Heerwagen v. Clear Channel Communications

435 F.3d 219, 2006 U.S. App. LEXIS 524, 2006 WL 45859
Court of Appeals for the Second Circuit·Decided January 10, 2006·No. No. 04-0699-CV·Published·Cited by 8 cases

Opinion

CARDAMONE, Circuit Judge.

Plaintiff, a putative class representative, brought this civil antitrust action in the United States District Court for the Southern District of New York (Sprizzo, J.), charging violations of § 2 of the Sherman Act against defendants Clear Channel Communications, Inc., et al. Plaintiff initiated suit on June 13, 2002 seeking damages and injunctive relief. She amended her complaint two months later. Defendants moved unsuccessfully to dismiss the amended complaint. Plaintiff then filed a motion for class certification pursuant to Federal Rule of Civil Procedure 23(b)(3). After limited discovery, the district court denied that motion in an order dated August 11, 2003.

BACKGROUND

I The Parties

Plaintiff Malinda Heerwagen (Heerwagen, plaintiff or appellant), an Illinois resident, has lived in Chicago during the entire putative class period from 1997 to the present. During that time she attended ten rock concerts held in her hometown where she heard, among others, U-2, The Grateful Dead, The Rolling Stones, and Paul McCartney. Heerwagen has not attended any concerts outside Chicago during the class period, nor has she studied the ticket prices of concerts held elsewhere.

Defendants Clear Channel Radio, Inc. and Clear Channel Entertainment, Inc. are [223] wholly owned subsidiaries of defendant Clear Channel Communications, Inc. (collectively, Clear Channel, defendant, or company), which is based in Texas. Defendant, together with its subsidiaries, makes up a media empire which owns, programs, and sells air time for nearly 1,200 U.S. radio stations and has interests in 240 radio stations overseas. , Through its subsidiaries defendant promotes or produces more than 26,000 live entertainment events per year; owns more than 135 live entertainment venues; and controls 900 music-related websites, 19 television stations, and more than 700,000 outdoor-advertising displays.

II Plaintiffs Allegations

A. Live Concert Industry in General

The following facts regarding the live concert ticket industry are alleged in the complaint. Typically, a live concert is the product of negotiations between a concert promoter, who stages a performance, and a booking agent, who represents an artist. The agent sells the right to organize a particular concert to a promoter who not only oversees the logistics and sells tickets to the public, but is ordinarily also responsible for the expenses of a show he promotes.

In the early 1970s, as new artists emerged whose performances could fill larger venues, certain regional promotion companies became big businesses. In 1997 a company called SFX Enterprises, Inc.(SFX) spent billions to acquire many major regional promoters. In 2000 Clear Channel purchased SFX and thereby became the nation’s largest promoter and producer of live entertainment events. In 2001 defendant accounted for 70 percent of concert ticket revenue in the United States. Clear Channel’s combined ownership of radio stations, outdoor advertising, and concert halls enabled it to book nationwide tours for performing artists without the involvement of independent operators, which regional promoters by definition cannot accomplish.

B. Allegations of Monopolistic Practices

Plaintiff maintains that Clear Channel uses its national presence to set nationally uniform concert -ticket prices for certain tours. Specifically, plaintiffs amended complaint charges that Clear Channel has engaged in anticompetitive, predatory, and exclusionary practices in an effort to acquire, maintain and extend its monopoly power in a national ticket market for live rock concerts. Defendant’s conduct allegedly constituted monopolizing and attempted monopolizing of the relevant market and thus violated § 2 of the Sherman Act, 15 U.S.C. § 2.. This conduct allegedly injured plaintiff because it forced her to pay inflated prices for concert tickets. The amended complaint also asserts an unjust enrichment claim that the parties do not pursue on this appeal.

To prove an unlawful inflation of ticket prices plaintiff relies on the difference between recent increases in concert ticket prices nationwide and recent increases in the Consumer Price Index (CPI). According to Princeton University Economics Professor Alan B. Krueger, U.S. concert ticket prices rose 61 percent from 1997 to 2002, but only 21 percent between 1991 and 1996. See Alan B. Krueger, How Much is Too Much? The Economics of Concert Ticket Prices, Keynote Address at the Concert Industry Consortium 2002 (Feb. 7, 2002), in The Concert Hotwire, Mar. 4, 2002, at 16, 17 (exhibit to motion for class certification). By comparison, the CPI increased 13 percent between 1997 and 2002, and 15 percent between 1991 and 1996. Id. Prices for top groups (those listed in the Rolling Stone Encyclopedia of Rock and Roll for which Pro[224] fessor Krueger had data) rose even more; ticket prices for these groups rosé 73 percent between 1997 and 2002. Id.' In that period the price of concert tickets rose more than ticket prices for movies, theatrical performances and sporting events. Id. at 20.

Plaintiff asserts that the rise in concert ticket prices during the proposed class period, 1997 to the present, was the direct result of Clear Channel’s intentional use of its dominance in other markets, particularly in the radio market, to achieve its objective of monopolistic profits through higher ticket prices. Heerwagen avers that Clear Channel has excluded competitors from the relevant market by using its position in the radio industry to put pressure on artists who do not avail themselves of Clear Channel’s concert promotion services (non-Clear Channel artists) in a number of ways: (a) limiting their access to advertising on Clear Channel radio stations; (b) misrepresenting the availability of advertising; (c) charging them excessive advertising rates; (d) excluding them from updates on future concert dates; and (e) failing to include them in miscellaneous promotions such as ticket giveaway contests.

By these means, plaintiff maintains, the company has been able to lure artists to sign on with it as a promoter of their tours. According to the complaint, Clear Channel’s alleged anticompetitive actions have led to reduced competition in the concert promotion market, unreasonable restraint of competitors’ entry into the relevant market, limitation of air time for non-Clear Channel artists, and reduction of announcements about non-Clear Channel artists’ upcoming concerts. These alleged unreasonable restraints have resulted' in artificially high concert ticket prices and a decrease in concert information available to consumers. Plaintiff insists that any procompetitive benefits of defendant’s actions are outweighed by these anticompetitive effects.

Ill District Court Proceedings

Plaintiffs amended class action complaint defined the putative class as follows

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Heerwagen v. Clear Channel Communications, 435 F.3d 219, 2006 U.S. App. LEXIS 524, 2006 WL 45859 (2d Cir. 2006).

435 F.3d 219 (Heerwagen v. Clear Channel Communications) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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Heerwagen v. Clear Channel Communications
435 F.3d 219 (Second Circuit, 2006)