Ontario to ban ticket-buying ‘bots’, cap markups in scalping crackdown

theglobeandmail.com
By JOSH O’KANE
June 26, 2017

Ontario plans to ban rapid ticket-buying “bot” software and put a cap on markups for resold tickets at 50 per cent of their face value to make scalping less lucrative as part of broad legislation to make ticket buying more fair.

The combination would strip financial incentive from scalping even as bot technology grows more sophisticated with time, Attorney-General Yasir Naqvi said in an interview Monday after announcing the forthcoming Ticket Sales Act, to be tabled this fall. The ticket industry has been stuck in a battle of technology versus technology: The Internet has driven legitimate demand to easily resell tickets, but bot-using scalpers have skewed the marketplace. “We want to make sure we put rules in place that can withstand the changes in technology,” he said.

In leaving room for moderate markups, the act would leave resale prices relatively low while still allowing music, theatre, sports and other live-event fans to offload tickets for small profits on popular resale platforms such as StubHub Inc. The legislation, which also includes price transparency measures, would be the first of its kind in Canada, though details are not yet firm and industry watchers are concerned how it effectively it could be enforced.

After a consultation with nearly 35,000 consumers and stakeholders this spring, Mr. Naqvi unveiled the act Monday morning at Roundhouse Park in Toronto, in the shadow of the Rogers Centre, one of the country’s largest live-entertainment venues.

Many jurisdictions worldwide have tried banning bots, but their origins can be hard to pin down and enforcement has been a struggle.

“The legislation is well-intentioned, but I don’t think it’s going to be too effective,” said Miro Oballa, a partner at entertainment law firm Taylor Oballa Murray Leyland LLP. He said certain initiatives Ontario announced around price transparency would be welcome, but when it comes to enforcement, especially around bots, “it’s hard to legislate these problems. The way you beat tech is with better tech.”

Even if Ontario were to heavily monitor secondary ticket sellers, the definition of what a “ticket” is can be vague, particularly for VIP packages where services such as transportation to the venue are included in the price. These are already among the highest-priced ticket packages for many events, and in high demand. “How do you enforce the law if you have to look at the micropayments of the package?” asked Pascal Courty, an economics professor at the University of Victoria who studies ticket resale markets.

Ticket vendors, especially those who benefit from the resale market, would rather place their faith in the free market than become mired in regulation, which might drive consumers to grey or black markets where ticket fraud could occur. “Any type of regulation that discourages consumers from using really transparent and public marketplaces, and taking those sales into an environment where consumer protections don’t exist, we believe is bad for the fan,” said Laura Dooley, StubHub’s senior manager of government relations, in an interview.

If adopted, the legislation would include a number of transparency-encouraging measures. Original vendors would need to make clear the full prices of tickets including service charges and fees and reveal the total number of tickets available to the general public.

Consumers would be able to file complaints with Consumer Protection Ontario if they find tickets posted for sale with too-high markups and have the ability to sue offenders, Mr. Naqvi said.

Ticket-reselling marketplaces generally define themselves as passive hosts for transactions and ask users to abide by local laws, but it’s still easy to find overpriced tickets in provinces such as Quebec and Manitoba on such websites, despite provincial laws against markups.

Mr. Naqvi told The Globe and Mail the new legislation would require more involvement from the marketplace companies themselves. Consumers would additionally be able to file complaints with Consumer Protection Ontario and inspectors would be available to investigate and impose fines.

For people and corporate entities found violating the proposed legislation, he proposed fines as high as $25,000 and jail sentences possibly reaching several years.

Even if the offenders lived or operated business outside of the province, the legislation would have language to enforce rules for any sellers of tickets to events in Ontario, Mr. Naqvi said. It would also require that marketplaces not knowingly allow for the resale of tickets bought with bots.

Scalping was long illegal in the province, but the Liberal-led Queen’s Park reversed course in 2015, amending the Ticket Speculation Act to let consumers resell tickets for more than face value as long as they were confirmed as authentic or had a money-back guarantee. Ontario’s Progressive Conservatives and New Democratic Party both issued statements Monday suggesting the new law only served to solve a problem the Liberals themselves created.

Ticketmaster, the global ticket-vending leader that has also recently dabbled in resale platforms, did not make someone available for interview. In April, Michael Rapino – chief executive officer of Live Nation Entertainment Inc., Ticketmaster’s parent – told The Globe that battling scalpers through legislation was “unrealistic.”

“I think some of these [legislative changes and suggestions around the world] are decent attempts, but I don’t think over all, until you start pricing the product better, and/or have better technology to deliver the fan their ticket, that you’ll start to make a difference,” Mr. Rapino said.

Ms. Dooley of StubHub defended the importance of a free market for ticketing. “Our whole concept is to provide the platform and the interaction between two parties that they themselves can price the ticket at the price they think makes sense, and then make the decision to purchase the ticket based on what they value that experience to be,” she told The Globe.

Ontario’s proposed rules were inspired by last year’s emotional Tragically Hip tour – their first after frontman Gord Downie revealed he had terminal brain cancer – for which tickets were widely scalped and put up for resale at enormous markups. While this has become a frequent problem in live entertainment as rapid ticket-buying software has become more sophisticated, Mr. Downie’s diagnosis gave the situation an emotional heft and a national scale.

Sophie Kiwala, an MPP representing the band’s hometown of Kingston, first put forward a private member’s bill to confront the issue, after which Mr. Naqvi’s office soon took up the cause.

In North America, ticket-scalping laws vary widely across provinces and states. New Jersey’s law is similar to the one Ontario is proposing: Registered ticket brokers can’t resell tickets for more than 50-per-cent above face value, while non-registered sellers can’t exceed 20 per cent.

Canada’s provinces have a patchwork of scalping laws; while Quebec adopted strict resale restrictions in recent years, Alberta repealed its own. Catherine Moore, an adjunct professor of music technology at the University of Toronto, said that enforcing sales caps and fighting bots might become easier if all Canadian provinces aligned their rules “to at least have some common ground across the different provinces. That would help,” she said.

Of the thousands who responded to the province’s public consultation this spring, 90 per cent said they’ve struggled to get tickets from original vendors because they were sold out. Many wanted laws to enforce fairness: Eighty-nine per cent, for instance, said ticket-buying software, or bots, should be illegal.

The consultation’s results were directly reflected in the legislation. Eighty-nine cent also said there should be a price cap for resale markups - which would make scalping much less lucrative. And 85 per cent of respondents wanted it to be illegal to post tickets on a resale site before they’re available to the public.

Transparency was a huge theme in the public response. The vast majority want primary sellers to disclose tickets’ full prices with service and processing fees, much like with airlines are required to. Many wanted sellers to reveal the total number of tickets for sale, and disclose how many would be reserved for fan clubs and membership programs or banked for the artist or venue. Nine in 10 wanted resellers to reveal tickets’ original face value to get a truer sense of markup.

Jurisdictions around the world are trying to wrap their heads around ticket scalping and markups. One of Barack Obama’s final acts as U.S. president was to sign a ban on ticket bots into law, and Australia is debating taking similar action. Ireland is considering banning the resale of most tickets for more than their original price.