Ticket scalping

ISE04/18-19

Subject:

home affairs, commerce and industry, ticket scalping, secondary ticketing, nominative ticket

Ticket scalping is a notorious form of secondary ticket market. It refers to activities where ticket scalpers purchase tickets in the primary market with a deliberate intention of making a profit through resale. In Hong Kong, concert and sports fans often complain about the difficulty to buy popular event tickets in open sale and the exorbitant prices of tickets put on sale on secondary ticket websites shortly after the events are sold-out. The dissatisfaction has sparked concerns over consumers' fair access to event tickets and calls for government intervention.^{1Legend symbol denoting A performance industry body comprising some entertainment companies called for more stringent anti-ticket scalping regulation in its press conference held in May 2018.}
In recent years, online ticket sale has become a norm and changed the scalping practice. Scalpers nowadays can resell tickets through secondary ticket or auction websites and social media platforms. Improved technology has also enabled scalpers to snatch tickets in large quantity from the primary ticket market through automated software. While ticket resale ban is often part of ticket conditions imposed by event organizers, its deterrent effect (i.e. through cancellation of tickets resold) is limited as it relies on the organizer's vigorous monitoring and enforcement at their own cost.
At the Panel on Home Affairs meeting on 26 November 2018, Members urged the Government to step up efforts to combat ticket scalping.^{2Legend symbol denoting Members have raised concerns over ticket scalping through questions raised at the Council meetings in 2004, 2007, 2014 and 2018. See Official Record of Proceedings of the Legislative Council (2018a) and (2018b).} In this regard, the Home Affairs Bureau has indicated that it would review relevant regulations and table a proposal in the third quarter of 2019. It would also consider other measures including increasing ticket supply available to the public and using nominative tickets with names printed. This piece of Essentials revisits ticket scalping regulations of Hong Kong, and the experiences of Australia, particularly the state of Queensland, which was one of the earliest states to introduce anti-scalping regulation.

Ticket scalping regulations in Hong Kong

Currently, several pieces of laws/regulations are applicable to ticket scalping activities in Hong Kong but the most important one is the Places of Public Entertainment Ordinance (Cap. 172) ("PPEO"), under which section 6b was enacted in 1941 in response to growing "intolerable nuisance" caused by on-street ticket scalping.^{3Legend symbol denoting The other laws/regulations are mainly concerned with unauthorized selling or soliciting in specified venues or in public places. These include the Civic Centres Regulation (Cap. 132F) and the Public Health and Municipal Ordinance (Cap. 132), which regulate the sale of any item in civic centres, and the Summary Offence Ordinance (Cap. 228), which empowers the Police to arrest people causing nuisance by soliciting sale of any item in public places.} Section 6b(2) of PPEO made it an offence for any person selling, offering for sale, or soliciting purchase, tickets for admission of events held at licensed venues at "a price exceeding the amount fixed by the proprietor, manager or organizer".^{4Legend symbol denoting The law was introduced to curb street violence related to ticket reselling. See Official Record of Proceedings of the Legislative Council (1941).} Ticket sellers breaching this rule is liable to a fine of HK$2,000 which has remained unchanged since 1950. Yet, there has been a lack of known records of enforcement.^{5Legend symbol denoting It was reported in 2004 that Police arrested 10 people in connection with "access to computer with criminal or dishonest intent" under section 161 of the Crimes Ordinance (Cap. 200). The arrested allegedly colluded to push up the ticket resale price in online bidding. However, Police does not keep statistics on the such arrests and prosecutions. See Official Record of Proceedings of the Legislative Council (2018a).}
In 2002, the Secretary for Home Affairs issued an exemption order under PPEO to exempt venues of Home Affairs Department, and Leisure and Cultural Services Department ("LCSD") which controls the largest number of performance and recreation venues, including the most popular 12 500-seat Hong Kong Coliseum, from the legal licensing requirements for places of public entertainment.^{6Legend symbol denoting LCSD managed facilities all along had not been required to be licenced under PPEO. That arrangement was formalized in the Places of Public Entertainment (Exemption) Order in 2002, when the Government sought to regulate the then popular rave parties in unlicensed premises through amendment to Schedule 1 of PPEO.} That arrangement is now considered as a loophole where tickets of any event held in these exempted public venues are not subject to the regulation.
The opportunity for ticket scalping to a large extent hinges on the supply of tickets in the primary market. At present, LCSD has put in place administrative measures limiting the proportion of tickets allotted to sponsors or priority sale to no greater than 80% for events held in large venues, and capping the number of tickets purchased each time.^{7Legend symbol denoting Event organizer has to limit internal and priority sale to no more than 80% (49% prior to 2001) of all available tickets for event held in Hong Kong Coliseum and Queen Elizabeth Stadium, and 49% for events held in other LCSD venues. In the past, about half of tickets printed under the public-funded ticketing system were for internal sale or gift coupon. Meanwhile, Urbtix, the official ticketing system hired by LCSD, allows only up to 40 tickets purchased each time regardless of the means of purchase.} Nevertheless, the upper limit of 80% for internal sale/distribution has been criticized to be overly high. To improve the public access to event tickets, the Government has recently indicated its intention to lower the proportion for internal distribution/sale, despite industry concerns that the change might affect the business relationships among the industry players and events' commercial viability.
Last year, after a spate of criticism on ticket speculation, LCSD also introduced an unprecedented one-off arrangement of using balloting and nominative tickets to ease public concerns on fair access to tickets of a concert event held in May 2018 at the Hong Kong Cultural Centre. While that arrangement effectively ruled out ticket scalping and even resale for genuine need, it is also considered as too costly for event organizers and time consuming for event goers.^{8Legend symbol denoting The arrangement required ticket holders to arrive at the event venue with their identity proof well before the concert began. Each ticket holder was also charged an extra HK$35 as administration fee per ticket for ticketing balloting. Apart from the concert event held at the Hong Kong Cultural Centre, the arrangement of nominative tickets had also been adopted for some concerts held in Asia-Expo. Ticket holders were reportedly randomly checked while entering the concert venue.} Despite that, the Home Affairs Bureau will still consider if this can be adopted on either a voluntary or mandatory basis in the future.
In sum, the Government has suggested various possible administrative and legislative measures to address the current inadequacies relating to sale of tickets for events held at LCSD venues. While the Government has planned to explore the feasibility of amending PPEO to cover LCSD venues with a view to combating profiteering activities,^{9Legend symbol denoting Other possible legislative proposals being considered by the Government include amending the Public Health and Municipal Ordinance (Cap. 132) that allows the relevant authority to make regulations on matters relating to civic centres, and amending the Summary Offence Ordinance (Cap. 228) to strengthen the provisions relating to touting in public places.} PPEO's ticket scalping provision as highlighted above is criticized by Members at the Panel on Home Affairs meeting on 26 November 2018 to be outdated with a lenient penalty.

Ticket scalping regulations in Australia

Secondary ticketing is a lucrative business in Australia, with an estimated market value of A$100 million (HK$700 million) a year which is equal to 5% of the value of the primary market.^{10Legend symbol denoting See Acil Allen Consulting (2014).} However, ticket scalping is not federally regulated. Instead, through the Australian Consumer Law, the federal government protects consumers from unfair sale practices in the ticket market including ticket resale involving misleading and deceptive conduct.^{11Legend symbol denoting In 2017, the Australia Consumer and Competition Commission sued an online ticket resale website for providing false and misleading information to consumers.} Amid growing consumer dissatisfaction over ticket scalping, the federal authorities have in recent years reviewed the secondary ticket market but have so far not taken any concrete action on it.^{12Legend symbol denoting In 2010, the Commonwealth Consumer Affairs Advisory Council published a report on ticket reselling, which did not recommend a national regulatory framework as it believed that the problem was not as serious as reported. The report was followed by an inquiry by a Senate committee in 2013 which also did not suggest any drastic measures. In November 2017, the Treasury of the federal government published a consultation document on the regulatory impacts of policy options relating to ticket reselling in Australia. The options are status quo with consumer education, national prohibition on ticket reselling, restricted reselling, improved information disclosure arrangement for ticket resellers, and national ban on the use of ticket-buying "bots" software. The submitted views published by the Treasury were divided over the options, particularly over the national prohibition on ticket reselling but most of them agreed on the option of banning "bots." There is no further update from the Treasury after the consultation.}
On the other hand, at the local level, between 2013 and 2017, many states have passed new legislation or reinforced existing regulations to combat ticket scalping. Some of these laws have even gone beyond the realm of secondary ticket market. For instance, New South Wales and South Australia have banned the use of automatic software to harvest tickets in bulk from the primary ticket market.^{13Legend symbol denoting Such ban has been imposed in the United States in 2016, and the United Kingdom in 2017. However, there is little public information over the enforcement of the law. In Australia, New South Wales introduced a similar ban in 2017, followed by South Australia in 2018. The magnitude of the "bots" problem was highlighted by a global online ticket agent which had reported 6 billions of such attempts - or 11 000 per minutes - in its platforms in 27 countries in 2016.} In Victoria, organizers of major sports events declared by the government are required to seek government approval of a ticket scheme, which must comply with the ticketing guidelines made by the Minister. The ticketing guidelines set out the requirements for a ticket scheme, such as specifying the minimum proportion of tickets made available for sale or distribution to the public or to particular classes of people, and placing conditions on such sale or distribution. However, it appears that there is no requirement for mandatory use of nominative tickets.
Queensland is among the first states in Australia to legislate against scalping in view of the "increasing prevalence" in scalping activities. Despite a common practice of event organizers in Australia to impose a self-enforced ticket condition of prohibiting unauthorized ticket resale, it was usually the buyers, rather than the sellers, who suffered loss due to tickets cancelled by the organizer as a result of breaching the ticket condition. To combat profiteering activities and ensuring fair access to tickets by the public, Queensland introduced in 2006 a state-wide regulation on ticket resale to "help bring scalping to an end" by amending the Major Sports Facilities Act 2001.^{14Legend symbol denoting See Queensland Parliament (2006).} The following paragraphs summarize the salient features of the coverage, restriction, and penalty imposed under the regulation in Queensland.

Declared major facilities or events

At present, under the Major Sports Facilities Act 2001^{15Legend symbol denoting The purpose of the Major Facilities Act 2001 is to provide for the management, operation, use, development and promotion of facilities in Queensland for staging national or international sports, recreational or entertainment events, special events and for other purposes.} in Queensland, the Minister can declare facilities with the capacity to stage international or national sports, recreational or entertainment events, as major facilities. Once declared, resale of tickets (except for charities) to events held in these facilities will have to satisfy the resale price restrictions laid by the law. However, the Act does not authorize resale if the original conditions of the tickets prohibit resale. As declaration of facilities could only be made with the agreement of facility owners, all nine facilities currently declared as major facilities are government-owned, with the largest one having 50 000 seats.
Apart from declaring facilities, Queensland also introduced the Major Events Act 2014,^{16Legend symbol denoting The purposes of the Major Events Act 2014 are (a) to enable the State to hold major events in Queensland; (b) to deliver economic and social benefits for the State of Queensland by attracting major events to Queensland; (c) to facilitate the safe and orderly running of major events; (d) to promote the enjoyment of participants and spectators of major events; (e) to prevent unauthorized commercial activities in relation to major events; and (f) to allow visiting health practitioners to be exempted from having to register under State law when practising a health profession for a visitor.} which further empowers the Minister to declare any qualified event as a major event (e.g. Commonwealth Games). Once declared, the event will be subject to the ticket resale price restriction, unless with the approval of the event organizer. The general criteria to declare major events include factors like the event size, demand for tickets, contribution to the state economy and reputation.

Resale price limit

The two laws prescribe a price limit for ticket resale. It is a criminal offence for anyone reselling or advertising to resell tickets to declared major events or events held at major facilities at a price 10% more than the "original sale price" of the event ticket, which includes any fee charged by the agent for the sale. In other words, the limit set the threshold for ticketing scalping. On top of ticket sale price, there may also be postages for ticket mailing and credit card surcharge.^{17Legend symbol denoting See CHOICE (2017).} The Queensland authorities believed that the 10% margin has already struck a balance between legitimate ticket resale and combating scalping as it allows ticket sellers to recoup administrative or booking fees they had paid. The 10% limit has now been adopted across four states.^{18Legend symbol denoting Apart from Queensland, New South Wales, Victoria and South Australia also adopted the 10% price cap, despite slight variations of the terms they use. Both New South Wales and South Australia refer it as 10% of the "original supply cost" - the amount for which the ticket was sold to the first purchaser by an authorised seller - in their respective Fair Trading Act. In New South Wales, to protect consumers, the law also abolishes the right of event organizers to cancel tickets for breach of the ticket resale restriction, if the tickets are resold in accordance with the Act (i.e. at a price below the 10% limit).}

Penalty and enforcement

Under the Major Facilities Act 2001, both ticket buyers and sellers would be liable to fines for engaging in ticket scalping. Buyers may face a fine of up to A$653 (HK$3,794), compared to a fine of up to A$2,611 (HK$15,164) for a reseller under the same law. However, under the Major Events Act 2014, only the sellers would be fined for the same penalty level.^{19Legend symbol denoting In some other states, the penalty charged to individuals and body corporates is different. For example, in New South Wales and Victoria, the maximum penalty charged to a violating corporation is five times more than the level charged to a violating individual.} To enhance the deterrent, the details of the offence and fines would be printed on tickets. The Queensland police are responsible for enforcing the legislation, with the power to issue infringement notice (similar to a fixed penalty ticket in Hong Kong) to sellers and buyers on spots for the scalping offence.
While the above laws and measures were considered necessary by Queensland to combat ticket scalping, their effectiveness and ease of enforcement were questioned. For instance, Live Performance Australia, which represents the live performance industry, had challenged if legislation was the right approach. In its submission to an inquiry of the Parliament of Australia in 2014, it raised that tickets for events held at some declared facilities in Queensland could still be found offered for sale at above the 10% price limit in online platforms. It was also concerned if the state legislation could be effectively enforced in other states or in foreign jurisdictions when the ticket resellers are based overseas and operate via the internet. That said, between 2007 and 2012, the Queensland authorities reported that there were a total of 53 prosecutions (ranging from 1 to 19 cases annually) taken by the Queensland police, for breaches of the anti-scalping provision of the Major Sports Facilities Act 2001 including internet scalping.^{20Legend symbol denoting See Queensland Parliament (2014a) and (2014b). However, there was no mention of whether the online scalping activities were conducted locally or overseas.} A total of 19 charges were laid in the court between 2007 and 2014. There were however no prosecution statistics in relation to the enforcement of the Major Events Act 2014.

Concluding remarks

In light of growing public concerns over ticket scalping in Hong Kong, the Government has proposed various possible measures to address the issue. In Australia, different states have introduced legislation to curb profiteering activities on ticket resale. In Queensland, the scalping regulation is applied to major facilities or major events designated by the government, with a price limit capped at 10% above original sale price to allow for recovery of associated administrative fees commonly charged. Both buyers and sellers are liable to a fine for engaging in ticket scalping if the event is held at major facilities. The regulation however provides flexibility where non-profit organizations can make legitimate resale above the price cap for fundraising. These may shed some lights on the way forward of Hong Kong to deal with ticket scalping.

Prepared by CHEUNG Chi-fai
Research Office
Information Services Division
Legislative Council Secretariat
30 January 2019

Endnotes:

1.	A performance industry body comprising some entertainment companies called for more stringent anti-ticket scalping regulation in its press conference held in May 2018.
2.	Members have raised concerns over ticket scalping through questions raised at the Council meetings in 2004, 2007, 2014 and 2018. See Official Record of Proceedings of the Legislative Council (2018a) and (2018b).
3.	The other laws/regulations are mainly concerned with unauthorized selling or soliciting in specified venues or in public places. These include the Civic Centres Regulation (Cap. 132F) and the Public Health and Municipal Ordinance (Cap. 132), which regulate the sale of any item in civic centres, and the Summary Offence Ordinance (Cap. 228), which empowers the Police to arrest people causing nuisance by soliciting sale of any item in public places.
4.	The law was introduced to curb street violence related to ticket reselling. See Official Record of Proceedings of the Legislative Council (1941).
5.	It was reported in 2004 that Police arrested 10 people in connection with "access to computer with criminal or dishonest intent" under section 161 of the Crimes Ordinance (Cap. 200). The arrested allegedly colluded to push up the ticket resale price in online bidding. However, Police does not keep statistics on the such arrests and prosecutions. See Official Record of Proceedings of the Legislative Council (2018a).
6.	LCSD managed facilities all along had not been required to be licenced under PPEO. That arrangement was formalized in the Places of Public Entertainment (Exemption) Order in 2002, when the Government sought to regulate the then popular rave parties in unlicensed premises through amendment to Schedule 1 of PPEO.
7.	Event organizer has to limit internal and priority sale to no more than 80% (49% prior to 2001) of all available tickets for event held in Hong Kong Coliseum and Queen Elizabeth Stadium, and 49% for events held in other LCSD venues. In the past, about half of tickets printed under the public-funded ticketing system were for internal sale or gift coupon. Meanwhile, Urbtix, the official ticketing system hired by LCSD, allows only up to 40 tickets purchased each time regardless of the means of purchase.
8.	The arrangement required ticket holders to arrive at the event venue with their identity proof well before the concert began. Each ticket holder was also charged an extra HK$35 as administration fee per ticket for ticketing balloting. Apart from the concert event held at the Hong Kong Cultural Centre, the arrangement of nominative tickets had also been adopted for some concerts held in Asia-Expo. Ticket holders were reportedly randomly checked while entering the concert venue.
9.	Other possible legislative proposals being considered by the Government include amending the Public Health and Municipal Ordinance (Cap. 132) that allows the relevant authority to make regulations on matters relating to civic centres, and amending the Summary Offence Ordinance (Cap. 228) to strengthen the provisions relating to touting in public places.
10.	See Acil Allen Consulting (2014).
11.	In 2017, the Australia Consumer and Competition Commission sued an online ticket resale website for providing false and misleading information to consumers.
12.	In 2010, the Commonwealth Consumer Affairs Advisory Council published a report on ticket reselling, which did not recommend a national regulatory framework as it believed that the problem was not as serious as reported. The report was followed by an inquiry by a Senate committee in 2013 which also did not suggest any drastic measures. In November 2017, the Treasury of the federal government published a consultation document on the regulatory impacts of policy options relating to ticket reselling in Australia. The options are status quo with consumer education, national prohibition on ticket reselling, restricted reselling, improved information disclosure arrangement for ticket resellers, and national ban on the use of ticket-buying "bots" software. The submitted views published by the Treasury were divided over the options, particularly over the national prohibition on ticket reselling but most of them agreed on the option of banning "bots." There is no further update from the Treasury after the consultation.
13.	Such ban has been imposed in the United States in 2016, and the United Kingdom in 2017. However, there is little public information over the enforcement of the law. In Australia, New South Wales introduced a similar ban in 2017, followed by South Australia in 2018. The magnitude of the "bots" problem was highlighted by a global online ticket agent which had reported 6 billions of such attempts - or 11 000 per minutes - in its platforms in 27 countries in 2016.
14.	See Queensland Parliament (2006).
15.	The purpose of the Major Facilities Act 2001 is to provide for the management, operation, use, development and promotion of facilities in Queensland for staging national or international sports, recreational or entertainment events, special events and for other purposes.
16.	The purposes of the Major Events Act 2014 are (a) to enable the State to hold major events in Queensland; (b) to deliver economic and social benefits for the State of Queensland by attracting major events to Queensland; (c) to facilitate the safe and orderly running of major events; (d) to promote the enjoyment of participants and spectators of major events; (e) to prevent unauthorized commercial activities in relation to major events; and (f) to allow visiting health practitioners to be exempted from having to register under State law when practising a health profession for a visitor.
17.	See CHOICE (2017).
18.	Apart from Queensland, New South Wales, Victoria and South Australia also adopted the 10% price cap, despite slight variations of the terms they use. Both New South Wales and South Australia refer it as 10% of the "original supply cost" - the amount for which the ticket was sold to the first purchaser by an authorised seller - in their respective Fair Trading Act. In New South Wales, to protect consumers, the law also abolishes the right of event organizers to cancel tickets for breach of the ticket resale restriction, if the tickets are resold in accordance with the Act (i.e. at a price below the 10% limit).
19.	In some other states, the penalty charged to individuals and body corporates is different. For example, in New South Wales and Victoria, the maximum penalty charged to a violating corporation is five times more than the level charged to a violating individual.
20.	See Queensland Parliament (2014a) and (2014b). However, there was no mention of whether the online scalping activities were conducted locally or overseas.

References:

Australia
1.	Acil Allen Consulting. (2014) Secondary Ticketing Sales Market.
2.	Australia Consumer Law. (2018) Ticket onselling.
3.	CHOICE. (2017) Ticket to take us for a ride.
4.	Commonwealth Consumer Affairs Advisory Council. (2010) Consumers and the ticket market - Ticket onselling in the Australian market.
5.	New South Wales Government. (2018) Fair Trading Amendment (Ticket Scalping and Gift Cards) Act 2017.
6.	Queensland Government. (2019a) Major Events Act 2014.
7.	Queensland Government. (2019b) Major Facilities Act 2001.
8.	Queensland Parliament. (2006) Record of Proceedings, 31 October.
9.	Queensland Parliament. (2014a) Department of Tourism, Major Events, Small Business and the Commonwealth Games - Response to Questions on Notice, Major Events Bill 2014.
10.	Queensland Parliament. (2014b) Report No. 51, Major Events Bill 2014.
11.	The Senate. (2014) Ticket scalping in Australia.
12.	Treasury. (2017) Ticket Reselling in Australia.
Hong Kong
13.	Consumer Council. (2018) Soaring Prices of Second-hand Tickets on Reseller Platforms, But No Customer Service & All Risks to be Borne by the Consumers.
14.	Home Affairs Bureau.(2018) Sale of Tickets for Events Held at Venues of the Leisure and Cultural Services Department. LC Paper No. CB(2)292/18-19(05).
15.	Official Record of Proceedings of the Legislative Council. (1941) 16 January.
16.	Official Record of Proceedings of the Legislative Council. (2018a) 21 March.
17.	Official Record of Proceedings of the Legislative Council. (2018b) 11 April.
18.	Urban Ticketing System. (2018) Website.
19.	《促將炒賣門票列刑事提高罰款演出業協會提6建議嚴打黃牛》，星島日報，2018年5月28日。
20.	《城市售票網三成票不公開賣網頁App每次容納2000人議員促改善》，明報，2018年5月2日。
21.	《歌神演唱會門票炒貴20倍》，東方日報，2004年5月29日。

^{Essentials are compiled for Members and Committees of the Legislative Council. They are not legal or other professional advice and shall not be relied on as such. Essentials are subject to copyright owned by The Legislative Council Commission (The Commission). The Commission permits accurate reproduction of Essentials for non-commercial use in a manner not adversely affecting the Legislative Council, provided that acknowledgement is made stating the Research Office of the Legislative Council Secretariat as the source and one copy of the reproduction is sent to the Legislative Council Library. The paper number of this issue of Essentials is ISE04/18-19.}