How do the world's largest concert promoter and its biggest ticket retailer convince Washington officials that their merger would not create a monopoly? The answer is: not easily.
Ever since early February, when Live Nation Inc. and Ticketmaster Entertainment Inc. announced a $2.5 billion merger to create Live Nation Entertainment, consumers, musicians and politicians have argued that the new entity would have a stranglehold over the concert business due to its power to control both promotion and seating.
The U.S. Justice Department's antitrust division has already announced it is looking into the proposed merger. Last week, the heads of both Los Angeles-based companies Irving Azoff of Ticketmaster and Michael Rapino of Live Nation defended the deal before a skeptical congressional subcommittee. The two argued that the dour economy necessitated the move, and that it would result in $40 million in cost savings.
If the companies can convince regulators that those savings would benefit consumers through lower ticket prices, that could mitigate antitrust concerns, legal experts said. But company executives contend that performers control the price of tickets.
Live Nation and Ticketmaster could strike a deal with the government to break off divisions in order to ease some antitrust concerns, said Arnold Sklar, a partner in the downtown L.A. office of Ropers Majeski Kohn & Bentley and a specialist in antitrust issues and unfair competition. One option would be for the new company to spin off a division that sells tickets to events that are not staged at Live Nation venues such as basketball games and museum exhibits, Sklar said.
Or the merged company could agree to give competing ticket vendors the same terms for concert sales, Sklar said. That would allow the company to argue it was allowing competition to survive.
Another option would be for Ticketmaster to sell TicketsNow, its ticket reselling division, which Azoff said Thursday he would consider. Ticketmaster last week agreed to put "a wall" between its main operations and TicketsNow as part of a settlement with New Jersey. The agreement came after that state's attorney general received complaints from more than 2,000 consumers who claimed TicketsNow unfairly hiked ticket prices for a Bruce Springsteen concert.
Divesting TicketsNow would at least give other secondary ticket retailers like eBay Inc.'s StubHub.com a shot at competing with the larger entity, said Stephen Happel, professor of economics at Arizona State University's W.P. Carey School of Business.
But Happel said the real problem is that the two companies already dominate the concert industry.
"This to me is two 800-pound gorillas in their respective businesses, and they're mating," he said. "That can't be good for competition."
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