Paradise Papers: Canadian Superscalper Used StubHub to Grift Music Fans

November 11, 2017, 9:08 PM UTC

The so-called Paradise Papers have blown open a global scandal, showing that the world’s wealthiest individuals and corporations have hidden hundreds of billions of dollars in offshore tax havens. But they also drew back the curtain on a smaller outrage, showing how a Canadian ticket scalper is skirting national laws to make millions off of concertgoers.

According to Canada’s CBC, Quebec-based Julien Lavallée runs multiple ticket reselling companies, including one registered in known tax haven the Isle of Man. The companies’ gross sales were $7.9 million in 2014. That makes Lavallée a relatively small part of the global ticket-resale industry, which has been projected to grow to $24.55 billion by 2021. But his practices illuminate a much broader problem.

The CBC’s investigation found sales records indicating that Lavallée’s businesses were able to buy hundreds of tickets for concerts by Jamiroquai, Metallica, Drake, and others, using many different names supposedly in many different locations, in just a few minutes. Experts who reviewed the records told the CBC they suggested the use of automated “bots” to buy tickets, which is illegal in many jurisdictions, including Lavallée’s home base of Quebec. But the CBC found that enforcement of such laws is rarely well-coordinated internationally.

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The victims, ultimately, are average concertgoers. Resellers like Lavallée generate profit by quickly locking down tickets that would have likely sold to actual fans at the original price, then marking them up. Some economists argue that scalpers perform useful market-clearing and convenience functions, but that argument falters when scalpers corner the market before fans can get their hands on tickets. Musicians and other performers have long considered scalpers a plague, but the advent of online sales and bots may have made the problem even more acute.

The CBC argues that StubHub is partly at fault for – and directly benefits from – large-scale scams like Lavallee’s. StubHub offers better commission rates, for instance, to sellers who top $50,000 in annual sales. The incentives are detailed in a “Top Seller Handbook” shared by the CBC, which also includes advice on handling large ticket inventories.

In a statement to the CBC, StubHub acknlowledged this “Top Seller” program, and said it agrees that the use of bots by scalpers harms consumers. But it refused to say how much of its inventory, or its $937 million in annual revenue, comes from the high-volume sellers who are most likely to use bots to snap up tickets.

Despite the presence of such high-volume sellers, StubHub markets itself as a “Fan to Fan Ticket Marketplace.”

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