One of the biggest resale sites in ticketing is claiming it can’t be sued for speculative ticketing because it is immune from being held liable for the actions of resellers who use its platform.
Last month New York’s Attorney General Barbara Underwood filed suit against TicketNetwork over what she said was widespread speculative ticketing listings — the practice of posting tickets for sale that one doesn’t actually own. Spec sellers often only procure the tickets after the consumer has made a purchase, often at high markups, and finds the tickets either on primary sites or from other brokers. The practice is controversial in the ticketing world and banned by resale sites controlled by Ticketmaster and officially against StubHub’s rules.
Underwood says the practice is rampant at TicketNetwork and personally named CEO Don Vaccaro in the lawsuit, but now attorneys for Vaccaro say TicketNetwork is immune from being sued thanks to a Clinton-era telecommunications law that generally forbids lawsuits against tech companies for third-party behavior that happens on their platform.
Vaccaro said TicketNetwork is protected under Section 230 of the Communications Decency Act of 1996, which generally holds website’s immune from civil lawsuit for the things its users post on its site. Lawyers for TicketNetwork say they were already granted immunity by a New Jersey Superior Court “from claims essentially identical to the NYAG’s claims here,” according to attorney Peter Harvey.
Filed in September, the NY Attorney General lawsuit shows that the New York AG’s office is not slowing down her office’s attempt to clean up the ticketing business, an initiative that began under former AG Eric Schneiderman, who resigned in May after being accused of abusing several women. Schneiderman had doggedly pursued illegal scalpers and the secondary ticket business, and Underwood appears poised to carry on that work with her new suit that seeks to hold Vacarro personally liable for TicketNetwork and other companies like TicketGalaxy’s conduct. Underwood is suing for repeated and fraudulent business conduct, deceptive business practices, false advertising and three counts of violating current business law.
The lawsuit (read the complaint here) examines the practice of speculative ticket listing, or short-selling tickets as some call it. The practice is fairly straight-forward — a ticket broker lists a ticket they do not have, often at a price far higher than the ticket’s face value, and then waits to see if a consumer buys the ticket at an inflated price. Only after the consumer has purchased the ticket, does the broker then attempt to purchase the ticket from either the primary or secondary market to fulfill the order.
The move is meant to reduce risk for the broker, but there are some high demand events when a ticket broker is unable to purchase the ticket for less than they agreed to sell it for. Unlike the stock market where a short seller would take a loss, many ticket brokers simply abandon the sale altogether and leave the customer with no tickets. And even when they are able to deliver the tickets, often times they aren’t in the same row as advertised — sometimes they aren’t even the same section.
Consumer groups argue the practice is deceptive — many fans don’t realize they are buying from a middle man and that tickets could be found elsewhere for cheaper. Ticketmaster bans the practice on its secondary site and StubHub frowns on the practice, according to the company’s handbook. Often brokers will list spec tickets before they have been put on sale, creating the perception that supply is low and that they are more expensive than many believe. Underwood argues the practice has been rampant at TicketNetwork and its affiliated sites.
“For years, TicketNetwork has operated programs specifically designed to enable Ticket Galaxy and other select ticket brokers to offer speculative tickets for sale through the TicketNetwork ticket resale platform that look like real tickets,” she writes, noting that the spec listings are “indistinguishable from listings for real tickets” accusing the company of “preying on consumers’ confusion” and charging “enormous premiums for tickets – often hundreds or thousands of dollars above face value.”
Underwood says TicketNetwork allegedly has “gone to great lengths to conceal their scheme” and “misrepresented to consumers that ‘[s]elling, attempting to sell, or advertising speculative tickets is strictly prohibited by our website.’” She accuses Ticket Galaxy customer service reps of lying to customers to conceal that tickets are bought and sold spec, and said Vacarro “had knowledge of and controlled all aspects of the deceptive scheme.”
“The Defendants’ conduct impacted thousands of consumers. Many consumers who unknowingly purchased speculative tickets paid vastly inflated prices,” she wrote. “Many consumers did not receive the seats that were advertised. In some cases, consumers received no tickets at all.”
Underwood estimates that New York consumers paid more than $37 million for tickets sold through TicketNetwork’s speculative tickets programs and consumers outside of New York paid more than $54 million for tickets sold by New York-based brokers using speculative ticketing practices.
Underwood is asking the judge overseeing the case to immediately begin the discovery process, but Vaccaro’s attorney says it would like the court to consider its motion to dismiss before beginning discovery.
“To subject TicketNetwork and Mr. Vaccaro to costly and disruptive discovery before the Court even considers their motions to dismiss would be not only a waste of time and resources, but also an affirmative violation of TicketNetwork’s and Mr. Vaccaro’s rights under federal law,” Harvey writes. “Respectfully, discovery should be stayed until the Court decides TicketNetwork’s and Mr. Vaccaro’s motions to dismiss.”
A hearing for the motion to dismiss is scheduled for next month.