A Potential No-go: Viagogo’s acquisition of Stubhub in choppy waters
January 21, 2020
3 min read
What's going on here?
Viagogo, the UK’s largest online platform for ticket reselling, is proposing a $4bn (£3bn) takeover of its US rival, Stubhub, which is owned by eBay.
What does this mean?
The secondary tickets market used to be dominated by four websites: Viagogo, Stubhub, GetMeIn and Seatwave. The latter two ceased trading in 2018, and now Stubhub is up for sale. Stubhub was bought by eBay in 2007 for $310m and it now produces $1.1bn in annual revenue. In spite of this, two of eBay’s biggest backers have told the company to sell off its non-core business (Stubhub and eBay Classifieds) in a bid to increase the value of its shares.
The proposed deal is interesting for two reasons. Firstly, StubHub is Viagogo’s only major competitor. This increases the likelihood of the takeover being deemed a “substantial lessening of competition” by the Competition and Market Authority (CMA), who may take issue with the acquisition. Secondly, Viagogo has a poor business record; it has previously been investigated by the CMA for failing to comply with consumer protection law.
What's the big picture effect?
Viagogo’s poor compliance record mainly relates to the practice of “touting” by traders on the platform. Touting involves purchasing original tickets in bulk on the primary market and then reselling on the secondary market on sites like Viagogo. Domestic and European legislatures have moved to reduce the prevalence of touting to protect consumers. One particularly harmful practice is “speculative selling”, whereby vendors advertise tickets that do not yet exist. The Consumer Contracts Regulations 2013 and the Consumer Rights Act 2015 both require that online advertisements provide details of the seat row, number and face value of the ticket, and that traders provide their identity and address before listing tickets. Viagogo earns a commission of up to 25% on each sale and has therefore been accused of being complicit in malpractice.
For consumers, tickets can quickly become unavailable on the primary market as they’re snapped up at market price by traders. This can be done using “bots”, which are illegal and yet account for 40% of all ticketing sales traffic. Tickets are then resold at a mark-up, on average 50% above face value. Ticket prices often climb much higher for popular events, such as £444 on average for an Ariana Grande concert and £635 for a Fleetwood Mac gig. Promoters have moved to ban resales, which puts buyers at risk of being turned away at the door. Viagogo is also alleged to have misled fans about the number of tickets left to pressure them into making a purchase, poor complaints handling and a lack of consumer guarantees.
Law firms advising secondary ticketing websites on legal compliance will be aware of recent legislation aiming at better enforcement and stricter penalties. The Breaching of Limits on Ticket Sales Regulations 2018, made under the Digital Economy Act 2017, came into force in July 2018. It prescribes heavy fines for the use of automated bots to buy tickets in excess of their sales limits.
The proposed takeover of Stubhub raises concerns not only with competition, but also the viability of the secondary tickets market. The company’s recent efforts to put things right at the last minute may be too little, too late.
Report written by Arun Allen
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