BREAKING: Illinois Attorney General investigating Lollapalooza for anti-trust

June 24, 2010

The office of Illinois Attorney General Lisa Madigan is investigating Lollapalooza sponsors C3 Presents and their partners for anti-trust issues stemming from the radius clauses that the Austin, Texas-based concert promoters impose on all of the artists who play the giant, three-day concert in Grant Park, according to numerous sources familiar with the investigation.

The controversial radius clauses prohibit Lollapalooza acts ranging from the top headliners to the smallest "baby bands" at the bottom of the bill from playing anywhere else in the Chicago area for months before and after their appearance at Lollapalooza in August. Sources have said that the most extreme of these clauses stretch from six months before Lollapalooza to three months after it, and that they encompass a 300-mile radius -- which would include concert markets as far away as Milwaukee, Madison, Iowa City, Detroit, and Indianapolis.

Many local Chicago club owners and independent concert promoters have said that these radius clauses are decimating the local music community and significantly hurting their business for much of the year, and that they constitute unfair, anti-competitive practices. Lollapalooza promoters respond that the clauses are standard practice in the concert industry, and that they waive them for any artist who asks to be excused from their requirements.

Late Thursday afternoon, Madigan press secretary Robyn Ziegler said, "We cannot confirm or deny whether or not we have an investigation." But music business super-agent Marc Geiger confirmed that he is among those who have been subpoenaed: "I did receive one," he wrote via email. He declined further comment.

Sources said executives at C3's offices also received subpoenas, but company spokeswoman Shelby Meade said only, "No comment in this question." Geiger launched Lollapalooza with concert founder Perry Farrell as a traveling day-long alternative rock festival in the early '90s. He is now a vice president at Beverly Hills-based William Morris Endeavor, the company run by Hollywood giant Ari Emanuel, brother of presidential chief of staff Rahm Emanuel, and model for the character of Ari Gold on HBO's "Entourage." The talent agency retains 50-percent ownership of Lollapalooza along with C3.

Most concert promoters impose some form of radius clause on bands to ensure that they draw the biggest audience possible -- and make the most money for all involved -- without competing with themselves. A group that performs at a 1,000-seat venue in Chicago in mid-October might be required to refrain from performing at another smaller or larger club in this market from early September through early November, or at least refrain from announcing and advertising a November show until the October show sells out.

The difference with Lollapalooza's radius clauses is that they are some of the longest and most extensive in the business, and they affect a huge number of acts, since there are more than 120 bands performing at the mega-concert. And, unlike a concert with two or three bands on the bill, Lollapalooza does not rely on any one headliner to sell tickets. In fact, promoters consistently trumpet the sheer volume of acts and wealth of different experiences offered in Grant Park as the main draw.

Geiger defended the radius clauses in an August 2009 interview by saying they were common practice in the concert industry. When asked why the promoters wouldn't waive these clauses for all but the headliners, allowing the smaller artists to play elsewhere in the market for fans who'd rather see them in a club or theater setting, Geiger said:

Geiger: When you sell out a couple of years in a row, you don't want to be arrogant in any way, shape or form. But then you have to look at it and say that if Lolla wasn't there and you had all of those shows in the clubs, if we're looking at it from a dollar spent by the consumer standpoint versus all of those bartenders and people who work at the clubs, the consumer would have to go out to 15 shows to see a fraction of the bands. They wouldn't have as much musical knowledge, background and enrichment, and they would have had to spend seven times as much, plus the parking and individual drinks to get anywhere near the same musical input they get from Pitchfork, Lolla or anything else"¦ [But] I'm not down at the local level there on that front.

The "three Charlies" who oversee Lollapalooza as the executives who run C3 Presents -- Charlie Jones, Charles Attal, and Charlie Walker -- also defended the radius clauses in an interview in March 2008, when this reporter questioned them extensively on the issue. Here is a transcript of their comments:

Q. What do you say to Chicago club owners and fans who complain that Lollapalooza is hurting their business and the local music scene because acts are shut out of performing elsewhere for six months?
Walker: Look, the music business in North America changed. The festival model up here has worked. Whether it was C3, Live Nation, Jam or [Metro owner] Joe Shanahan on that site in this city, someone was going to do a festival. In this case it happened to be us. Yeah, it sucks up 130 bands in the summer. But they can still play the market in the fall.
Q. C3 owns several clubs in Austin. Would you be happy if all those bartenders, security guards, sound technicians and staffers suddenly lost a big part of their livelihoods? Half a dozen Chicago club owners have shared their schedules with me from before and after Lollapalooza, and in some cases, they now have half the number of shows they had in the summers before Lollapalooza.
Jones: I don't know what the facts are or what the show count is, but we're there and they are there. There is nothing I can really do about it.
Q. You could waive the radius clauses for all but, say, the top five or eight headlining bands each day.
Attal: So who is going to decide, "This band gets a radius clause and this band doesn't?" You can't do it that way. We have a radius clause because we don't want all of these bands playing all over the city. Not that they necessarily would, but it's to protect us.
Walker: Everybody does it. It's the way the business works, and it's good, sound business for us and the acts. That's the way we operate.
Q. You often say, "Lollapalooza is not in competition with Chicago clubs or promoters," but that certainly sounds like a competitive policy.
Attal: I've never had a band call me and say, "Hey, I want to play the Double Door" where I didn't say, "Great, let's call the promoter to play the Double Door."
Q. I know of a band that was scheduled to play a free lunchtime show at the Chicago Cultural Center a few years ago, and Lollapalooza made the group cancel.
Attal: Bull----!
Jones: That is not true.
Q. I'm telling you what the group's manager told me.
Attal: Well, we.... They probably read their contract and didn't call me and talk to me about it. Ninety percent of the bands aren't going to call me, they're just going to look at the contract. If someone calls me and says, "I want to play the Double Door, I want to play here, etc.," I'll work it out with them. I've done it in the past. But we can't let 130 bands go do side gigs, because then why do Lolla?
It might loosen up a little bit once this thing gets to the point where it's sold out. We struggled to get where we are today with it. You've got to weigh the pros and cons. Last year, we didn't crush it; we had a good crowd, but we didn't sell out. So we have to get to the point where ACL [the C3-owned Austin City Limits Festival] is... But we're not taking it out of our contracts. We can't. All the bands have to read it and if there is an issue, they can take it up with me and we will talk about it. No one has an issue with it.
Q. The Chicago music community has an issue with it. All of the club owners I've talked to have an issue with it.
Jones: But they're doing after-shows every night!
Attal: There's no question, if I was a club owner and a big festival dropped on my city, I would feel the same way. But I can't help the way the business changed in North America. That does not mean that we're not going to protect the integrity of our line up and say, "Go play where you want." It's not the way we are going to do business.
Jones: I don't know if it's about the radius clause or more about the fact that it's a huge vessel--it has changed the dynamic of the city. It's not like it was before Lollapalooza was there, but neither is Manchester, Tenn. or Nashville or wherever else.
Walker: It's not like we're sitting here trying to figure out how to negatively impact other businesses. We try to do the best we can.

Chicago club owners and independent promoters generally have been reluctant to criticize the Lollapalooza radius clauses -- at least in on-the-record interviews -- because they are vying to host official Lollapalooza after-hours concerts, and they do not want to lose out on that business when they already are losing out on dozens of other gigs over the summer. A full roster of official afterhours shows at Metro, the House of Blues, Lincoln Hall, the Empty Bottle, the Congress Theatre, and Reggie's Rock Club was announced on Tuesday to coincide with this year's Lollapalooza weekend, August 6 to 8.

But sources said complaints from local clubs and promoters were part of what triggered Madigan's investigation. And some of the city's best-known promoters did speak out against the radius clauses in interviews with me in March 2008. Here are some of the comments they made at that time.

Joe Shanahan, owner, Metro: "It's a very different summer now for all of us. I look at those Lolla bills, and I know they're paying so many of those bands really well. It may not be the career moves that all of them should be making, but I'm not their manager or their agent. I'll still be standing in the fall, and they'll come back to work for us then or in the winter. But the shift has definitely been to the other seasons because of this."
Michael Yerke, talent booker, House of Blues: "There's no doubt about it: If Lollapalooza wasn't there, there would be more shows at places like Metro and the House of Blues and the Vic Theatre and probably for that matter Reggie's. On the other hand, we have a good relationship with those guys [Lollapalooza promoters C3 Presents], and we do a couple of the after shows. At least we're getting a couple of shows during that weekend, where if we didn't have a relationship with them, we'd probably have no shows at all! It's hard, but Lollapalooza isn't the only culprit: You also have the Warped Tour and the Linkin Park tour that swallow up a lot of bands that take away from Metro and House of Blues as well."
Bruce Finkelman, owner, the Empty Bottle: "If you look at summertime in Chicago and summertime around the country now, it's just festivals taking over everything. The summer used to be a really big time, but now, you're not looking at bands that are on tour, but at acts that are just going from one festival to another. It's a completely different scenario now."
Sean Duffy, talent booker, the Abbey Pub: "When I first started rolling at the Abbey, before Lollapalooza and Pitchfork and Intonation, my summers were awesome. Summers always slowed down a little bit: You lost some of the bands to Ribfest or the Randolph Street Festival or whatever. But then, all of the sudden, the summer that Lollapalooza came here, the talent pool was completely empty. During the summers now, you're lucky if you have a couple of shows, and you're just picking up the leftovers that couldn't get into any of the festivals. And some bands that play at these festivals can't play anywhere else in the city for 90 days before and 90 days after -- that's six months, and that's just ridiculous! I'm not against more clubs opening; I'm against more festivals! Lollapalooza alone probably wiped out about 60 club shows last summer, and we've just got to rein that in."

With a handful of notable exceptions, such as a performance by Radiohead in Grant Park's Hutchinson Field promoted by Chicago-based Jam Productions in 2001, city officials were reluctant to allow for-profit rock concerts in the lakefront park. The Park District notoriously blocked performances by the Smashing Pumpkins, the survivors of the Grateful Dead, and other bands throughout the '90s.

The Park District's attitude changed in 2005 when it was presented with a proposal by C3 to reinvent Lollapalooza as a Chicago-based "destination festival" generating more than $1 million a year for parks improvements. All licenses and permits for Lollapalooza are taken out not in the name of C3, but by the non-profit Parkways Foundation, an organization headquartered inside the Park District's offices.

In 2006, Lollapalooza signed a contract with the city to continue bringing Lollapalooza to Grant Park for five years. For that deal, C3 was represented by attorney Mark Vanecko, a nephew of Mayor Richard Daley.

In November 2008, only two years into that first five-year deal, the city signed a new 10-year deal with C3, extending Lollapalooza's hold on Grant Park and the local concert industry to 2018 -- or a year after that, if the city had succeeded in winning its bid for the 2016 Summer Olympics, when Lollapalooza would have taken a one-year sabbatical.

C3 organized several of the events promoting Chicago during that unsuccessful Olympics bid, and executives said that they had hoped to play a major role in festivities here if the Olympics had come to the Windy City. C3 also organized the election-night celebration for President Obama in Grant Park, as well as several events at the inauguration in Washington, D.C.