With A Key Ruling Anticipated For Ticketmaster Lawsuit, Federal Judge Monday To Pave A New E-Commerce Path

Written by Evan Schuman
October 12th, 2007

Ticketmaster’s suing a small software vendor, whose products allows companies and people to buy tickets more quickly, saying that consumers who have not bought the product are at a disadvantage.

On Monday, U.S. District Court Judge Audrey B. Collins will likely charter new E-Commerce ground on Monday from her Los Angeles courtroom, when she rules on a preliminary injunction request from Ticketmaster against a 10-person Pittsburgh ISV called RMG Technologies.

The Ticketmaster case is interesting because of its non-traditional legal issues—where Ticketmaster’s core argument is that it’s being damaged by a potential loss of consumer goodwill—plus the fact that these are claims that couldn’t happen outside of current-day E-Commerce.

The essence of the case is that RMG makes software that allows for their customers to order tickets from Ticketmaster more quickly and more efficiently. Ticketmaster sued RMG, saying that the small Pittsburgh firm helps brokers buy lots of tickets, so that they can be resold at a large markup.

Ticketmaster is also saying that RMG has repeatedly violated the terms of use provision on its Ticketmaster agreement, by using the tickets for large-scale resale purposes.

This situation becomes critical when Ticketmaster is selling some especially popular concert, for example, and knows that it will likely have a million people trying to get seats at concerts that might collectively only seat 100,000 people.

No matter what Ticketmaster does, 90 percent of the fans of that performer will be unable to buy tickets and they’ll be upset and want to blame someone. What Ticketmaster wants to avoid is giving the fans who did not get tickets any legitimate reason to feel that others were favored.

Another problem for Ticketmaster is a Web-fueled shift in price control. Ticketmaster sells all of its direct tickets at a price negotiated with the performers. But tickets that are purchased in bulk and then resold typically have a much higher pricetag. The more tickets that are purchased by people using applications such as those produced by RMG, Ticketmaster argues, the higher percentage of total tickets sold will be sold at the much higher price.

"We want consumers to have a fair and equitable access to tickets" and to not allow one group of consumers to "cut ahead in line," said Joe Freeman, Ticketmaster’s associate general counsel and VP.

RMG attorney David Tarlow sees the matter quite differently. Anyone is allowed to purchase his client’s software and get the same advantage. It’s akin to saying that a travel agent can get better rates because they pay for expensive reservation software and that there is something unfair about it.

Tarlow challenged the logic of Tickermaster’s "fair and equitable" argument as something that is inherently no longer attainable. Does a consumer who pays for a high-end broadband connection have an unfair advantage over someone using dial-up because they can get to a site and make a purchase more quickly?, Tarlow asked.

After months of motions and arguments, Judge Collins will make a critical decision in the case on Monday, when she is expected to rule on a Ticketmaster request to have a preliminary injunction ordered against RMG. That preliminary injunction would prevent RMG from selling the product until the trial, which is currently slated for October 2008.

Tarlow said if the injunction is issued and upheld, it would likely force his client out of business.

The case has the potential to cause a lot of E-Commerce disruption. How much protection can an E-tailer expect from the courts when technology advancements change the retail environment?

Similar issues were debated more than 10 years ago when financial services firms were trying to make new E-Commerce rules for themselves. With Wall Street’s long history of identical access for all, would some investors have an advantage with faster connections and speedier servers? Ultimately, the financial world relaxed about those issues, resigning themselves that "equal access" needs to be more about realistic and good-faith efforts than about identical-to-the-nanosecond information delivery.

Does this decision have a potential impact on traditional retailers, who don’t typically run out of stock in less than a minute? As we approach the holiday season, it’s hard to answer anything other than "yes."

The issues crops up for Ticketmaster only where there is a much greater demand than supply. The same is true for any retailer. Let’s say that this season’s hottest gift is an Omega 9 Widget. The manufacturer can’t make enough in time and there is expected to be largeshortages in all major metropolitan areas.

When an e-tailer posts the product, is it reasonable to guarantee identical access for all potential customers? If someone hits the site from their employer’s T3 connection and thereby buys 10 of them, would that merit a preliminary injunction against that telco?

What if it’s a brick-and-mortar store in Minneapolis and there’s a brutal sub-zero blizzard predicted for five hours before the store opens? If a consumer purchases special snow clothing that allows them to camp out in front of the store during conditions that many other consumers couldn’t endure, does that merit an injunction against that winter coat manufacturer?

The irony in the Ticketmaster case is that Ticketmaster is getting its full money even when RMG’s clients swoop in. The fear is a loss of potential consumer good will. But given the overwhelming marketshare of Ticketmaster today, what is the business fear? Even if consumers did get angry at Ticketmaster, where else could they typically go to purchase the most popular shows?


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