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U.S. Drops Ticketmaster Antitrust Probe : Entertainment: Abrupt closure of investigation lifts cloud of uncertainty over firm, catches others in industry off guard.

July 06, 1995|CHUCK PHILIPS | TIMES STAFF WRITER

The Justice Department on Wednesday ended its antitrust probe of Los Angeles-based Ticketmaster, closing the book on an investigation that once threatened to dramatically alter business practices in the nation's $1-billion concert industry.

The yearlong investigation was prompted by complaints from the Seattle rock group Pearl Jam, which alleged in a May, 1994, memorandum to the Justice Department that Ticketmaster exercised a monopoly over ticket distribution and used its market power to gouge consumers with excessive service fees.

The department's abrupt decision to end the investigation--announced in a two-sentence news release late Wednesday--came just after Pearl Jam's effort to organize a tour without the ticket giant collapsed in acrimony. Although the band said recent concert cancellations were further evidence of Ticketmaster's monopoly, the company said Pearl Jam's troubles were of its own making.

For Ticketmaster, the Justice Department's decision to end the investigation is a major victory, lifting a cloud of uncertainty that had threatened the company's ambitious plans to launch new electronic services and establish itself as a broad-based entertainment company.

"Ticketmaster is pleased that after an intense, yearlong investigation that the Justice Department has concurred we are conducting business within the bounds of the antitrust laws," Ticketmaster spokesman Larry Solters said.

"Unfortunately, those who will be most hurt by the Justice Department's cave-in are the consumers of live entertainment," a Pearl Jam spokesman said. "The consumers are the ones who ultimately pay for the lack of choice in the marketplace."

The investigation centered on Ticketmaster's practice of paying a portion of the service fee it collects to the owners of major venues and promotion firms in exchange for exclusive contracts to ticket all events at that venue. Over the past year, the Justice Department has subpoenaed documents and conducted numerous interviews with talent managers, promoters, venue owners and ticket software firms.

Department officials would not elaborate on the sparse announcement that the investigation was being dropped without action. But sources close to the case said economic analysts in the antitrust division believed it would be difficult to bring a case against Ticketmaster, primarily because venue owners and promoters willingly signed the exclusivity contracts.

In addition, sources said, the antitrust division is currently stretched thin, in part because of its controversial investigation of Microsoft Corp., and officials reportedly viewed the Ticketmaster case as a difficult one with highly uncertain prospects.

The announcement of the probe's closure caught Ticketmaster and others in the ticket business off guard--particularly one ticket company financier who was scheduled to be interviewed today in Washington.

"I'm astonished," said Ray Garman, a Philadelphia shareholder in ETM, the Orange County firm that sold tickets to Pearl Jam's defunct alternative summer tour. "The Justice Department just called me and canceled my interview only minutes before they released the news to the media. Go figure."

Indeed, the department met in March with attorneys representing a coalition of Ticketmaster clients who contended that because the arrangements were entered into freely by venue owners, it would be an infringement on their rights to challenge such agreements.

This is the second time Ticketmaster's practices have been reviewed and approved of by the Justice Department.

The company's domination of the ticketing business became an issue in 1990 when it proposed to buy the remaining assets of Ticketron, essentially putting its largest competitor out of business.

Because of the size of the transaction, both companies were required to file notice with the federal government under the Hart-Scott-Rodino Act to seek antitrust exemption. Despite objections raised by several consumer groups, the Justice Department in 1991 declined to oppose the deal.

The debate over tickets has been heating up for years as fans have complain about increasing prices.

The controversy triggered hearings last fall on Capitol Hill, and legislation was introduced in the House that would require a Federal Trade Commission study of ticket distribution and mandate disclosure of service charges in concert advertising. Political observers say the bill's prospects in a Republican Congress are dim.

A handful of lawmakers have called for similar state measures, with at least one that includes a provision seeking to place a 15% cap on service charges.

Over the past year, Ticketmaster, which is 80% owned by Microsoft co-founder Paul Allen, has enlisted a corps of prominent law firms, public relations companies and high-powered lobbyists to combat litigation and legislation on all fronts.

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