Weekend Law: Musk Testifies in Twitter Investor Fraud Case, Live Nation's Antitrust Trial

17:17Jef Feeley:Thanks for listening to the weekend edition of Bloomberg Law. I'm Amy Morris in for June Grosso. And we've been talking about the Department of Justice antitrust trial against the live entertainment giant Live Nation. Bloomberg News antitrust reporter Leah Nylan is with us. The crux of the DOJ's case against Live Nation, Leah, is that it has a monopoly on live entertainment because it owns Ticketmaster, which is the nation's largest ticket seller in the nation. And, Leo, one of the things you mentioned is that at the very beginning of this, back in 2010 when the judge allowed for this merger in the first place, even then the judge said, don't threaten concert venues.

17:54Jef Feeley:If they don't want to use your services, you can't intimidate them. The judge said that from the beginning. So is that what they're accused of doing?

18:02Amy Morris:So that is one of the allegations that the Justice Department is seeking to prove. Their very first witness, in fact, was the CEO from the Barclays Center, which is a large concert venue in Brooklyn, New York. And they are one of the venues that allege that they were sort of threatened by Ticketmaster. Ticketmaster, they had wanted to switch their ticketing provider away from Ticketmaster to SeatGeek, which is another ticketing provider that primarily does a lot of sports-related events. Events. Thank you. So SeatGeek primarily does a lot of sports-related events. And so Barclays agreed to switch to SeatGeek, and they played a phone call in court with the CEO of Barclays and the CEO of Live Nation.

18:50Amy Morris:And the CEO of Live Nation said, if you switch away, it's going to be hard for us to keep sending you concerts. And then after they switched to SeatGeek, the allegation is Live Nation started moving concerts, popular concerts to another concert venue in Queens instead of this one in Brooklyn. And so there was some talk about a Billie Eilish concert that had been booked at the Barclays Center, and all of a sudden it got moved to this other venue.

19:17Jef Feeley:So they're not just switching venues. They're actually moving acts from a venue that was already booked to a different venue that uses Ticketmaster.

19:27Amy Morris:Yes, and that is the allegation that the Justice Department was focusing on. Live Nation maintains that this was at the choice of Billie Eilish's team. The Barclays CEO said they had somebody check it out, and Billie Eilish's team said that this was, in fact, a request by Live Nation. So it is a little bit disputed, but the Justice Department is planning to put on a number of other venues who allege this happened to them. They would look at switching to a different ticketing provider and Live Nation would say, well, if you switch to somebody else, we're not going to be able to bring you the same tickets.

20:02Amy Morris:Live Nation has argued all along that it's sort of under no legal obligation to do business elsewhere, that it makes most sense for them, business-wise, to put concerts at either venues it owns or venues that are using Ticketmaster, because when it's a vertically integrated company, it's cheaper for them. And so that's actually one of the major issues in the trial, is this a legitimate business practice, or is this sort of unfair coercion? Does this practice of them trying to tie their contracts in this way make it illegal and sort of force pressure on these venues to use Ticketmaster instead of other options?

20:46Amy Morris:The other interesting thing here is that the case is being brought not just by the Justice Department, but by a number of state attorneys general. And state attorneys general do have the right to sort of seek damages on behalf of their citizens. So there are 25 states, 24 in D.C., depending on how you count it, that are seeking damages from Ticketmaster on behalf of concertgoers. They say that because of Ticketmaster's monopoly, ticket prices were increased by at least about$2 per ticket. So obviously$2 a ticket is not that much for an individual ticket. But we're talking about something in excess of like 20 ,000 concerts at thousands of concert venues across the country.

21:29Amy Morris:So if you add that all up, we're talking about damages in the potential millions or billions of dollars, depending on what the jury finds.

21:36Jef Feeley:You cover antitrust cases a lot. I do. This is your jam. So what criteria then do they have to meet to show that, yes, they violated this?

21:46Amy Morris:So first, the jury has to find that they're a monopoly. That's not really that contest. There is a little bit of contention here about whether they're a monopoly. it depends on what venues you consider to be in the market versus not in the market. Because the government first has to show that they have the power to sort of exert undue influence. The government says that Ticketmaster controls ticketing at about 87 % of what they're calling major concert venues. So these are the venues that generally, like the thing that they do the most is hold music concerts. Sure. Ticketmaster says that that's not really the appropriate market, that it should include sort of all spaces that could potentially host a concert.

22:37Amy Morris:So in addition to like something like an amphitheater or an arena, it should also include a stadium. And so if you consider all of those things, stadiums, amphitheaters, arenas, their market share is a little bit smaller. It would be only about 40%, which there isn't like a legal definition of what a monopoly is, but generally it's considered to be at least 50 to 60%. So that's one of the things the jury will have to decide. Should they be considering every single place that a concert should take place or just sort of major concert venues? The Justice Department argues that, you know, there are only certain artists who are going to be able to fill a stadium, someone like Beyonce.

23:14Amy Morris:So if you are a, you know, up and coming artist, you're not really going to be playing a stadium. you're going to be playing some of these smaller places. And those are the places where Ticketmaster has a little bit more power because most of the business they're doing is music concerts. So are we also including nightclubs in this? Yeah, so they sort of start, they have a bunch of people from sort of the music industry who are taking the stand and sort of talking about this. When an artist starts, you know, they tend to start in smaller venues like clubs, and then they move up to amphitheaters, and then they move up to arenas, And then if you're very, very popular, you move up to a stadium.

23:51Amy Morris:So the Justice Department's case is sort of focused on those slightly smaller ones, the clubs, the amphitheaters, the arenas. These are like places that have maybe like 1 ,000 to maybe 20 ,000 seats, whereas a stadium is going to have like 40 ,000 to 50 ,000 seats. So it's focused mostly on those. So we're not going to be hearing from people like, you know, Beyonce or Taylor Swift. Although Taylor Swift's concert agent is supposed to testify, it's mostly focused on like mid-level artists. So the people who are definitely testifying are Kid Rock, who has been very interested in this case and is close friends with President Trump.

24:33Amy Morris:And then also one of the members of the Mumford and Sons band is expected to testify. So like artists along that sort of caliber who do a lot of shows and can talk a little bit about how, you know, Live Nation's control over concert promotion has really impacted where they end up performing.

24:55Jef Feeley:So what is the court then being asked to decide here?

24:57Amy Morris:So there is a jury for this portion, and the jury is being asked to decide first whether Live Nation is a monopoly, and then second, if they are a monopoly, what the damage amount per ticket is. So there will be some testimony from all these people about Live Nation's conduct, and then there will be some testimony from experts about how Live Nation's conduct impacted the price of tickets. Once the jury decides that, and if they decide in favor of the government, the judge would then take the jury's damage number and sort of decide the overall damage number. So they're deciding per ticket. He's deciding the overall number.

25:35Amy Morris:And then he will also decide whether there are any additional remedies needed. So that's where the potential for a breakup comes in. Because the government has said, you know, we allowed this merger to take place in 2010 on the condition that Live Nation sort of not engage in bad conduct. and they have been doing that the whole time. And so really, we tried to allow this to go through. It hasn't worked. And so what we really need now is to break up this company.

26:02Jef Feeley:So this might seem like an out-of-the-left-field question, but I wonder how ticket resellers like StubHub would somehow be involved with this. Are they completely left out of this because the damage was already done by the person who originally bought the ticket through Ticketmaster?

26:16Amy Morris:So most of this, yes, is focused primarily on what we call the primary ticket market. So that's the very first sale of the ticket because the venue itself generally picks the primary ticketer, i.e. who is the first person selling the tickets. But they don't have a lot of control over what we call the secondary ticketing market, i.e. when you're reselling, where you decide to do that, the venue doesn't itself usually get involved. So there are a bunch of concerns about the secondary market. There's some legislation pending in Congress that's focused on that. But this case is primarily about the primary ticket.

26:52Jef Feeley:How difficult will it be for the prosecution to prove its case?

27:00Amy Morris:So, I mean, the standard is a preponderance of the evidence because this is a civil case. But it's interesting. Like, antitrust cases, by the time they get to this point, with the Justice Department bringing it to trial, very often the Justice Department wins.

27:20Amy Morris:There's a pretty high bar for the Justice Department to file a monopolization case in the first place. And then, you know, it has to get past the motion to dismiss. It has to get past summary judgment. This one is pretty interesting because it's pretty rare, actually, for antitrust cases to go before a jury. The only reason it's actually before a jury is because of the damages portion. But, you know, the Justice Department was very interested in getting this before a jury because these are the people allegedly who have been harmed by this conduct. Right. The peers. They are. Yeah. They are like the people who might have actually gone to a concert.

27:54Amy Morris:Live Nation a little bit earlier last week actually tried to insist that if you had ever bought a ticket through Ticketmaster, you were ineligible to be on the jury. and the judge actually threw out that request because he felt that it would have been impossible to actually seat a jury if one of the requirements was that you had never bought a concert ticket online. So it's entirely possible that these people have used Ticketmaster's product before but in order to be seated on the jury they had to insist that they could be impartial and fair and so we'll see what they say. You know, juries much more frequently find for antitrust plaintiffs.

28:35Amy Morris:So it's interesting that Live Nation wanted to take this gamble.

28:39Jef Feeley:It really is. And at some point, there is going to be, let's say if they find in favor of the Department of Justice, there is a chance that Live Nation might have to be broken up. What would that even look like?

28:52Amy Morris:So the Justice Department and the state AGs say that in this case, they don't think it would be that hard because these used to be separate companies. And in their view, you know, this is now a vertically integrated company. Live Nation does the concert promotions. That is the all of the logistics behind having a live music event, whereas Ticketmaster is a ticketing service. It is, you know, like primarily a website that integrates with like websites of venues. So these two things don't have to go together. And therefore, it would not, in their view, be necessarily that difficult to separate them.

29:31Jef Feeley:So it would just go back to what it was before 2010. Live Nation and Ticketmaster. Here's your tickets and here's your venue.

29:37Amy Morris:Yes, that's the idea of the Justice Department. It would separate these two things into two companies and they would just go back to the way that they had done business before.

29:45Jef Feeley:Okay, we're going to watch and see how this develops right along with you, Leah. Thank you so much for talking to us. Thank you for having me. Bloomberg News antitrust reporter, Leah Nylan. And just ahead, we're going to take a look at one major business. They haven't had to worry about antitrust issues at all. That's the great American pastime of baseball. But how did they get past that? I'm Amy Morris in for June Grosso, and this is Bloomberg.

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32:43Martin Edel:You're listening to Bloomberg Law with June Grosso from Bloomberg Radio.

32:49Jef Feeley:You're listening to the weekend edition of Bloomberg Law. I'm Amy Morris filling in for June Grosso. June is off this week. Major League Baseball is a massive organization and is exempt from federal antitrust law. Now, this week, the Supreme Court refused to hear an appeal to challenge this longstanding exemption. why the MLB Players Association is fighting to change it. We get more on the history of this and why the MLB Players Association is fighting to change it with Martin Edel, co-chair of Golston and Stor's sports law practice and adjunct professor at Columbia Law School. Okay, Martin, thank you so much for joining us today.

33:26Jef Feeley:Amy, thank you so much for having me. The high court called this exemption an aberration. It's clearly unusual. Why is baseball so special?

33:35Martin Edel:Well, baseball is magical in many ways because it stirs everyone's imagination. People from the farmlands joined baseball when it first started. It became a path for immigrants to become part of American society. and it's easy to understand the basics, not the real strategy, but the basics. So it tends to appeal to everyone. And in that way, it is different than many sports, but the same as many other sports, at least economically and perhaps legally, except as we're about to get into.

34:21Jef Feeley:Okay, let's talk about that. Why was this exemption created for baseball in the first place?

34:26Martin Edel:You have to go back to 1922 when the Supreme Court, U.S. Supreme Court, first looked at baseball and whether it was subject to the antitrust laws. Now, put yourself in the time frame. In 1922, the GIs had just come back from World War I and had lots of cash to spend, particularly on leisure topics. You had a Supreme Court which had a very cramped view of the Commerce Clause, tending to restrict its availability. And you had the Black Sox scandal by 1922. So you put these three things together and the Supreme Court looks at baseball in 1922 and it dealt with an ownership dispute at the time. and an opinion written by none other than Oliver Wendell Holmes, one of the great jurists on the Supreme Court, he decided that baseball, for the court, he decided baseball was an exhibition that was not involved in interstate commerce and therefore was exempt from the antitrust laws.

35:39Martin Edel:Because as we know, Congress gets its power to regulate from Article 1, Section 8, the Commerce clause. If you're not in commerce, Congress can't regulate that type of activity. So that was the start of the baseball exemption. I must say it made little sense in 1922. And as I'm sure we'll get into, it makes even less sense 104 years later.

36:04Jef Feeley:Well, I was going to say maybe in 1922, it wasn't interstate commerce, but today it's worldwide. It's America's pastime. So So how has it managed to survive any challenges for these changes?

36:18Martin Edel:So what we've had is the Supreme Court has looked at the baseball exemption two more times after 1922. Once in 1953 in a case called Toulson against the New York Yankees, where Mr. Toulson was claiming that something called the Baseball Reserve Clause was an antitrust violation. It restricted players to particular teams and didn't give them any mobility to move to another team, such as we now see in free agency. And the Supreme Court looked at this case, six sentence decision. It was called per curiam because it was by the court, no individual author. And in six sentences, the Supreme Court said, stare decisis.

37:04Martin Edel:We had decided this 31 years ago, and therefore there's no reason to change. Congress could have acted to eliminate the baseball exemption and did not do so. So that's the end of it. Then in 1972, we have the Supreme Court looking at it again in a case called Flood against Kuhn. This is sometimes referred to as the Curt Flood case. And what happened there, you now had a five to three decision by the Supreme Court. The major decision was written by Justice Blackmun. For those who like elegance of language, the first third of his decision is this great elegy to the game of baseball. The second third of his decision is based on Kurt Flood's outstanding statistics as the premier center fielder of his time.

37:57And the third third of his decision was, hey, this is an aberration, but it's our aberration.

38:04Martin Edel:And while there's something to be said for consistency, even when it's layered in inconsistencies, we're going to uphold the baseball exemption. Congress hasn't stepped in. There's been what the court called positive inaction. And therefore, baseball exemption stands. Sounds quite Ralph Waldo Emersonian in its scope.

38:31Jef Feeley:So it sounds like also because the Supreme Court opted not to take up this case that what did you call it? The inaction? Positive inaction. Positive inaction remains. Correct.

38:46Martin Edel:And since 1972, we've seen a whole bunch of developments. We've had on the congressional front, Congress in 1997 or 1998 passed something called the Curt Flood Act. Unfortunately, Curt Flood had passed away before Congress enacted this and President Clinton signed it into law. that said that baseball players for Major League Baseball had the right to sue under the antitrust laws. Of course, by that time, it didn't matter much because baseball had developed a union, the Major League Baseball Players Union, and the Major League Baseball players, Major League Baseball owners had negotiated a collective bargaining agreement.

39:34Martin Edel:Where you have a collective bargaining agreement. The labor law takes precedence over the antitrust laws. And so there is no such thing as an antitrust violation for player disputes, as long as there is a collective bargaining relationship. So it was a sop to, unfortunately, at that time, the deceased Mr. Flood, but it didn't matter much. You had a whole bunch of lower court cases coming up, challenging the scope of the baseball exemption. Why? Because this exemption did not apply to any other sport. The Supreme Court and all lower courts had held professional football, professional hockey, professional basketball, theatrical exhibitions.

40:23Martin Edel:You name the type of entertainment form the Supreme Court and the lower courts have held, they're subject to the antitrust laws, not so for the great game of baseball. So lower courts tried to limit the scope. And ultimately, they found that the circuit courts of appeals did not agree and held that baseball is subject to the antitrust, is not subject to the antitrust laws because of the exemption.

40:53Jef Feeley:So in this case, if this appeal had been successful, how would that change Major League Baseball, how we experience it as fans, how it actually is run as an organization?

41:06Martin Edel:I think the answer is not much. So what we're talking about is the Congreeros decision that where the Supreme Court last week, last week, earlier this week, sorry, denied a petition for a writ of certiorari. What that affects is not Major League Baseball, but the minor leagues. This involved Puerto Rican baseball leagues. And were they subject to the same baseball exemption? Were the players there subject to the same baseball exemption? The First Circuit Court of Appeals held the baseball exemption applied. And therefore, it seemed to expand it beyond the scope of what the Supreme Court had held three times applied to major league baseball.

41:52So the effects would be to minor leagues, non-sanctioned leagues, and as I'm sure you're

41:59Martin Edel:going to ask me, the NCAA.

42:02Jef Feeley:Right, exactly. I was stopping other organizations like the NCAA, because I keep thinking about things like name and image and likeness and the portal and how students are now able to lobby for more money, which was unheard of back in my day. So what's stopping other organizations like the NCAA from lobbying for this type of an exemption?

42:23Martin Edel:So great question. And the answer is they are lobbying for an exemption. I can't tell you every day, but the NCAA has lobbyists who are going to Congress on a regular basis and claiming that the NCAA should be exempt, at least in some of its activities, from the scope of the antitrust laws. The principal reasons given by the NCAA are, one, money, and two, money. And the reason for this is antitrust laws are so, antitrust lawsuits are so expensive and take so much time and divert energy that they, in fact, divert attention from the scope of the activities that the parties want to engage in and take on a life of their own.

43:13Jef Feeley:How does that not apply to baseball, though?

43:17Martin Edel:It would, but for these three Supreme Court cases.

43:20Jef Feeley:Okay, okay. Okay, so what happens now? There have been challenges, they get shot down, or they're not hurt at all. Is this just the way it is? Baseball has this antitrust exemption? So the answer is yes and no.

43:40Martin Edel:that's my legal and lawyerly type answer. Yes, because we have three Supreme Court cases which uphold the baseball exemption. Lower courts can't change that. What can change that is Congress. If Congress wanted to jump into the fray, and that's in effect why the NCAA is lobbying Congress now, it can create exemptions to the antitrust laws. The antitrust laws are congressional laws. They're not constitutional laws, and they can be changed by Congress or modified by Congress. So that's one avenue. Another avenue would be if the Supreme Court waded in again, which doesn't look likely. It's had ample opportunity over the last 54 years since the flood case was decided, and it's chosen not to do so.

44:36Martin Edel:So those are the two areas. A third area may be private parties. If, for instance, Congrejeros decided to develop a collective bargaining relationship with its players and the players would unionize and then perhaps be subject to the scope of the National Labor Relations Act, they could then bargain without the sort of Damocles of an antitrust suit hanging over their heads because the antitrust laws would be superseded by the collective bargaining relationship.

45:10Jef Feeley:Marty, we're going to leave it there. Thank you so much for taking the time with us. This was fascinating. Amy, thank you so much for having me. I've really enjoyed myself. Marty Edel is co-chair of Goulston and Storrs Sports Law Practice. And that does it for this edition of Bloomberg Law. Subscribe to the Bloomberg Law podcast on Apple, Spotify, or wherever you get your podcasts so you never miss an episode. I'm Amy Morris, in for June Grosso. This is Bloomberg. Stay with us. Today's top stories and global business headlines are coming up right now.

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