ticketmaster-live-nation-mergerLive Nation, a major concert promoter, and Ticketmaster,  a major concert ticket seller, have agreed to merge, according to the Wall Street Journal. And the Wall Street Journal Law Blog reported that the U.S. Department of Justice  announced on Wednesday that they are indeed launching an investigation into whether the merger violates anti-trust laws. These rules are aimed at preventing companies from forming monopolies which stifle competition and allow them to overcharge for their products or services free from the constraints of market competition.

The question is whether such a merger would actually violate anti-trust laws. The U.S. Dept. of Justice’s website lists three elements of an anti-trust violation:

To establish a criminal violation of Section 1 of the Sherman Act, the government must prove three essential elements: 

  1. That a combination or conspiracy existed; 
  2. That this combination or conspiracy was an unreasonable restraint of trade or commerce; and 
  3. That the trade or commerce restrained was interstate or international in nature or affected interstate or foreign trade.

The government has the burden of proving all three of these elements. The main test the courts have used to determine whether an agreement between former competitors constitutes an “anti-competitive” violation of the Sherman Act is the “Rule of Reason” test. According to the U.S. DOJ:

Under the Rule of Reason, the courts must undertake an extensive evidentiary study of (1) whether the practice in question in fact is likely to have a significant anticompetitive effect in a relevant market and (2) whether there are any procompetitive justifications relating to the restraint. Under the Rule of Reason, if any anticompetitive harm would be outweighed by the practice’s procompetitive effects, the practice is not unlawful.

Tickets do seem expensive enough already when Ticketmaster charges a $12.25 fee for selling you each ticket plus another $2.50 for the privilage of printing out that ticket on your own printer. However, although I may not understand their business models fully, each company does different things. Live Nation primarily promotes the concerts (though they do also sell tickets) while Ticketmaster is the broker who sells the tickets. If they were both primarily ticket sellers, I would understand the problem better. It seems as if Ticketmaster already has a virtual monopoly on ticket sales, though there is some competition.

Perhaps someone can explain how this merger could lead to higher ticket prices. Live Nation is talking about purchasing Ticketmaster. We’re not discussing Ticketmaster purchasing [] Tickets.com after all. So I’m not clear on how there will be fewer competitors in terms of ticket sales after this merger takes place…