Blocking a deal isn’t always best antitrust answer

September 30, 2011

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Blocking mergers is the bluntest tool in an antitrust watchdog’s armory. That’s what the U.S. Justice Department is trying with AT&T’s ambitions to acquire T-Mobile USA. But as the case of Live Nation Entertainment shows, aborting deals isn’t always necessary to foster competition – extracting concessions can work instead.

The $1.5 billion group was created by the early 2010 union of TicketMaster, the largest ticket seller in the United States, with the leading concert promoter. The creation of such a vertically-integrated beast scared consumer groups – even rock’n’roll tough guys like Pearl Jam and Bruce “the Boss” Springsteen sang foul.

But a funny thing happened on the way to Live Nation’s predicted market domination. It never actually materialized. That much is apparent to the company’s stockholders. Since hitting a post-crisis peak north of $16 soon after the merger closed, the stock has lost about half of its value.

In approving the deal, the DOJ set some important conditions. Among these, Live Nation was required to license its ticketing technology to a nascent rival, AEG. It was also prohibited from retaliating against venues that worked with competitors.

At the time, opponents of the merger considered these insufficient. Clearly investors today think differently. Since August, when AEG went live with its new ticketing site, Axs – led by the former chief executive of TicketMaster – shareholders have clipped a quarter out of Live Nation’s share price.

In addition to competitive threats, Live Nation appears to have set itself back by misjudging the market. While Lady Gaga still manages to attract hordes of little monsters to big arenas, consumer preference may be moving toward smaller venues. To wit, Radiohead played the relatively tiny Roseland Ballroom in New York this week – not Madison Square Garden.

One promoter taking advantage of changing tastes is Ashley Capps. Later this month he is putting on Moogfest, a three-day festival dedicated to the synthesizer. Some 12,000 concertgoers paying as much as $350 are expected to attend each day. And all of this, arguably, was made possible by regulators flexible enough to look for alternatives to blocking Live Nation’s deal.

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