The Sports Law & Policy Centre | A Legal Analysis of Ticket Scalping – Learning Module
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A Legal Analysis of Ticket Scalping – Learning Module

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Introduction

Legally speaking, a ‘ticket’ is a certificate granting the person to whom it is issued, or the holder, a specified right or privilege. While the ticket itself is worthless, it is the right of entry associated with it that makes it valuable. Like other consumer goods, the forces of demand and supply are at play in the sale and resale of tickets. For most major sporting events, the demand for tickets almost always exceeds supply. The primary seller, i.e. the authorised ticketing agent/the event organizer, issues tickets at a fixed price. A few individuals and businesses buy tickets at a primary issue with the intention of reselling them at whatever (higher) price the market will bear. This practice is known as ticket scalping.

The scalping market exists primarily because sports organizers keep prices low to allow the masses to interact with the game. In this way they also aim to generate a positive brand image. Sometimes organizers find it challenging to price tickets as they are not able to accurately judge the demand for a game and do not wish to run the risk of overpricing tickets. Often, demand also varies for each game in say the league stage of a series. However, organizers are often required to maintain a uniform price throughout the league stage and ticket scalpers take advantage of the differential demand.

The Internet revolution has also contributed to the growth of ticket scalping. It has enabled easy access to tickets in the secondary market through auction websites, online ticket exchanges and online ticket resale agents. There has also been significant development in the fields of sports hospitality and sports tourism, which are supported by ticket scalping. Hospitality groups put together packages usually consisting of scalped prime seat tickets to the sporting event, food and drink, and transportation. Travel agents also assemble similar packages for visitors including travel to and from the destination hosting the sporting event, hotel stay and tickets. Hospitality groups and travel agents obtain tickets either directly by employing people to line up at the ticket distribution centres or via online purchase or through on-selling by various groups. They then sell their high-priced packages to corporate and other clients, often competing with authorized travel and tour operators who have paid substantial amounts to the event organizer for exclusive rights.

This module discusses the legal position with regard to ticket scalping in the jurisdictions of Australia, U.K., U.S.A and India. It identifies the need to combat ticket scalping and analyses the concerns that may be raised regarding the legal safeguards currently in place. It then proposes measures that may be implemented to combat this practice.

Australia

Australia does not have any central legislation dealing with ticket scalping. However, certain Australian states have enacted legislations prohibiting unauthorized sale/resale of tickets throughout the state or in specific venues or in relation to specific events. In addition to this there are generic consumer laws, both central and state, which prohibit corporations from engaging in misleading or deceptive conduct or making false or misleading representations. While such legislations may aid in tackling sale of counterfeit tickets, or fraudulent practices at the time of on-selling, they do not bar unauthorized on-selling per se.

The state of Victoria has enacted the Major Sporting Events Act, 2009 which allows the appropriate Minister to declare an event a “Sports Ticketing Event” and invite the event organizer to draw up a ticketing scheme to be implemented in relation to an event. Once the scheme is approved by the Minister, it is an offence to sell tickets without a scheme or otherwise than in compliance with the scheme or in breach of the ticket terms and conditions prohibiting unauthorized sale. In Queensland, under the Major Sports Facilities Act, 2001 it is an offence to sell or buy tickets to events held at eight specified venues for a price in excess of ten percent of the face value of the ticket. In the state of New South Wales, unauthorized ticket sales in the areas surrounding the Sydney Cricket Ground, the Sydney Football Stadium and the Sydney Olympic Park is prohibited under the Sydney Cricket Ground and Sydney Football Stadium By-law 2009 and Sydney Olympic Park Regulation 2007 respectively.
The Federal Court of Australia in the case of Australian Rugby Union Ltd. v. Hospitality Group Pty Ltd. [2000] FCA 823 extended principles of contract law to tackle ticket scalping. The case involved unauthorised on-selling of tickets to international rugby union test matches, as part of hospitality packages. All tickets which had been issued for purchase by the public for the tests during 1998 contained the following term (“the ticket condition”):

“This ticket may not be resold at a premium or for commercial purposes without the prior written consent of the ARU. If this ticket has been resold in contravention of the condition, the bearer of the ticket will be denied admission.”

The Court held that any on-selling of tickets amounts to (a) breach of the ticket condition by primary purchasers of tickets and (b) such conduct by third parties (e.g., organizers of corporate hospitality) that would induce purchasers of tickets to breach this term. Ticket conditions were like contractual terms and the rights associated with the tickets were contractual rights, which could not be transferred to another person without the agreement of all parties to the contract. In essence, this meant that tickets could not be on-sold and the associated right of entry could not be transferred without the consent of the primary seller of tickets (i.e., the organiser of the sporting event).

The United Kingdom

In the United Kingdom scalping of football tickets is dealt with under the Criminal Justice and Public Order Act 1994. Section 166 of the Act prevents an unauthorized person from selling match tickets. A person is deemed “unauthorized” unless he has been authorized by the official body in writing to sell tickets. This Act stipulates a fine of up to £5,000 for such offence. While this Act creates liability for primary offenders engaging in resale, it previously did not address the issue of secondary liability of internet auction sites facilitating resale of tickets. To resolve this, Section 166A was added in 2006 which creates liability for information service providers (including websites such as Ebay)in the event that (a) they know that tickets are being sold illegally at the time the tickets are advertised or, (b) they become aware that tickets are being sold illegally but do not take immediate steps to remove the advertisements. Notably, this Section does not create a general duty for website operators to monitor their website for illegal tickets. However, if the event organizer reports any unauthorized offer or sale of tickets, the website shall take immediate action to remove the advertisements.

Recently, on 30th December, 2011, in the case of Rugby Football Union v. Viagogo ltd, [2011] EWCA Civ 1585 the Court Of Appeal granted a Norwich Pharmacal Order against the ticket exchange website Viagogo requiring the website to provide the Rugby Football Union (“RFU”) names and addresses of all individuals who have sold tickets on its website during the Autumn International Series 2010 and the RBS Six Nations 2011 matches in order to enable the RFU to take action against them. A Norwich Pharmacal order can be made against a third party that has, through no fault of its own, facilitated a wrong. The purpose of the order is typically to identify wrongdoers – in the present instance, the persons advertising and selling the tickets.

Certain municipal laws enacted in U.K. also assist in dealing with ticket scalping. For instance, with respect to sale by individuals outside the venue, it is a criminal offence to ticket-tout in a public place in the London Borough of Westminster.

U.S.A

Ticket scalping laws in the U.S.A. vary from state to state. Many states place restrictions on ticket resale such as limiting resale price to the price printed on the ticket or to a certain amount above the face value, prescribing the maximum service charge that may be added to the face value of the ticket price, or placing percentage limitations on the amount a ticket could be scalped for. For instance, in Massachusetts, reselling agents are required to be licensed and cannot resell tickets for more than $2 above face value inclusive of their true service costs such as postage, courier. In Florida the ticket resale price cannot be more than $1 of the original retail price of the ticket. Certain other restrictions attempted by the state legislatures include prohibition on resale without authorization of the event organizer and prevention of ticket resale in certain locations. Certain states have enacted laws that prohibit resale of tickets within a defined distance of a sporting venue. However these laws have proved largely ineffective as unauthorised persons are able to utilize the internet to effect resale of tickets or simply move slightly beyond the no-scalping zones.

Further, none of these laws deal with a situation of cross border sale of tickets (acquired in one state and resold in another), an issue of jurisdiction, especially if such transactions take place over the internet, as they most commonly do.

In the case of scalping via websites, it is interesting to note, that sites such as Ebay display caveats which read “Scalping tickets … is indeed illegal in certain states. However, reselling tickets for up to face value is legal nationwide, and resale above face value is legal in most states. The eBay ticket market encourages lawful transactions and has been designed to communicate to users all state ticket resale laws that should be adhered to”. Sites like StubHub.com go one step further stating inconspicuously at the bottom of their pages “You are buying tickets from a third party; neither StubHub.com nor StubHub, Inc. is the ticket seller. Ticket prices are set by sellers and may differ from face value.” Such websites also have user agreements that commonly require the seller to undertake that he/she shall comply with all laws and regulations applicable to such transactions, to the use of such sites and to ticketing (StubHub, also claims to not have any knowledge of the face value of tickets listed). Such caveats attempt to absolve sites facilitating scalping, whether or not knowingly, from any liability, especially secondary liability of the kind introduced by Section 166A of the Criminal Justice and Public Order Act in the U.K. Act.

India

India has not enacted any special legislation dealing with ticket scalping or black marketing. Recent actions of the police suggest that persons found to be engaging in black marketing of tickets, either in public places or on the Internet, are prosecuted under sections 416 and 420 of the Indian Penal Code, 1860 relating to offences against property and dealing with ‘cheating by personation’ and ‘cheating and dishonestly inducing delivery of property’, respectively. The Supreme Court of India, in the case of Ishwarlal Girdharilal Parekh v. State of Maharashtra & Ors, AIR 1969 SC 40, has held that the word ‘property’ in the context of criminal law in India does not necessarily require an article to be of monetary value but that any object that has special value or significance for the person who possesses it. Match tickets would therefore come within the purview of the term ‘property’. Dishonestly causing the organizer to provide him tickets not for personal use, but so that he can engage in ticket scalping/black marketing, amounts to “cheating and dishonestly inducing deliver of property”.

During the recently concluded Cricket World Cup 2011, individuals were arrested for offering match tickets at an exaggerated price (around 100 times more than the actual price) of the ticket on online auction websites such as eBay.com. In addition, certain Indian states have enacted legislations pertaining to entertainment and betting tax which prohibit resale of tickets to “entertainment” events such as exhibitions, shows, performances, amusement, games or sport. For instance, the Rajasthan Entertainments and Advertisements Tax, 1957 categorically lays down that a ticket for admission to an “entertainment” (event) shall not be resold for profit by its holder.

Analysis

Ticket scalping or black marketing of tickets strikes at the root of the sport. First, ticket scalpers profiteer by taking advantage of sports organizers’ attempts to make attendance at sporting events accessible to all sections of society that are fans of the game. Second, ticket scalping also interferes with the organizer’s commercial programmes. Authorised travel and ticket agents pay sports organizers substantial sums of money to obtain exclusive rights to sell tickets and travel packages to an event. Unhindered ticket scalping undermines the value of their exclusive rights and leaves them with little incentive to pay for such rights at a later stage. This compromises the organizer’s ability to generate revenues and fund sports at the grass root level.

The Legal remedies currently available across various jurisdictions are limited because;

(i)  they focus primarily on ticket scalping around certain sporting locations and in other public places often ignoring ticket exchanges enabled over the Internet

(ii)  available remedies are often state-centric and state law enforcement authorities have limited capacity to take action against operators outside their state.

Currently in India, only the State of Rajasthan has enacted laws prohibiting unauthorised resale of tickets. Any ticket resale transaction concluding outside the jurisdiction of the state is not a punishable offence and any ticket agency (including an online ticket agency) situated outside the jurisdiction of the said state is not bound by its laws.

Under the Constitution of India, “sports” is a subject appearing under the State List in Schedule VII. Accordingly, states have complete authority to legislate with regard to matters pertaining to sport. “Criminal Law”, including all matters covered by the Indian Penal Code, 1860, is included in the Concurrent List, giving both the states and the centre legislative powers over it. A proposed nationally consistent legislative approach may be to introduce an amendment to the Indian Penal Code on the lines of Section 166 of the U.K. Criminal Justice and Public Order Act 1994, making unauthorised resale of tickets to sporting events, an offence.

Separately, ticket agents (including online portals enabling exchange of tickets) should be encouraged to adopt a code of conduct whereby they provide an assurance that (a) they will not actively scalp tickets (b) when informed they will immediately delist unauthorised offers for resale from their website (c) they will co-operate with the event organizers in providing relevant personal information about ticket scalpers, who use their website to conduct illegitimate sale of tickets, as well as buyers.

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