Scalping Probe Ends Amextix Service

American Express agreed Dec. 22 to discontinue a high-price ticket service available to its platinum card holders and to pay $75,000 to New York state to cover some of the costs of a nine-month investigation by outgoing Attorney General G. Oliver Koppell.

The settlement-which includes an agreement by American Express and USAssist, a vendor hired to provide the service, to cooperate in any further inquiries-was the chief accomplishment of the investigation. It involved dispatching undercover agents to Broadway theaters, concerts and sporting events, and subpoenaing theater owners, hotel concierges and licensed and unlicensed ticket brokers.

American Express did not admit to having acted illegally. But in a 15-page report included with the announcement, Koppell wrote, “Ticket scalping does not only occur on street corners or grubby cramped offices but through the highest ranks of American commerce,” pointing the finger directly at American Express, which was selling $70 tickets to “Beauty and the Beast,” for example, to platinum card holders for $175.

The maximum markup allowable under New York State law is $5 or 10% above the face value of a ticket.

Ticketmaster targeted

Koppell’s team also extensively researched Ticketmaster, sending undercover investigators to disparate locations to observe how tickets were sold at the B.O. giant’s 350 local outlets. The report claims “widespread diversion of tickets from public sale,” noting that in one instance, 17 people were waiting on line at one location where Ticketmaster recorded 40 transactions. (A classic technique used by scalpers, especially to thwart legitimate agents who try to cut down scalping by limiting the number of tickets sold per transaction, is to use several different credit cards to buy choice tickets.)

Koppell also took Ticketmaster and Madison Square Garden to task for failing to notify the public that 46% of the tickets to Barbra Streisand’s concerts in June were, according to the report,” withheld from public sale for promoters, agents, the house and Streisand herself,” which, he said, “exacerbated the problems created by the unrealistic expectations of the fans and their subsequent disappointment.” Tickets to the concerts, which had a $350 top, were scalped for as much as $2,000.

Ticketmaster head Fred Rosen was on vacation when the report was released, but a highly placed source at the company insisted that it has been diligent about closing down outlets when the diversion of tickets is discovered, as in one case where the head of an outlet also owned a ticket brokerage. The source also complained that Koppell’s office refused to share its information with the company despite Ticketmaster’s cooperation.

B’way focus still blurry

Though much of the investigation that focused on Broadway shows generated the most publicity, that aspect is incomplete, Koppell wrote, adding that it would be “premature to disclose what we have learned” beyond the fact that the records seized from four scalpers in New York and New Jersey “reflected extensive transactions with Broadway box offices.”

Gerald Schoenfeld, chairman of Broadway’s largest theater owner, the Shubert Organization, responded by calling for “multistate legislation, a uniform law enforced in the neighboring states of New Jersey, Pennsylvania, Connecticut and Massachusetts, in order to close the obvious loopholes that exist.” The theater owners generally have declined to make any statement about the investigation.

The report concluded that ticket scalping is widespread, that large blocks of tickets to all kinds of events are never made available to the general public, and that unlicensed brokers get better tickets than licensed brokers, presumably with the cooperation of box offices-all of which was known before the investigation was undertaken. Indeed, critics of the investigation, while not condoning the practice, noted that scalping has gone on as long tickets have been sold to events, and investigations into scalping have gone on as long as there were politicians looking for a sure-fire consumer issue to hang a press release on.

Changing of the guard

Koppell, a Democrat who was replaced Jan. 1 by Republican Dennis Vacco, noted that current law governing ticket sales to sporting and cultural events expires in June. Koppell recommends sharply increasing the cash penalties for scalping, more stringent accounting and fair disclosure of availability to the public and, as the Shubert’s Schoenfeld suggested, enlisting the aid of neighboring states in clamping down on scalpers.

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