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The City of Chicago v. Stubhub

October 6, 2011

THE CITY OF CHICAGO, APPELLANT,
v.
STUBHUB, INC., APPELLEE.



The opinion of the court was delivered by: Justice Theis

JUSTICE THEIS delivered the judgment of the court, with opinion.

Chief Justice Kilbride and Justices Freeman, Thomas, Garman, Karmeier, and Burke concurred in the judgment and opinion.

OPINION

¶ 1 This case comes before us on certification from the United States Court of Appeals for the Seventh Circuit. See Ill. S. Ct. R. 20 (eff. Aug. 1, 1992). That court asked us to determine "whether municipalities may require electronic intermediaries to collect and remit amusement taxes on resold tickets." Our answer is no.

¶ 2 BACKGROUND

¶ 3 In 1923, the Illinois General Assembly passed the Ticket Scalping Act, which prohibited owners of public entertainment venues from selling admission tickets anywhere other than the venues' box offices. See 1923 Ill. Laws 322. In 1935, the legislature broadened that statute beyond venue owners, and outlawed the sale of such tickets for more than face value. See 1935 Ill. Laws 707. This statute remained unchanged until 1991, when the legislature rewrote it to provide an exception for ticket brokers, who could avoid any penalties for selling tickets above the box office price by meeting several requirements, including registering with the Secretary of State and paying all applicable state and local taxes. See Ill. Rev. Stat. 1991, ch. 1211/2, ¶ 157.32. The legislature amended, and expanded upon, these requirements in 1995. See 720 ILCS 375/1.5 (West 1996).

¶ 4 That year, the City of Chicago also amended its municipal code to extend its existing amusement tax, which applied to admission fees for entertainment events in the city, to ticket resales. Under this amendment, "every reseller" was required to pay the amusement tax on "that portion of the ticket price that exceeds the amount that the reseller paid for the tickets." Chicago City Council, Journal of Proceedings, November 15, 1995, at 12016.

¶ 5 In 2002, the legislature amended the Auction License Act, requiring "Internet Auction Listing Services" either located in Illinois or dealing with persons or property located in Illinois to register with the state's Office of Banks and Real Estate. See 225 ILCS 407/10-27(b) (West 2010). This amendment brought online auctioneers under the same regulatory umbrella that covered more traditional auctioneers, but the amendment also recognized the significant differences between them. Specifically, the statute defined an internet auction listing service as a website or other interactive computer service that brings together prospective sellers and buyers of personal property, but "does not examine, set the price, or prepare the description of the personal property ***, or in any way utilize the services of a natural person as an auctioneer." 225 ILCS 407/10-27(a)(1) (West 2010). The statute mandated that an internet auction listing service must certify that it "does not act as the agent of users who sell items on its website, and acts only as a venue for user transactions," and that it retains identification information on its users and provides customer support for its users. 225 ILCS 407/10-27(c)(1) (West 2010).

¶ 6 Shortly thereafter, as tickets to entertainment events began to appear on such websites, the legislature replaced the Ticket Scalping Act with the Ticket Sale and Resale Act (Act) (720 ILCS 375/0.01 et seq. (West 2010)). The new statute still prohibited the sale of tickets for more than face value, but contained more exceptions, including one for internet auction listing services, which featured extensive and detailed consumer protection measures. Section 1.5(c) provides:

"This Act does not apply to the sale of tickets of admission to a sporting event, theater, musical performance, or place of public entertainment or amusement of any kind for a price in excess of the printed box office ticket price by a reseller engaged in interstate or intrastate commerce on an Internet auction listing service duly registered with the Department of Financial and Professional Regulation under the Auction License Act and with the Office of the Secretary of State on a registration form provided by that Office. This subsection (c) applies to both sales through an online bid submission process and sales at a fixed price on the same website or interactive computer service as an Internet auction listing service registered with the Department of Financial and Professional Regulation.

This subsection (c) applies to resales described in this subsection only if the operator of the Internet auction listing service meets the following requirements:

(1) the operator maintains a listing of the names and addresses of its corporate officers;

(2) the operator is in compliance with all applicable federal, State, and local laws relating to ticket selling activities, and the operator's officers and directors have not been convicted of a violation of this Act within the preceding 12 months;

(3) the operator maintains, either itself or through an affiliate, a toll free number dedicated for consumer complaints;

(4) the operator provides consumer protections that include at a minimum:

(A) consumer protection guidelines;

(B) a standard refund policy that guarantees to all purchasers that it will provide and in fact provides a full refund of the amount paid by the purchaser (including, but not limited to, all fees, regardless of how characterized) if the following occurs:

(i) the ticketed event is cancelled and the purchaser returns the tickets to the seller or Internet auction listing service; however, reasonable delivery fees need not be refunded if the previously disclosed guarantee specifies that the fees will not be refunded if the event is cancelled;

(ii) the ticket received by the purchaser does not allow the purchaser to enter the ticketed event for reasons that may include, without limitation, that the ticket is counterfeit or that the ticket has been cancelled by the issuer due to non-payment, unless ...


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