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Is it legal for a company to scalp their own tickets?

I guess in this specific instance, the jurisdiction would be Illinois.

I am curious because there seems to be evidence that the company who puts on Lollapalooza music festival, artificially "sells out" of tickets, so they can increase prices on the fly on second hand sellers.

I have this suspicion for a couple reasons.

  1. They usually sell out in a couple hours. That is quite fast for 150,000+ tickets.

  2. As soon as they sell out, there seems to be a never ending supply of tickets on the second hand sellers (literally the same day).

3.The second hand websites NEVER run out of tickets. I have observed second hand lollapalooza tickets on sale till the day of the show, and not in diminishing numbers.

The interface of stubhub has seemed to changed this year, but last year they said something like "1875 tickets available at this price", and the number rarely changed, and sometimes would be replenished.

Is there anywhere in the US that this sort of practice is illegal, or is it just shady?

  • Why would they do this, rather than just have different prices for the tickets depending on when you call? – Martin Bonner supports Monica Mar 29 '16 at 12:36
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    What does "scalping" mean specifically in your jurisdiction? If it's a transfer of the performance license without the promoter's permission, well it's not without permission here. If it's the operation of an unlicensed cash business on a public sidewalk, well it's not that either. If it's concerned with regulating the markup of prices, then it may apply. – user662852 Mar 29 '16 at 12:49
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    @MartinBonner people get MBA degrees to learn about "price discrimination", "yield management", and "channel marketing". They believe this maximizes their total profit. – user662852 Mar 29 '16 at 12:53
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The practice you described is illegal in just about every state in the U.S. and probably elsewhere. There's not a specific statute that prohibits ticket sellers from scalping their own tickets but it would clearly fall within most state's consumer protection statutes. It might even be a criminal act in some jurisdictions, but generally it will be a civil issue.

Applicable Law

Illinois' consumer protection statute, 815 ILCS § 505/2, states that:

Unfair methods of competition and unfair or deceptive acts or practices, including but not limited to the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or omission of such material fact, . . . in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby.

Illinois statute is similar to other state's consumer protection statutes as well. See this wikipedia article for a general overview of consumer protection law.

This basically means that it is unlawful to:

  1. Use deception, fraud, unfair acts, or conceal/hide material facts,
  2. With the intent that someone will rely upon the fraud/misrepresentation/deception/misstatement,
  3. In the course of any trade or commerce.

Addressing the Specifics of your Question:

Applying this law to your example, a company that buys tickets or reserves tickets that it is supposed to be selling to the general public and re-sells them on a website such as Stubhub.com, is conducting their business a misleading or even fraudulent way.

It is misleading and fraudulent because, assuming that they do not disclose to consumer that they reserve/sell large blocks of tickets to ticket re-sellers, consumers that try to buy the tickets from the original seller are deceived into thinking the tickets were actually sold out. This deception, by the original seller, causes them to try to buy the tickets through the re-seller (Stubhub) at an inflated price.

One can also make an argument that the the original seller is manipulating the market for the tickets to make it look as though they actually sold out, so they can inflate their profits. All of this is illegal because of the deception / lack of transparency. By itself, the practice of pricing tickets based on demand, not a fixed face-value, is legal. However, it is not often practice as the performer or sports team hosting the event would not receive the profits. Think of it this way--artists hate scalpers because they are taking away money that could go into their pockets and pricing out loyal fans.

Possible Proof Issues:

However, given the facts you have described above, I think you would have some difficulty proving a ticket seller was actually doing this. If you want to try to stop this practice, you should consult with a lawyer that can bring a private lawsuit against the ticket seller (unlikely to be an affordable option) or file a complaint with the Illinois Attorney General's office (they can, but are not required, to investigate your case).

It is more likely that the market is saturated with re-sellers. Many people make businesses out of buying and re-selling various tickets. Wired Magazine did an article on this practice in 2006 called Diary of a Scalper. I am sure that it has grown and gotten worse since the.

Laws Regulating & Prohibiting Scalping:

Also, here is an article from legalzoom.com that explains that scalping is regulated or illegal in some states; however, these laws are rarely enforced. Illinois is not one of these jurisdictions. https://www.legalzoom.com/articles/who-needs-tickets-is-ticket-scalping-legal

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