacy of the 
remedy only for the antitrust violations alleged in the complaint. See 
United States v. Microsoft Corp., 56 F.3d 1448, 1459 (DC Cir. 1995). 
The Tunney Act does not usurp the Department's prosecutorial discretion 
to choose what type of case to bring; courts ``cannot look beyond the 
complaint * * * unless the complaint is drafted so narrowly as to make 
a mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15. 
Jam, however, seeks to ``construct [its] own hypothetical case and then 
evaluate the decree against that case''--precisely the approach 
specifically forbidden in Tunney Act proceedings by the DC Circuit. 
Microsoft, 56 F.3d at 1459.
    During its investigation, however, the United States did carefully 
consider

[[Page 37659]]

Jam's allegations \47\ and determined that it could not prove that the 
vertical integration resulting from the merger would significantly harm 
competition in the concert promotion market or any market other than 
primary ticketing services. To be sure, vertical mergers can reduce 
competition under certain circumstances, for example by foreclosing 
rivals from access to an input critical to the ability to compete, 
raising the costs of rivals by preventing them from achieving efficient 
scale, or raising entry barriers. Vertical mergers can, however, also 
be procompetitive by bringing together complementary businesses and 
making the merged firm a more efficient competitor.\48\
---------------------------------------------------------------------------

    \47\ See id. at 6 (acknowledging that during the investigation 
JAM raised the same issues with the United States that it provides 
in its comments).
    \48\ Jam may have been concerned that the merger would make 
LiveNation a more efficient competitor to it when it says: ``The 
critical mass created by the complete vertical integration of the 
live music industry by Live Nation and Ticketmaster puts all its 
competitors at a distinct competitive disadvantage.'' Id. at 19. Of 
course, having companies become more efficient at providing their 
goods or services is generally procompetitive, not anticompetitive.
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    The United States analyzed whether the addition of Ticketmaster's 
ticketing business and Front Line artist management business to Live 
Nation's concert promotion business would adversely effect competition 
in the concert promotion market. The United States concluded this was 
unlikely for two primary reasons.
    First, although the merged firm will remain an important player in 
the artist management business, it will not have the ability to exclude 
promotion competitors from the market. Even if, in theory, all artists 
managed by Front Line refused to work with promoters other than Live 
Nation, a substantial majority of the artists are not affiliated with 
the merged firm and will be fully available for competing concert 
promoters to present.\49\ Moreover, Front Line is unlikely to withhold 
all of the artists it manages from competing promoters. Front Line has 
no legal right to dictate to its artists which promoters they can use. 
In fact, Front Line has a fiduciary obligation to obtain the best deals 
for its artists, regardless of the interests of other Front Line-
affiliated companies. In addition, artist management services are 
typically provided pursuant to agreements that can be terminated by the 
artist at will. If the merged firm acted or threatened to act contrary 
to the interests of its managed artists, the artists could simply sign 
with another artist manager. There are countless managers capable of 
handling acts of all sizes; indeed, some of the largest artist 
management firms represent only one artist. In light of these factors, 
the United States concluded it was unlikely that the combination of 
Front Line with Live Nation restrict competition in the concert 
promotion business.
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    \49\ According to Pollstar data, Front Line artists accounted 
for just under 25% of gross sales for the top 50 tours in 2008 in 
North America. Including artists subject to long-term ``360-degree'' 
promotional agreements with Live Nation raises the merged firms' 
share to approximately 30%.
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    Second, artists would have the ability and incentive to prevent the 
merged firm from exercising market power in concert promotion. There 
are two primary ways that the merged firm could attempt to exercise 
such market power: (1) Reducing compensation paid to artists (or 
otherwise adversely altering the terms on which promotional services 
are provided to artists); or (2) restricting output--i.e., the number 
of concerts--in an effort to raise prices to consumers. In both cases, 
artists would have the incentive to prevent the merged firm from 
harming their own economic interests. Artists would also have the 
ability to turn to a large number of competing concert promoters, 
including AEG and many regional promoters, who would gladly seize on 
the opportunity to expand their promotion business at the expense of 
the merged firm.
    In addition to considering the impact of the merger on the concert 
promotion market, the United States also analyzed the possibility that 
the merger would reduce competition in the market for operating venues. 
The United States did not rule out the possibility that Live Nation's 
ownership of many key venues throughout the country could give the 
merged firm some market power. However, Ticketmaster owned no venues 
and therefore the merger does not result in any increase in the number 
of venues owned or operated by Live Nation. In other words, whatever 
market power Live Nation had in concert promotion or venues before the 
merger would not be enhanced by its merger with Ticketmaster. 
Therefore, the addition of Front Line and the Ticketmaster ticketing 
business to Live Nation seems unlikely to alter the competitive 
dynamics in the venue market. As noted above, Front Line artists 
account for a fairly modest share of the concert business, and the 
merged firm does not ``control'' the Front Line artists to the degree 
that it can prevent them from performing at competing venues.

    Contrary to Jam's contention, the Supreme Court's 1948 Paramount 
decision does not compel the United States to challenge this merger 
under stare decisis.\50\ In Paramount, the Supreme Court was not 
determining the effects of a vertical merger. Rather it was 
fashioning a remedy for a long-running price fixing agreement among 
competing movie studios that had a vertical aspect in that the movie 
studies used their ownership of movie theaters to facilitate their 
price fix. In that context, the Supreme Court instructed that the 
court-ordered remedy should be tailored to the anticompetitive 
conduct at issue and, under the facts in that case, determined that 
the defendant studios had to divest themselves of their movie 
theaters in order to ``uproot'' the long-running price fixing 
agreement. In this case, consistent with Paramount, the United 
States fashioned a remedy that was tailored to the anticompetitive 
conduct alle