The stars versus the touts

Fans eager to see one of their favourite stars perform need to be on the lookout for fraudulent ticket selling schemes.

In mid-December 2015, tickets for Adele's upcoming US tour were gobbled up within minutes, leaving untold numbers of fans angry and frustrated when they discovered, usually after a long wait on hold or online, that they were sold out. The same stampede for tickets occurred for her Canadian and UK tours.

“Hello from the ticket line. I’ve clicked refresh a thousand times,” tweeted fan Maggie Sage Hunter, in a clever twist on the lyrics to Adele’s hit single “Hello,” the Mail Online reported.

Interest in the 27-year-old singer was fuelled by her new album, 25, which sold 7.4 million copies in the US in the first month after its release. “You couldn’t get a bigger name in music right now,” says Max Lousada, chairman of the Brit Awards.

In December, prior to the commencement of UK ticket sales, UK consumer group Action Fraud warned the public about scams that were sure to emerge. “Industry experts believe this will be the biggest and most heavily subscribed ticket sale of the year and we are reminding everyone to beware that this is likely to attract the UK’s most proliferate ticket fraudsters,” it said.

It underlined its message by pointing out that “victims have lost more than £1.2 million to ticket fraud in the last six months with nearly 3,000 cases reported to Action Fraud between May and October. On average, customers who bought fake tickets lost £444 per transaction.” It urged consumers to purchase tickets only from official sources and never to pay by direct transfer.

Adele and other stars such as Bruce Springsteen have been trying to combat fraud, as well as ticket-price gouging by scalpers and ticket resellers (standing-room balcony seats for her four-night Toronto appearance began at $275 a ticket on reseller StubHub, the Toronto Star reported), by insisting that a certain number of tickets be reserved for “credit card entry only,” also referred to as paperless tickets.

“That means that customers must present the card they used to buy the ticket at the door, along with government-issued picture ID. It’s a popular option for artists who want to cut down on scalpers and save tickets for their fans,” the Star noted.

Adele was so concerned about gouging by “touts,” as scalpers and resellers are referred to in Britain, that her management team retained an untold number of seats for her tours that could only be purchased through her website.

“The resale of tickets will not be tolerated,” Adele said when she announced her European tour.

The initiative proved incredibly attractive to fans — Music Business Worldwide said that more than 500,000 fans registered at adele.com for a chance to purchase tickets for her UK tour — and to touts.

Adele’s team, however, had anticipated this happening. In December, more than 18,000 known or likely touts were deregistered before the UK presale tickets were made available, the Independent reported.

“Media Insight Consulting estimates that 36,000 tickets were rescued from touts,” the newspaper said. “Research showed that there were over 50,000 people willing to pay over £750 for each ticket, valuing the potential lost profit for touts at just over £29 million. The research found that on average, people were willing to pay £181 for tickets, suggesting that Adele’s move saved her fans £4.2 million.”

While gouging is rampant in the world of tickets for music and sporting events, fans eager to enjoy a live performance of one of their favourite stars need to be on the lookout for fraudulent schemes when buying tickets.

In December, which was a major period for ticket fraud, a website emerged promoting a “Magnetic Hill Music Festival 2016” in Moncton, NB, featuring Taylor Swift, Sam Smith, Hozier and Vance Joy. The promoters claimed the proceeds from the late July festival would go to a Nova Scotia hospital.

The prospect of major stars coming to Moncton was not, in itself, implausible. The Magnetic Hill site had previously hosted major international artists such as U2, Springsteen and The Rolling Stones.

According to a CBC report, however, this festival was a hoax. One clue might have been the numerous spelling errors on the website, including Maritime, which appeared as Mairtime.

Isabelle LeBlanc, director of corporate communications for the City of Moncton, told the CBC that the concert was “an absolute scam.” Fortunately, the hoax was detected before the website was able to process payments for tickets, which were priced at $100 to $120 apiece.

Last year, tickets to the ever-popular Swift were sold to people in the Vancouver area through ads posted on Craigslist by a couple. The 30-year-old man and 22-year-old woman also sold fake tickets to AC/DC, Sam Smith and Fleetwood Mac, as well as five-day Disneyland passes. Vancouver police spokesman Const. Brian Montague told the Vancouver Sun that “conservatively, you’re looking at [victims in] the hundreds.”

While consumers likely know that purchasing tickets on Craigslist and Kijiji can be risky, they can take steps to assess the legitimacy of the tickets. “Avoid purchasing tickets if they do not include the block, row and seat details,” advises Action Fraud. “Without these details there is no way to determine if the tickets exist or not.” It suggests never buying tickets through social networks such as Twitter or Facebook. “Only make purchases from sites encrypted for payment. Look for the closed padlock, and the web address in the browser should begin ‘https.’ Be aware that fraudsters often employ Search Engine Optimizers to give them false positive feedback and often copy Terms and Conditions from legitimate ticket sellers’ websites.”

The sometimes-murky world of ticket sales and exorbitant resale prices can’t be discussed without a mention of Ticketmaster, which monopolizes ticket sales in North America. Consumers have long complained about its booking fees, among other grievances.

In 2009, then Industry minister Tony Clement told the House of Commons he was referring to the Competition Bureau allegations that Ticketmaster was involved in price gouging by reselling sold-out tickets at an inflated price on its subsidiary website TicketsNow, a charge the company denied, Sun Media reported (the Competition Bureau declined to investigate).

That year, however, a class-action lawsuit was launched against the company in Quebec, Ontario, Alberta and Manitoba, claiming the same practice existed. In 2012, a court ordered Ticketmaster to pay an $850,000 settlement to consumers who had been directed by the company to TicketsNow (later shut down by Ontario), which demanded a premium payment.

That settlement was small compared to the US$400-million payment it agreed to in the US in 2014. “Credit will be offered to 50 million ticket buyers who were charged [fees] that were secretly profit centers for the company,” the Hollywood Reporter said. “The lawsuit, originally filed in 2003, alleges that Ticketmaster, now owned by Live Nation but then part of IAC/ InterActive Corp., misled consumers by charging ‘order-processing fees’ and a UPS ‘delivery fee’ and that the company didn’t spend on either,” the publication said.

The company did not admit to any wrongdoing. It did, however, “change the language on its website to clarify that order processing and delivery charges may include a profit for Ticketmaster.”

To help consumers, in July 2015 Ontario amended its Ticket Speculation Act, making it legal for the “for-profit resale of tickets if sellers can provide authentication or offer a money back guarantee,” the Star reported. “The provincial government, which had previously prohibited the selling of tickets for higher than face value, said the change was made to protect consumers against fraud in the increasingly popular online ticket resale market. Anyone reselling without those safeguards on Kijiji and Craigslist is still breaking the law.”

The amendment, the newspaper noted, “opened the door for big players like Ticketmaster to offer a fan-to-fan marketplace where people can resell their tickets for more than they paid to Ticketmaster in the first place.”

The new law will at least take away the taint of illegality to what had become a commonplace aspect of the ticket-sale black market. It won’t eliminate fraud or gouging, of course. These will almost certainly continue to exist because of the law of supply and demand. Today it’s the rush to see Adele, Swift, the Toronto Blue Jays and other major attractions. Others will be added to the list as their stars shine bright.

Consumers, however, may still be left trying to enter an event with a ticket that is not worth the paper it was printed on, or with legitimate seats that cost much more than the average fan could ever afford. And after all, it’s all about the fans. Just ask Justin Bieber.

About the Author

David Malamed


David Malamed, CPA, CA•IFA, CPA (Ill.), CCF, CFE, CFI, is a partner in forensic accounting at Grant Thornton LLP in Toronto.

comments powered by Disqus

Highlights

Jointly presented by CPA Canada and CPA Ontario, The ONE is the must-attend, multi-track event of the year, designed for all CPAs who want to be at the top of their game.

Our Firm Directory allows you to search for Canadian CPA firms using our interactive map as well as other criteria.

You’re in the eye of the storm amid a swirl of slips, forms and receipts. Chart your way through tax-time turbulence with these updates and resources.