Live Nation, Ticketmaster Tie Up Faces Federal Scrutiny

WASHINGTON – The CEOs of music industry giants Ticketmaster Entertainment Inc. and Live Nation Inc. had a long week on Capitol Hill defending the planned merger of their two companies to lawmakers worried that such a move would create a monopolistic behemoth.

The Justice Department is investigating the deal due to concerns that the yet-to-be-approved merger of the world’s top ticket seller and top concert promoter could violate antitrust laws.

Sen. Charles E. Schumer, D-N.Y., wasted no words in questioning the proposed deal Tuesday during a hearing of the Senate’s antitrust subcommittee.

“This is not the American dream, as the companies’ witnesses might have you believe,” Schumer said. “This is monopolistic behavior, plain and simple.”

West Hollywood-based Ticketmaster and Los Angeles-based Live Nation, announced earlier this month their intention to join forces in an all-stock merger. The new company, to be called Live Nation Entertainment, would have a combined value of approximately $2.5 billion.

Gibson, Dunn & Crutcher and Wachtell, Lipton, Rosen & Katz represent Ticketmaster in the matter, and Latham & Watkins counsels Live Nation.

The fate of the proposed merger, which would dramatically reshape the music industry, could offer an early look at how the Obama administration’s Justice Department polices mergers and enforces antitrust laws.

Under the Bush administration, the department’s antitrust division focused on price-fixing schemes by
international cartels and mostly ignored domestic mergers and monopolization issues, antitrust lawyers said.

“The DOJ in the Bush administration was very lax on merger enforcement with a couple of exceptions during the time that Hew [R. Hewitt] Pate was assistant attorney general for antitrust,” said Daniel J. Mogin of the Mogin Law Firm in San Diego. “Other than that, as an observer, I would consider it an historic low point.”

Critics of the Ticketmaster-Live Nation merger claim that due to the immense size and scope of the two
companies, the deal would cause anti-competitive damage on both a horizontal basis, because the two
companies directly compete in the ticket market, and a vertical basis, because they operate on many different levels along the industry supply chain. The companies manage artists, control venues, promote concerts and sell tickets on both the primary and resale markets.

While any Justice Department move to challenge the merger would signal a break from the Bush administration’s hands-off approach, antitrust lawyers said, a challenge based on vertical issues could represent a sea change in antitrust policy.

A generation of antitrust analysis has favored vertical mergers due to the higher efficiencies produced, the lawyers said.

The two companies’ chief executive officers, who testified before the antitrust subcommittees of the Senate Judiciary Committee and the House of Representatives Judiciary Committee this week, portrayed the merger as a necessary step for the music industry’s future in tough economic times.

“I have two choices: I can hope the economy gets better, or I can seek a more proactive approach to protect our employees, reward our shareholders and grow our company,” Live Nation CEO Michael Rapino said Tuesday. “That is the motivation behind this merger.”

Ticketmaster CEO Irving Azoff, who said the deal would eliminate about $40 million in inefficiencies,
characterized his company as a “lightning rod” for unfair criticism. Ticketmaster “take[s] so much heat for what we do, you’d think we’re the IRS,” Azoff said Thursday before the House subcommittee.

The company was investigated for alleged antitrust violations throughout the 1990s.

Azoff’s defense, however, didn’t stop a barrage of criticism from legislators.

Sen. Herbert H. Kohl, D-Wisc., chairman of the Senate’s antitrust subcommittee, said he was “disturbed” by the CEOs’ lack of candor about the merger, while Sen. Orrin G. Hatch of Utah, the subcommittee’s ranking Republican, worried that the vertical merger could hurt competition.

Some legislators on the House subcommittee appeared less confrontational when discussing the merger

The glare on both executives, but particularly Azoff, was magnified by recent reports that people trying to buy tickets through Ticketmaster for a show by rock star Bruce Springsteen were automatically directed to TicketsNow, the company’s resale broker, which was offering more expensive seats even though tickets at the standard rate were still available.

The incident drew outrage from fans and even from Springsteen himself, who along with his manager,
denounced the merger in a letter posted on Springsteen’s Web site.

“The one thing that would make the current ticket situation even worse for the fan than it is now would be Ticketmaster and Live Nation coming up with a single system, thereby returning us to a near monopoly situation in music ticketing,” the Web site read.

Azoff apologized for the incident before both the House and Senate subcommittees, blaming it on a technical glitch.

He went on to say that he would not have acquired TicketsNow if he had been in charge of Ticketmaster at the time the reseller was purchased and that ticketing resales should be banned.

By Robert Iafolla
Daily Journal Staff Writer

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