Ticket fraud: A review of the UK’s legislative developments to regulate the secondary ticket market

Published 23 June 2017 By: Louise Millington-Roberts

A person holding sports tickets in their hand

This article was updated on 27th July 2018

This section considers the on-going developments in England & Wales to tackle ticket fraud and the lack of transparency in the “secondary ticket market” (i.e. when tickets are resold on “secondary” ticket platforms). Please note that the section focuses on the obligations placed on secondary ticket platforms and sellers, as opposed to the position and legal remedies of rights holders.1 Specifically, the article examines:

  • Why legislation has been necessary;

  • The Competition & Markets Authority’s (CMA) letter to secondary ticketing businesses;

  • The Consumer Rights Act 2015 (CRA 2015) – an overview of key provisions relating to the advertisement of tickets, and the perceived missed opportunities;

  • The “Waterson Report2 – the conclusions of Professor Michael Waterson’s independent review of the CRA 2015;

  • The Digital Economy Act 2017 (DEA 2017), and how it addresses ticket harvesting software and botnets (explained below); and

  • The effectiveness of the current regulatory framework – does the legislation and the Waterson recommendations go far enough to tackle the problems associated with ticket touting?

This section builds on a previous piece that the author wrote for LawInSport in 2014, available here.3

Introduction

There has been substantial activity within UK Government - particularly over the last few years – to try to effectively regulate the secondary ticketing industry.

Firstly, in 2015, came the CRA 2015, relating principally to the provision of ticket information and greater transparency. This was followed in 2016 by the independent review of the UK’s online secondary ticketing market, commissioned by the Government and conducted by Professor Michael Waterson – the Waterson Report.

In April 2017, we saw the introduction of new measures that have made their way via the DEA 2017, which relate principally to ticket fraud and the use of ticket harvesting software.

But did these measures go far enough to provide sufficient transparency to the ticket resale process, and to tackle ticket crime? Or have we still more to come?

Why has legislation been necessary?

The impact of ticket abuse on both the live event industry and consumers has been debated for years by government, the authorities and those in the entertainment industry. We have come a long way, since Operation Podium (the MET’s serious and organised crime team set-up to combat ticket fraud for the London 2012 Olympics) published its report on Ticket Crime4. This was closely followed by the All Party Parliamentary Group (“APPG”) on Ticket Abuse publishing its recommendations to combat Ticket Abuse5. Both acknowledged that the ticket industry should not continue to regulate itself, due to the scale of ticket fraud and the lack of transparency surrounding ticket resale.

Whilst there are civil legal remedies available to a rights holder where its ticket policy is being abused (ranging from sending cease and desist letters, to issuing claims and obtaining Injunctions for breach of contract, to applying for Norwich Pharmacal relief6) it is, all too often a costly and time consuming process to monitor unauthorised secondary ticketing activity, and enforce ticket terms and conditions7. It is also perceived to be unfair that the expense and responsibility for policing ticket abuse appears to lie solely with the primary ticket industry, when policing is not only for the benefit of the rights holder, but consumers too.

In order to pave the way for the regulation of live event ticketing (outside of football), the general acceptance that there was a role to play for a secondary ticketing market was key, much to the disappointment and frustration of many who preferred to outlaw the unauthorised resale of tickets and retain control over resale via what means, if at all.

It was perceived by many in the events industry that any attempt to regulate the secondary ticket industry was pointless if further legislation was not enforced. Despite reporting abuse to the authorities, the existing legislation8 was rarely enforced, where for example, it was already illegal to give consumers misleading information, to make a misleading omission, the law already required certain information to be provided to a consumer prior to entering into a contract including accurate price information.

The secondary ticket market was however perceived to be a necessary tool for the consumer who for example, could no longer attend an event, which is one of the reasons the opportunity has been taken to regulate the advertisement of tickets via consumer protection law.

The Competition & Markets Authority (CMA) letter to secondary ticketing businesses

In March 2015, prior to the enactment of the CRA 2015, the CMA wrote an open letter to all secondary ticket websites, and secondary ticket business sellers9 to raise awareness of the CMA’s expectations with regards to compliance with existing legislation10 and to forewarn of the new duties which were likely to be passed by Parliament via the Consumer Rights Bill.

The existing legislation relied upon by the CMA required businesses to give consumers all the information they need in order to make an informed choice, before they buy tickets. The letter made reference to the undertakings provided to the CMA by the “big four” online ticket platforms (GET ME IN! Seatwave StubHub and Viagogo, UK operations) following the CMA’s earlier investigation under the Consumer Protection from Unfair Trading Regulations 200811.

At that time, the big four undertook to provide information concerning

  1. all additional charges,

  2. contact details for a buyer to use in the event that a problem arose, and

  3. a mechanism for the seller of tickets to list restrictions, the original face value of the ticket, to indicate if they are a trader and if multiple tickets being sold are located together.12

The author suspects that the CMA found evidence of, and/or had been presented with, accounts of non-compliance with legislation, including failing to provide consumers with specified information and has since the provision of the undertakings, been presented with evidence of further non-compliance.

In June 2016, the CMA launched a further review to assess whether the undertakings and legal obligations were being complied with and found that one online platform was not compliant with the undertakings.

The open letter had put all on notice that failure to comply with CMA’s expectations and legislation, “could result in enforcement by either the CMA or Trading Standards Services, which could lead to civil and/or criminal action”.

The Consumer Rights Act 2015 and its effects on the secondary ticketing market

The legislation introduced, among other things, new measures where a ticket is offered for resale via an online secondary ticketing facility. The legislation puts the onus on the seller and the operator of the platform to ensure a buyer of tickets is given certain information. This includes information

  1. necessary to enable a buyer to identify a seat or standing area,

  2. about any restrictions which limits use of the ticket to persons of a particular description and

  3. the face value of a ticket.

Further clarification is given regarding a) and c), but not b).

A seat or standing area includes the name of the area within venue (i.e. the stand) and the part of the venue (i.e. block, the number or letter of the row and seat). The face value is simply the amount stated on the front of the ticket. If a seller has the ticket in hand, or an e-ticket, this information should be easy to gleam. Of course this information would not be available if tickets were being advertised prior to the release of those tickets to market.

The legislation was meant to apply in relation to restrictions which limit the “use of the ticket to persons of a particular description”.13 If ticket terms and conditions provide that the use of a ticket is intended for the original recipient of the ticket, and the person accompanying the original recipient, this restriction should be listed (i.e. where tickets are non-transferable). However it appears that this is not being done, and for example, you may only see an age restriction being listed.

Further, there is a requirement that the seller must make it clear if it is anyway linked to the secondary ticket platform (i.e. if the person is employed by the platform) or an event organiser for which the ticket is being sold. This provision was fundamental as it was common knowledge that the “most common method for unauthorised ticket resellers and touts to obtain large numbers of tickets is from compromised contacts within sporting bodies, primary ticket agencies, concert promoters, venue operators and event sponsors14.  

Most importantly the ticket information must be provided prior to the buyer being bound by contract. Unfortunately the legislation did not go as far as stating “within the advert” for the ticket. Practically speaking, had this information been provided within the advert, this would give the consumer the chance to assess the quality of the seat, without having to log in and click through each advertisement in order to obtain exact ticket detail.

This greater transparency in theory should give a consumer confidence that a specific ticket exists. The rights holder also has the opportunity to investigate the details of the ticket and possibly the seller, although not all sellers have to provide their details. The ticket may transpire to be fraudulent or may be being advertised in breach of ticket terms and conditions. If the details are correct, it may lead to the cancellation of the ticket and the ability to track the original purchaser, as well as the seller of the ticket, which may be a different person. Although the provision of ticket details is a key part of the Act, this information is only of use if provided and the details are genuine.

Finally, in an attempt to fight fraud, the secondary ticket platform is obliged to report criminal activity. It remains to be seen as to whether such activity is being reported.

Analysis of CRA 2015 – perceived missed opportunities

Despite information having to be provided before a contract is made, in the author’s view this information could have been listed in the advert itself, not buried 2 or 3 steps down the purchasing route. It was also not ideal that whilst all information which appeared on the face of a ticket was to be listed, the legislation did not originally provide for the listing of a ticket number or bar code. A ticket number would have enabled a ticket which remains the property of the rights holder to be immediately identifiable by a rights holder. Theoretically, a purchaser could also easily check with a rights holder, if the ticket listed would gain them entry.

There is no prohibition against listing adverts for tickets which are not yet available for sale. If an exchange was a genuine fan to fan exchange, it is perceived that a genuine fan would only list a ticket once he has been successful in acquiring the same and decides not to go to the event. Often traders in tickets list tickets without having acquired the same. The legislation does not provide for a seller to disclose if they are a business trader of tickets, only if they are in some way linked to the platform or the event organiser. Unfortunately professional traders, often referred to as “power sellers” continue to operate anonymously. The Met police report identified 1000 ticket touts working in the UK, in 2013 alone.

The legislation does not allow for a mechanism to be put in place for a rights holder to report suspected criminal activity to a secondary ticket platform and the legislation only applies to online sales via a secondary ticket platform and does not regulate the reselling of tickets via all means.

In the author’s view, it would have been beneficial to the consumer if the legislation provided for the platform to make it abundantly clear, in each event advert, whether it was an authorised secondary reseller of tickets for a particular event. If this was made clear, a consumer should be aware of the risk it was taking by buying from the site (if the site was unauthorised) and factor this into the price he was willing to pay for the ticket, if he was willing to take the risk buying via the medium at all.

A ticket would not be at risk of cancellation of course, where the secondary platform is an authorised reseller of tickets and is selling tickets which are transferable via an authorised reseller, or where the ticket is fully transferable.

The CRA 2015 required a review of the online secondary ticket market to be published within 12 months of the legislation coming into force. In May 2016, Professor Michael Waterson released his independent review of Consumer Protection measures concerning online secondary ticketing facilities (the Waterson Report15).

The Waterson Report

The Report’s key recommendations included the need to ensure that secondary ticketing platforms were compliant with the CRA 2015, and the need for greater enforcement of the legislation.

The review found little compliance with the provision of the minimum information required under the CRA 2015 and in fact had only “limited success in establishing full seat or standing locations (where applicable)”.16

The review made no recommendation for further legislation (slightly ironic given the new measures brought in via the DEA 2017 and the new rules, which will come into force in April 2018, see below) and rejected

  1. an outright ban on the secondary ticketing market,

  2. a cap on resale prices and

  3. making the use of ticket harvesting software (bots17 or botnets) illegal (see below).

The Digital Economy Act 2017, botnets and the provision of further information

The reason that Waterson rejected making the use of bots or botnets (software used to harvest significant numbers of tickets for any one event) illegal is because in his opinion this activity may already give rise to breaches of the Computer Misuse Act 1990, although the use of the legislation remains untested. Waterson instead put onus on primary sellers, suggesting that they make use of “confirmed identity technologies”.18

Although the Waterson report did not recommend the requirement for new legislation, to clarify the illegality of using bots, power has been given under the DEA 201719 to create a criminal offence. The offence applies where a purchaser buys tickets, in excess of a limit imposed by ticket terms and conditions, using “an electronic communications network or electronic communications service”.

The use of bots and botnets to harvest/bulk buy tickets has been widely understood in the event industry, across many jurisdictions, for some time. Rights holders have historically capped the number of tickets one person/one household can apply for and/or buy, to give everyone a fair chance of acquiring a ticket at face value. These conditions were in place prior to the use of computers to apply for/buy tickets, when people were buying and applying over the phone and via mail. Advances in technology have been utilised by ticket touts who have circumvented the conditions by using bots to acquire tickets via digital platforms, to then sell on immediately at significantly inflated prices. The use of this technology completely distorts market activity and the genuine fan is left with no other option when faced with a “sold out” event in seconds, than to buy via an unauthorised secondary ticketing platform.

The opportunity has also been taken to widen the breadth of information to be listed about a ticket sold on the online secondary ticket market under the CRA 2015. This amendment20 provides for the inclusion of a “unique ticket number” in the information provided to buyers of tickets, “to identify the seat or standing area or its location”.

Unfortunately the proposed provision prohibiting an online secondary ticketing platform selling for events unless they were the authorised resale agent did not progress21.

Comment on points arising out of Waterson Report

No outright ban on the secondary ticketing market

The rejection of an outright ban without thoroughly distinguishing between the need for an authorised as opposed to unauthorised market is in the author’s view short sighted. The author believes there is a place for platforms that are authorised to sell at or below face value, as not only would it allow a consumer who is genuinely unable to attend, the ability to recover the majority of his ticket cost, it would hopefully mean less empty seats in venue as the seat would be filled by another genuine fan. There is however in the author’s opinion no place for unauthorised secondary ticket platforms.

No cap on resale prices

The rejection of a cap on resale prices because “there is a question of who would enforce the cap ….merely declaring there to be a cap is not sufficient22 again appears short sighted. A cap on the resale price above face value is simple, clear and transparent. It is key to stop regular traders from abusing the primary ticket market by buying up tens, hundreds, if not thousands of tickets with the sole intention of reselling them, in cases misusing computer software systems to do so. Lack of enforcement exists with all legislation relating to ticketing, even where the legislation expressly states what information should be provided by a seller of a ticket to a buyer. A price cap can just as easily be defined as the provision of what particular information can be.

Botnets

Although the author believes the use of technology is key in order to identify the misuse of unauthorised software, stating simply that the primary ticket market should take responsibility, which would entail it baring the costs of implementing such technology, would surely only pass significant costs onto an event organiser and ultimately the consumer.

Comment on today’s legislative framework in practice

Although an extremely positive step, legislation had been rushed through during the “wash up” period (the last few days of Parliament before its dissolution). It remains to be seen whether secondary ticketing platforms will comply fully with the requirements or continue to circumvent them.

The author is quite certain that compliance by the secondary ticketing market will only evolve with the enforcement of consumer laws, against the few that will remain defiant and even then, if significant action is taken against the offenders. A maximum penalty of £5000 for a breach of the CRA 201523 is substantial if for example, this breach relates to each individual ticket advertisement, but insubstantial if it relates to all ticket listings for one event. It remains to be seen how the financial penalty will be imposed by the enforcement authority.

Compliance with the legislation remains a fundamental way forward in tackling abuse in order to achieve an open market. Total transparency will not be achieved if at the very least genuine ticket information is provided. A cursory glance at secondary ticket platforms reveals vast differences in the information being provided in an advertisement. Rarely does it include full seating information, the exact face value of a ticket or trader’s information; some adverts include a summary of total fees to be paid prior to logging in, but not all. In stark contrast, primary platforms provide full ticket details and total costs within the advertisement itself, without having to log on and click through to the checkout page.

Most recently, in November 2017, further to another year-long investigation, the CMA announced that it will take enforcement action against secondary ticket websites which it considers are breaking consumer law, it also announced that it would broaden the scope of its original investigation and consider the extent that issues including pressure and speculative selling are affecting the transparency of the buying and selling process24. What enforcement action the Advertising Standards Authority will be take against secondary ticketing websites that have broken advertising rules remains to be seen,

Further in February 2018, the Government announced new rules which will come into force in April 201825, which include the provision of additional information about:

  1. the location of a seat or standing area of the venue;

  2. restrictions that apply to the category of person who can use the ticket;

  3. the original price of the ticket aswell as the unique ticket number; and

  4. the details of connections the seller has with either the online facility on which it is selling or the organiser of the event for which the ticket is being sold.

The author is in no doubt, that although the most recent action may be considered a breakthrough by those who have been campaigning for decades against ticket crime, confusion in the market place will remain even if ticket information is available. Although many consumers understand that most tickets (like a train ticket) are not transferable and remain the property of the rights holder, legislation allowing for a ticket which is not the property of the original purchaser, and is non-transferable (for both legitimate and justifiable reasons) be advertised for resale via an unauthorised mechanism is contradictory.

The much-anticipated action against ticket abuse has slowly gained momentum although we are still some way from achieving total transparency and clear understanding for the consumer. Removing the ability for a buyer to profit from the resale of a ticket remains the most idealistic position and would benefit all parties involved (save for the ticket touts and the unauthorised secondary ticket platforms selling on an industrial scale). A straight forward prohibition on unauthorised resale for specific events and an overall cap on the resale price of a ticket (including fees) remains the most sensible and transparent solution. In the end it may come to this.

In the meantime the appetite for exchange platforms at ticket face value is growing between fans. There is also a growing trend amongst rights holders to legitimise secondary ticketing by authorising secondary platforms to resell on their behalf. These straightforward and transparent mechanisms could be embraced by all, whilst the authorities commence along the long road of enforcing legislation against those that do not embrace the need for transparency and compliance.

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Author

Louise Millington-Roberts

Louise Millington-Roberts

Louise has extensive experience working with major brands in the field of sport, media, commercial and intellectual property law, providing practical commercial advice on specialist legal matters including rights and brand protection, the commercialisation of brand, sponsorship, endorsement, and event management.

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