Scalpers Beware: States Target Ticket Sellers

 

When 10-year-old Kameron Schuler saw that a Hannah Montana show was coming to Baltimore, she begged for a special birthday present - tickets to the concert for her and a friend. But 10 minutes after tickets went on sale on Ticketmaster.com, they already had been swept up and posted on ticket resale Web sites for considerably higher prices. So Kameron's father ended up shelling out triple the original price for a pair of upper-level seats - paying $150 each.

Failed efforts to get face-value tickets for hot concerts and sporting events, like the World Series, are not uncommon - especially among the less technologically savvy who are more familiar with staking out a spot in front of a box office. But the consumer outcry over online hijacking of huge blocks of these tickets for resale on Web sites, such as Stubhub.com for as much as 20 times face value, has led some states to pursue legislation and lawsuits targeting people who use special software to sidestep ticket sellers' online security measures.

Six states have passed or considered legislation banning the software's use. Two more are considering bills to limit the resale price of tickets, and North Carolina has a bill that would allow only event organizers to authorize tickets to be sold for more than face value. Four other states limit the amount of mark-up for a resold ticket. Penalties range from fines to jail time. Other states have aggressively targeted software resellers through lawsuits and criminal investigations.

Ticketmaster, the world's largest ticket distributor, sells about 75 percent of its tickets online. It and other companies attempt to prevent large ticket-block purchases by requiring buyers to retype online a series of distorted, fuzzy letters created on the Web site. The technology was designed to distinguish between humans buyers and computers because, theoretically, a computer can't read the letters.

 "People using this software can circumvent the process and cut ahead of everyone else," said Minnesota state Rep. Joe Atkins (D), a sponsor of the "Hannah Montana Bill," which passed 119-12 on April 30. "You can't do that at the school bus stop. You shouldn't be doing that for tickets either. It's really the 21 st century version of bullying."

Similar legislation in Tennessee was signed into law in early April, while another bill aiming for a ban on the software is being mulled in Pennsylvania. Other bills were introduced in Wisconsin, Florida and Illinois, but died in committees. Colorado Gov. Bill Ritter (D) signed a law in May that guarantees ticket refunds under certain conditions, and lifts many restrictions for reselling tickets. Another bill banning the use of ticket-buying software is expected to be signed Thursday (June 5), months after the Colorado Rockies said their ticketing computers failed because of a deluge of automated requests from ticket brokers during last year's World Series with the Boston Red Sox.

Other measures addressing event ticket sales include a bill in the Louisiana state senate that would outlaw selling tickets for more than two times their face value. An Ohio legislator has introduced a bill to require a ticket broker to register with the state and would ban it from reselling tickets bought from the event's designated ticket seller.

Meanwhile, proposed legislation in Massachusetts would prohibit a broker not licensed by the state from selling tickets above face value, and Rhode Island lawmakers decided to study Internet ticket sales before considering legislation. Attorneys general in Missouri and Arkansas have aggressively pursued certain ticket brokers over the high price of Hannah Montana tickets. Missouri attorney general Jay Nixon sued three ticket brokers in October - in connection with a Kansas City concert - for selling tickets at prices far above face value, a violation of the city's ordinance against scalping.

Nixon brokered a deal with Ticketmaster to make a total of 2,000 extra seats available for that concert and one in St. Louis. To gain entry, those who bought these seats had to show the credit cards they used to buy the tickets. Complaints from angry parents to the Arkansas attorney general relating to concert ticket sales there prompted an investigation as well. That same month, Ticketmaster sued and won an injunction in California federal district court against RMG Technologies, a Pittsburgh-based software company that the court ruled was infringing on Ticketmaster's terms of use and copyright restrictions by selling technology that could automatically solve the fuzzy pictures.

Ticketmaster has since started using an upgraded version of the security program. Ticketmaster vice president Joe Freeman told Stateline.org that the best ticketing legislation would ban the software's use, but also doesn't impose price caps for reselling tickets.

"The right legislation is deregulation," Freeman said. "Price caps are counterproductive, because you can't legislate away supply and demand. We support the kind of legislation that looks to protect the ticket selling process (because) part of what we provide our clients is a promise of efficient, equitable ticketing."

Freeman declined to comment on the number of automated requests the Web site gets from ticket-buying software, but he says the company spends a considerable amount of resources on protecting against these attacks.

RMG Technologies has appealed the court's ruling. RMG president C.J. Garibay told Stateline.org that the laws "are being proposed by demagogues based on the emotions of consumers."

"In the long run, the laws are not going to be effective," he said. "These (popular) concerts will be sold out without (the use of) software." Garibay acknowledges there are underground companies designing programs to skirt sellers' technology - the ones lawmakers are going after.

But he maintains that RMG's software doesn't do that, but provides a better way to browse for tickets.

Lawmakers opposed to the legislation regulating event ticket sales say states are meddling with free market trade. Some economists agree, arguing that concert promoters for Hannah Montana concerts failed to properly price tickets in sync with demand, making way for the agressive, higher-priced secondary market.

"To economists, this complaint misses the point," Doug Campbell, an economist at the Richmond Federal Reserve Bank, wrote on the bank's blog in October. "The ticket company didn't inflate the price; the forces of supply and demand did."

Jonathan Bick, an adjunct law professor at Rutgers University who practices Internet law, questioned whether the legislation regulating Internet ticket sales violates laws protecting interstate commerce. He also expressed concern over whether the laws could be effective, saying that defining an "equitable ticket buying process," as the Minnesota and Illinois legislation requires, is difficult.

"One way to avoid vagueness would be to put the state gaming commission in charge of this," Bick said. "This way (the states) have some leeway, and courts are not loath to overturn the state mandates."

 
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