LN/Ticketmaster deal possible, some say
Ex-gov't officials among experts looking at vertical mergerWhen the world's biggest concert promoter and largest ticket seller announced last month that they would merge, it seemed unlikely that antitrust enforcers would approve the creation of such an entertainment giant.
But some competition experts, several of whom are former government officials, now say the combination of Live Nation and Ticketmaster Entertainment actually has a fair shot, though they were not certain if it finally could win approval.
The loudest critics of the deal say it will form an overly powerful live entertainment business that could raise ticket prices for consumers. But the issue facing the Justice Department is complex since Live Nation and Ticketmaster are not traditional competitors.
The deal is known in antitrust language as a vertical merger, meaning the two businesses do not compete directly but provide complementary services or products. In this case, Ticketmaster's ticketing and Live Nation's concert promotion.
The question facing government reviewers is whether the merged Live Nation Entertainment's hold over the live music supply chain -- including artist relationships, venues, primary and secondary tickets and merchandising -- is too tight and would choke off competitors.
"The DOJ will want to know if anybody else will be able to reach the minimum efficiency and sufficient scale necessary to compete with the new Live Nation," said professor Luke Froeb of Vanderbilt University, a former senior economist for the Federal Trade Commission and Department of Justice.
"This is a small merger with small potential overlap, I think they'll get a fair hearing," said Froeb, who gave testimony at a congressional hearing last month in Washington D.C. on Live Nation's $225 million bid for Ticketmaster.
The issue is further complicated because each company has made forays into the other's business areas, so the merger shares some similarities to a horizontal merger of rivals.
Live Nation on Jan. 1 launched its own ticketing service after it ended a 10-year relationship with Ticketmaster; and Ticketmaster last year bought Front Line Management, which manages the affairs of more than 200 artists.
Antitrust watchers said it could be argued that the merger would eliminate a middleman -- bringing ticket sales and concert promotion under one roof -- which could help the new company cut ticket prices. But Live Nation has made no promises on that front,
"It won't be an easy thing to work out, it's a judgment call" for the Justice Department, said Marc Schildkraut, an antitrust lawyer with Washington firm Howrey LLP and a former assistant director of the FTC's Bureau of Competition.
Given the complexity of the issue, many antitrust watchers were unwilling to bet whether the deal would finally be allowed to proceed.
The merger is high profile as it was proposed during a major economic downturn, and is the first major antitrust issue for the new U.S. administration under President Barack Obama.
"I think you're going to see greater sensitivity in any area, which could result in higher consumer prices as a consequence of a concentration of power in an economic era where every dollar counts more," said Michael Hausfeld, a Washington D.C.-based lawyer.
The deal has been criticized by some superstars like Bruce Springsteen and politicians like Sen. Charles Schumer as well as rival companies like AEG Live, a concert promoter, and various ticketing firms.
The Obama administration has indicated it would take a tougher antitrust stance than the Bush administration, which approved deals ranging from the largest phone company's takeover of a smaller rival -- AT&T Inc and BellSouth -- and the combination of the only two satellite radio service providers to create Sirius XM Radio.
Both Live Nation and Ticketmaster have links to powerful members of the Obama administration, but analysts doubt they will have any undue influence on the merger review.
Live Nation board member Ariel Emanuel, is a powerful Hollywood manager who is also brother of Rahm Emanuel, the White House Chief of Staff. Ariel Emanuel was also a major Hollywood fund-raiser for Obama's election campaign.
Julius Genachowski, nominated by Obama earlier this month to be the new chairman of the Federal Communications Commission, was on Ticketmaster's board until March 10.
Froeb and Schildkraut said such connections count for next to nothing in the eyes of the government staffers who will be going over the merger application.
"Government agencies aren't immune from politics but there's a bigger gap in antitrust enforcement from government, than in other arms of government," Schildkraut said.