Government Blocks Free Market in Tickets
7 September 2005
One of the more bizarre pieces of legislation in Hong Kong is the Places Of Public Entertainment Ordinance (the POPE Ordinance). It turns out that if you buy (or legally obtain) a ticket to go to say, Disneyland, or a concert, or a football match, and then try to sell it, then it is illegal to make a profit.
Imagine a securities law which allows IPOs but bans share-trading above the IPO price. That, in a nutshell, is a description of the law on the market for entertainment tickets in Hong Kong. It makes a mockery of the Government's claim to be running a free market economy. Why can't you pay a premium for a ticket that was under-priced by the organiser? Imagine the outcry if the Government prohibited the resale of postage stamps by philatelists at a price exceeding the face value of the stamp, or if they outlawed the resale of toys given away by McDonalds.
A person might have any number of reasons for wanting to sell a ticket after obtaining it. He might be called away on business, or taken ill, or have decided to go to the place on a different day, or have found something he would rather do that day. Or he might just feel that as the event is so popular, he would rather take a profit and spend the money elsewhere, because the market is willing to pay more than he thinks attending the event is worth to him.
Section 6 of the POPE Ordinance says:
"No person shall sell...any ticket or voucher authorizing...admission to any place of public entertainment...at a price exceeding the amount fixed by such proprietor, manager or organizer"
That makes it illegal to offer your tickets on auction sites such as eBay Tickets or Go2HK, because heck, you might just make a profit in the auction, and that's illegal in Hong Kong. You could offer the tickets at a fixed price of face value, but if there is excess demand, then someone who is willing to break the law will grab it and re-sell it offline for a profit. The fine for doing so is HK$2,000 (US$257), and the Government commits untold amounts of public money to policing this through the Technology Crime Division of the Commercial Crime Bureau (CCB), resulting in prosecutions like this one. They even have a pejorative name for the offence: "ticket-scalping". Sounds naughty, doesn't it? We guess that makes investors "share scalpers" - occasionally selling shares for more than we paid for them. Let's outlaw the stock market to prevent this egregious sin. The CCB says it will "monitor any on-line ticket scalping" - they must spend a lot of time surfing auction sites down at the CCB. Haven't they got better things to do, like going after fraudsters in listed companies? Or do they have infinite resources?
The law also inhibits the creation of jobs that would otherwise exist in the secondary market, in ticketing agencies and web sites that would help match buyers and sellers. In our postage stamp comparison, if a ban on profits were imposed, philatelists would be out of business.
How do you know what something is worth if there is no market in it? The secondary market in any commodity serves an important function - it provides "price discovery" for the primary issuer of what the market is willing to pay for a ticket, and thereby helps issuers get the maximum price for their product. By outlawing the secondary market, Government makes it harder for entertainment organisers and operators to set their prices so as to maximise revenue.
We fully accept that, as a matter of private contract, an event organiser or theme park operator may, as a condition of sale, make the tickets non-transferable and personalise them in the name of the first buyer. Airlines do that all the time, and customers agree to that condition when they buy a ticket. But if no such condition is imposed by the organiser, then the Government should not intervene and impose a condition by law.
The POPE Ordinance also contains a clause that make it illegal to resell tickets (at any price) in "any public thoroughfare, or in the entrance hall of, or approaches to" a place of public entertainment, except as authorised by the entertainment organiser. There is a good reason for this, because ticket traders (or "touts") are in effect running a business on public property, or on private property without the owner's consent. But it should not be illegal for them to trade tickets in their own premises. Indeed, by making the resale of tickets for profit illegal, the Government has driven the trade underground and removed a potential source of profits tax from Government revenue.
So we call on the Government to scrap the ban on resale of tickets at a profit, collect profits tax from ticket trading businesses, and by scrapping the ban, to stop wasting the resources of the Commercial Crime Bureau which would be better spent on investigating and prosecuting fraudsters at listed companies.
© Webb-site.com, 2005
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