November 27, 2006
Ticket Scalping and the Free Market
Posted by Lisa Fairfax

Last week the Boston Globe reported that the New England Patriots have filed suit against an on-line ticket reseller, arguing that the reseller encourages ticket holders to violate their state’s anti-scalping laws. Although the practice is rampant, many states regulate ticket scalping in some way from requiring resellers to obtain licenses for reselling tickets to some form of prohibition. Under Massachusetts law, a person cannot resell a ticket for more than $2 over its face value, plus certain service charges. Interestingly, because a service charge may include a reseller’s costs of advertising and certain payments to employees the service charge can be up to $80 or $100. Thus, the service charge is really the hidden gotcha because many cites will advertise one price and then when you go to purchase the ticket, the cite will tack on a large service charge.

Apparently, while the service charge may be valid, some of the reselling practices employed by ticket cites may violate state laws. As you can imagine, however, ticket scalping is difficult to patrol and the Internet has only exacerbated the problem. If the Patriots are victorious, therefore, their suit could send a strong message. But it raises an interesting question—is there something wrong with ticket scalping? In fact, there are some states that are either doing away with or relaxing their scalping laws, I believe based on a theory that resells are inevitable and that we should simply allow the resale market to play out.

Yet I think there are some good reasons for some kind of regulation in this area. First, scalping appears to encourage the selling of counterfeit tickets, a concern for both the organizing body and the ticket purchaser.A Patriots’ spokesperson indicated that the number of people who show up at the stadium with tickets that have been invalidated has increased because of ticket resells through the Internet. Second, scalping obviously drives up ticket prices. This is the problem that you hear many entertainers complain about. The idea is that their true fans are locked out of the market for their tickets. Of course there is always that nagging suspicion that entertainers are not worried about the fact that additional profit is being made, but rather that it is not being made by them. Indeed, why begrudge the individual ticket holder from making some profit on their resell? Yet, the problem is not really the individual ticket holder, but rather the industry wide facilitators. Indeed, it appears that resells are not isolated incidences—but rather standard practice with some events. This not only means that ticket prices at certain events have become so high that only certain segments of the population can afford to attend such events, but also that some have made a business out of purchasing tickets quickly so that events become artificially sold out.  This kind of practice suggest that many people end up paying inflated prices for their tickets, even when they make an effort to get them early.  Hence, even though I recognize that the problem of scalping can never really be resolved, I applaud the efforts of those trying to do something about it.

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