Labour Is Poised to Boost the Black Market at the Expense of True Fans

I warned against any UK price control proposals on event tickets a year ago, after discontent with Oasis’s reunion tickets selling at inflated prices in dynamic primary markets was grouped with concerns about resale in secondary markets at significant mark-ups. Then, Starmer pledged tickets available at prices everyone can afford. But of course, prices are a rationing system, whatever market we consider.

There is no guarantee of prices everyone can afford except by increasing supply. Capping prices below that which people are willing to pay creates a shortage in any official market. Musical artists have limited time to perform, and venues have a limited number of seats. Nothing Starmer does can change that. If his policy is to work for anything, it’ll only work to produce shortages, misallocations, and black markets given some people who missed out in the primary market and are willing to pay more to go will now not be able to make mutually beneficial trades with sellers.

Decades of research shows this. One study of NFL tickets sold on eBay in the early 2000s found strict resale laws actually increased prices in new, thinner black markets. As many resellers hung up their hats with secondary market controls, those left operating faced less competition and charged higher markups (not least, for some, to reflect the risks of engaging in criminal activity). Fans who seriously wanted tickets at whatever cost (and missed out in primary markets), now had fewer alternatives available and paid whatever their first guy was asking. And since price controls are more easily enforced on regulated, online markets, strong resale caps encourage resellers to merely abandon the regulated platforms and sell at higher mark-ups in person. They’re the real winners if Labour’s policy succeeds: the exact “touts” they say they are targeting.

Frictionless resale platforms like StubHub create substantial consumer benefits. First, resellers reallocate tickets from people who don’t care about a band or performance as much to the genuine super fans. One paper found total surplus increases with larger numbers of resellers just by allocating tickets to bigger fans. If instead you can’t allocate a limited number of tickets by willingness to pay, you’ll have to resort to random chance by lottery or the endurance test of “who will wait around in line the longest?” in the primary market. If the lucky winner here really can’t be bothered to go (or just doesn’t care as much as someone else), and a super fan is willing to pay a premium, everyone is better off letting the sale go through. But this law would stand in the way.

Second, resellers also act as insurance for performers and increase the variety of performances offered. There are significant costs and risks associated with running a new show—costs that can’t always be recouped if demand for a show is less than originally anticipated. Speculators buying tickets in the primary market offload some of that risk away from artists and onto the reseller. The reseller’s profit scales with his or her ability to correctly anticipate what shows people will really want to see. A lot of the annoyance against resellers and platforms that allow it stems from the superstar shows where demand hugely exceeds supply at current face value prices, and resellers are seen to be raking in easy profits. But these regulations will ensnare all live performances, even risky ones that resellers’ risk preferences facilitate.

Across academic studies, the pattern is clear: ticket reselling is a legitimate economic activity that makes markets more efficient. Attempts to suppress resale hurt consumers by reducing the diversity of performances available, making it harder for fans to access the tickets they want, and driving up prices (and risks) when fans are lucky enough to find a ticket.

Not only will this now lead to more intense competition in the primary market (some currently don’t engage in that scramble knowing they can pay more to guarantee a ticket in the secondary market). It will also result in a much deeper, less scrupulous black market. When someone has a ticket they are willing to sell for X and there’s buyers willing to pay X for it, humans find a way.

And price controls probably won’t stop here either. The whole concept of “face value” is less meaningful now that primary markets are incorporating forms of variable or dynamic pricing. Enforcing price controls in the secondary market will thus naturally require defining face value in primary markets, likely quashing or restricting price innovation in the primary market too.

Sadly, price controls like this are exactly what I suspected would happen in a world where voters are peeved with high living costs. Instead of acknowledging that we live in a world of finite resources that requires tradeoffs, compromise, and economic rationing, it’s almost always easier for politicians to declare a war on prices.

Starmer signaled he fell for that fallacy last year when he promised “We’ll grip this and make sure that tickets are available at a price that people can actually afford.” His government’s latest move is thus unsurprising, but still regrettable.