Taylor Swift and the Real Lesson From the Ticketmaster Antitrust Hearings

by | May 10, 2023 | Antitrust & Monopolies

In a true capitalist system or free market, there would be no antitrust laws.

As I was preparing for a workshop for educators on the economics of the music industry, I read more about Taylor Swift than one should!

Specifically, it was about the Ticketmaster debacle last year when the system crashed after “Swifties” tried to buy tickets for Swift’s Eras Tour. In addition to reading various articles, I watched the nearly three-hour US Senate Judiciary Committee hearing from January 2023, broadcast by C-SPAN, that focused on this particular issue and the question of whether the 2010 merger between Live Nation and Ticketmaster, which created Live Nation Entertainment (LNE), resulted in a monopoly that abused its power by forcing customers to pay higher prices and tying artists’ hands by forcing them into exclusive and long-term contracts. Recent Senate hearings have focused on the Justice Department’s alleged failure in 2010 in allowing Live Nation to merge with Ticketmaster.

I would like to offer a purely free-market view of what is and is not anti-competitive. This view differs not only from Democratic Senators, who are more inclined to government intervention in the economy, but also from Republicans and representatives of certain political think tanks who claim to support free markets and limited government when in fact they do not.

As I listened to the senators and other witnesses, I thought I heard the song “Here We Go Again” by the Isley Brothers, because it reminded me of the Senate hearing on Microsoft in the late 1990s, when Microsoft was portrayed as the Evil Empire and Bill Gates sat as Darth Vader next to his competitors who complained about being victimized by Microsoft. This time the villain was Joe Berchtold, CFO and president of Live Nation Entertainment, who sat alongside other witnesses including Jack Groetzinger (co-founder and CEO of SeatGeek), Jerry Mickelson (co-founder and CEO of Jam Productions) and singer Clyde Lawrence of the band Lawrence.

I wanted to sing “It must be exhausting always rooting for the antitrust,” a variation of Swift’s popular 2022 song “Anti-Hero.” For these senators and the antitrust lawyers and economists who work for the FTC and the Justice Department’s Antitrust Division and benefit from the legislation because it justifies their employment, of course, it is not exhausting. Moreover, we must not forget the CEOs of newer or smaller companies who hope to use antitrust laws against the dominant firm to get the government to do for them what they cannot do for themselves.

Aside from the misuse of the words “competition” and “anti-competitive,” the problem is the notion that bureaucrats and politicians know what the right market share is and how many firms make a market competitive. Real competition, contrary to the textbook portrayal, is a rivalrous process in which companies fight to reach the top and be the best. This rivalry can result in many companies or one. An arbitrary standard for the “right number” of companies or setting a “fair” or “reasonable” price should not take precedence over the market process. Competition is more like a video in motion, something dynamic, than a photograph, a static snapshot. This competitive process could lead to one company “wiping out” or “eating up” other companies. Yes, real competition is “cutthroat” (metaphorically speaking). What often is swept under the rug is how the successful company accomplished the metaphorical “killing.” It was the consumers who voluntarily chose the company’s product or service over those of its competitors.

It is more appropriate and logically consistent to consider the behavior of a company whose goal is to eliminate competition in the marketplace as an example of actual competition. It is not anti-competitive to seek to eliminate one’s competitors.

Moreover, a private company has no “power” over its customers. No private company can force us to buy or use its product or service. The only entity that has real power is the government or a company that has been granted a special government privilege.

Proponents of capitalism (free markets, free enterprise) would not support antitrust laws. They would understand that there is no right number of businesses and no objective “reasonable” or “fair” price that a firm should charge its customers. As long as the government does not impose barriers to entry on other entrepreneurs or does not give one firm government privileges over its competitors, what happens is the result of the market process. What results from the competitive process today (i.e., that a particular firm dominates) does not mean that this will be the case in the future.

What is also lost in the discussion is what exactly is “unconscionable,” “exorbitant,” or “unreasonable” when it comes to the price of a product or service. Is $50 for a concert ticket reasonable? If so, what is the criterion? Some people no doubt feel that $50 is a “rip-off” and is the result of Ticketmaster “taking advantage” of loyal fans. For them, $30 may be acceptable. Perhaps the only “fair” price is zero? Of course, that would mean that individuals have a right to a concert experience; that a company owes people its product or service. I also bet that these same complainants would be singing a different tune (no pun intended) if they were selling a product from their own company, or if they were selling their labor—they would love a higher price or wage and would not see themselves as exploiting their customers or their employer. Greed and exploitation only go one way it seems.

It is telling what some of the senators said before the Judiciary Committee. Senator Amy Klobuchar (D- MN) stated, “I believe in capitalism, and to have a strong capitalist system, there has to be competition. You cannot have too much consolidation.” Senator Richard Blumenthal (D- CT) said, “I want to congratulate you for bringing together Republicans and Democrats in a unified cause.” Senator John Kennedy (R- LA) suggested to Mr. Berchtold: “If you care about the consumer, limit the price” and “You can’t make an obscene profit.” Senator Ted Cruz (R- TX) boldly stated, “I start from the principle that free markets are good. I also start from the principle that monopolies are bad.” Senator Josh Hawley (R- MO) told Joe Berchtold, “You are using your monopoly to get a monopoly in the resale market. You are leveraging your power in one market into another…they have to get the Ticketmaster app.” Finally, Senator Marsha Blackburn (R- TN) concluded in a testy tone, “This is an issue of fairness and right now we have a system that’s not fair.”

Interestingly, both Senator Klobuchar and Senator Cruz have stated that they support capitalism and free markets. However, I am sure Klobuchar is a proponent of minimum wages, rent controls, government regulation of businesses, progressive income taxation, and other government intervention, proving that she either does not understand what “capitalism” means or she is disingenuous. At least many of her Democratic colleagues boldly proclaim their opposition to free market capitalism, so supporting antitrust is not inconsistent with their beliefs.

When Republicans claim to be in favor of free enterprise and free markets, but at the same time support subsidies for businesses and farmers, “price gouging” laws, and in this case, antitrust laws and ticket price caps, they show that they too either do not understand what the terms capitalism and free market really mean, or that they do not really support capitalism and free markets.

As for Mickelson and Groetzinger, of course, they were grumbling because Live Nation Entertainment is currently winning the game. Mickelson stated that Ticketmaster owns 87 percent of NBA and NHL arenas and 93 percent of NFL stadiums in terms of ticketing contracts. Groetzinger testified that consumers are harmed because there are not dozens of competitors and that “you are beholden to what Ticketmaster says.” But that invites the question, how did Live Nation Entertainment get to the top? Yes, they bought up other companies and vertically integrated. But so what? Those are strategic moves. In other words: It seems to me that Live Nation Entertainment is just smarter, faster, and more innovative than SeatGeek or Jam. No one is beholden to anyone—a private company cannot use force or the threat of force.

As for Clyde Lawrence’s perspective as an artist, from a free-market perspective, an artist has no right to a certain percentage of ticket sales, nor is it a right to perform at a particular venue that is the private property of another company. The only right is the expectation of receiving the agreed-upon terms of the contract. In other words: If it is my property and you want to sing on my property, I will give you the terms. If you do not like it, no problem! I can’t force you to do anything. However, if you sing on my property, it is because you chose to do so and your actions prove that, on balance, you thought it was a good decision. Lawrence claims that artists are forced into arrangements or have no choice—this is false. A private company can never force anyone into a contract; only the government can legally use force or the threat of force.

The same is true for customers who voluntarily pay “exorbitantly high” prices. I do not think Taylor Swift has a hit squad of verified fans holding a gun to someone’s head and forcing them to buy a ticket. Everyone who attends a Taylor Swift concert does so of their own free will. Their demonstrated preference—their action of buying the ticket—proves that they think the ticket price is worth it. Actions speak louder than words. The rejoinder is the “excessive” fees Ticketmaster charges at the last minute before completing the purchase. This was an example used by Sal Nuzzo of the James Madison Institute in his critique of Live Nation Entertainment.

Again, yes, it may be frustrating to spend a lot of time in the purchase process and then have additional fees pop up on the last page. But that should not be a government issue. If customers do not like this feature, the market will speak and Ticketmaster will be punished. But even after the frustration and surprise of the fees before the final purchase, it’s still a decision to click the mouse and buy the ticket. The bottom line is that it is not a right to attend a Taylor Swift concert; Live Nation Entertainment does not owe anyone a concert experience. If someone cannot afford a ticket, so be it. (Getting angry about government-imposed taxes that contribute to the final price is a valid but different issue.)

As for the Senators and Live Nation Entertainment’s competitors complaining about exclusive contracts, the venue is free to decide with whom they want to work. If they choose to contract with Live Nation Entertainment, both parties have benefited. This would not be unfair, nor would it hinder competition or violate “consumer rights” because nothing was ever taken away from LNE’s competitors; to take something away from someone, it has to belong to them in the first place. In other words, Seat Geek and other Live Nation Entertainment competitors have no right to sell their tickets to specific venues in the first place. If the venue made a mistake by getting into the deal with Live Nation Entertainment, it will become obvious over time and the contract will be renegotiated. But in the meantime, no harm has come to anyone. Harm occurs when one party takes something away from another by force or denies another party something to which it is entitled. It is arrogant for the CEOs of LNE competitors to believe they are entitled to a seat in the stadium (again, no pun intended).

In a true capitalist system or free market, there would be no antitrust laws. The philosophy would be that the only threat from a monopoly is the government itself, or a company that receives a special privilege from the government. There would be no fear of mergers or of companies coming out on top and eliminating their competition in the process. There would be an understanding that prices are determined by supply and demand and that there is no objective measure of what is the right or fair price. There would be a realization that the real power lies with the consumer and that it is consumers who ultimately determine the success of a firm. There would be laws to prevent fraud and prosecute contract violations, but the government would stay out of determining the right market share, the number of companies, or the right price.

Taylor Swift correctly captures the behavior of these senators when she sings, Did you hear my covert narcissism I disguise as altruism, Like some kind of congressman?

Senators support antitrust legislation because it allows them to signal that they are compassionate and pro-consumer. But they overlook the fact that their version of consumer-friendliness is anti-business, anti-profit, and anti-competitive.

As for antitrust laws, Taylor Swift was right when she sang, “Bye, bye, baby.”

This article was originally published on FEE.org. Read the original article.

Ninos P. Malek is a Professor of Economics at De Anza College (Cupertino, California) and an Economics Lecturer at San Jose State University.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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