Live Nation Loses Bid to Dismiss Investor Class Action Lawsuit Over Antitrust Scrutiny
Live Nation may have lied to investors by misattributing its success to the quality of its platform and services instead of allegedly anticompetitive behavior, a federal judge has ruled.
U.S. District Judge Kenly Kato, in an order issued on Monday declining to dismiss a proposed class action lawsuit, found that the ticket giant may have violated securities laws by misrepresenting the scope of its legal troubles for allegedly abusing its market power in the live events industry. The judge concluded that the suit advances “cogent and compelling” allegations that Live Nation executives intentionally chose “not to disclose the full picture” regarding its revenue success or antitrust concerns because they “understood their likely effect on” investigations into its conduct by competition regulators.
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Last year, The New York Times reported that the Justice Department had opened an antitrust investigation into Live Nation, which owns Ticketmaster, after the platform’s systems crashed during a highly-anticipated presale for Taylor Swift tickets. Live Nation’s stock fell nearly eight percent that day and dropped another eight percent upon Politico reporting that federal prosecutors could file an antitrust suit against the company by the end of the year.
The saga became a flashpoint into the company’s power over the live music industry. Investors who saw their shares in the company plummet sued last year in a proposed class action, accusing Live Nation of misleading them about conduct that may violate antitrust laws that includes charging bloated fees, bundling services and retaliating against venues that choose a ticketing service provider other than Ticketmaster.
The allegedly misleading statements from chief executive Michael Rapino and chief financial officer Joe Berchtold included assertions in securities filings that the company “compete[s] primarily on the basis of [its] ability to deliver quality music events, sell tickets and provide enhanced fan and artist experiences” and that “barriers to entry into the promotion services business are low.”
Siding with investors, the court said that there is “no reasonable basis for” Live Nation’s posture and that the statement is “materially misleading” given the suit raises multiple allegations that its success can be traced back to allegedly anticompetitive conduct. They include claims that Live Nation controls at least 60 percent of concert promotion services for major concert venues; that promoters must have the ability to provide substantial up-front payments to artists; and that the company attempts to lock up talent so competitors cannot produce concert tours.
The court also found that Live Nation misled investors when it said that its 2022 revenue growth “is a reflection of the quality of the Ticketmaster platform and its continued popularity with clients across the globe.” Kato faulted the company for failing to include context that Ticketmaster controls distribution for over 70 percent of major concert venues, is the “sole ticketing provider for 82% of the top amphitheaters in the U.S., as well as 77% of the top 100 amphitheaters worldwide,” and enters into “long-term exclusive dealing contracts” with venues that last at least a decade.
Another potentially false statement came when Live Nation asserted that “Ticketmaster has a significant share of the primary ticketing services market because of the large gap that exists between the quality of the Ticketmaster system and the next best primary ticketing system.” The court cited multiple allegations undermining the claim, including testimony from SeatGeek chief executive Jack Groetzinger before the Senate Judiciary Committee last year that Ticketmaster “now uses even longer exclusive agreements with venues, in some instances as long as ten years.”
Kato found the allegedly misleading statements were made by Rapino and Berchtold with the intent to deceive investors.
If the Justice Department chooses to sue, it wouldn’t be Live Nation’s first run-in with competition enforcers. The agency found in 2019 that the company had been violating the terms of a settlement to greenlight its 2010 merger with Ticketmaster by forcing venues to accept Ticketmaster’s ticketing services as a condition for hosting Live Nation performers and retaliating against those that refused. Under an amended deal that allows a monitor to investigate further breaches of the consent decree until 2025, the company was barred from tying services and is subject to a $1 million fine for violations pursuant to oversight from an independent monitor.
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