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May 10 — The New York attorney general's recent crackdown on the ticket industry may be just the tip of the iceberg, with criminal or civil enforcement actions possible and state legislation to further regulate the industry gaining some momentum, according to industry and legislative sources interviewed by Bloomberg BNA.
The biggest target appears to be so-called ticket bots, which both lawmakers and industry representatives have openly opposed. The use of bots—computer software that allows ticket brokers to snag hundreds or thousands of tickets in minutes—would be a criminal offense under a bill ( S. 192, A. 9181 ) introduced in the Legislature and one proposed by Attorney General Eric T. Schneiderman (D).
“I think this is the very beginning,” Tony Knopp, chief executive officer of InviteManager, told Bloomberg BNA, referring to Schneiderman's recent crackdown. “We’re in the first inning of a nine inning game.”
Nick Benson, a spokesman for Schneiderman, told Bloomberg BNA that the attorney general's investigation into bots and the ticket industry as a whole is ongoing. He said Schneiderman would release proposed legislation in the coming weeks.
Another factor adding momentum to action by the state Legislature is the expiration May 14 of the existing ticket selling statute, Article 25 of the Arts and Cultural Affairs Law. The current law regulates the ticket industry, including requiring ticket resellers to be licensed with the state and prohibiting the use of bots, although without a criminal offense.
Schneiderman essentially put the industry on notice in January when he released a scathing report that took aim at ticket brokers, ticket sellers and sites like StubHub Inc. and TicketsNow (21 ECLR 137, 2/3/16).
The report was particularly critical of bots, citing one example where a single ticket broker purchased 1,012 tickets to a U2 concert within the first minute the tickets went on sale.
Schneiderman has reached settlements with eight ticket brokers—two upon release of the report and six in April—for failing to obtain licenses with state. The brokers agreed to take steps to protect consumers and to pay a total of $2.8 million in fines (21 ECLR 660, 5/4/16).
The attorney general has also asked StubHub, Ticketmaster, TicketNetwork and Vivid Seats Ltd. to voluntarily take steps to ensure that ticket brokers are following state laws (see related article).
Knopp, whose company uses software-as-a-service (SaaS) technology for companies to manage their ticket and entertainment purchases, predicted that criminal enforcement against bots would be the next shoe to drop in Schneiderman's efforts.
“There’s a lot of bad apples,” Knopp said. “It's systemic because it’s so easy to do,” he said, referring to the use of bots.
Gary Adler, executive director and general counsel of the National Association of Ticket Brokers (NATB), told Bloomberg BNA that “we applaud any effort to rid the industry of illegal bots.” He said, however, that problems in the industry are not systemic. The NATB's code of ethics and other efforts have helped, he said.
“I think the marketplace is much better now for consumers than it ever was,” said Adler, who is an attorney with Clark Hill PLC. “People are doing it in the light of day with consumer protection measures.”
Legislation that establishes limits on ticket prices and competition in the secondary market are opposed by the NATB, according to Adler. The Association is also concerned, he said, about licensing requirements that could require out-of-state companies to get licensed in New York.
Catherine Martin, vice president of communications at Ticketmaster, said the company applauds the attorney general's efforts “to root out abusers.”
“Ticketmaster works to combat bots everyday in order to make ticket availability and the overall ticket buying process better,” she told Bloomberg BNA in an e-mail.
The attorney general's report has helped build momentum for a bill (S. 192, A. 9181) in the state Legislature that would make it a criminal offense to use bots and take other steps to regulate the industry. Moreover, Schneiderman is expected to propose his own bill this year to cover the issues raised in his January report.
At the same time, U.S. Reps. Marsha Blackburn (R-Tenn.) and Paul D. Tonko (D-N.Y.) have introduced a federal bill (H.R. 5104) known as the Better On-line Ticket Sales Act of 2016 to prohibit the use of ticket bots to circumvent security measures found on ticket sellers' websites to purchase concert and sporting tickets in large quantities (21 ECLR 661, 5/4/16).
"I agree with Attorney General Schneiderman's report, which added to the chorus of serious concerns about our state ticket law, including tickets never being made available to fans, the prevalence of bots, and a real lack of transparency,” state Sen. Daniel L. Squadron (D), the chief sponsor of S. 192, told Bloomberg BNA in an e-mail.
“I've put forward a number of common sense reforms to increase transparency, create a price cap, and ban charity ticket resales, which are an important step,” he said. “I've also called for the Senate to hold oversight hearings to ensure our ticket law is working for everyday New Yorkers, rather than industry special interests.”
Assemblyman Thomas J. Abinanti (D), the chief Assembly sponsor of the bill, said the deregulation of the secondary ticket market under a 2007 state law led to many of today's problems.
“The problem is the lack of regulation,” Abinanti told Bloomberg BNA in an e-mail. “Once deregulation occurred in 2007, ticket resellers were able to take advantage of the free market at the expense of everyday New Yorkers. The cap for tickets resold in the secondary market was removed, leading to resellers utilizing ticket bot software to buy a large amount of tickets in a short amount of time—and then reselling those tickets at enormously high prices above face value.”
State Sen. Brad Hoylman (D), whose district includes Times Square in Manhattan, told Bloomberg BNA that “many ordinary New Yorkers are prevented from enjoying our great theater and performing arts assets because of the voracious greed and sophistication of ticket resellers.”
Hoylman, who co-sponsors a separate bill ( S. 571 ) with Squadron to limit the re-sale of tickets to charitable events, said sites like StubHub and Ticketmaster should be prevented from selling tickets to charitable events at higher prices.
“We need to ensure that buyers know the base price of a ticket when they make a purchase, as well as whether that ticket is for a charitable or free event,” Hoylman said in an e-mail.
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