The tie-up “could lead to customers who use secondary ticketing platforms facing higher fees or poorer service in future,” the CMA says in its ruling, which came out on Tuesday (Feb. 2). To address those concerns, the regulator — while not publicly revealing a deadline — has instructed Viagogo to sell StubHub’s U.K. and international ticketing business, which operates in Europe, South America and Asia. The ruling comes after the CMA launched a “Phase 2” investigation into the merger in June.
Importantly, the CMA did not force the company to unload StubHub’s profitable North American arm – a fact that will be seen as a big win for Viagogo. In November, the company offered to sell off its international business to appease the CMA. The strongest sanction it could have faced was being forced to fully divest itself of StubHub worldwide. In total, StubHub operates in 48 markets, while Viagogo is active in 175 countries.
“After examining all the options, including unwinding the merger in full, the evidence shows that Viagogo selling StubHub’s international business will resolve our competition concerns, effectively and proportionately,” Stuart McIntosh, chair of the CMA inquiry group, said in a statement.
For its part, a Viagogo spokesperson says the company is “pleased to have found a remedy that is acceptable to the CMA that will allow everyone involved to move forward with clarity and certainty.”
Nevertheless, Viagogo faces significant obstacles in the road ahead. Selling StubHub’s international business in the midst of a pandemic won’t be easy. The company issued hundreds millions of dollars in refunds to ticket buyers at the beginning of the pandemic, and is still trying to recover money that it advanced to ticket brokers for events sold on the platform prior to the pandemic. Even more challenging, whoever buys the company will be competing against Viagogo, which has a much larger market share of the secondary ticketing business than Stubhub.
One of the conditions of the sale is that the CMA has to approve any potential buyer and be satisfied that they have the capability and incentive to compete against Viagogo.
The CMA will also determine key conditions of the sale, such as the right of the purchaser to use the StubHub brand for the next 10 years. Of arguably greater concern for Viagogo CEO Eric Baker and his investors will be the regulator’s power to appoint an independent trustee to handle the transaction if a buyer cannot be found soon enough. That would effectively leave Viagogo out of negotiations and significantly reduce its chances of recouping a sum near to the $4 billion it paid for StubHub.
Viagogo would also need to find a buyer with deep enough pockets who wants to snap up a secondary ticketing platform at a time when the live business is facing unprecedented hardship — and stronger regulation against secondary ticketing in Europe is on the way in the form of the European Commission’s Digital Services Act, which aims to tighten rules for online platforms and marketplaces. Last year also saw the passing of landmark anti-touting legislation in the European Union, banning the use of bots to harvest tickets and forcing traders to declare if they are professional sellers.
One potential buyer could be Jeff Fluhr, Baker's former business partner and the co-founder of StubHub. Fluhr made a written submission to the CMA late last year declaring his “deep love for the StubHub business.”
Fluhr made it clear, however, that he was not interested in acquiring only part of StubHub, stating that anything less than a full divestiture would result in "insurmountable business challenges" given the company's "complex and multifaceted" software technology.
"Splitting StubHub in this way," wrote Fluhr, now a general partner at San Francisco-based investment firm Craft Ventures, "would almost certainly result in failure for the carved-out business."
Critics of Viagogo will be paying close attention to what happens next. “Practically all of StubHub's value is in the company's North American operation,” says Adam Webb, campaign manager at U.K. anti-scalping group FanFair Alliance. "The Stubhub business outside of North America is pretty much worthless and a poisoned chalice," says Reg Walker of Iridium Consultancy, a leading expert on the U.K. ticket retail market that opposes the merger.
Webb says that aside from the acquisition costs, anyone wishing to operate a successful uncapped ticket resale business in the U.K. would require two things: "significant relationships with large-scale ticket touts to supply inventory, and deep enough pockets to outspend Viagogo on Google search advertising."
According to the CMA's final report, dated Feb. 2, Viagogo spent more than £5 million on paid search advertising in 2019, despite the company being suspended from Google ads between July and November for breaching advertising policy. (Google lifted the global ban in the majority of markets after four months, after Viagogo made a number of changes to ticket listings, such as no longer using the word ‘official’ when advertising inventory.)
The CMA also confirmed that both StubHub and Viagogo have vastly overestimated the size of the U.K. resale market as being worth up to £2.5 billion ($3.3 billion) a year. The CMA valued it at being worth around £350 million ($467 million) in 2019.
That could prove problematic now that Viagogo has to quickly find a buyer for StubHub’s U.K. and international arm. The CMA, in its report, redacted the text describing the time period it gave to Viagogo. In similar divestment cases, the CMA has given selling companies several months to find a buyer, although the ongoing impact of the pandemic on the live business may buy Viagogo more time in this instance.
StubHub says the company would continue to work with the CMA to implement the sale. “StubHub is happy to have found common ground with the CMA that allows our North American business to move forward with the merger with Viagogo and our international business to move forward under new ownership,” a spokesperson says.
"Once completed," the spokesperson says, "consumers will continue to benefit from the safe and secure marketplaces provided by both businesses."