The president recently issued an executive order (Order), targeting allegedly unfair pricing practices such as “scalping” and “junk fees” in live entertainment ticketing. The Order prioritizes enforcement of price manipulation, including markups and fee practices across federal and state law enforcement agencies, administrations, and political parties. While federal and state enforcement authority has existed for years, scrutiny of practices used to acquire large-scale ticket quantities and mark up ticket prices charged to consumers has recently intensified.
The Order directly impacts ticket sellers, resellers, entertainment venues and other ancillary businesses. It also signals continuing enforcement of unfair pricing practices and is an important reminder for other industry sectors that have been the focus of “junk fee” statutes, rules, and enforcement actions to pay even greater attention to price transparency, including timing and prominence of disclosures about pricing and fees.
The level of attention and enforcement focused on pricing disclosures and added fees has increased, across two federal administrations and by several state attorneys general as well as other consumer protection agencies, including some political subdivisions. The Order reaffirms that this level of scrutiny will continue and remain heightened going forward.
In the Order, Combating Unfair Practices in the Live Entertainment Market, the president establishes a whole-of-government approach, bringing the full force of federal law enforcement to bear on what he labels as anti-competitive, unfair, and deceptive. The Order directs the Federal Trade Commission (FTC), US Department of Justice (DOJ), and US Department of the Treasury to collaborate with state attorneys general and other state and local consumer protection agencies to combat allegedly unfair ticket selling and reselling practices.
The Order targets all levels of the live entertainment ticketing industry. Although the Order places a strong focus on the practice of “scalping,” in which unaffiliated third parties buy up large quantities of face-value tickets to resell on the secondary market, the Order is not limited to third parties or even the secondary market. Rather, anyone involved in the marketing or sale of event tickets, including venues, event organizers, and ticketing companies, are targets of the Order and should consider whether their sales process could be subject to action.
Further, enforcement under federal and state Unfair or Deceptive Acts or Practices (UDAP) laws, which vary by state, in some instances allow for the possibility of statutory penalties and disgorgement, restitution, attorney fees, and prospective injunctive relief regarding business practices.
The FTC and states including California, Massachusetts, and Minnesota, have instituted specific “junk fees” related statutes and regulations as discussed below and in recent LawFlashes, including FTC Issues Final Junk Fees Rule to Crackdown on Aggressive Pricing Practices, California Governor Signs Bill Targeting ‘Junk Fees’, Massachusetts Attorney General Issues Expansive ‘Junk Fees Rule’. The risk also goes beyond government enforcement and may include individual or purported class or mass actions.
The Order sets out five distinct enforcement mechanisms, not to the exclusion of other federal and state authorities which may exist:
The Order cannot direct the activities of state and local officials such as the state attorneys general. However, the president takes note of their significant role and directs prosecutors under his control to collaborate with state officials. Indeed, all 56 state and territorial attorneys general have state law authority to bring actions against businesses allegedly engaged in UDAP.
In addition to federal and state enforcers, California counties and several large California municipalities, including Los Angeles, San Diego, and San Francisco, all have authority to bring cases under California’s powerful UDAP statute. Elsewhere, many counties and municipalities have local ordinances which include consumer protection authority.
In addition, the Order’s reference to DOJ and the Treasury assuring that tax and other compliance tools not ordinarily associated with consumer protection is new and novel and creates materially enhanced exposure.
Given the focused, resolute, and bipartisan attention from federal, state, and local enforcement agencies, it should be of particular concern to businesses that there are multiple potential enforcement approaches, thus increasing the risks for online and other national and cross-border consumer sellers—and the need for clear and prominent disclosure of fees and explanations for those charges to ensure consumers understand the full cost.
These multiple approaches create the risk of disparate enforcement, conflicting views of what is “unfair or deceptive,” and may ultimately force a business to defend the same conduct in multiple settings.
To mitigate these risks, businesses should:
The issues covered in the Order promote a whole-of-government approach by federal, state, and local agencies, across partisan divides, and sharpening existing and new tools. The underlying concern, for example, that pricing is not transparent and fees are not genuine or not disclosed, should be at the forefront when considering enhancing consumer disclosures and mitigating risk.
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[1] 15 U.S.C. Sec. 45c (penalizing circumvention of security measures undertaken by ticket sellers to prevent resale, hoarding, scalping, junk fees and other allegedly unfair and deceptive practices).