A Look at Revisions to New York State's Ticket Resale Law

[Editor's Note: Even with the success of some major tours, the 2010 concert business is turning out to be an economic disappointment. Consumers have long raised concerns over ticket prices and ticket availability, but the currently weak U.S. economy has made these issues more pressing. This article discusses the recent comprehensive changes in New York's ticket resale statute. The detailed law, which is set for further revision next year, touches on many hot-button, ticket resale aspects that in general impact venues, promoters, artists and others in the live event industry.]

Among the flurry of legislation passed by the New York State Legislature during the summer was a bill amending New York's Arts and Cultural Affairs Law. The bill, which subsequently was signed into law by Gov. David A. Paterson, governs the sale of tickets to places of entertainment in the state, and represents New York's third ticketing resale law in as many months.

The new ticketing law imposed several, potentially significant changes affecting New York venue operators and ticket sellers, including new rules governing the use of paperless tickets, limitations on service charges that can be imposed on ticket buyers, a ban on the use of automated ticket buying software, tighter restrictions on “ticket holds,” and twice-annual reporting obligations for licensed ticket sellers in the state. In addition, the new law provides for increased criminal penalties against companies found to have violated the ticketing law. (“Operator” is defined in the law as “any person who owns, operates, or controls a place of entertainment or who promotes or produces an entertainment.” N.Y. Arts & Cult. Aff. L. '25.03 (as amended July 2010).)

By way of background, since the 1920s, New York has regulated the sale of tickets to places of entertainment within the state. Since that time, New York imposed limits on the price at which tickets to New York sports and entertainment events could be sold. In 2007, however, New York State enacted a ticket resale law (the 2007 Ticketing Law) that reflected a shift toward a more open and expansive market for ticket resales.

In particular, the 2007 Ticketing Law removed the long-standing price cap on the resale of tickets. The 2007 Ticketing Law also prohibited venue operators from refusing to honor or renew season tickets and subscriptions if the tickets had been resold by the original purchaser. N.Y. Arts & Cult. Aff. L. '25.30 (2007). These changes removed potential barriers on ticket brokers and online secondary ticketing Web sites (such as StubHub.com and TicketsNow.com), which had developed a robust market for the resale of tickets to New York sporting events, concerts and theatrical events.

Because it repealed long-standing resale limits, the 2007 Ticketing Law was passed with a mere two-year shelf life, and was to expire on June 1, 2009. But on the eve of its expiration, in order to allow the NY Department of State to consider whether the 2007 Ticketing Law benefited the state as a whole, the 2007 Law was extended through May 15, 2010, albeit with two changes. First, in order to curb a heavily criticized practice known as “ticket holds” ' in which blocks of tickets are diverted to ticket brokers and resellers without first being offered to the general public ' agents of venue operators were prohibited from selling or conveying tickets to a ticket reseller owned or controlled by the operator's agent. Second, operators were required to determine whether a seat had an obstructed view, and if so, to disclose such obstruction. N.Y. Arts & Cult. Aff. L. '25.11 (2009).

In February 2010, the N.Y. Department of State issued a 59-page “Report on Ticket Reselling and Article 25 of the Arts & Cultural Affairs Law,” which concluded, among other things, that:

• As a general matter, an open and unfettered secondary market benefits the public as a whole, enabling purchasers to obtain tickets to sold out events, and helping ticket holders “sell off” purchased tickets that they cannot use;
• There was no conclusive evidence before the Department of State that imposing price caps on ticket resale affects the availability (or price to consumers) of tickets on the secondary market;
• Ticket holds harm the public and damage the reputation of the ticket industry in New York State;
• The use, typically by ticket brokers, of computer programs and auto-dialing systems gives users of such methods an unfair advantage over the general public in obtaining tickets; and
• New York State would benefit from greater auditing rights and stronger reporting requirements for ticket sellers and resellers.

During this time, the state legislature considered extending the 2007 Ticketing Law, with certain modifications. Efforts stalled, however, largely because of a debate over paperless ticketing ' a form of admission under which purchasers are not issued paper or electronic tickets, but instead gain admission to a venue by presenting the credit card used to buy the tickets. Proponents of paperless ticketing ' which include major recording artists ' argued that the system benefits the public by making it harder for brokers to obtain tickets and resell them at significantly higher prices. Opponents argued that the system prevents consumers from selling tickets they cannot use and from obtaining tickets on the secondary market.

New Law Prohibits Paperless Tickets,
Restricts Service Charges

Because the state Senate and Governor Paterson could not agree how the paperless ticketing issue should be addressed, if at all, the 2007 Ticketing Law expired on May 15, 2010, without passage of a bill to extend or replace it. Thus, New York reverted to the ticket resale law in place in 1991, which, among other things, contained a maximum ticket resale price of $2 above face value. As a result, the New York ticket resale market was thrown into a state of flux for nearly two months until the passage of the new legislation. The new ticketing law is based in large part on the 2007 Ticketing Law, with no limits on ticket resale price, but with several notable differences.

One of the most significant changes is the regulation of paperless ticketing sales. Section 25.30 of the amended Arts & Cultural Affairs Law generally prohibits an operator of a place of entertainment (and an operator's agent) from using paperless tickets unless consumers can transfer those tickets on their own, at any price, at any time and without incurring any additional fees. The law does allow operators and their agents to sell non-transferable paperless tickets, but only if consumers also are offered ' at the time of tickets' initial sale ' the option to purchase the same tickets in a form that is transferable, such as a paper ticket or e-ticket.

The state also instituted restrictions on service charges that may be imposed. The 2007 Ticketing Law permitted an operator or its agent to impose a service charge over and above the face value of a ticket for “special services, including but not limited to, sales away from the box office, credit card sales or delivery.” Now, however, operators may only impose a “reasonable service charge” for such services. N.Y. Arts & Cult. Aff. L. '25.29 (as amended July 2010).

The new law also creates reporting requirements for licensed ticket resellers. Section 25.25 of the 2007 Ticketing Law already required operators and licensed ticket resellers to maintain records showing the prices at which all tickets have been bought and sold by the licensee, as well as information about the source of the tickets. The new law retains this requirement, but also requires licensees who resell tickets (or facilitate resale or auction between third parties) to report to the N.Y. Department of State twice a year on “the total number of, and average resale or average final resale auction price of, all tickets to each ticketed event.” Under '25.13, an operator or manager of a Web site that merely serves as a platform for third parties to sell or auction tickets to other third parties is not required to obtain a license under New York law. Thus, operators or managers of such sites will likely be able to avoid the reporting requirements unless they hold a license to sell or resell tickets within the New York state.

Another significant change is a ban on automated ticket purchasing software, used by some brokers to gain an advantage over the general public in obtaining tickets. Section 25.24 of the new law makes it unlawful for any person to purchase tickets using such software (defined as “any machine, device, computer program or computer software that navigates or runs automated tasks on retail ticket purchasing [Web] sites in order to bypass security measures”). In addition, '25.24 grants the New York attorney general power to enforce the ban, and also grants a private right of action to parties injured by use of the prohibited software. Finally, a court may award treble damages, issue an injunction, and/or award reasonable attorney fees and costs in connection with any violation of '25.24.

Section 25.30 has also been amended to include an exception permitting an operator to restrict the resale of tickets, but only those tickets initially provided at a discount or for free as part of a “targeted promotion” to specific individuals or groups due to their “status as, or membership in, a specific community or group, including, but not limited to, persons with disabilities, students, religious or civic organizations, or persons demonstrating economic hardship.” However, the exception does not apply to promotional or discount tickets offered “to the general public,” meaning that holders of such tickets must be allowed to resell them. In addition, any tickets offered promotionally to specific groups and that are subject to resale restriction must be clearly marked as such.

The new law also broadens the state's efforts to limit ticket holds and make more tickets available to the general public. Specifically, '25.30 has been expanded to prohibit not only the operator's agent, but also the operator itself from selling or conveying tickets to any secondary ticket reseller owned or controlled by the operator's agent or the operator itself.

Other changes include expanded disclosure obligations for obstructed view seats (with certain exceptions), N.Y. Arts & Cult. Aff. L. '25.30 (as amended July 2010), and a revision to the procedure for drawing down upon bonds posted by licensed ticket sellers and resellers. N.Y. Arts & Cult. Aff. L. '25.15 (as amended July 2010). In addition, the state has prohibited the resale of tickets immediately outside any “Ticket Office,” which is defined as a location away from a place of entertainment at which tickets are offered for initial sale. (New York Arts & Cult. Aff. L. '251. as amended July 2010, establishes a “no sale zone” of 500 or 1500 feet, depending on the size of office at issue. The new law also retains the 2007 Ticketing Law's “no resale zone” at venues, which prohibits the resale of tickets within 1,500 feet of a place of entertainment with 5,000 or more seats, and 500 feet of a venue with fewer than 5,000 seats. Venue operators are still permitted to designate an area within the property line of the venue for the lawful resale of tickets to that venue. N.Y. Arts & Cult. Aff. L. '25.11 (as amended July 2010).)

Section 25.35 of the 2007 Ticketing Law had imposed criminal penalties available for those convicted of violating '25.27 (providing commissions to employees of places of entertainment), '25.29 (including unlawful charges in an initial ticket price), '25.09 (unlawful reselling), '25.07 (ticket price printing requirements), '25.13 (licensing requirements), '25.15 (posting a bond) or '25.11 (prohibiting the resale of tickets within the buffer zone). Although the criminal penalties remain largely unchanged, the new law expands the fines that may be imposed upon “a firm, corporation or other entity that is not a single person.” Such fines may be imposed “at up to two times the amount otherwise allowed, or, where applicable, three times the amount of the defendant's gain.” N.Y. Arts & Cult. Aff. L. '25.35 (as amended July 2010).

As a general matter, the new law was effective retroactively to May 16, 2010; thus, the resale of tickets after May 15, 2010 for more than $2 above face value would not violate New York Law. There were, however, certain exemptions to the retroactive application of the law. For example, paperless tickets sold between May 16 and July 2 did not have to comply with the new restrictions.

Notwithstanding the efforts that went into analyzing, drafting and debating the current ticket resale law, most of the new provisions will be in effect until May 15, 2011. Then it will be up to the state legislature to once again decide whether to extend, modify, or let lapse New York's ticket resale laws. One provision that will not need to be extended, however, is the ban against the use of ticket purchasing software; that prohibition expressly survives any expiration of the law in May 2011. See, N.Y.S.B. S8340A, '11 (2010).

[Editor's Note: Even with the success of some major tours, the 2010 concert business is turning out to be an economic disappointment. Consumers have long raised concerns over ticket prices and ticket availability, but the currently weak U.S. economy has made these issues more pressing. This article discusses the recent comprehensive changes in New York's ticket resale statute. The detailed law, which is set for further revision next year, touches on many hot-button, ticket resale aspects that in general impact venues, promoters, artists and others in the live event industry.]

Among the flurry of legislation passed by the New York State Legislature during the summer was a bill amending New York's Arts and Cultural Affairs Law. The bill, which subsequently was signed into law by Gov. David A. Paterson, governs the sale of tickets to places of entertainment in the state, and represents New York's third ticketing resale law in as many months.

The new ticketing law imposed several, potentially significant changes affecting New York venue operators and ticket sellers, including new rules governing the use of paperless tickets, limitations on service charges that can be imposed on ticket buyers, a ban on the use of automated ticket buying software, tighter restrictions on “ticket holds,” and twice-annual reporting obligations for licensed ticket sellers in the state. In addition, the new law provides for increased criminal penalties against companies found to have violated the ticketing law. (“Operator” is defined in the law as “any person who owns, operates, or controls a place of entertainment or who promotes or produces an entertainment.” N.Y. Arts & Cult. Aff. L. '25.03 (as amended July 2010).)

By way of background, since the 1920s, New York has regulated the sale of tickets to places of entertainment within the state. Since that time, New York imposed limits on the price at which tickets to New York sports and entertainment events could be sold. In 2007, however, New York State enacted a ticket resale law (the 2007 Ticketing Law) that reflected a shift toward a more open and expansive market for ticket resales.

In particular, the 2007 Ticketing Law removed the long-standing price cap on the resale of tickets. The 2007 Ticketing Law also prohibited venue operators from refusing to honor or renew season tickets and subscriptions if the tickets had been resold by the original purchaser. N.Y. Arts & Cult. Aff. L. '25.30 (2007). These changes removed potential barriers on ticket brokers and online secondary ticketing Web sites (such as StubHub.com and TicketsNow.com), which had developed a robust market for the resale of tickets to New York sporting events, concerts and theatrical events.

Because it repealed long-standing resale limits, the 2007 Ticketing Law was passed with a mere two-year shelf life, and was to expire on June 1, 2009. But on the eve of its expiration, in order to allow the NY Department of State to consider whether the 2007 Ticketing Law benefited the state as a whole, the 2007 Law was extended through May 15, 2010, albeit with two changes. First, in order to curb a heavily criticized practice known as “ticket holds” ' in which blocks of tickets are diverted to ticket brokers and resellers without first being offered to the general public ' agents of venue operators were prohibited from selling or conveying tickets to a ticket reseller owned or controlled by the operator's agent. Second, operators were required to determine whether a seat had an obstructed view, and if so, to disclose such obstruction. N.Y. Arts & Cult. Aff. L. '25.11 (2009).

In February 2010, the N.Y. Department of State issued a 59-page “Report on Ticket Reselling and Article 25 of the Arts & Cultural Affairs Law,” which concluded, among other things, that:

• As a general matter, an open and unfettered secondary market benefits the public as a whole, enabling purchasers to obtain tickets to sold out events, and helping ticket holders “sell off” purchased tickets that they cannot use;
• There was no conclusive evidence before the Department of State that imposing price caps on ticket resale affects the availability (or price to consumers) of tickets on the secondary market;
• Ticket holds harm the public and damage the reputation of the ticket industry in New York State;
• The use, typically by ticket brokers, of computer programs and auto-dialing systems gives users of such methods an unfair advantage over the general public in obtaining tickets; and
• New York State would benefit from greater auditing rights and stronger reporting requirements for ticket sellers and resellers.

During this time, the state legislature considered extending the 2007 Ticketing Law, with certain modifications. Efforts stalled, however, largely because of a debate over paperless ticketing ' a form of admission under which purchasers are not issued paper or electronic tickets, but instead gain admission to a venue by presenting the credit card used to buy the tickets. Proponents of paperless ticketing ' which include major recording artists ' argued that the system benefits the public by making it harder for brokers to obtain tickets and resell them at significantly higher prices. Opponents argued that the system prevents consumers from selling tickets they cannot use and from obtaining tickets on the secondary market.

New Law Prohibits Paperless Tickets,
Restricts Service Charges

Because the state Senate and Governor Paterson could not agree how the paperless ticketing issue should be addressed, if at all, the 2007 Ticketing Law expired on May 15, 2010, without passage of a bill to extend or replace it. Thus, New York reverted to the ticket resale law in place in 1991, which, among other things, contained a maximum ticket resale price of $2 above face value. As a result, the New York ticket resale market was thrown into a state of flux for nearly two months until the passage of the new legislation. The new ticketing law is based in large part on the 2007 Ticketing Law, with no limits on ticket resale price, but with several notable differences.

One of the most significant changes is the regulation of paperless ticketing sales. Section 25.30 of the amended Arts & Cultural Affairs Law generally prohibits an operator of a place of entertainment (and an operator's agent) from using paperless tickets unless consumers can transfer those tickets on their own, at any price, at any time and without incurring any additional fees. The law does allow operators and their agents to sell non-transferable paperless tickets, but only if consumers also are offered ' at the time of tickets' initial sale ' the option to purchase the same tickets in a form that is transferable, such as a paper ticket or e-ticket.

The state also instituted restrictions on service charges that may be imposed. The 2007 Ticketing Law permitted an operator or its agent to impose a service charge over and above the face value of a ticket for “special services, including but not limited to, sales away from the box office, credit card sales or delivery.” Now, however, operators may only impose a “reasonable service charge” for such services. N.Y. Arts & Cult. Aff. L. '25.29 (as amended July 2010).

The new law also creates reporting requirements for licensed ticket resellers. Section 25.25 of the 2007 Ticketing Law already required operators and licensed ticket resellers to maintain records showing the prices at which all tickets have been bought and sold by the licensee, as well as information about the source of the tickets. The new law retains this requirement, but also requires licensees who resell tickets (or facilitate resale or auction between third parties) to report to the N.Y. Department of State twice a year on “the total number of, and average resale or average final resale auction price of, all tickets to each ticketed event.” Under '25.13, an operator or manager of a Web site that merely serves as a platform for third parties to sell or auction tickets to other third parties is not required to obtain a license under New York law. Thus, operators or managers of such sites will likely be able to avoid the reporting requirements unless they hold a license to sell or resell tickets within the New York state.

Another significant change is a ban on automated ticket purchasing software, used by some brokers to gain an advantage over the general public in obtaining tickets. Section 25.24 of the new law makes it unlawful for any person to purchase tickets using such software (defined as “any machine, device, computer program or computer software that navigates or runs automated tasks on retail ticket purchasing [Web] sites in order to bypass security measures”). In addition, '25.24 grants the New York attorney general power to enforce the ban, and also grants a private right of action to parties injured by use of the prohibited software. Finally, a court may award treble damages, issue an injunction, and/or award reasonable attorney fees and costs in connection with any violation of '25.24.

Section 25.30 has also been amended to include an exception permitting an operator to restrict the resale of tickets, but only those tickets initially provided at a discount or for free as part of a “targeted promotion” to specific individuals or groups due to their “status as, or membership in, a specific community or group, including, but not limited to, persons with disabilities, students, religious or civic organizations, or persons demonstrating economic hardship.” However, the exception does not apply to promotional or discount tickets offered “to the general public,” meaning that holders of such tickets must be allowed to resell them. In addition, any tickets offered promotionally to specific groups and that are subject to resale restriction must be clearly marked as such.

The new law also broadens the state's efforts to limit ticket holds and make more tickets available to the general public. Specifically, '25.30 has been expanded to prohibit not only the operator's agent, but also the operator itself from selling or conveying tickets to any secondary ticket reseller owned or controlled by the operator's agent or the operator itself.

Other changes include expanded disclosure obligations for obstructed view seats (with certain exceptions), N.Y. Arts & Cult. Aff. L. '25.30 (as amended July 2010), and a revision to the procedure for drawing down upon bonds posted by licensed ticket sellers and resellers. N.Y. Arts & Cult. Aff. L. '25.15 (as amended July 2010). In addition, the state has prohibited the resale of tickets immediately outside any “Ticket Office,” which is defined as a location away from a place of entertainment at which tickets are offered for initial sale. (New York Arts & Cult. Aff. L. '251. as amended July 2010, establishes a “no sale zone” of 500 or 1500 feet, depending on the size of office at issue. The new law also retains the 2007 Ticketing Law's “no resale zone” at venues, which prohibits the resale of tickets within 1,500 feet of a place of entertainment with 5,000 or more seats, and 500 feet of a venue with fewer than 5,000 seats. Venue operators are still permitted to designate an area within the property line of the venue for the lawful resale of tickets to that venue. N.Y. Arts & Cult. Aff. L. '25.11 (as amended July 2010).)

Section 25.35 of the 2007 Ticketing Law had imposed criminal penalties available for those convicted of violating '25.27 (providing commissions to employees of places of entertainment), '25.29 (including unlawful charges in an initial ticket price), '25.09 (unlawful reselling), '25.07 (ticket price printing requirements), '25.13 (licensing requirements), '25.15 (posting a bond) or '25.11 (prohibiting the resale of tickets within the buffer zone). Although the criminal penalties remain largely unchanged, the new law expands the fines that may be imposed upon “a firm, corporation or other entity that is not a single person.” Such fines may be imposed “at up to two times the amount otherwise allowed, or, where applicable, three times the amount of the defendant's gain.” N.Y. Arts & Cult. Aff. L. '25.35 (as amended July 2010).

As a general matter, the new law was effective retroactively to May 16, 2010; thus, the resale of tickets after May 15, 2010 for more than $2 above face value would not violate New York Law. There were, however, certain exemptions to the retroactive application of the law. For example, paperless tickets sold between May 16 and July 2 did not have to comply with the new restrictions.

Notwithstanding the efforts that went into analyzing, drafting and debating the current ticket resale law, most of the new provisions will be in effect until May 15, 2011. Then it will be up to the state legislature to once again decide whether to extend, modify, or let lapse New York's ticket resale laws. One provision that will not need to be extended, however, is the ban against the use of ticket purchasing software; that prohibition expressly survives any expiration of the law in May 2011. See, N.Y.S.B. S8340A, '11 (2010).