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Reselling Tickets in New York: 2010

By Bennett Liebman

The ticket reselling saga in New York State reached a measure of temporary closure two weeks ago with the signing by Governor Paterson on July 2, 2010 of legislation (Ch. 151, Laws of 2010; Glenn Bain and Kenneth Lovett, " Gov Paterson Kos Bruce Springsteen's and Other Rocker's Bid to Make Tickets Paperless," New York Daily News, July 3, 2010) which largely reinstated the provisions authorizing the free market in the reselling of tickets. This capped a month and a half period where the laws authorizing the free market in ticket reselling lapsed, triggering the reinstitution of New York State's traditional strict limits on the scalping of tickets.

From 1922 -2007, New York State had a rigorous law limiting the price for which tickets for entertainment events could be resold. (Michael H. Samuels, "New York's Ticket Resale Law Leaves Industry in Limbo," Long Island Business, May 28, 2010. Arts and Cultural Affairs Law, §, 25.30 .1.(c)) There was limited and inconsistent enforcement, and with the advent of the Internet, these strict anti-scalping laws had become antiquated. The anti-scalping law was replaced in 2007 by legislation which established a free market for the resale of tickets coupled with a system under which ticket brokers were regulated by the New York State Department of State. (See. Ch. 61, Laws of 2007 and Ch. 374, Laws of 2007)

The 2007 legislation was set to expire in 2009, and was renewed by the legislature in 2009 until May 15, 2010. (Ch. 68, Laws of 2009) The 2009 renewal renewed the free market in included a requirement that the Secretary of State report on the overall effectiveness of the 2007 deregulation scheme. The Secretary of State reported that the legislation should be renewed. In reviewing the issue of paperless ticketing, she also found that paperless ticketing "arguably cuts down on ticket speculation insofar as the actual purchaser has to be present in order to gain access to the concert venue." (Samuels, note 2 supra)

Nonetheless, the 2010 renewal was hardly easy. The 2010 battle largely involved the issue of the use of paperless tickets. Paperless tickets are tickets issues for an event without any paper whatsoever. They are not e-tickets which can be printed out at home; they are closer to what would be considered electronic personal seat reservations. (Paul Fahri, 'Paperless Ticketing' Aims to Thwart Scalping at Concerts, Sports Events," Washington Post, July 5, 2010) The buyer uses a credit card to purchase the ticket. "The buyer must then go to the venue with the same credit card and a photo ID to gain admittance. A swipe of the credit card at the gate produces a slip confirming the location of the reserved seat." (Id)

This was largely a battle between the primary ticket sellers (Think Live Nation/Ticketmaster which overwhelmingly dominates this market) joined by venue operators and certain artists against the larger ticket resellers (Think StubHub and Razorgator). Over the past few years, a number of artists such as Miley Cyrus and Bruce Springsteen have insisted on a paperless system under which the artist's fans would have direct access to the primary tickets since the paperless system would largely prevent purchasers from selling their tickets on sites such as StubHub. This arguably means "that tickets end up in the hands of fans, not speculators, ... and at the prices established by the performer." (http://www.ticketnews.com/view/TopPrimarySellers) The proponents of the paperless system also believe that it thwarts counterfeiting and the problem of lost tickets. (Id) They suggest that there is no reason to regulate paperless tickets while the technology is evolving and where technology may resolve these issues.

The difficulty is what happens when the purchaser wants to give a gift of the paperless tickets to his or her friends or relatives. Also, what happens to the would be attendees if the person who purchased the tickets fails to make it to the event? Do the parents of the children who want to attend the Miley Cyrus concert have to actually show up at the venue site to swipe their credit card? Perhaps more significantly, the battle is one between the primary ticket sellers and the secondary ticket sellers. Under a paperless system, the ticket buyer would need to go through the primary ticket seller or its agent to transfer a ticket. The secondary ticket vendors see paperless tickets as "a way for Ticketmaster and other companies to control, and potentially eliminate, that secondary market."(Ben Sisario, "Scalping 2.0: Naming the Ticket's Master," New York Times, June 6, 2010)

On the political side, the fight was largely fought between Governor Paterson (with the State Assembly as an ally) against State Senator Craig Johnson. Governor Paterson supported a requirement that purchasers have a right to a paper ticket (Governor Paterson issued a statement to the press saying, "Specifically, the bill would make it illegal for venues and ticketing companies to prohibit ticket holders from transferring tickets on their own. In many cases, these entities require that ticket holders charge minimum prices and pay substantial service charges just to get rid of tickets that they can no longer use. This important consumer protection will ensure that consumers can give tickets as gifts, and transfer or sell tickets that they cannot use to other people without having to go through the entity from which they originally purchased the tickets. May 18 Statement from Governor David A. Paterson, http://www.state.ny.us/governor/press/051810_StatmntGovDavidAPaterson.html), while Senator Johnson wanted no restrictions on paperless ticketing. The Assembly initially passed the Governor's program bill (Assembly Bill No. 11108) which required "require that consumers be provided with the option of a transferable ticket at the time of first public sale." (New York State Assembly Memorandum in Support of Legislation, Assembly Bill No. 11108) The Senate, however, only passed legislation extending the existing legislation one month until June 15, 2010. (Senate Bill No. 7835)

With the impasse between the Senate and the Assembly, the free market in ticket resales came to an end on May 15, 2010, and the old anti-scalping laws went back into force. (Kenneth Lovett, "Gov Reenacts Tough Ticket Scalping Law," New York Daily News, May 21, 2010)

Meanwhile, the war of words between Senator Johnson and the Governor became more heated. Senator Johnson at a public hearing on June 2 stated, "For reasons I have yet to get a satisfactory answer on, Governor Paterson has chosen to ignore his own secretary of state, and a pre-existing agreement that let her report govern any extension of the secondary ticket market, and insist that the paperless system be altered in any final legislation."(Ryan Hogan, "New York Lawmakers Still Debating Paperless Ticketing Legislation," http://www.authoritytickets.com/?p=214. The video of the hearing held by the Senate Committee on Investigations and Government Operations can be seen at http://www.nysenate.gov/event/2010/jun/02/paperless-ticket-transferability) Senator Johnson cited a New York Daily News editorial which stated, "From start to finish, this is craziness. Paterson and the Legislature should simply reauthorize the law as it existed and let arenas expand into paperless ticketing without government interference. Albany should butt out of private business until a problem arises, if one ever does."("Ticket Blitzed," New York Daily News, May 24, 2010)

Nonetheless, with considerable confusion occurring due to the reversion to the pre-2007 anti-scalping provisions, Senator Johnson eventually largely acceded to the demands of the Governor Paterson on paperless tickets. The Governor resubmitted a program bill (Senate Bill No. 8340-A, same as Assembly Bill No. 11536-A) ,and it was passed at the conclusion of the legislative session in 2010. It was quickly signed into legislation by Governor Paterson. (Ch. 151, Laws of 2010, signed on July 2, 2010)

The basic provision on paperless tickets in the enacted bill requires that an operator of a place of entertainment may not "employ a paperless ticketing system unless the consumer is given an option to purchase paperless tickets that the consumer can transfer at any price, and at any time, and without additional fees, independent of the operator or operator's agent.

Notwithstanding the foregoing, an operator or operator's agent may employ a paperless ticketing system that does not allow for independent transferability of paperless tickets only if the consumer is offered an option at the time of initial sale to purchase the same tickets in some other form that is transferrable independent of the operator or operator's agent including, but not limited to, paper tickets or e-tickets." (Id., §8; Arts and Cultural Affairs Law, § 25.30 .1.(c)) Thus, consumers are entitled to the option to purchase a transferrable ticket at the time of the first purchase.

The language of the enacted bill seems somewhat less restrictive of the right of the operator of a place to entertainment or restrict resale of promotional tickets. In the first Governor's program bill, the only tickets that could not be resold were promotional tickets for people with disabilities.(See Assembly Bill No. 11108 note 13 supra ) In the enacted bill, the operator may restrict the" resale of tickets to a far larger community. Resales can be restricted "that are offered as part of a targeted promotion, at a discounted price, or for free, to specific membership in, a specific community or group, including, but not limited to, persons with disabilities, students, religious or civic organizations, or persons demonstrating economic hardship." (Arts and Cultural Affairs Law, §25.30.2)

Other provisions of Ch. 151 were far less controversial. Automated ticket purchasing software to purchase tickets was made illegal by the legislation. (Arts and Cultural Affairs Law, §25.24) The free market in resale of tickets is extended until May 15, 2011. (Ch 151, Laws of 2010, §5) Certain penalties for violating the ticket reselling provisions of the law are increased(Id., §9, Arts and Cultural Affairs Law, §25.35.7), and service charges in association with tickets sold shall be reasonable. (Id. §7, Arts and Cultural Affairs Law, §25.29.1) Additionally, "operators and their agents would be prohibited from charging differing face value prices on any given ticket based on its form or transferability" (New York State Senate Introducer's Memorandum in Support for S. 8340 -A. Arts and Cultural Affairs Law, §, 25.30 .1.(c)), and obstructed view seats must be disclosed." (Ch. 151, Laws of 2010 §8, Arts and Cultural Affairs Law §25.30.4)

Finally, the legislation would provide for a new reporting requirement for ticket brokers. (Id. §6, Arts and Cultural Affairs Law §25.25.2) This "would enable the State to better determine the impact of the resale marketplace on consumers, as well as to study the purchasing trends of consumers." (Introducer's memorandum, note 28 supra )

In the absence of a crystal ball that can accurately foresee developments in ticket technology, it remains to be seen what happens next. Will certain performers not hold concerts in New York due to the limits imposed on paperless tickets? Will the law de facto stop paperless tickets in New York, or will primary ticket vendors be able to figure out a way to work within the law to establish a system under which the overwhelming majority of customers will opt for paperless tickets? Will other states follow New York State's lead on paperless tickets? Will technology provide a solution for the easy transferability of paperless tickets? Will anyone venture to explore the tax consequences occasioned by the resale of tickets for the all the parties involved in a transaction? In short, can we expect a similar battle to reoccur in the legislature in May of 2011? We are likely to need to log in next year to find out what will happen.

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