Lollapalooza and Antitrust

Josh Wright —  28 June 2010

Apparently, the Illinois Attorney General is investigating Lollapalooza for potential antitrust violations arising out of exclusivity clauses that the concert promoter includes in the contracts signed with artists who play the show.

The controversial radius clauses prohibit Lollapalooza acts ranging from the top headliners to the smallest “baby bands” at the bottom of the bill from playing anywhere else in the Chicago area for months before and after their appearance at Lollapalooza in August. Sources have said that the most extreme of these clauses stretch from six months before Lollapalooza to three months after it, and that they encompass a 300-mile radius—which would include concert markets as far away as Milwaukee, Madison, Iowa City, Detroit, and Indianapolis.

Many local Chicago club owners and independent concert promoters have said that these radius clauses are decimating the local music community and significantly hurting their business for much of the year, and that they constitute unfair, anti-competitive practices. Lollapalooza promoters respond that the clauses are standard practice in the concert industry, and that they waive them for any artist who asks to be excused from their requirements.

The standard exclusivity clause, it is reported, restrict bands from playing 180 days before and 90 days after Lollapalooza within a 300-mile radius.  On the waiver issue, C3, the promoter behind Lollapalooza, claims to have never denied an exemption to a requesting artist.

There is no word yet on whether the Illinois AG will file a complaint.  The publicly available facts, however, don’t seem to trigger much of an antitrust issue.  Note that the pro-competitive explanation for exclusivity here is fairly intuitive and recognized by the entire industry (check the links above for representative quotes): C3 makes large promotional and marketing investments to ensure the success of Lollapalooza and has a legitimate economic interest in ensuring that competitors are not allowed to free-ride on those investments.  Exclusivity constrains the ability of rival concert promoters to free-ride by scheduling performances (presumably at lower prices) around Lollapalooza and thus facilitates the output-enhancing investment in the first place.   There are other points to be made about the apparent short duration of the exclusives.

But notice that we’re talking about antitrust efficiency defenses before we’ve made out the plaintiffs prima facie case here.   Absent a demonstration that C3 has market power in the relevant antitrust market, the exclusive is not of antitrust concern.   Without conducting a full market definition exercise, I’m skeptical that C3 has antitrust-relevant market power.  Consider the alternatives available for competing concert owners.  What’s the relevant market?  Well, even narrowly defined, perhaps its an input market involving musicians.  Perhaps musicians who might come play in Chicago?  Perhaps we could further segment the market by genre.  Anyway, I’m skeptical that even under the most narrow plausible market definitions, that C3 has conventional antitrust market power.  Does C3 tie up such a sufficient fraction of artists for show that it is left with no choice?  I doubt it.  And without antitrust market power, I suspect such a complaint wouldn’t go anywhere under the Sherman Act.

NOTE: We discussed similar issues in this post on the Harlem Ambassadors claims against the Harlem Globetrotters, and the contractual arrangements the latter entered into with sports arenas and other venues that would limit the venue’s ability to put on performances from the Ambassadors (or presumably, similar competitors) for 8 weeks prior and 4 weeks after the Globetrotters came to town.  Perhaps unsurprisingly given the above analysis, I argued then that the Globetrotters had little to fear from the Sherman Act.

I’m also very disappointed in the title of my blog post.  Lollapalooza and the Globetrotters in a single post and that was all I could come up with?

One response to Lollapalooza and Antitrust

    antitrust guy 29 June 2010 at 6:02 pm

    The market definition question is an interesting one, as is whether a dangerous probability C3 will acquire a monopoly from its conduct.

    It seems that the market complained of is more along the lines of “Concert promotion/sales at venues in the Chicagoland area” (violating the 5-word limit). But what is the likelihood C3 is going to monopolize that market given the business model? First off, they don’t seem to be aiming at the clubs and bars venues, so it’s probably large venues/events. Plus they’re limited to Lollapalooza. Are they really likely to put all these bars out of the music business, or at least out of the independent music promotion business, such that only C3 artists are able to play in the bars?