Consumer fraud
By Ticketmaster has, pending final approval, settled a class action suit, brought on behalf of people who paid fees that, according to the plaintiffs’ allegations, were categorized in a fashion that made them appear to be actual transaction costs rather than profit to Ticketmaster.
On paper, the settlement is supposedly going to cost Ticketmaster around $400 million; in reality, it will cost the firm perhaps $20 million and maybe less than that. (Ticketmaster enjoyed profits of nearly $300 million last year, on revenues of $1.37 billion).
The settlement works like this: if you bought a ticket via Ticketmaster between 1999 and early 2013, you’re eligible to use a $2.25 discount code on your next purchase of a ticket via the firm. You get one discount for every ticket you bought, up to a limit of 17, so in theory you could receive as much as $38.25 in “damages.” The quotation marks indicate that these types of damages are pretty tricky entities, in economic terms.
The discount codes are in effect in-store coupons, which means that to collect your damages you have to buy more of what Ticketmaster is selling. Ticketmaster processing fees vary a great deal; a check of the Denver web site indicates that they can run anywhere from $7 to $19.95 per ticket. On average, a $2.25 discount appears to represent around a 20% savings on processing fees.
When you think about it, which needless to say everyone making money off this litigation strongly encourages you not to do, it’s quite unclear whether those discount codes that will be redeemed (which will end up being a small percentage of potential theoretical total, since most eligible class members won’t bother, either out of ignorance of this great “deal,” or unwillingness to invest time and effort to cash in on it) will cost Ticketmaster anything at all. The marginal cost to Ticketmaster of issuing another ticket to A Night With Lionel Ritchie must surely be close to zero, which means that lopping 20% off what it charges for that sale merely reduces the profit on the transaction — that is, assuming the transaction would have taken place anyway.
If on the other hand the availability of the discount code is what causes the purchaser to decide to buy the ticket, offering the discount code is increasing Ticketmaster’s profits in that instance. In other words, the plaintiffs in this case are to a significant extent actually paying for the “damages” they are putatively collecting, which means that the $400 million this is supposedly costing Ticketmaster is largely an illusion. Even on paper, the settlement only contemplates that Ticketmaster will end up issuing around $35 million in discount codes, and again, to a significant extent the codes Ticketmaster does issue will end up making rather than costing the firm money.
So who (besides, oddly enough, the defendant) is making money off this litigation?
(1) The plaintiffs’ attorneys, who are slated to collect around $15 million in fees, as well as a couple of million in litigation costs.
(2) Greenberg Traurig, which represented Ticketmaster.
(3) UC-Irvine’s new, wildly expensive, and totally superfluous law school, which is getting $3 million for — this is the kind of thing you could never put in a novel — its Consumer Fraud clinic. The $3 million represents a quasi-charitable cy pres donation by Ticketmaster, given to a deserving entity chosen by the judge. It would be fascinating to know how Judge Kenneth Freeman hit upon the idea of making UC-Irvine the object of his judicial bounty. (Here’s Dean Erwin Chemerinsky’s sworn declaration explaining why his institution should be allowed to wet its beak a little).