By Robert E. Freeman, Jonathan Mollod, and Al Lucia, of Proskauer
The New York State Attorney General’s office announced a “big ticket” settlement this past July against two ticket resellers alleged to have engaged in the sale of “speculative tickets,” or offering to sell tickets they didn’t yet own without adequate disclosures (In re: TicketNetwork Inc., No. 451858/2018 (N.Y. Sup. Ct., Consent and Stipulation July 12, 2019)). In July, a judge approved a consent order requiring that TicketNetwork Inc. (“TicketNetwork”), Eventvest, Inc. d/b/a Ticket Galaxy (“Ticket Galaxy”), and Donald Vaccaro (the owner of both businesses, collectively the “Defendants” or “Resellers”) pay $1.55 million to settle the enforcement action brought by the Attorney General, and provide certain disclosures when the brokers do not have possession of the tickets up for sale. Going forward, fans looking for tickets to the big game will have a clearer view of the playing field when browsing for tickets at these (and perhaps other) brokers’ sites.
In announcing the settlement, the Attorney General indicated that New Yorkers have spent over $37 million on tickets sold through TicketNetwork’s speculative tickets programs between 2012 and 2018. Numerous complaints over inflated secondhand ticket prices prompted an extended investigation by the New York Attorney General’s office, resulting in a report in 2016 and enforcement actions, including the TicketNetwork complaint.
According to the Attorney General, the Defendants and other select ticket brokers using the TicketNetwork platform would list tickets to popular sporting events and concerts, but, in some cases, did not have possession of the tickets or even have a contractual right to obtain them. The complaint alleges that the resellers would often list these tickets for events before the tickets had even been released for sale to the public, misleading the public to believe that defendants had access to the tickets, thereby driving up demand and charging high premiums that greatly exceeded the listed ticket price. After completing a sale of the “ticket” to a consumer, the defendants would purchase the ticket from another vendor, ideally at a lower price, and keep the difference. Worst of all for consumers, the Attorney General claimed that “speculative ticket listings on the [reseller’s] platform are, in all relevant ways, indistinguishable from listings for real tickets,” and consumers could not tell whether they are buying a ticket that actually existed. The complaint also alleged that the Resellers went to great lengths to hide the practice and routinely lied to customers when they could not obtain tickets in the particular stadium section offered (or could not obtain any tickets at all), trotting out excuses such as “technical errors” or “supplier” issues. In all, the Attorney General stated that the resellers engaged “in a massive scheme to trick tens of thousands of unsuspecting consumers into buying tickets to concerts, shows, and other live events that the sellers did not actually have,” labelling such practice as “deceptive” and a violation of New York law.
This settlement was the final round in a back-and-forth contest between the State and the Defendants, beginning with the Resellers first filing declaratory judgement actions in September 2018 against the Attorney General after her
office had threatened to bring a civil action against the defendants, seeking a judicial determination that their speculative ticket selling practices were “by the book.” (See TicketNetwork, Inc. v. Underwood, No. 158291/2018 (N.Y. Sup. Ct.); Eventvest, Inc. d/b/a Ticket Galaxy v. Underwood, No. 158292/2018 (N.Y. Sup. Ct.)). The defendants argued that the practice is known as “drop shipping” in other industries, and is a common business practice to offer products for sale when the seller does not yet have such products in its possession. Moreover, the defendants claimed that they made adequate disclaimers that tickets listed for sale by ticket brokers on the TicketNetwork platform might not be “in hand” when listed and that it was “extremely rare” when a seller was unable to fulfill an order.
Not taking the defendants’ claims at face value, the Attorney General responded to the declaratory judgement actions by bringing an action in September 2018 over the speculative ticket sales, claiming that such practices were deceptive and misleading under consumer protection laws. (People of the State of New York v. TicketNetwork, Inc., No. 451858/2018 (N.Y. Sup. Ct. filed Sept. 14, 2018)). The Attorney General also alleged that defendants engaged in false advertising and violated provisions of the New York’s Arts and Cultural Affairs Law § 25.23, which puts in place certain requirements for online secondary ticket resellers, such as requiring conspicuous posting of the ticket list price and the price charged by the broker. Incidentally, Section 25.10 of the law expressly prohibits the sale of speculative tickets unless it is accompanied by “clear and conspicuous” disclosures to the consumer.
With both parties apparently wishing to avoid the prospect of attending the live show of a trial, the matter was settled.
Pursuant to the consent order, the Resellers agreed to pay $1.55 million and undertake certain transparency measures to better inform consumers about speculative ticket sales. However, if one reads the fine print on the back of the settlement papers, the Defendants did not expressly agree to stop the practice of selling speculative tickets. Specifically, the consent order distinguishes between the resale of in-hand tickets or (“Ticket Offerings”) and the resale of tickets that are not in hand (called “Service Offerings”), and requires the Resellers to refrain from making Service Offerings that are “deceptive or misleading” and use certain labels differentiating Service Offerings and Ticket Offerings. The Resellers are also prohibited from indicating that tickets are in hand when they are not, and are required to conspicuously disclose when they do not have possession of the tickets for sale (and otherwise comply with Arts and Cultural Law § 25.10). Further, the consent order requires that the consumer confirm having received such a disclosure before completing a transaction. The Resellers also agreed to be truthful when responding to client inquiries regarding the filling of ticket orders or speculative ticket practices.
The consent order will give consumers a better vantage point to understand what kind of tickets they are buying from the Defendants and may indirectly usher in more transparent practices from other brokers’ practices as well. Yet, the settlement leaves the defendants’ secondhand ticket box office open, and it remains to be seen whether the enforcement action will have any impact on prices for secondhand tickets for certain big events in the future.