The Eras vs New Era: How Bulletproof is Ticketmaster’s Arbitration Provision?

Ticketmaster is facing major backlash after its system malfunctioned during the ticket pre-sale for Taylor Swift’s “The Eras” tour. Ticketmaster left fans waiting for hours on its site, with many walking away empty handed. (Julian Mark, The Washington Post). Consequently, Ticketmaster cancelled public ticket sales, resulting in thousands of overpriced tickets on the secondary market. Id. The company may have purposefully not safeguarded its site for financial gain, raising major antitrust concerns. (Eleanor Tyler, Bloomberg). Numerous claims regarding this issue have settled in arbitration. Id.However, a group of aggrieved customers in California recently filed a complaint in the United States District Court for the Central District of California alleging that Ticketmaster violated federal antitrust laws and that the arbitration provision contained within Ticketmaster’s New Era Agreement (“Agreement”) is unenforceable due to unconscionability. Id.

Taylor Swift and Taylor Swift Management contracted with Ticketmaster, the world’s largest ticket marketplace, to secure venues and sell concert tickets for Taylor Swift’s “The Eras” tour. (Parija Kavilanz et al., CNN). On November 15, 2022, Ticketmaster began releasing pre-sale concert tickets for “The Eras,” Ms. Swift’s first tour since 2018. (Charles Edward, Dailymusicroll). Ticketmaster sold two million tickets, the most tickets sold for a single artist in a day. Id. Unfortunately, thousands of these fans were victims of a ticket sale disaster. (Julian Mark, The Washington Post). They experienced extremely long wait times, system lagging, and being kicked out of the queue, making it impossible to complete a purchase. (Eleanor Tyler, Bloomberg).

Joe Berchtold, president and CEO of Live Nation Entertainment, Ticketmaster’s parent company, testified before the United States Senate that the terrible customer service fans experienced resulted from the overwhelming amount of bot traffic amid the unprecedented demand for Taylor Swift tickets. (Parija Kavilanz et al., CNN). Hit with three times the amount of bot traffic the site previously encountered, Ticketmaster was required to slow down and pause sales. Id.Ticketmaster ultimately canceled general public ticket sales, reasoning that due to the infiltration of bots and software tools scalpers use to buy as many tickets as possible, there was insufficient ticket inventory to meet demand. (Julian Mark, The Washington Post). By canceling general public ticket sales, Ticketmaster left millions of fans with only one option: to buy Taylor Swift tickets on the secondary market. (Eleanor Tyler, Bloomberg).

Many upset fans are skeptical of Ticketmaster’s claims that the system failure was purely accidental and a result of unprecedented demand and think the company intentionally allowed for the infiltration of bots. Id. Ticketmaster is not only the largest ticket marketplace, but also has a growing position in the secondary ticket market. Id. Ticketmaster can generate a higher second fee on an ancillary sale of the same ticket, translating to higher profits for Ticketmaster if scalpers buy tickets at the expense of ordinary consumers. Id.

For years, Ticketmaster has compelled aggrieved consumers to arbitration. (Dan Papscun, Bloomberg). In July 2021, Ticketmaster drastically altered its arbitration agreement. Id. The new Agreement designates New Era ADR as the dispute resolution forum, requires claims against Ticketmaster to be brought in an individual capacity, and requires each aggrieved consumer to pay the entirety of New Era ADR’s $300 filing fee. (Terms of Use, Ticketmaster). Unlike traditional arbitral forums that set filing fees for plaintiffs and defendants, New Era ADR offers a subscription model where corporations can keep New Era ADR on retainer by paying a yearly subscription fee. (Alexis Narotzky, Benjamin N. Cardozo School of Law). A corporation with a subscription pays the same rate regardless of the number of claims arbitrated. Id.  However, plaintiffs compelling arbitration must pay New Era ADR’s $300 filing fee. Id. New Era ADR also streamlines mass arbitration for its corporate clients by only arbitrating a few representative “bellwether” cases and applying the outcomes to similar claims. (Dan Papscun, Bloomberg).

On January 4, 2022, a group of aggrieved plaintiffs filed a lawsuit against Ticketmaster in the United States District Court for the Central District of California claiming that Ticketmaster violated multiple antitrust laws including Section 16 of the Clayton Act; 15 U.S.C. Sections 1, 2, 15, and 16; and Sections 1 and 2 of the Sherman Antitrust Act. (Heckman v. Live Nation Ent. Inc., 2:22-cv-00047-DMG-MAR (C.D. Cal. Jan. 4, 2022) (Law360)). The plaintiffs also assert that Ticketmaster’s arbitration clause is unenforceable due to unconscionability. Id. Their complaint states that the Agreement forces customers to engage in a novel, one-sided process that is directly against their interests. Id. Further, the plaintiffs allege that the defense-bias provisions of the Agreement radiate unconscionability, significantly disadvantaging customers by skewing the odds so egregiously in Defendants’ favor. Id. 

The Federal Arbitration Act and the California Arbitration Act make clear that a written provision in a contract compelling arbitration is valid unless grounds exist for the revocation of that provision. (9 U.S.C. § 2; Cal. Civ. Proc. Code § 1281). Although federal and California law favor enforcing arbitration agreements, courts will not enforce an unconscionable agreement. (The Nourmand Law Firm). An agreement is unconscionable when there is an “absence of meaningful choice” for one of the parties along with contract terms that unreasonably favor the other party. Id.

It is unlikely that the court will strike down Ticketmaster’s arbitration clause. Although the Agreement contains questionable procedures to settle cases quickly and protect Ticketmaster from lawsuits, unconscionability is a rare defense with a high threshold. (Melissa T. Lonegrass, Loyola University Chicago Law Journal). The defense requires both procedural and substantive unconscionability. Id. It is evident that the arbitration provision raises serious substantive unconscionability concerns. However, the Agreement is likely not procedurally unconscionable. The terms of the Agreement unreasonably favor Ticketmaster given that consumers who wish to have their claims heard are required to pay the entirety of the $300 filing fee, are not promised to be heard in arbitration, and are prohibited from bringing class action claims. However, plaintiffs knowingly and voluntarily accepted these terms when they decided to use Ticketmaster to purchase Taylor Swift tickets. Unconscionability must be assessed at the time the contract was entered into, not in hindsight. (Cornell). On the other hand, the court may prioritize public policy concerns regarding Ticketmaster’s monopolistic power in the entertainment industry and find the agreement void due to procedural and substantive unconscionability.