Ticketmaster Lead Counsel on Live Nation Merger Issues

The proposed merger between Ticketmaster Entertainment Inc. and Live Nation Inc., the world's largest concert promoter, won Justice Department approval in January 2010, following a year of negotiations. The deal was the first negotiated under the Obama administration, which has pledged to impose more stringent antitrust review of corporate mergers.

For consumer groups, independent concert promoters and some performing artists, the combination of West Hollywood-based Ticketmaster and Beverly Hills-based Live Nation represents a threat to competition in ticket sales. The settlement between the companies, the Department of Justice and the attorneys general of 17 states, awaits review by a federal judge. The Canadian Competition Bureau also participated.

The final deal came with strings attached. Ticketmaster must sell one of its ticketing divisions and license its ticketing software to concert promoter Anschutz Entertainment Group Inc. (AEG). Moreover, the merged company, to be called Live Nation Entertainment, will be subject to “tough anti-retaliation provisions,” according to the Justice Department.

The law firm Latham & Watkins advised Live Nation, and Los Angeles-based Gibson, Dunn & Crutcher counseled Ticketmaster. At Gibson Dunn, Steven Sletten, a partner in Los Angeles, led a team of dozens of lawyers in Los Angeles, Washington, Dallas, New York and London. In an interview, Sletten stated that he prepared his client to face a tough audience, both at the Justice Department and in the court of public opinion. The ticketing services aspect of the merger, which constituted a minor aspect of the deal from a business perspective, proved the stickiest point in the negotiations, he said. The interview transcript has been edited for clarity and length.

Q: Negotiations over this merger have been going on for a year. How much work was this?

A: For me, it was daily. I don't think a day or two went by when I wasn't working on something related to this deal. I'm sure in excess of 50 [Gibson attorneys] contributed to the effort, although a core group of a few partners and half a dozen associates were leading the charge.

Q: From the beginning, you considered this a vertical integration of two companies in different businesses, rather than a combination of two direct competitors. But the Justice Department heavily scrutinized this deal. Why?

A: Our basic position on the merger is that it is, by and large, a vertical combination. You've got Ticketmaster, which historically had been a ticket services provider, and Live Nation, longtime customer of Ticketmaster's services, in the promotion and venue and operations business. These are vertically connected sections of a chain of delivering content to the public. Had that been all the merger was, I'm confident the Justice Department would have closed its file and proceeded.

What the Justice Department set their sights on was the fact that Live Nation, after it left Ticketmaster and announced it was doing so in 2008, licensed technology from a German company called CTS Eventim to do its own ticketing. There was a horizontal element to the deal.

We thought it was the tail wagging the dog a bit. It was such a small horizontal overlap. There was only a small amount of head-to-head competition. Even if it was not a full-fledged ticketing venue, the Justice Department believed it could grow into one. The facts on Live Nation's plans and capabilities were hotly contested.

Q: The deal comes with several provisions. Among them, Ticketmaster must agree to sell some of its ticketing assets and license its ticketing software. Why did you agree to this aspect?

A: The Department of Justice's concern was that Live Nation would no longer be a ticketing competitor. So they were focused on remedies that would enhance what they believed would create a very competitive environment in the area of ticketing services.

So the ultimate resolution produced basically two different things: One is an opportunity for AEG, which is the second largest promotions business in the world behind Live Nation, to become its own ticketing company using Ticketmaster's technology. It sets up AEG to do its own ticketing and be able to offer ticketing to others ' sort of like what Live Nation had plans to do before the merger.

Second, Ticketmaster acquired Paciolan, which is a ticketing system for venues that want to manage their own ticketing and not have a third-party service like Ticketmaster do the ticketing for them. Ticketmaster agreed as part of the settlement with the Justice Department to sell Paciolan to Comcast Spectacor L.P. [a Philadelphia sports and entertainment company]. Both the Justice Department and the Canadian Bureau of Competition, as well as the state AGs, believed that putting Paciolan in the hands of Comcast-Spectacor would again add a significant competitor to the ticketing business.

Q: The agreement also comes with tough anti-retaliation provisions. What are these?

A: These go to some of [the government officials'] vertical concerns. They didn't want the combined entity ' the largest provider of ticketing services in the world and the largest promoter of live entertainment in the world ' to be able to unfairly leverage one of those businesses against the other to secure an unfair competitive advantage. So as is reflected in the documents and the final judgment, the merged entity has been directed to not retaliate against a venue by depriving it of entertainment content, i.e., live entertainment, because it decided to use another ticketing services provider. What is important is that nothing in the judgment prohibits the parties from bundling or packaging their services. One of the key efficiencies arising out of the merger, and arising out of most vertical mergers, is the ability of the merged entity to provide at a lower cost to the consumer.

The proposed merger between Ticketmaster Entertainment Inc. and Live Nation Inc., the world's largest concert promoter, won Justice Department approval in January 2010, following a year of negotiations. The deal was the first negotiated under the Obama administration, which has pledged to impose more stringent antitrust review of corporate mergers.

For consumer groups, independent concert promoters and some performing artists, the combination of West Hollywood-based Ticketmaster and Beverly Hills-based Live Nation represents a threat to competition in ticket sales. The settlement between the companies, the Department of Justice and the attorneys general of 17 states, awaits review by a federal judge. The Canadian Competition Bureau also participated.

The final deal came with strings attached. Ticketmaster must sell one of its ticketing divisions and license its ticketing software to concert promoter Anschutz Entertainment Group Inc. (AEG). Moreover, the merged company, to be called Live Nation Entertainment, will be subject to “tough anti-retaliation provisions,” according to the Justice Department.

The law firm Latham & Watkins advised Live Nation, and Los Angeles-based Gibson, Dunn & Crutcher counseled Ticketmaster. At Gibson Dunn, Steven Sletten, a partner in Los Angeles, led a team of dozens of lawyers in Los Angeles, Washington, Dallas, New York and London. In an interview, Sletten stated that he prepared his client to face a tough audience, both at the Justice Department and in the court of public opinion. The ticketing services aspect of the merger, which constituted a minor aspect of the deal from a business perspective, proved the stickiest point in the negotiations, he said. The interview transcript has been edited for clarity and length.

Q: Negotiations over this merger have been going on for a year. How much work was this?

A: For me, it was daily. I don't think a day or two went by when I wasn't working on something related to this deal. I'm sure in excess of 50 [Gibson attorneys] contributed to the effort, although a core group of a few partners and half a dozen associates were leading the charge.

Q: From the beginning, you considered this a vertical integration of two companies in different businesses, rather than a combination of two direct competitors. But the Justice Department heavily scrutinized this deal. Why?

A: Our basic position on the merger is that it is, by and large, a vertical combination. You've got Ticketmaster, which historically had been a ticket services provider, and Live Nation, longtime customer of Ticketmaster's services, in the promotion and venue and operations business. These are vertically connected sections of a chain of delivering content to the public. Had that been all the merger was, I'm confident the Justice Department would have closed its file and proceeded.

What the Justice Department set their sights on was the fact that Live Nation, after it left Ticketmaster and announced it was doing so in 2008, licensed technology from a German company called CTS Eventim to do its own ticketing. There was a horizontal element to the deal.

We thought it was the tail wagging the dog a bit. It was such a small horizontal overlap. There was only a small amount of head-to-head competition. Even if it was not a full-fledged ticketing venue, the Justice Department believed it could grow into one. The facts on Live Nation's plans and capabilities were hotly contested.

Q: The deal comes with several provisions. Among them, Ticketmaster must agree to sell some of its ticketing assets and license its ticketing software. Why did you agree to this aspect?

A: The Department of Justice's concern was that Live Nation would no longer be a ticketing competitor. So they were focused on remedies that would enhance what they believed would create a very competitive environment in the area of ticketing services.

So the ultimate resolution produced basically two different things: One is an opportunity for AEG, which is the second largest promotions business in the world behind Live Nation, to become its own ticketing company using Ticketmaster's technology. It sets up AEG to do its own ticketing and be able to offer ticketing to others ' sort of like what Live Nation had plans to do before the merger.

Second, Ticketmaster acquired Paciolan, which is a ticketing system for venues that want to manage their own ticketing and not have a third-party service like Ticketmaster do the ticketing for them. Ticketmaster agreed as part of the settlement with the Justice Department to sell Paciolan to Comcast Spectacor L.P. [a Philadelphia sports and entertainment company]. Both the Justice Department and the Canadian Bureau of Competition, as well as the state AGs, believed that putting Paciolan in the hands of Comcast-Spectacor would again add a significant competitor to the ticketing business.

Q: The agreement also comes with tough anti-retaliation provisions. What are these?

A: These go to some of [the government officials'] vertical concerns. They didn't want the combined entity ' the largest provider of ticketing services in the world and the largest promoter of live entertainment in the world ' to be able to unfairly leverage one of those businesses against the other to secure an unfair competitive advantage. So as is reflected in the documents and the final judgment, the merged entity has been directed to not retaliate against a venue by depriving it of entertainment content, i.e., live entertainment, because it decided to use another ticketing services provider. What is important is that nothing in the judgment prohibits the parties from bundling or packaging their services. One of the key efficiencies arising out of the merger, and arising out of most vertical mergers, is the ability of the merged entity to provide at a lower cost to the consumer.