Jonathan Sandiford QC writes about this landmark case in which the Court of Appeal Criminal Division (“CACD” or “the Court”) considered the legality of ticket touting and the impact upon the consumer rights or interests of fans and the commercial interests of all those involved in the music business.
Jonathan was instructed with Danielle Graham by National Trading Standards (“NTS”).
The CACD considered and disposed of a number of arguments previously used by touts and others to justify their conduct and resist attempts by artists, promoters, venues, ticket sellers, the CMA and Trading Standards to combat ticket touting.
The judgment will therefore make it easier to use and enforce ticket restrictions to prevent and deter touting and for prosecutions to be brought by enforcement bodies against the touts and others that benefit from their activities.
The appeal followed a successful prosecution by NTS for offences of fraudulent trading and having articles for use in fraud which reflected some of the most common dishonest practices of ticket touts, including:
(i) the use of multiple identities (names, addresses, payment cards and email addresses) and specialist software (including bots and the Insomnia web browser) to acquire tickets in breach of the restrictions intended to prevent ticket touting.
(ii) reselling tickets that were at risk of being cancelled or refused entry due to being acquired by the methods described in (i).
(ii) ‘spec selling’ – the listing and selling of non-existent tickets to deceive consumers into purchasing them.
The appeal dealt with some points of wider application concerning the legal elements of fraudulent trading using limited companies under s993 of the Companies Act 2006 (and by implication, the similar offence under s9 of the Fraud Act 2006 of fraudulent trading as a sole trader or via other types of trading entity).
These points of wider application are dealt with elsewhere, this article will focus upon the issues and implications for ticket touting.
The Impact of Ticket Touting on Consumers and Commercial Interests:
The CACD noted that, by ‘harvesting’ large numbers of tickets, touts prevented consumers from being able to acquire tickets at face value from ‘honest’ ticket websites.
This distorted the market and created an artificially inflated demand for tickets at inflated prices on secondary ticket websites (STWs).
The touts also interfered with the legitimate commercial interests of artists, promoters and primary ticket sellers (AXS, Eventim and Ticketmaster etc.) by:
(i) Undermining their rights to enforce contractual restrictions on sale and efforts taken to curb the activities of ticket touts.
(ii) The reputational damage caused when consumers were overcharged or unable to afford to buy tickets for their favoured artist.
The Court concluded that:
The tout adds nothing whatsoever of value to the service. All that is achieved, to use the vernacular of Hunter…., was to make “fucking loads” for the touts
Key Points for Combatting Ticket Touting
1. The legal status of a ticket
The CACD rejected the notion that a ticket was a ‘mere good’, that could be bought and re-sold like any other personal property without regard to the terms and conditions on which it was issued by the artist, promoter, venue or primary ticket seller. Rather, a ticket was a contractual licence issued on terms and therefore in legal terms, a ‘chose in action’ rather than a ‘mere good’. Even if tickets were to be regarded as ‘mere goods’, the Court held, that they would still be subject to the rights and obligations attached to them. Hence, the Court concluded at Para 174:
When a ticket is handed from person to person it transfers any restrictions upon use. The Judge’s analysis accords with the law but also with elementary common sense.
2. Terms and conditions (or restrictions) designed to prevent secondary ticket sales and touting were not systemically unfair.
The CACD rejected the contention that restrictions on the purchase and resale were systemically unfair and therefore unenforceable under Part 2 of the Consumer Rights Act 2015.
The most important restrictions used to prevent or deter ticket touting were identified by the Court as:
– limiting the number of tickets that an individual could purchase
– prohibiting purchases by commercial traders or those acting for them
– banning resale save in limited circumstances
– the right to cancel or refuse entry to tickets that had been resold.
The Court observed at Paragraph 7 that:
The object behind the restrictions is to prevent the very activity that the appellants in this case were engaged in, namely the bulk purchase of tickets for an event with a view to resale at a substantial profit, usually amounting to multiples of the ticket face value, on STW to the detriment of consumers both as to price and risk.
The Court went on to find that such restrictions were intelligible to consumers and served a legitimate purpose in protecting consumers from the harm caused by ticket touting. At Paragraph 165 the Court concluded that such terms
…seek to address a reprehensible and widespread, and otherwise criminal, practice which operates significantly to the detriment of consumers. This is in our view a compelling starting point. By the same token if the terms were unfair and unenforceable then it would create an environment whereby ticket touts could operate almost with impunity and ticket vendors could do nothing to prevent the practice.
3. Failing to warn consumers that tickets were or may be invalid was a breach of the Consumer Protection from Unfair Trading Regulations 2008.
The CACD noted that, both Hunter and Smith and the STWs used by them, had failed to make clear that consumers were acquiring at inflated prices, tickets that event organisers might treat as null and void.
At Para 12 the Court observed that:
“This lack of transparency is unlawful. ….Regulations 5 – 6 of the Consumer Protection from Unfair Trading Regulations 2008 impose a duty on sellers of tickets not to present information about the existence or main characteristics of a ticket in a way that deceives or is likely to deceive a consumer…..It is the Prosecution case – which seems to us incontrovertible – that the appellants breached these statutory duties when selling though STW with no warning that the tickets were at risk of cancellation because of the manner in which they had been acquired by the appellants and because of the contractual restrictions attaching to them. Indeed, it was a deliberate part of their business methodology that they kept this information quiet”
Given that breaches of Regulations 5 and 6 are strict liability offences and may now give rise to civil redress, this has significant implications for touts and any commercial organisation (trader) used by them to re-sell tickets.
Whilst there is available a due diligence defence, the most elementary measures necessary to establish such a defence would almost inevitably reveal that tickets were obtained and offered for re-sale in breach of restrictions and by the commission of offences of fraud of the type considered by the CACD in this case.
4. Collusion by Primary Ticket Sellers and STWs did not negate dishonesty or excuse the dishonesty of Hunter and Smith.
In dismissing the appellants contention that they were not dishonest because some primary ticket sellers and STWs had colluded in their activities, the CACD at Para 19 sounded a warning note to other touts and other persons in the ticketing market who colluded with them:
If the appellants are correct and there are potentially hundreds of other operators all running businesses like theirs; and if they are also correct and there is connivance and collusion between ticket touts and the PTW and STW, then the ticketing market is one which appears to be characterised by a high degree of criminal fraud. The evidence we have seen certainly suggests this possibility. This appeal however focuses more narrowly upon the conduct of the appellants as buyers and resellers of tickets, and not on the possibility that fraud is also being perpetrated by others. It will be for the prosecutorial authorities to consider whether other and broader enforcement action is necessary.
At Paragraph 191 the Court returned to the core of NTS’ case on fraudulent trading and summarised it in the following terms:
We return to a point that we have already made which is that, at base, the Prosecution case is relatively simple. It involves defendants who institute systems of business the purpose of which is dishonest. On the facts the dishonesty lay in a system designed to deploy a deliberate and systemic lack of candour in dealings with sellers of tickets and buyers of tickets, all of which was intended to enable the appellants to charge grossly inflated prices to consumers for risk laden tickets and earn substantial profits thereby
The CACD swept a number of the arguments previously used by ticket touts and others to resist attempts to prevent and deter their activities which serve no other purpose than to manipulate the market to the detriment of consumers and to the gain of touts and other commercial operators who rely upon them for profit.
This should encourage and enable the enforcement bodies such as NTS and the CMA to take a more robust line with ticket touts and those who facilitate their activities.
Artists, promoters and ‘honest’ ticket sellers should find it easier to be able to use and enforce ticket restrictions for the legitimate purpose of deterring ticket touting and protecting consumers.
Artists, promoters, venues, primary ticket sellers and enforcement agencies seeking advice and representation on the issues raised by this judgment and the prevention of ticket touting or enforcement action should contact Jayne Drake.