Header, the Administration of the Honorable Lincoln C. Almond
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July 24, 1996

TO THE HONORABLE, SPEAKER OF THE HOUSE OF REPRESENTATIVES:

In accordance with the provisions of R.I. Gen. Laws § 43-1-4, I am transmitting herewith, with my disapproval, 96-H-7925 Substitute A, As Amended, "An Act Relating To Business and Professions Ticket Sales."

This Act would eliminate the current statutory maximum premium which may be charged by speculators selling tickets to the general public. Under current law, the maximum allowable surcharge added to the face value of any ticket is the greater often percent (10%) of the ticket price or three dollars ($3.00). The Act also requires a posting at the point of purchase that informs consumers that they are paying a surcharge and that they "could purchase a ticket for face value at the event's box office." At the same time, the Act removes a provision from current law that allows entities such as the Providence Civic Center to contract directly with a ticket seller to sell tickets to a particular event for a certain price, usually not far in excess of face value.

This bill legalizes ticket scalping in Rhode Island and is the first bill of its kind in the United States. It is anti-consumer because it would result in higher ticket prices for Rhode Islanders and is anti-family because it would severely hamper the ability of Rhode Islanders to afford a family night out at a reasonable price. The Act is impracticable, unworkable and bad public policy. It offers only illusory protection to the consumer and is opposed by the Division of Taxation. It should also be opposed by all interested in preserving the availability of quality entertainment at a fair price.

The Act makes legal what has long been illegal under Rhode Island law; that is, reselling of entertainment tickets by brokers and scalpers for a price far in excess of their face value. Rhode Island General Laws section 5-22-26 was passed to protect the public from unscrupulous scalpers selling tickets at unfair prices. Without the protection of law, this practice will become commonplace in an environment where there is overwhelming demand for entertainment events and a finite number of tickets to such events. While ticket brokers argue for letting the "marketplace" set the price for such events, that price lines the pockets of legalized scalpers at the expense of the consuming public. If entertainers wanted to charge exorbitant prices based on market demand, they certainly could raise the ticket price to do so. Instead, they are interested in building fan loyalty and opening up their events to those who could not otherwise afford to attend. Legalizing ticket scalping nullifies these goals by erasing the value of the ticket set by the event's promoters and replacing it with a price few can afford. Under the new world of legalized ticket scalping, brokers would quickly buy up most tickets for popular events at their face value and resell them at several times that price.

The Act contains no real consumer protection. First, the new requirement of a retail sales permit contained in the Act is meaningless. The Division of Taxation issues such permits only to account for proper sales tax payments. Tickets, however are not, and will not under this Act, be subject to the state sales tax. Since no sales taxes are collected, such permitting serves no purpose. Permits will be routinely issued without exception to anyone who wishes to resell tickets. Street peddlers would be no different than reputable ticket agencies. Because this would be the first time that the Division of Taxation would be responsible for issuing a retail license to merchants selling a nontaxable item, the Division is opposed to this bill.

Second, consumers will not be protected by the Act's requirement that a sign be posted at the point of ticket purchase, which informs the consumer that a service charge is being added to the price and that the consumer "could purchase a ticket for face value at the event's box office." Under this Act, for popular events there would be few tickets available at the box office at face value. Scalpers would quickly buy up as many tickets as possible and resell them for several times their face value. Moreover, street peddlers with a sign hung around their neck would comply with this section. There would be no true mechanism for a refund for a canceled event, leaving the consumer, who paid several times the face value of the ticket, with no recourse except perhaps to return the ticket to the box office for only face value.

Finally, scalpers make the argument that this Act is necessary to allow consumers the convenience of purchasing by phone or mail. Not true. Under present law, the owner of a property such as the Civic Center can authorize agents to sell its tickets for events. Large agencies such as "TicketMaster" perform this service by phone and mail with a small markup. This Act removes the very section of the present law which allows these agencies to contract with local entertainment providers and replaces it with a provision authorizing price gouging.

The only other state, to our knowledge, which has done a reversal of this kind legalizing ticket scalping that was previously prohibited is New Jersey. The legalization, however, was for an eighteen-month trial period. Our understanding is that New Jersey considers the trial a failure. Neither the Governor nor the legislature is expected to propose a continuation of legalized ticket scalping. Other states which allow ticket brokers to legally exist do so with much greater regulation and protection than this Act provides - including rules of operation which would regulate the process in which ticket speculators would function.

In sum, this Act makes bad law and will only serve to increase the already high cost of entertainment. For the foregoing reasons, I disapprove of this legislation and respectfully urge your support of this veto.


Sincerely,

Lincoln Almond
Governor