Key Ruling Coming in Ticketmaster Suit

U.S. District Court Judge Audrey B. Collins will likely chart new e-commerce ground on Oct. 15 from her Los Angeles courtroom, when she rules on a preliminary injunction request from Ticketmaster against a 10-person software vendor called RMG Technologies.

The Ticketmaster suit is interesting because it involves untraditional legal issues—Ticketmasters core argument is that its being damaged by a potential loss of consumer goodwill—along with factual claims that couldnt happen outside of current-day e-commerce.

The essence of the case is that RMG makes software that allows its customers to order tickets from Ticketmaster more quickly and more efficiently. Ticketmaster sued RMG, saying the small Pittsburgh firm helps brokers buy lots of tickets to resell at a large markup.

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Ticketmaster also said RMG has repeatedly violated the terms of use provision on its Ticketmaster agreement by acquiring the tickets for large-scale resale purposes.

This situation becomes critical, for example, when Ticketmaster is selling tickets for an especially popular concert and knows that it will likely have a million people trying to get seats at concerts that might only seat 100,000 people.

No matter what Ticketmaster does, 90 percent of the fans of that performer will be unable to buy tickets and theyll be upset and want to blame someone. What Ticketmaster wants to avoid is giving the fans who did not get tickets any legitimate reason to feel that others were favored.

Another problem for Ticketmaster is a Web-fueled shift in price control. Ticketmaster sells all of its direct tickets at a price negotiated with the performers. But tickets that are purchased in bulk and then resold typically have a much higher price tag. The more tickets that are purchased by people using applications such as those produced by RMG, Ticketmaster argued, the higher percentage of total tickets sold will be sold at the much higher price.

“We want consumers to have a fair and equitable access to tickets” and to not allow one group of consumers to “cut ahead in line,” said Joe Freeman, associate general counsel and vice president for Ticketmaster, based in Charleston, W.V.

David Tarlow, attorney for RMG, said he sees the matter quite differently. Anyone is allowed to purchase his clients software and get the same advantage, he said, adding that Ticketmasters objection is akin to saying that a travel agent can get better rates because they pay for expensive reservation software and that there is something unfair about it.

Tarlow challenged the logic of Ticketmasters “fair and equitable” argument as something that is inherently no longer attainable. He asked, Does a consumer who pays for a high-end broadband connection have an unfair advantage over someone using dial-up because he or she can get to a site and make a purchase more quickly?

After months of motions and arguments, Judge Collins is expected to make a critical decision in the case on Oct. 15, when she is expected to rule on a Ticketmaster request to have a preliminary injunction ordered against RMG. That preliminary injunction would prevent RMG from selling the product until the trial, which is currently slated for October 2008.

Tarlow said if the injunction is issued and upheld, it would likely force his client out of business.

The case has the potential to cause a lot of e-commerce disruption. How much protection can an “e-tailer” expect from the courts when technological advancements change the retail environment?

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Similar issues were debated more than 10 years ago when financial services firms were trying to make new e-commerce rules for themselves. With Wall Streets long history of identical access for all, would some investors have an advantage with faster connections and speedier servers?

Ultimately, the financial world relaxed about those issues, resigning themselves that “equal access” needs to be more about realistic and good-faith efforts than about identical-to-the-nanosecond information delivery.

Does this decision have a potential impact on traditional retailers, who dont typically run out of stock in less than a minute? As we approach the holiday season, its hard to answer anything other than “yes.”

The issue crops up for Ticketmaster only where there is a much greater demand than supply. The same is true for any retailer. If a manufacturer cant make enough of the seasons hottest gift in time, and there are expected to be large shortages in all major metropolitan areas, then when an electronic retailer posts the product, is it reasonable to guarantee identical access for all potential customers? If someone hits the site from an employers T3 connection and thereby buys 10 of the items, would that merit a preliminary injunction against that telephone company?

What if the items are to be found at a brick-and-mortar store in Minneapolis and theres a dangerous sub-zero blizzard predicted for 5 hours before the store opens? If a consumer purchases special snow clothing that allows him or her to camp out in front of the store during conditions that many other consumers couldnt endure, does that merit an injunction against that winter coat manufacturer?

The irony in the Ticketmaster case is that Ticketmaster is getting its full money even when RMGs clients swoop in. The fear is a loss of potential consumer goodwill. But given the overwhelming market share of Ticketmaster today, what is the business fear? Even if consumers did get angry at Ticketmaster, where else could they typically go to purchase the most popular shows?

Retail Center Editor Evan Schuman can be reached at Evan.Schuman@ziffdavisenterprise.com.

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