The newly formed Live Nation Entertainment has industry watchers asking this: Why would the government allow a vertical merger that could possibly limit competition?

Promoters are upset a competitor will have their ticketing data. And most everybody seems to doubt a few of the concessions - a data firewall and anti-retaliatory provisions - will have much practical effect. Here is a recap of the most notable online items of the last few days.

Washington Post business columnist Steven Pearlstein calls the Ticketmaster-Live Nation merger a wrong decision by the Department of Justice. He believes the fact that DOJ did not force the merger proposal into court suggests Live Nation's ticketing operation was financially unsustainable and not an adequate threat to Ticketmaster. He bemoans the "gradual retreat" from antitrust enforcement over the last three decades. He's wrong that a merged company has economy of scale (it will have very little) but is correct in thinking DOJ will have a difficult time enforcing its rules against retaliatory behavior. And Pearlstein is surprised to see this deal approved in this country.

"However clever and well intentioned, this is the kind of industrial policy micromanagement you'd expect in Japan, not the United States. The better approach would have been to keep Ticketmaster and Live Nation as separate companies and leave it to the competitive marketplace to sort things out."


Chicago Sun-Times music critic Jim DeRogatis has a Q&A with an unnamed Department of Justice official. There are some good sections, such as a discussion of the data firewall that is supposed to prevent Live Nation's ticketing division from sharing information with its artist management and promotion divisions. But the best part is when the DOJ official explains the difference between approving vertical and horizontal mergers. Critics of the deal can't seem to get their heads around the DOJ's mindset. The short version is the government tends not to stand in the way of vertical mergers. Here's the long version:

"The problem is that there isn't a good basis in antitrust laws for challenging vertical integration just sort of for the sake of challenging vertical integration. It's one thing where you have the ticketing company that dominates--Ticketmaster, which has a level of dominance over the ticketing business--but if you start looking at promotion and venue ownership and concerts, and those are things that are not directly affected by horizontal competition as a result of the merger, when you start talking about those vertical theories, aligning the different chains, you get torn between whether that can provide some real benefits to consumers versus whatever less competitive outcomes might happen."


Steven Sletten, a partner at the law firm that counseled Ticketmaster on its merger with Live Nation, does a Q&A with The National Law Journal. He said the firm had over 50 attorneys working on the deal. It makes for a good review of the settlement. One notable section refers to the DOJ's anti-retaliation provisions and the argument that consumer prices will benefit.

"What is important is that nothing in the judgment prohibits the parties from bundling or packaging their services. One of the key efficiencies arising out of the merger, and arising out of most vertical mergers, is the ability of the merged entity to provide at a lower cost to the consumer."


The ability to offer lower costs to consumers has been one of the companies' cornerstone reasons for doing the merger. Some cheap seats may be filled as a result of improved ticket pricing and promotions, but I would very surprised to see average prices fall as I result of this merger. (If ticket prices do drop, the difference will be made up elsewhere: parking, concessions, merchandise, etc. At least the latter two represent consumers' discretionary spending that is separate to the ticket purchase.) In a typical vertical merger scenario, the markup charged by a supplier is removed from the final product cost after that supplier is acquired by the upstream producer. Without that markup (or with less of a markup) to pass along to consumers, prices drop. In this case, though, the cost of the artist may be difficult to remove from ticket costs. Vertical mergers can also make for more efficient transaction costs within the merged company. Those savings could either be kept by the merged company or passed along to consumers in the form of lower prices.

The Los Angeles Times focused on local promoter Spaceland Productions. Owner Mitchell Frank dislikes that his contract with TicketWeb (owned by Ticketmaster) now means he will make money for a competitor promoter. His concract with Ticketweb is up in 15 months, Frank said he plans to open a box office to sell advance tickets and make tickets available at more local venues. But the issue of ticketing data really strikes a nerve.

"I made it very clear to TicketWeb that I wasn't going to go along for the ride," Frank said. "I'm sure they're going to make me stay a year. The Department of Justice should have had an out for guys like me, guys who don't want to give all of their money to their competitor and don't want our competitor to have all of our competitive information at their fingertips...

"First of all, who owns the data?" Frank asked. "It's my show, so how will they use that data for their own uses? TicketWeb through Ticketmaster could do studies using my data. Therefore, Live Nation would know what shows my crowd is going to, what the demographic is, what neighborhood, what the ZIP Codes are. TicketWeb could easily do a published study. It's unfair competition. That becomes the killer."