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StubHub sued over COVID-19 change to its FanProtect guarantee scheme

By | Published on Monday 6 April 2020

StubHub

The COVID-19 shutdown of the live entertainment sector has created unprecedented challenges for the entire ticketing sector, which often advances money to the event promoters who are now desperately working out if their cancelled events are insured.

Meanwhile, the secondary ticketing industry is also in crisis mode as customers seek refunds from resale platforms which have likely already advanced monies to touts who are in turn awaiting news from primary sellers. And in the middle of all that, StubHub is now on the receiving end of a class action lawsuit in the US.

The secondary ticketing platform, recently acquired by rival Viagogo, is accused of breach of contract, negligent misrepresentation and unlawful business practices over changes it made to its FanProtect guarantee scheme in the wake of the COVID-19 crisis.

According to the lawsuit filed by ticket-buyer Matthew McMillan, when sporting, music and other live events started to cancel last month as measures were introduced to restrict and delay the spread of COVID-19, StubHub told its customers that instead of a refund they could choose a voucher worth 120% of their original ticket purchase.

But then, on 25 Mar, the company’s position changed, so that in some circumstances customers would be forced to take the voucher rather than cash.

StubHub is not alone in trying to persuade customers with tickets to cancelled events to take an account credit rather than a proper refund as everyone in the industry deals with unprecedented cash flow challenges. Whether a promoter or ticket agent can refuse a cash refund depends partly on the terms and conditions of the original ticket sale and also local consumer rights law.

In some countries (or provinces and states) promoters and ticketing firms will be obliged to offer cash, which is something StubHub acknowledged when changing its position on 25 Mar. However, McMillan reckons there are also contractual grounds for getting his money back.

Secondary ticketing sites in particular have always made a much bigger deal about their money-back guarantees, which state that a platform will refund any monies spent if a ticket does not get a buyer into a show.

That’s partly to combat ticket fraud, where third parties use resale platforms to sell non-existent or fake tickets. If the platform promises a refund on tickets that don’t get a buyer into a show – and refuses to hand over any monies to any sellers who sell non-tickets – then, the argument goes, resale sites won’t be used by fraudsters, making them a safer place to buy tickets from touts than the likes of Craigslist or Gumtree.

McMillan points out StubHub’s past promotion of its FanProtect guarantee in his lawsuit. “StubHub has advertised the FanProtect guarantee heavily in internet and other media, including on its own website and partner websites”, it states. “Largely because of the guarantee, StubHub’s users have been willing to pay premium prices for tickets and pay substantial fees directly to StubHub”.

Noting how the 120% voucher was first presented as an alternative to a refund via an email to customers on 12 Mar, the lawsuit goes on: “On 25 Mar 2020, without delivering a corresponding email to all users, StubHub changed the terms of its FanProtect guarantee on its website, now stating that ‘if the event is cancelled and not rescheduled, you will get a refund or credit for use on a future purchase, as determined in StubHub’s sole discretion (unless a refund is required by law)'”.

In a subsequent email to customers on 30 Mar, StubHub President Sukhinder Singh Cassidy explained how his company’s usual policy is to advance monies to sellers before an event has taken place, despite the usually modest risk that a refund may be necessary. If it is, StubHub then issues the refund before seeking to recoup the money from the seller. These practices are “a convenience” for both buyers and sellers, Cassidy wrote, but “given the impact of the coronavirus, it is not possible to sustain this practice in the near-term”.

However, reckons McMillan’s lawsuit, “these refunds were not offered as a ‘convenience’ to buyers, but rather were a key component of the contract between StubHub and its buyers, and the underlying feature of the heavily-advertised FanProtect guarantee. These refunds were not courtesies, they were and remain contractual obligations”.

And while the COVID-19 crisis may have created a unique situation, the lawsuit says, StubHub – recently acquired by Viagogo for more than $4 billion – should have been prepared for the cash flow implications of a sudden flood of event cancellations. “Despite having recently been acquired for over $4 billion”, the legal filing goes on, “instead of obtaining liquidity to weather the storm, defendants sought to simply pass its losses on to its clients”.

“As a result of defendants’ abrupt and illegal about-face”, it adds, “at least tens-of thousands of their customers have been and/or will be cheated out of refunds to which they are legally entitled for thousands of different events”.

McMillan’s lawsuit seeks class action status so that, if he were successful in forcing StubHub to provide a cash refund for his ticket, that ruling could be relied upon by any US customer of the resale site who bought a ticket before the 25 Mar policy change.

StubHub is yet to respond to the lawsuit. One technicality it could look to exploit is that the ticket McMillan bought from StubHub was for a National Hockey League game, and the NHL has so far only officially paused its season not cancelled it.

The lawsuit concedes that the game McMillan has a ticket for “could conceivably be rescheduled”, but adds that “it remains all but a certainty that those games will be cancelled”.

Nevertheless, that could be enough for StubHub to argue that McMillan is not in the same class of StubHub users who have bought tickets to shows that have definitely been cancelled, providing a distraction that would prevent it from having to actually answer the breach of contract claims, at least in the short term.

Which means we await the secondary ticket firm’s response with interest.



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