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The law catches up with viagogo - event promoters and music fans are the winners

Nothing angers event promoters and music fans more than scalpers (ticket touts) who profit from reselling tickets for events and the secondary ticket marketplace providers who help make the resales possible.

Over the past two months, live event promoters and music, theatre and sporting fans have had two ‘wins’:

  1. the Australian Government has issued a new role and price display information standard for electronic ticket resale website providers; and
     
  2. the Federal Court of Australia has upheld a penalty of $7 million against viagogo for both misleading consumers into believing that it was the official ticket seller for musical, theatrical and sporting events and for concealing the booking, handling and VAT fees it charged.

Let’s start with the new information standard and follow with the viagogo decision which was the template for the information standard.

The new electronic ticket resale service display information standard

The new information standard is directed at website providers who provide a secondary ticket marketplace, which allows scalpers to easily and profitably re-sell tickets.

The Government’s aim “is helping prevent Australians being ripped off when buying resold event tickets by introducing new disclosure requirements for ticket resale websites under the Australian Consumer Law.”

The new information standard applies to a wide range of live events:

event includes all of the following:

  1. a sporting event;
  2. an entertainment event, including a concert, a performance at a theatre or the opera, and a dance event;
  3. a festival;
  4. a cultural event or display;
  5. an arena event;
  6. any other form of public performance, exhibition, display or public gathering.”*

The new information standard applies to event ticket resale services provided on electronic platforms which meet:

“all of the following conditions:

  1. the service is the provision of information to a person (the consumer) in relation to the supply, in a secondary market, of a ticket for admission to an event hosted or located in Australia;
  2. the information is supplied by means of an electronic platform whose sole or dominant purpose is to facilitate a market in tickets for admission to events.”*

Under the information standard, the website provider must make perfectly clear that the tickets for sale on the platform are not offered by the ticket provider and must display the ticket price before the reseller’s and platform provider’s mark-up. Specifically:

“The person providing the service must ensure that the following is continuously displayed to the consumer, by means of the electronic platform, in a legible, prominent and unambiguous way:

  1. a statement in the form “This is a ticket resale service. You are not buying from a primary ticket provider.”; and
  2. the total price, excluding a charge that is payable in relation to sending the ticket to a person, that the consumer would reasonably be expected to pay to purchase the ticket from a person who is authorised to provide the first supply of tickets for the event.”*

Notes

  • The information standard will commence on 1 October 2022.
  • The information standard was made under the Competition and Consumer Act 2010 (Cth). Breaches may result in civil penalties, criminal conviction and disqualifying orders.
  • The text marked * is extracted from the information standard – Competition and Consumer (Australian Consumer Law – Electronic Ticket Resale Service) Information Standard 2022

Viagogo penalty for misleading claims confirmed

The viagogo proceedings have a long history. The breaches took place in 2017. The proceedings were commenced that year. The Australian Competition and Consumer Commission (ACCC) was successful in establishing liability and the primary judge ordered viagogo to pay a $7 million penalty in October 2020.

The Full Court of the Federal Court of Australia (the Appeal Court) has dismissed viagogo’s appeal against liability and penalty. The judgement in the appeal proceedings is: viagogo AG v Australian Competition and Consumer Commission [2022] FCAFC 87 (Yates, Abraham and Cheeseman JJ) (18 May 2022).

The Appeal Court determined three questions of liability:

Question 1 Was the phase “Buy Now, viagogo Official Site”, used in the viagogo advertisement on Google misleading because viagogo was a ticket resale platform and had no sponsorship, approval or affiliation with the primary ticket seller?

Viagogo argued that official was ambiguous and could refer to the “official” website for viagogo. The Appeal Court adopted the primary judge’s view that such argument could only be supported had the phrase read “Official viagogo site” and said that the ordinary consumer would understand by the words “viagogo Official site” that it was the site from which the authorised event ticket sellers would issue tickets.

Also, the Appeal Court said that when searching on Google, the ordinary consumer was not likely to be aware that viagogo was not a primary ticket seller but operated a ticket marketplace for the re-sale of tickets for events.

The Appeal Court rejected viagogo’s argument that once the consumer had clicked into its website (from Google) that it would be clear that viagogo was an online ticket marketplace because by then, the consumer had entered into “the marketing web” of the viagogo website.

Question 2 Was it too late for the actual “VAT and Booking Fee” to be disclosed as additions to the price only on the final Review Page (before the Payment Page) on the viagogo website?

The primary judge rejected with viagogo’s argument that by using the term “marketplace”, the consumer had adequate notice that viagogo would “levy a handsome impost for its own services (beyond a handling fee)”.

The Appeal Court noted that by the time the consumer selected the “Buy” button, to progress to the final Review page, they were well into not only the marketing web but also the transactional web created by the viagogo website. They had progressed too far for any subsequent correction of the misleading impression given to be effective.

Compare the price disclosures in the “Buy” page (first column) with the “final Review” page (second column):



Question 3 Did including the word “SUBTOTAL” on the Delivery Page (i.e. the page after the “Buy” page and before the “final Review” page) make it sufficiently clear that the price was not likely to be the whole price paid? Was there price transparency?

This appeared on the Delivery page to purchase a ticket for the musical “The Book of Mormon”:

The primary judge rejected viagogo’s argument that the process for the acquisition of tickets should be regarded as a single transaction or that adding the words “+ Booking, Handling and VAT” was sufficient to make the price transparent, without specifying the amounts of the fees.

The Appeal Court agreed that the whole price was not displayed in a prominent way, as required by law. It was not ‘prominent’ to display the whole price of A$177.45 on the final Review page, where the amounts of A$4.95 for the secure ticket handling fee and A$37.50 for the VAT and Booking fee were first disclosed. The Appeal Court considered it was significant that the fees were proportionately large amounts – adding about 28% to the ticket price.

Notes

  • The viagogo proceedings were brought under the Australian Consumer Law part of the Competition and Consumer Act 2010.
  • The viagogo proceedings were subject to the old penalty regime. The penalty was $7 million. Since then, the maximum penalty has increased from $1.1 million per contravention to the higher of $10 million, three times the profit or benefit obtained or, if this cannot be determined, 10 per cent of the company’s annual Australian sales turnover. If the contravention happened today, the penalty would be much higher.
  • For our analysis of the primary judge’s decision on penalty, click: Viagogo to pay $7 million penalty for ‘industrial scale’ misrepresentations

Is scalping illegal?

Most event promoters prohibit resale of tickets at a premium, on the threat of cancellation without refund. Many Governments also prohibit resale of tickets at a premium. It’s fair to say that scalping is for a profit is illegal in Australia.

Comment

viagogo’s uses the word “official” in its websites internationally, and it has been the official ticket marketplace for various sporting teams and music festivals.

viagogo launched in Australia in 2013. Initially it was in ‘partnership’ with two Australian Football League clubs in Melbourne, making it their “official” ticket seller. This affiliation lapsed, but the word “official” was not removed from the marketing.

The ACCC’s legal proceedings against viagogo were for breaches of the Australian Consumer Law prohibitions against misleading representations as to “sponsorship, approval or affiliation” (i.e. use of “official”) and as to “price” (i.e. hidden extra fees) (Australian Consumer Law: s 29(1)(h)&(i) and s 48).

The Australian Government’s information standard is specifically directed to catch ticket resale marketplace providers such as viagogo, to require them to make crystal clear that they are not an official seller and to require them to display the full price at the start of the website booking process.

The law has caught up with viagogo, nine years after it launched in Australia, and the live event promoters and fans are the winners.




Marketing Commentary by Michael Field from EvettField Partners

How viagogo Laid the Marketing Trap

Consumer marketing and magic have a lot in common. Both artforms engage in deception and misdirection. However, when a consumer feels they have been deliberately misled by a vendor, they understandably become upset and even resentful. A quick Google search reveals that viagogo has a long history of consumer complaints, dissatisfied customers, and legal action in nearly every jurisdiction in which they operate.

Given the obvious deception in viagogo's business model and marketing (that the Court found), why would a prospective ticket buyer complete a transaction with them online, especially once the deception becomes apparent?

The answer lies within the textbook marketing ploys used by consumer marketers to lure customers into the ‘marketing web’. Unlike business-to-business buying behaviour which is evidence-based and logical, consumer buying behaviour is notoriously irrational and is easily influenced by marketing deception.

viagogo employs these marketing techniques to lay the trap:

Authority:

Authority is a compelling driver of consumer buying behaviour and is often represented by common marketing terms such as ‘authorised reseller’ or ‘official supplier’.

viagogo and their marketing team relied heavily on the power of ‘authority’ by using the word ‘official’ in their marketing communications. The use of the word ‘official’ and in particular its placement leaves no room for doubt or misinterpretation that they intended to deceive the customer and have them believe something that was not true; that viagogo was the official ticket seller of the promoted shows.

Scarcity:

By their very nature, concerts, dances, entertainment, and sporting events are limited by availability, capacity, dates and duration. A date and venue are set for the event by the organiser, or a season schedule, and a limited number of tickets are made available to purchase.

Limited availability drives ‘scarcity’ which is a key driver of consumer buying behaviour, and is a powerful lever to drive prices upwards. viagogo capitalised on this with their pricing structure and the ‘drip feed’ presentation of the pricing add-ons, keeping the customer in the dark about the total price until the final stage of the purchase.

This marketing ‘trick’ sets the stage for the next consumer marketing trap; the ‘sunk cost fallacy’. viagogo exploited this psychological flaw in consumer buying behaviour to its full advantage.

Sunk cost fallacy

Sunk cost fallacy is a psychological trap where a normally rational person becomes reluctant to abandon a course of action because they have already invested heavily in pursuit of the outcome of their goal; even when it becomes obvious that abandonment is rationally the best course of action.


When the customer is confronted with unexpectedly high fees that were not previously disclosed, abandoning the transaction becomes difficult. They have already invested so much time to the process and are now plagued by concerns of ‘scarcity’ and FOMO (fear of missing out).

In viagogo’s website, the prospective customer has already selected available dates and tickets to their desired event by adding it to the cart before they find out the total cost.

The ‘sunk cost fallacy’ investment extends beyond the transaction itself. It reaches into the emotional, psychological and social connection the customer makes to the attainment of their desired outcome, which is difficult to reverse. They are now deeply invested in their desired outcome of seeing their favourite performer, sporting event or show and complete the ticket purchase.

Summary

The cumulative effect of the three-pronged consumer marketing assault of authority, scarcity, and sunk-cost-fallacy overwhelms the customers’ rational mind and lures them into the marketing web which is difficult to escape. They are trapped.

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