No go, Viagogo: embattled seller fights back

Who hasn’t heard of Viagogo – the Swiss-based multinational ticket-selling platform that has left thousands of Kiwi concert-goers out of pocket?

The Commerce Commission has received a staggering 750 complaints about tickets to multiple events, including the 2017 British Lions tour of New Zealand, All Blacks matches, and various concerts, including Bruno Mars in February 2018.

The limited number of shows and events held in New Zealand, combined with scalpers using automated software (bots) and several different credit cards to snap up tickets, means many Kiwis turn to the secondary market.

Viagogo is the platform of choice for on-selling by scalpers, leaving few other options for locals who want to buy tickets.

The commission issued proceedings against Swiss-based Viagogo AG earlier this year, seeking:

  • a declaration that Viagogo has breached the Fair Trading Act 1986 (FTA);
  • an injunction restraining it from further breaches; and
  • corrective advertising orders.

The commission’s case cites potential false and misleading representations. It also alleges Viagogo’s contract includes an unfair contractual term under the FTA - that all disputes brought by a consumer must be heard in Swiss courts under Swiss law.

Under this, Viagogo can take court action against consumers in the consumer’s own country.

But the Commerce Commission isn’t Viagogo’s only problem.

The Ministry of Business, Innovation & Employment (MBIE) has released a ticket reselling discussion paper as part of the government’s crackdown on ticket scalping. The document explores issues under the FTA and the Consumer Guarantees Act 1993.

At the same time, the player and their lawyers are gearing up for a massive scrap about jurisdiction.

Global action

Viagogo is fast becoming one of the world’s most unpopular companies. Legislators, lawyers and regulators around the globe are grappling with the issues of Viagogo’s offshore marketplace and of cross-border commerce in general.

Multiple nations’ regulators, including Australia, New Zealand, Italy and the UK, as well as FIFA and the Rugby Football Union, have been hit with injunctions, fines, bans, inquiries and orders since 2012.

Italian antitrust agency AGCM has fined Viagogo €1 million (US$1.2 million) for failing to comply with earlier demands. In 2017 a German court banned Viagogo from claiming tickets are guaranteed. The UK has an ongoing battle with Viagogo, which has been thumbing its nose at orders.

Pending a hearing on the substantive proceedings, the Commerce Commission filed an injunction application requesting interim orders prohibiting Viagogo from making specific representations about:

  • the number of tickets available
  • the likelihood of the tickets selling quickly, and
  • the validity of the tickets.

Viagogo was not expected to be represented at the hearing in February but caught observers by surprise when MinterEllisonRuddWatts partner Aaron Lloyd appeared on a Pickwick basis. Viagogo used provisions allowing respondents to ex parte applications to appear without preparing written submissions.

The first issue the court faced was service on the defendant in accordance with the High Court Rules. This is where it got tricky.

Cross-border issues made service more complex than if Viagogo were located in New Zealand. Here, proceedings can be served by personal service with the documents handed to the defendant, or by delivering them to the company’s registered office or a branch.

With foreign defendants such as Viagogo, service can be by any method permitted in the company’s country or through official channels, which in Switzerland means consular channels. Under rule 6.32(4) the service is invalid if effected contrary to the law of the country where it is served.

In her judgment released on February 18, Justice Patricia Courtney held the High Court didn’t have jurisdiction to grant an interim injunction. Even if the FTA applied to Viagogo, the court’s jurisdiction depended on service.

As in many European countries, it’s illegal to effect service by email or post in Switzerland and New Zealand is not a signatory to the Hague Service Convention 1965.

Chapman Tripp partner Daniel Kalderimis, who teaches civil procedure at Victoria University and appeared in the Discovery Geo Corporation v STP [2013] case applied by Courtney J in Viagogo, says the importance of the proposition is that service is jurisdictional and is therefore needed for an interim injunction.

Kalderimis says there have been suggestions to the contrary, such as in Equipment Finance Ltd v C Keeton Ltd (1999) where the High Court found that a freezing order could be granted against an overseas defendant who had not yet been served, subject to service being completed subsequently.

That interim jurisdiction position was not, however, fully argued and Kalderimis suggests the principled approach in Discovery Geo and Viagogo seems correct.

Opinions differ. Auckland barrister John Land has followed the case and disagrees with the reasoning. Land says if the case were to go to appeal, this requirement for service might be overturned.

“I am not convinced that is right. Ex parte injunctions are commonly granted without it being suggested there isn’t a jurisdiction to do so. Freezing orders have often been granted against overseas defendants without notice.”

Land says if the court was right it would be for reasons other than service.

“The decision is saying no matter how urgent it is, there is nothing you can do. I don’t think that is right. I think ex parte injunctions can be ordered. I don’t think Justice Courtney’s reason for refusing to grant the injunction would hold up.”

If there were a problem with granting an interim injunction, it would be on the basis of jurisdiction, not service, says Land.

Justice Courtney held that if the circumstances were truly urgent, the commission could request permission for “substituted service”.

But Land says he is not sure that would be the answer with Viagogo because rule 6.8(2) would treat any substituted service as having been effected in Viagogo’s home jurisdiction in Switzerland.

“If by email or on Viagogo’s lawyers (rule 6.32(4)), that would still be treated is if it were effected in Switzerland under that rule,” says Land. In other words, Catch 22.

Kalderimis is not so sure. “Substituted service was raised as a possibility and it could have been further explored. The limits of substituted service which, in theory, would satisfy the jurisdictional requirement, hasn’t yet been tested in New Zealand.

“Although there are arguments to explore, my instinct is that substituted service represents both a principled and a practical solution,” he says.

“There would, for example, be a factual question whether emails sent by substituted service would need to be routed through Switzerland or could be sent to a relevant agent in New Zealand or elsewhere,” says Kalderimis.

“Even if it were concluded that Viagogo was being served by email in Switzerland, one argument is that substituted service is not an avenue of service regulated by rule 6.32 at all, but is a genuine alternative.”

Other alternatives may include serving Viagogo in a third country where it has a branch office. It would be regarded as being present wherever it had a fixed place of business.

Once Viagogo is served, the next hurdle will be a “big scrap” over jurisdiction, says Land.

Viagogo indicated in court through its New Zealand counsel that it does not accept New Zealand has jurisdiction.

Land, on the other hand, doesn’t believe the commission will have trouble establishing jurisdiction. “Viagogo will say ‘any representations we made were made on a website outside of New Zealand’.[However] the representations can still be said to be made [here] because they were made to New Zealand consumers and there is case law in Australia (ACCC v Valve Corporation 2016 and others) that would support that. “Here Viagogo is carrying out business in New Zealand and the representations it makes are related to the supply of tickets in New Zealand. “The commission can also say New Zealand is the appropriate jurisdiction for New Zealand consumer protection legislation,” says Land. “There is a prior court judgment supporting that proposition,” YPG IP Ltd v Yellowbook.com.au Pty Ltd (2008).

What next?

Should the commission get its injunction, the next step will be enforcement it and Viagogo has form for thumbing its nose at regulators.

In late 2018, Viagogo settled with the UK Competition and Markets Authority (CMA) ensuring: purchasers were warned they could be turned away at the door; the seat number they would get in the venue was named; it was not giving misleading information about the available and popularity of tickets; and it was to make it easy for people to get their money back under the Viagogo guarantee.

In early March the CMA threatened further court action, saying Viagogo had not adhered to the order.

Land note internet service providers stepped up to assist in blocking video and objectionable content following the mosque attacks in Christchurch in March. They could do the same with Viagogo advertising.

The government acknowledged our laws haven’t kept pace with modern ticket reselling. Last month MBIE released a ticket reselling discussion paper about scalping. Submissions close on Thursday 18 April. The policy objective outlined in the paper is to promote the long-term interest of consumers and provide access to redress.

Currently it’s not illegal to resell tickets for a higher price than was originally paid unless it is an event declared under the Major Events Management Act 2007 (MEMA).

The main exception is if the seller engages in misleading or deceptive conduct under the FTA.

The Consumer Guaranties Act 1993 also sets out quality guarantees and the requirement that businesses must offer repairs, replacements or refunds when goods are faulty. They apply only to businesses, not to peer-to-peer transactions where consumers buy from other consumers.

The MBIE paper outlines several potential policy outcomes, ranging from option 1: the status quo, option 2: a price cap on resale tickets, Options 3: information and disclosure requirements, Option 4 a legislative ban on ticket buying bots, Option 5 creating joint industry-government initiatives, although there is no industry wide body.

If the outcome of the discussion document is regulatory changes, consumer legislation will need updating or new legislation focusing solely on ticketing agencies drawn up.

MBIE considers the MEMA to be unsuitable for any of the five options outlined in the discussion document. The Advertising Standards Authority has some powers but probably not sufficient to have any real effect on Viagogo.

An appropriate regulator would also be needed to enforce new regulatory options.

Land says one solution to the enforcement problem would be to give the commission similar stop powers to those held by the Financial Markets Authority (FMA). This approach would completely side-step the service issue, says Land. The commission would could also be given ancillary powers to require other parties (such as ISPs) to assist in the enforcement of such stop orders, says Land.

Chapman Tripp partner Kelly McFadzien believes MBIE doesn’t yet have a sense of the scope of the problem and that a discussion around this needs to be the starting point.

The challenge is where we have the ability to conduct business online and there is not a presence in New Zealand. This is relevant not only to ticket reselling, she says. Ultimately, should the commission win it could seek a permanent injunction under the Fair Trading Act, fines and/or sanctions.

A seminar on serving proceedings outside New Zealand and enforcing foreign judgements will be held on 25 June.

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