Taylor Swift is returning to the concert circuit and Congress is working on monopoly pricing and hidden fees. Unfortunately, our respected representatives are investigating Live Nation Entertainment and its subsidiary Ticketmaster, not ourselves. For those of you who are a little confused, rewind the cassette tape and start from the beginning.
Once upon a time Taylor Swift became popular. After a respite from performing live concerts, she announced plans for a new tour and, in November 2022, launched online ticket sales through Live Nation/Ticketmaster (hereafter Ticketmaster). In anticipation of high demand for superstar artists, Ticketmaster introduced a variety of changes to its online shopping software in early 2017, including presale codes for “verified fans” and “dynamic pricing”. The Verified Fan Code was designed to prevent scalpers from using automated purchasing “bots” to snap up all the tickets and then sell them on secondary markets at higher prices. Later reforms also sought to reduce secondary sales by pricing tickets according to demand. The higher the demand for seats, the more a person has to pay for a ticket. Alternatively, if ticket sales were low, prices would drop.
Not surprisingly, the internet melted as both fans and automated “bots” overwhelmed Ticketmaster’s website. The media reported countless stories of fans waiting online for hours only to have the website crash when they were about to choose a seat. And for all of Ticketmaster’s valiant technical efforts, tickets still appeared on secondary markets at prices significantly higher than the initial purchase price. Attempts to circumvent secondary sellers through “verified fan status” only encourage scalpers to register as “verified fans”. Outrage spread. Taylor got mad.
In addition, the event also fueled a trend of people upset by service, processing and delivery charges added to the price, sometimes increasing the total cost of the ticket by 20 percent or more. This concern was raised by Pearl Jam in the 1990s, but other artists such as Robert Smith (The Cure) brought it to public attention in light of Swift’s debacle. And with political action comes public attention.
Should be the law… or should it be?
Just as every problem these days demands government regulation, representatives in Congress swung into action, introducing two bills designed to ease the teen angst of securing seats at concerts. The first law is the Unlocked Ticketing Market Act (UTMA). The Bill bars ticket touts from establishing contractual relationships with venues for more than four years. This will reportedly encourage other companies to enter the market selling tickets knowing that Ticketmaster’s relationship with the White River Amphitheater will end in 48 months. If Ticketmaster fears being undermined by new competitors, it will also have an incentive to negotiate better deals that benefit concert-goers.
The second bill is more cleverly abbreviated the Transparency in Charges for Key Events Ticketing Act (TICKET). Here, the explicit target is to require the ticket seller to disclose the total ticket value, which includes various charges, prior to sale. In essence, the law seeks to ban “hidden fees”. The Act also requires that secondary ticket sellers actually have physical possession of tickets before selling them, reducing the possibility of speculative sales that trick customers into thinking they have actually bought something when such sales are Depends on the seller getting the promised tickets.
There are several fundamental economic problems with both pieces of legislation.
First, the anti-trust UTMA law rests on the idea that if a firm has too much market power it can set prices “above market rates”. But the mere existence of secondary markets reselling SWIFT tickets for many times their face value indicates that Ticketmaster was not – I repeat No – Selling tickets at above market rate! in fact, they were devaluation stamps. What’s more, the secondary market is — I repeat Is – An “unlocked” ticket market where many sellers (people who want to resell) are competing with each other. Sometimes the prices increase, but sometimes they also fall. That’s what markets do. There is no need for the government to “unlock” any markets here.
Also realize that Ticketmaster selling at “above market value” assumes that anyone knows what the exact market value is. Hayek scoffs at that! One can only find out what a true market price is by taking a good or service to the market and allowing people to bid what they are worth. Ticketmaster’s “dynamic pricing” model is based on exactly this, something that even the increasingly inclined Bruce Springsteen acknowledges. Granted, Ticketmaster was trying to profit by capturing consumer surplus that had previously gone to scalpers, but in the process of doing so it introduced an improvement that was more market-like, not less. In dynamic pricing model, it is the consumers who decide the prices, not the sellers.
As far as transparency of ticket prices (Ticket Act) is concerned, it seems strange that concert goers are not aware of the additional charges. While the face value of a ticket is the price that is directed toward the concert venue and performers, Ticketmaster needs to coordinate these sales to make a profit. This is where these charges originate. Arriving at the checkout page may surprise a first-time shopper, but these charges are relatively well known, just as it is well known that popcorn at the movie theater will be expensive. Ergo, caveat emptor!
But even with that caveat, the “hidden fees” aren’t really hidden. Before a buyer clicks “Buy,” Ticketmaster provides you with a total cost that includes an indication of the various fees. In other words, “hidden fees” are hidden in plain sight. If someone doesn’t like the final price, they shouldn’t click “buy”. It’s that simple. If Ticketmaster, or any other retailer, starts charging your credit card after the final contractual sale, that’s theft and there are anti-fraud laws to deal with it. There is no need for additional legislation to rectify this.
A Twist on the Swift Controversy
If musicians and musicologists are upset about the so-called “deceptive” practices of “monopolies” like Ticketmaster and want the government to do something, they really want to redirect their attention to another entity with monopoly power that also hides fees. Makes an effort , That institution is … the government. Yes, the entity that Taylor Swift and her army of fans are turning to to protect themselves from a predatory monopoly that engages in shifty pricing is itself a predatory monopoly that engages in shifty pricing.
Ok, the monopoly part is easy enough to understand. Almost by definition, the government is the sole provider of various public goods that cannot be provided by markets. A more realistic definition is that the government is the sole provider of various public and non-public goods that its political leaders determine should not be provided by markets. Politicians derive such power by asserting their sovereign claim to be the ultimate authority of law and order. This furthers their ability to define what is and what is not within their official purview.
And when it comes to monopoly pricing, let me just say – taxes. Unlike the typical Taylor Swift fan, who may choose not to attend a concert if it costs more than they like, the government forces individuals to purchase a variety of public goods and services, which Those people don’t want to. And while in a democracy one might claim that through the ballot box the consumers of these goods can have some say in what and how much they pay, in reality we are often forced to pay at rates that We do not accept willingly. Unless there is unanimity in the vote on how to use the resources, at least some of the minority (and sometimes the majority) may be required to buy goods and services they do not want.
Granted, a case can be made for some level of mandatory taxation to provide social order, namely the most basic of public goods, except for the most ardent of anarchists. Thomas Hobbes, Adam Smith, and even James Buchanan have all made such a case. But the scope and scale of government activities has long outgrown even these most basic services.
As for hidden fees, the variety of taxes collected by the government can make it very difficult to know what we are buying at any given time. Indeed, these taxes are often given other names such as tariffs, licensing fees, levies, and so on. While we can talk about certain subtleties, at the end of the day they are all financial contributions mandated by the government from individuals. Of course, you may have the option of avoiding some of these taxes, but this option may come at the cost of not being able to pursue other opportunities. Consider the licensing fees which make it cost prohibitive to pursue a career as a hairdresser. If it seems like a service charge on tickets makes attending concerts difficult, that’s because the same principle is at work.
Also, take a look at your phone bill and see the myriad additional charges that have been added to the quoted price of your cell service. Yes, those taxes are calculated on the bill, just as they are on your final Ticketmaster receipt. But, to my knowledge, there has never been a legal effort to make these taxes as clear as the Stamp Act is asking for Live Nation.
Finally, taxes are often hidden in the way they are implemented. While the sales tax on a given item may be clearly written at the bottom of the sales receipt, and with a little experience with our local sales tax we can calculate it into our final price, what we don’t see is all that tax. and other regulatory costs that are imposed on businesses and then passed on to customers. The prices paid for grocery items and other goods do not clearly reflect the tariffs paid for imports of various goods around the world. and while it may seem innocuous, sometimes politicians Clearly Try to hide the cost of their policies on consumers. Washington state legislators are considering a law that would prevent fuel suppliers from telling consumers that consumers are paying for a new carbon tax that goes into effect in January 2023. Not only is this a poor way to hide fees, but it can also be a violation. of free speech!
Yes, buying concert tickets can be frustrating. Competing with other loyal fans for great seats at a popular music festival can seem like the odds are against us in charge of allotting those seats. But when we cast our gaze more broadly, we see how market processes work exceptionally well to allocate resources and that the politicians we look to for solutions are themselves guilty of that behavior. which they accuse others of. Hope we learn our lesson and don’t be fooled again.