StubHub’s co-founder Jeff Fluhr has urged the UK’s competition watchdog to force Viagogo to fully divest the StubHub business that it acquired earlier this year in a $4.05bn deal.
In a letter to the Competition and Markets Authority (CMA), Fluhr, who co-founded StubHub in 2000 and was the chief executive from inception through to its sale to eBay in 2007, also expressed interest in buying his former company.
Fluhr’s letter, submitted during the investigation period, emerged following Viagogo’s proposal to sell off StubHub’s businesses outside North America after the CMA provisionally blocked the merger between the two resale rivals.
The Swiss company has put forward plans to sell the holding company that operates all its international primary and secondary ticketing businesses, while retaining StubHub’s much larger US and Canadian ticket resale business in an attempt to ease the CMA’s concerns.
Fluhr said in the letter that a partial divestiture is not feasible, adding: “The CMA should require a full divestiture because it is the only way to achieve the CMA’s objective of addressing the SLC.
“By forcing a full divestiture, Viagogo and StubHub would be two distinct companies leading to optimal competition in the UK market and elsewhere. This competition would, in turn, lead to many advantages for consumers including lower ticket prices, more choice and access to live events, increased innovation in the mobile app and website product experience, and better customer service.
“The US market has more significant competition than the UK market and enjoys all of these strong customer benefits.”
In explaining why he believes a partial divestiture is not feasible, Fluhr said that the software technology backbone of the StubHub business is “complex and multi-faceted”.
He continued: “The system has many components that interact with one another and require sophisticated orchestration to operate and maintain. This technical interconnectedness means that separating the StubHub business into two parts would be prohibitively onerous and unproductive.”
Fluhr added that in addition to the technical challenges of a partial divestiture, there would be “insurmountable challenges” that would make the carved-out business unsustainable. He noted: “The StubHub brand is a key asset for the business which has much less value without the brand.
“It would be untenable for any buyer to share the brand name with the seller. If the StubHub brand were owned by one company in certain geographic markets and a different company in other markets, the experience would be disjointed for consumers. More importantly, the mistakes of one company would damage the brand of the other.”
He added that a partial divestiture would result in precisely the opposite of what the CMA hopes to achieve: “Instead of increasing competition, the failed carve out would hand Viagogo the lion’s share of the UK market to the detriment of UK citizens and consumers.”
The remedy proposal from Viagogo came after the CMA last month provisionally blocked the merger, which was confirmed in February, citing concerns over “substantial lessening” of competition. As part of its Phase 2 inquiry, the watchdog said it was concerned that the acquisition could lead to increases in fees for customers, including fans, who resell or buy secondary tickets to live events.
It noted that Viagogo and StubHub are close competitors in an already “very concentrated” market with no significant additional competitors, adding that they are the only two companies of material size in the UK’s secondary ticketing market with a combined market share of more than 90 per cent.
Fluhr concluded: “It is important that the CMA take swift action in this matter. This urgency is caused by the significant challenges resulting from Covid-19: In order for StubHub to survive through the pandemic, it needs a clear Covid-19 contingency plan, decisive leadership, a lean team and an optimistic yet patient culture.
“The longer this process goes on without a clear decision, the harder it will be for the divested entity to pull these pieces together and ensure the availability of this ticket marketplace for UK consumers.”
Image: Ajay Suresh / CC BY 2.0 / Edited for size
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