Scalper Bots: Unfair and Deceptive Trade Practices?

March 11, 2016

Current ticket sale technology allows for almost instantaneous sellouts of coveted performances. However, what was once a testament to the overall demand for a show and success of the performer, today ticket sellouts are practically a guarantee with the advent of scalper bots—a computer program used to purchase tickets online at rapid speeds. Fifteen states have banned or regulate the practice of ticket scalping, or ticket reselling, some specifically addressing “bots”. A bot is a term “for software designed to beat website security in order to buy tickets in bulk, then resell them on a third-party website.” An estimated 60% of ticket sales, up to 200,000 tickets per day, are purchased using these scalper bots. Proponents of scalper bots—companies such as Ticketmaster, TicketZoom, and StubHub—argue that assuring high ticket sales is “a blessing for artists, consumers, venues, and the market for live music generally. Hampering them would harm everyone.” However, Ticketmaster has “reportedly spent millions of dollars since 2011, including hiring machine-learning experts to combat [the bots].”
Artists perform for profit, and high ticket sales that generate revenue long before the scheduled performance date is desirable given the difficulties in projecting ticket demands for concerts scheduled many months, even a year in advance. These scalper bots that buy up half the seats at lightening speed, risk the purchase in hopes of generating a higher, and more profitable, demand for the ticket. To illustrate, Beyonce tickets go on sale online to the general public for $60. Scalper bots will buy an estimated 60% of those tickets. When the tickets sellout, which they will because the bots will buy 60% of tickets faster than any one person can, demand will greatly increase and the bots will be able to resell those purchased tickets for more than $60, thus generating what could be a very substantial profit. These bots operate on a theory that high profits from a number of seats, generally seats closest to the stage sold right before the performance date when demand is greatest, will cover any possible losses for other “nosebleed” or unpopular seats. Those opposed to bots argue that artists could simply raise their initial selling price, making demand speculation less profitable. However, fans might not be too happy if Beyonce sold floor seats for $5,000. On the other hand, it appears to be inherently unfair to allow a person using a computer program to generating a substantial profit off Beyonce’s performance. In response, those in favor of scalper bots argue that these ticket brokers “guarantee that if even a band or an act completely flops, the artists and venues are still going to get paid.”
Is there a solution to bots taking advantage of us online? Sure, Beyonce, the venue, and the ticket seller is going to be paid a given amount regardless of speculative future ticket sale demand, but what about the consumer who can only afford a $60 Beyonce ticket and now, within seconds of the ticket going on sale, is forced to buy a $600 or even $6,000 ticket? New York Senator Chuck Schumer has introduced a Congressional bill to make ticket bots illegal. The bill will fine scalpers $1,000 for every ticket purchased using bot software, nationwide. The goal is that the bill will increase the supply of affordable concert tickets by making it a federal crime to use scalper bots.

According to Schumer, the proposed legislation “would prohibit ‘the unfair and deceptive act’ of using bots and other software to circumvent safeguards designed to ensure that concertgoers have fair access to buy tickets.”

The bill is similar to the Better Online Ticket Sales Act, which was introduced in the House in February 2015. Some states, like Tennessee, have anti-scalping laws specifically referencing bots, but federal legislation is necessary because there is no state coordination for this national and rampant problem. Without any federal regulation, a bot program could be used illegally in one state, like Tennessee, but may be physically located in another state without anti-bot laws, which in turn creates confusion about where the cause of action occurred and what state, if any, would have jurisdiction. The goal of Schumer’s bill is to classify bots as an unfair and deceptive practice, which violates the Federal Trade Commission Act; therefore,“mak[ing] it easier for a company like Ticketmaster to file lawsuits.” In 2015, The Grateful Dead’s Fare Thee Well reunion tour “may rank the greatest concert-ticket scramble in history.” Producer Peter Shapiro reverted to old ticket sale tactics—mail order tickets were placed first to shut out all scalper bots, followed by a traditional online sale. According to Shapiro: “For a super hot show…it’s the way to do it.” Following the Grateful Dead’s lead, another feasible approach to sell tickets in a way that promotes fair access to tickets is to move away from “the kind of 10 a.m. free-for-alls that have marked the business for decades.”