Unfair Trading Practices

Recently the Federal Government consulted on a proposal to amend the Australian Consumer Law to introduce general and specific prohibitions on unfair trading practices.

As part of this consultation, Treasury sought feedback on drip pricing and dynamic pricing issues relevant to ticketing. from the ALMBC.

Here is the key points from our response:

• The ALMBC is aware of several examples of unfair trading practices that cause (or are likely to cause) consumer harm and harm to other businesses, but which fall into existing gaps within the ACL. Although the ACL provides a range of protections against unfair practices, the ALMBC argues that these provisions are outdated in some respects and therefore may be ill-equipped to address the existing examples we will examine.
• The harmful impacts of these examples to consumers and businesses include financial loss, loss of commercial opportunity and more.
• The harmful impact of these examples to the music industry as a whole is the reduction in trust in purchasing, consumers choosing not to engage further, reduction of trust in the overall market and more.
• We note that Australia faces similar challenges to other countries in terms of adapting consumer protection laws in the context of technological change. Other international jurisdictions, such as the United Kingdom, the European Union and the United States have a general ban or prohibition on unfair trading practices and have introduced specific regulation targeting unfair commercial conduct resulting from evolving business practices, particularly digitally enabled commerce.

The ALMBC’s response focuses on three areas:

IMPACT OF DYNAMIC TICKET PRICING

• Many ticketing companies and in particular, major globally owned ticketing companies, include substantial extra fees, compared to independent sellers for the same tickets and this has been described as up to triple the fees of independent sellers of the same tickets.The impact of unfair contracting practices for some major festivals
• Many fees are not explained and are added towards the final moments of ticket purchasing.
• The ALMBC believes strongly that, just like food packaging, and just like GST requirements, all fees need to be separately listed and explained clearly both in the initial stages of purchase and on the final receipt.
• The status quo sees audiences in some locations paying much larger prices to see the same act, or simply paying hefty prices that are not explained. Our feedback from ticket purchasers is that they are less likely to purchase tickets at all after experiencing the feeling of being ‘ripped off’ in this way.
• The ALMBC understands the need for some surge pricing, for example when it is raining an uber will cost more. This is frustrating, however widely understood and the higher amount is known up front.
• The ALMBC argues that any dynamic pricing for music concert tickets should be banned. There is no call for this practice and the downsides to the consumer and the industry are many and varied.
• As a note, the industry should be encouraging early bird pricing with cheaper tickets available earlier and tickets gaining in expense the closer to the event. This would be an appropriate way for companies to gain income without any need for dynamic pricing and would be an easily understood process for all consumers.
• If dynamic pricing is allowed, then ticketing companies must:
  • Advise that the ticket is dynamically priced
  • Advise the standard ticket price (rack rate) and the rate the ticket cost is being increased by
  • Display the quantity tickets left so that consumer can make a decision to proceed at a higher rate
  • Refund the higher rate is a second / further show is released (as often occurs after tickets sell out to a concert)
  • Allow extended time period to finalise a ticket purchase if the ticket is being dynamically priced above the standard ticket price so the consumer can make a decision without being pressured into missing out decisions
• Dynamic Pricing should be prohibited under the ACL for concert ticketing.
• Dynamic pricing encourages hasty purchases with poor planning. Some purchasers reported being alarmed at the final price they paid for their tickets.
• The ALMBC asserts that there should always be a ‘Guest’ check out option. A major asset for ticketing companies is the contact details of many thousands of purchasers that can then be directly marketed to. The forced creation of accounts is a major issue across many online business sectors and forcing of accounts should be banned.
• Across dynamic pricing and online account requirements, small businesses that engage with major corporations face identical issues to individual consumers and should be treated identically.
• There will only be positive outcomes for the industry and the consumer if our proposed changes are implemented:
  • Consumers will know what price they are paying and will understand the fees they are paying clearly
  • Consumers will feel more positive towards their artists and the ticketing companies
  • Consumers will feel safe as they purchase tickets

UNFAIR CONTRACTING PRACTICES

• As well as the impact on consumers from unfair practices, there are significant impacts on other businesses, in particular where a sole trader, micro business (company with a sole director or with one or two directors or employees) is contracting against a major globally-owned company with exceptionally greater power in the industry.
• Currently, the ACC accepts vertical integration of company ownership in the Australian music industry, where one company (and their subsidiaries) can own all facets of the system such as the artist, management, booking agent, label, publishing, venues, ticketing and more. A clear and predictable outcome of this, is that when any artist or partner causes any kind of disruption or annoyance to any part of that system, they can quickly find themselves without ongoing gig bookings and contracting opportunities.
• A globally-owned company reigns supreme in the contracting power they have over the small players in the industry. The ALMBC has witnessed this on many occasions with emerging artists being booked to perform at major globally-owned festivals; artists being booked for tours with major players; sole traders or micro-businesses engaged to provide production services for a major festival; the list is extensive.
• The ALMBC understands these kinds of power-differences are to be anticipated but also believes that the ACL should include provisions to prohibit unfair practices such as:
• festival contractual exclusions around exclusivity, timeframes and milage. Major festivals regularly force artists to sign contracts that exclude the artist from playing any other shows in the country within a 4-6 month period. When a festival then cancels without payment to the artist, the artist is left with many months of no income as well as the lost anticipated festival payment and anticipated income from merchandise sales at the festival. Currently the artist bears the risk for this 100%. These impacts are identical for sole traders and micro-businesses contracted to the festival.
• distribution of risk when major environmental or disaster impacts occur to artists and contractors. Major festivals routinely provide no deposit and include provisions in their contract for non-payment of artists when natural disasters or environmental impacts such as major rain events cause the cancellation of the event. Further, some major festivals force artists to provide their own insurance against their own cancellation. This insurance is impossible for artists to gain because insurance companies require significant information such as event plans, wet weather plans, etc, which the artist is not privy to. Again, this is identical for sole traders and microbusinesses contracted to the festival.
• non-payment of deposits by major festivals to all artists and contractors. Some festivals refuse to pay deposits to artists and contractors, meaning that the full risk of loss is transferred to these smaller players. Major global companies can afford to announce new festivals with grand displays and then cancel if ticket sales are poor. For major companies this may be a ‘loss-leading’ exercise – that is, a way to test the market or to hold a space against a competitor, even if the company has little commitment to go through with the festival. Allowing contractual arrangements that mean artists and contractors booked do not need to be paid, provides no incentive for the company to go through with the festival – instead it encourages major companies to take major risks, knowing that their costs if a cancellation occurs, are minor. Smaller artists and contractors caught up in this process cannot afford these losses and many have closed business because of the large losses they have incurred.

TICKETING BARRIERS TO COMPETITION AND RISK

• Promoters are in the business of taking risk and should not be allowed to pass that risk on to their vendors, suppliers or artists, as outline above.
• Currently ticketing agents are unregulated and can hoard the large windfalls of income generated from initial ticket sales without any requirement to keep these funds in trust. If the festival / event fails, then consumers should be refunded their tickets in full, however currently these funds can be held out of the country and are likely not to be refunded to the consumer in the event of a cancellation.
• The ALMBC believes that Ticket Agents could be regulated the same way travel agents and real estate agents are regulated, to stop the practice of ticket companies loaning or advancing ticket funds that should be held in trust.
• Whilst there is legitimate reason patrons may not be able to attend an event and wish to on-sell their ticket, the re-sale market should be restricted so tickets cannot be resold for more than 10% face value, thereby stopping speculation from scalpers and stopping them artificially inflating prices.
• Making ticket scalping illegal on all events regardless of venue or government ownership is an appropriate prohibition.

Read the full Response here.