Patriots vs. StubHub: Do Anti-Scalping Laws Prevent Beneficial Markets?

Patriots vs. StubHubThe case:
In November 2006, The New England Patriots sued Ebay’s StubHub claiming they encouraged ticket holders to resell game tickets, contrary to a “ticket holder agreement”. That same month, StubHub countersued claiming that the Patiots were restricting lawful commerce.

Last week the Patriots were granted a discovery request forcing StubHub to turn over contact information for 13,000 people who sold or purchased Patriots tickets, or even simply attempted to do so through that service.

In what is perhaps the best ongoing coverage of the cases, Cade Metz quotes the court decision written by Massachusetts Superior Court Judge Allan van Gestel: “The Patriots have said that they intend to use the identities of the purchasers and sellers not only for this case, but also for its own other allegedly legitimate uses, such as canceling season tickets of ‘violators’ or reporting to authorities those customers that they deem to be in violation of the Massachusetts anti-scalping law…”.

Analysis: Why do anti-scalping laws exist? 
26 states, the District of Columbia, and nearly every city with a major sports franchise has some form of anti-scalping regulation. Nearly three quarters of the US population lives in jurisdictions where such laws apply.  We’d balk if Random House prohibited reselling their books, so why do we accept various prohibitions against relling tickets?

The Cato Institute recently published a thoughtful analysis of the social and economic drivers behind anti-scalping laws. Unlike most other products, event tickets gain a great deal of their value through social significance.  Being popular and populist, makes rock concerts and sporting events more attractive than if they were priced to be exclusive.  

Long waiting lines for general admission tickets or for season passes establishes this popular interest. It allows promoters to increase the value of the premium box seating sold without lines to corporate or wealthy buyers. Popular interest in tickts also builds a fan base which make the assembled crowd more interesting to attendees as well. So promoters seek laws to keep some ticket prices low by limiting their resale.

This system then carries two costs for general admission ticket purchases: the face value of the ticket, and the cost either of waiting in a line or having a relationship with someone with excess tickets that they can legally provide.

Impact & Recommendations:
The New York Times observes that the regulation of online sales raises the usual jurisdictional questions that come with online commerce.  Cities such as New York and Boston claim jurisdiction for any transaction, anywhere, if the event is to be held in their municipality. It is unlikely that bidders residing in two remote cities, and completing their tranaction using infrastructure in still other locations, would reasonably be aware of regulations in force for the municipality where the event is held. 

Patriot fans have noted publicly that HubStub was in fact one of the few places they could obtain tickets for these games at all.  Since tickets have a time limited value, the Patriots and other teams should seek to promote the lawful resale of tickets. 

Imagine how much more productive it would be for the NFL to start their own free Craigslist style exchange for tickets between fans. They could provide a marketplace to make face value transactions easy, or allow the market to price these resold tickets and share in the sale’s value.

Many promoters still want people to stand in line. It’s the public face for the reserve of public interestin their event. The problem is, promoters can’t put up with others pricing-in the cost of waiting in those lines, which result in private sales which don’t include them.

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