Blog
Event Ticketing Fraud: False Claims Act
Contents
Event Ticketing Fraud: False Claims Act
The recent Taylor Swift ticket fiasco has shone a spotlight on shady practices in the live event ticketing industry. Fans feel ripped off and regulators are starting to pay attention. Some fans and consumer watchdogs are even taking legal action under the False Claims Act and other laws.
What is the False Claims Act?
The False Claims Act (FCA) is a federal law that prohibits defrauding the government. It allows private citizens to file lawsuits on behalf of the government against companies that engage in fraud. These private citizens are called “whistleblowers” or “relators.”
To violate the FCA, a company must knowingly submit false claims for payment to the government, use false records or statements to get claims paid, or conspire to defraud the government. Common examples are overbilling Medicare or providing substandard products/services to the military.
If found liable under the FCA, a company must pay back triple the amount of damages to the government plus penalties. Whistleblowers who initiate the lawsuit receive 15-30% of the recovered funds.
How Does This Relate to Event Tickets?
At first glance, event ticketing and the FCA seem unrelated. But creative attorneys are finding ways to apply the FCA based on ticketing industry business practices.
Anti-Competitive Behavior
Plaintiffs often allege that major ticket sellers like Ticketmaster engage in anticompetitive behavior that defrauds government entities. This includes:
- Price fixing
- Restricting ticket supply to drive up resale prices
- Forcing venues into exclusive contracts that limit consumer choice
If proven, this anti-competitive conduct could violate federal or state antitrust laws. Plaintiffs then argue that these antitrust violations “taint” all ticket sales to government entities under the FCA.
Substandard Products or Services
When tickets are resold at inflated prices or counterfeit tickets are sold, buyers may claim they received a “substandard product.” Government employees who purchase these marked up or fake tickets for work travel/conferences could trigger FCA liability.
For example, if a Defense Department employee buys overpriced tickets for a work trip, the plaintiff may claim the government “overpaid” due to industry manipulation. Or if a municipal employee buys a knockoff ticket that doesn’t grant venue access, the city could claim “fraudulent” services under the FCA.
Kickbacks or Bribes
Offering kickbacks, bribes, or other “remuneration” to secure business can also lead to FCA violations. For instance, providing free sports tickets or concert tickets to hospital executives who agree to use a ticketing platform could be an FCA issue.
This theory relies on the Anti-Kickback Statute, which prohibits payments to induce referrals of federal healthcare business. Even though ticketing falls outside healthcare, the alleged bribes could still “taint” claims submitted to government programs.
Recent Ticketing Industry Lawsuits
While novel, these event ticketing FCA arguments are gaining some traction in court. Recent examples include:
Taylor Swift Fan Lawsuit Against Ticketmaster
After the botched sale of Taylor Swift concert tickets, fans filed a proposed class action suit against Ticketmaster and its parent Live Nation. The lawsuit alleges:
- Monopolistic practices that inflate ticket prices
- Fake or substandard tickets sold due to insufficient verification
- Violations of antitrust and consumer protection laws
While not directly alleging FCA violations, the lawsuit could provide a roadmap for future whistleblower suits about overpayments on tickets bought by government entities.
NextGen Healthcare FCA Settlement
Health records company NextGen Healthcare paid $31 million to settle a ticketing related FCA case. The lawsuit claimed NextGen gave free sports and event tickets to hospital executives to induce them to use NextGen’s software.
The government alleged this violated Anti-Kickback laws, which tainted hospital claims submitted for reimbursement from federal healthcare programs like Medicare. So even though no patients received substandard care, the kickbacks themselves triggered FCA liability.
What This Means for the Ticketing Industry
These emerging FCA lawsuits create substantial legal risks for major ticket sellers like Ticketmaster, StubHub, Vivid Seats and more. Even tangential involvement with government customers could lead to potential liability.
It also demonstrates that almost any industry is susceptible to FCA claims with the right legal framing. Savvy whistleblower attorneys are getting creative in applying the FCA well beyond its traditional bounds of overbilling Medicare or defense contracting fraud.
For its part, the ticketing industry should proactively assess any anti-competitive practices, kickbacks or bribes, and sale of substandard tickets. Implementing robust compliance programs could help mitigate liability down the road.
But make no mistake – we likely haven’t seen the last of event ticketing FCA disputes. Where there’s a will (and the potential for a big monetary award), creative attorneys will find a way!
Sources: