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Soul’d Out Festival Challenges Coachella’s Demand for Noncompete Clause Despite Sold Out Shows

On April 9, 2018, the producer of  the Soul’d Out music festival in Portland, Oregon, sued the owners and producers of the Coachella music festival in California for what it alleges are anticompetitive contract terms that prevent performers from playing in its much smaller festival.  As alleged in the compliant, to perform at the massive Coachella festival, performers must agree not to perform at any “Festival or Themed Event” in California, Nevada, Oregon, Washington or Arizona between December 15, 2017 and May 7, 2018—a contract term that the complaint refers to as the “Radius Clause.”  Coachella is scheduled to take place this year in April 2018, so the clause restricts performers for roughly four months before and one month after the festival. 

Plaintiffs allege that, given the state-based restrictions, it is unable to book Coachella performers for its much smaller festival in Portland (this is the first year that the clause has been extended to cover Oregon).  In particular, it alleges that it was precluded from booking SZA and Tank and the Bangas due to the Radius Clause.  The complaint contends that Tank and the Bangas were already signed up to play the Soul’d Out festival, but had to withdraw, citing the Radius Clause in the band’s agreement with the Coachella producers.  It also alleges that SZA’s booking agent declined Soul’d Out’s offer for her to play, citing the defendants’ refusal to waive the radius clause.

The refusal to waive the Radius Clause, Soul’d Out alleges, is not justified by the need to preserve demand for Coachella.  In both instances, Coachella was already sold out at the time the defendants refused to waive the Radius Clause, and it is unfounded that a small festival in Oregon would affect demand for one of the country’s largest music festivals 130 miles south of Los Angeles.  In a preview of its economic arguments, Soul’d Out cites a 2012 academic paper, Exclusive Dealing and Its Effects: The Impact of Large Music Festivals on Local Music Venues, which concluded that exclusive contracts enforced through radius clauses have a dampening effect on the number of music venues in areas within the geographic scope of the clause. 

Soul’d Out asserts a claim pursuant to Section 1 of the Sherman Act, as well as a variety of Oregon and California state unfair competition claims.  It also asserts a tortious interference with contract claim as to Tank and the Bangas, given they were already signed up to play at Soul’d Out and withdrew due to the Radius Clause. 

Exclusive dealing arrangements are not per se anticompetitive, and the court will have to consider the challenge to the arrangement under the rule of reason, taking into account potential procompetitive effects of Radius Clauses.  If Soul’d Out meets with some success, similar challenges to other festival agreements may spring up as well.  For example, Lollapalooza, a popular annual festival taking place in Chicago, has a 9-month, 300-mile radius clause which was the subject of an Illinois Attorney General investigation several years ago.