Coachella Silences Smaller Promoter’s Antitrust Claims

PORTLAND, Ore. (CN) – Coachella’s requirement that bands appearing at its southern California music festival skip other festivals and forego promotion of any west coast show for nearly five months surrounding the April festival is not anticompetitive, a federal judge ruled Tuesday.

Soul’d Out Productions sued the massive Indio, California festival and its promoters in April 2018. One of the largest music festivals in the world, Coachella grossed $114 million in 2017 from 250,000 attendees, according to Soul’d Out’s complaint.

Operating 1,000 miles away, Soul’d Out books soul and jazz concerts at 11 venues around Portland in April. It also promotes shows during the rest of the year. The company says multiple artists have opted out of performing at its festival, citing pressure from Coachella or specifically pointing to the radius clause. And if artists do book shows outside that five-month period, Coachella’s “radius clause” prevents promotion of their gigs during the prohibited period, Soul’d Out says. The Portland promoter said such agreements are expressly illegal under California law, and illegal in Oregon as unreasonable restraint.

Coachella promoter Anschutz Entertainment Group and its sister company AEG Presents waive the radius clause under one condition, Soul’d Out says: when a band wants to play at another of its west coast venues. Soul’d Out calls that illegal tying between venues.

Justin Bernick with Hogan Lovels said in court that Soul’d Out’s claims don’t hold up under antitrust law.

“There are tens of thousands, if not hundreds of thousands of artists that could perform at these events,” Bernick told the judge. “All their arguments are about ticket prices and profits and the number of artists that perform, but they say nothing about the number of artists available. Anticompetitive arguments require a numerator and a denominator.”

In Coachella’s motion to dismiss, it noted Soul’d Out showcases music within a specific genre, while Coachella presents a variety of music types. And while the 180 or so artists who perform at Coachella may be unavailable to Soul’d Out, the radius clause says nothing about the thousands of others who don’t perform in Indio.

But Soul’d Out argued there is a big difference between promoting a festival – where fans buy tickets to a “carnival-like atmosphere” of multiple stages with many performers, and promoting individual shows where fans buy “hard tickets” and expect to see a specific musician. Coachella obscures this difference and uses its radius clause “as an anticompetitive tool to compete with concert promoters in distant hard ticket markets,” Soul’d Out said in its complaint.

On Tuesday, Nicholas Aldrich Jr. with Schwabe, Williamson & Wyatt told the court that Coachella’s use of the radius clause showed anticompetitive dominance in the market.

“The fact that Coachella is able to impose upon artists terms that are so unreasonable and counter to their interests is an indicator that they have market power,” Aldrich said.

But Chief District Judge Michael W. Mosman tossed the case in a ruling from the bench.

“I think the more fundamental problem is that you have numerous facts alleged that show profitability and success in this market but they don’t show market power,” Judge Mosman said. “Some get close, for example the facts show the rise in ticket prices. That’s on the path, but they would have to show that in comparison to other ticket prices.”

“I also reject the sort of horseshoe argument that if you stack up enough facts about profitability you show market power,” Mosman added. “But profitability doesn’t require a company to defend an antitrust claim. Because I see this as a case that is facts in search of a theory, I am granting the motion to dismiss with prejudice.”

Soul’d Out co-founder Nicholas Harris attributed the loss to “good lawyering” and said the ruling would likely have a big effect on the company.

“The water got muddied and unfortunately the very simple facts that brought us to this place were not the basis of the language on which the judge ruled,” Harris said.

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