March 28, 2014 -- How are an O.A.R. rock concert, parking and telecom consolidation potentially harming consumers?
In a word: bundling. And things might get worse for customer prices when it comes to items such as concert tickets and telecom services after a ruling this week by the U.S. Seventh Circuit Court of Appeals in Illinois, consumer advocates say.
Bundling, in which customers have to buy one product to get another, is not illegal, however. Telecommunications providers can do it within legal limits, offering Internet, telephone or television services together in a package. And now concert companies have free rein when it comes to “parking” fees.
Glenn Derene, electronics editor with Consumer Reports, said customer frustration toward telecom firms and concerts have growing similarities when it comes to industry consolidation and fewer choices.
"You’re almost forced to deal with the powers that be," he said. "There's not necessarily a way around them."
Consumer Reports' cover story for its May issue, called "Untangling the Bundle," provides an in-depth look into packaged services. The magazine encourages customers to negotiate aggressively with providers and to cut back on services to save money, such as choosing lower-speed Internet or reducing the number of cable channels.
In the case of concert tickets, the three-judge panel this week affirmed a lower court's ruling in favor of Live Nation, which bundled a $9 parking fee in a concert ticket for an O.A.R. concert.
Jason Batson, the plaintiff, bought a ticket for an O.A.R. concert in Chicago from the Live Nation box office at the Charter One Pavilion. After he paid for the ticket, he noticed a $9 parking fee included in the price. Believing Live Nation's practice to be "unfair," he sued the entertainment company, calling it a "forced parking charge," according to a court filing. He argued that it violated antitrust laws against "tying" two separate products.
But the appeals court this week made a distinction between bundling and tying, saying the former is allowed in this case because it could be considered "fair" competition under the Consumer Fraud Act. The judges ruled Batson did not show that Live Nation has so much power over performances to force people to spend money for unused parking rights, so there was no harm done.
"Even if it does, however, Batson has failed to allege anything that would plausibly show that Live Nation's parking tie-in has affected a substantial volume of commerce in parking," the judges' opinion stated.
As one judge wrote, “There is no rule that requires everything to be sold on a fully unbundled basis. Nothing could have stopped Live Nation from erasing ‘$9 PRK Paid,’ charging $9 more for the ticket, and announcing that there was ‘free’ parking for all who needed it.”
Jacqueline Peterson, a spokeswoman for Live Nation, declined to comment on the court ruling. Batson and his attorney did not respond to a request for comment.
The court also said music fans have many other options besides Live Nation for concerts in Chicago.
"There are times when consumers are required to accept a package deal in order to get the part of the package they want," the 13-page opinion states. "An airline passenger with no luggage may prefer the cost of baggage to be decoupled from the cost of a seat, and a law student may prefer to pay lower tuition and avoid 'free' pizza days. But while some people may find these bundles annoying, or even unfair, the tie is not illegal unless the standards set forth in the governing antitrust cases have been met."
Chris Grimm, communications director for Fan Freedom, a nonprofit that protects the rights of live entertainment and sports fans, said such concert fees are often decided by the venue, but many are owned by Live Nation.
"This is why it is really important for ticket sellers to be transparent about fees and present fans with the total price, including any and all fees, up front," Grimm said.
While transparency may be good for consumers, it can hurt the bottom line for ticket sellers. StubHub, the country's largest ticket reseller, Wednesday said sales took a hit after the company moved to "all-in" pricing strategy in January that lists prices with all the fees.
While the court said this week the Chicago concertgoers have multiple choices for music, they likely don't have a large number of O.A.R. choices. Therein lies the rub for content provided via cable and Internet, Consumer Reports’ Derene says: the provider for both is often the same firm.
And when it comes to information or entertainment in your home, Derene says, many Americans say they can't live without it.
"There’s a lot of discussion about cord-cutting, but people don’t want to sever all telecom from their home,” he said. “It’s a part of American life. To be really engaged with American society, you need to be connected. You need Internet, maybe TV. And people don’t feel like they have options in selecting these things.”