Introduction:
This week, reports surfaced that a nearly decade-long legal dispute between TKO Group Holdings Inc., the parent company of the Ultimate Fighting Championship (UFC), and over 1,200 fighters has concluded with a $335 million settlement.[1] Zuffa, UFC’s parent company, founded in 2000 and later sold to WME-IMG for approximately $4 billion, is based in Nevada.[2] It primarily promotes Mixed Martial Arts (MMA) events under the UFC brand, generating revenue from media deals, ticket sales, sponsorships, and merchandise. The settlement focuses on allegations of anticompetitive behavior under Section 2 of the Sherman Act, centering on UFC’s purported monopoly power in promoting live Elite Professional MMA events and marketing MMA Fighters’ identities.[3] The settlement was finalized just before the trial scheduled for April 2024.[4]
The Allegations:
Plaintiffs accuse the UFC of systematically eliminating competition from rival MMA promoters, solidifying its dominant position. They argue that the UFC’s control over Elite Professional MMA Fighters and crucial resources stifles competition, resulting in suppressed fighter compensation and unauthorized exploitation of their identities. Allegedly, the UFC employs various coercive tactics to suppress fighter pay, resulting in fighters receiving only about 20% of a fight’s revenue, substantially less than athletes in other sports or fighters in UFC-acquired rivals.[5] They estimate their underpayment to range from $811 million to $1.6 billion.[6] If successful, damages awarded in the antitrust case could be trebled to nearly $5 billion.[7]
Additionally, they claim that the UFC’s alleged acquisition prowess effectively blocks competition, leaving fighters with limited options and substantially lower pay than they could command in a competitive marketplace. Over the years, the UFC has acquired several rival MMA promoters, including the World Fighting Alliance, World Extreme Cagefighting, Pride Fighting Championships, and Strikeforce.[8] In September 2023, it was announced that UFC would merge with the wrestling promotion WWE to form TKO Group Holdings which made major headlines.[9] While facing competition from organizations like Bellator, ONE Championship, and Absolute Championship Berkut, as well as smaller leagues, the UFC remains the dominant force in the MMA industry.[10] The court found that Zuffa’s horizontal acquisitions of rival promotions limited fighters’ alternatives and reinforced its dominance in the market. The UFC now controls approximately 90% of the revenues derived from live Elite Professional MMA bouts.[11]
Zuffa’s contracts may limit fighters’ freedom and bargaining power with exclusion clauses, tolling provisions, right-to-match clauses, and exclusive negotiation clauses.[12] These contracts also allegedly use coercive tactics like controlling bout details, delaying fights, and threatening unfavorable opponents, pressuring fighters into signing or extending contracts. Fighters in the UFC, considered independent contractors, receive compensation solely based on their fight participation. They sign Promotional and Ancillary Rights Agreements, receiving a “show” fee for participation and a “win” fee for victories.[13] UFC matchmakers manage these negotiations and have discretion in considering various factors when determining fighter compensation.
The UFC denies these allegations, asserting that its control over fighters and promotional resources is necessary for the success and integrity of MMA events. They highlight their expansion efforts as evidence of healthy competition and market growth.[14]
Class Certifications:
In 2023, the court ordered certification for the Bout Class but denied certification for the Identity Class.[15] Federal Rules of Civil Procedure Rule 23 establishes prerequisites for class action certification, including numerosity to make joining all members impracticable, commonality of law or fact among class members, typicality of the claims or defenses of representative parties, and adequacy of representation.[16] The Bout Class, comprising fighters participating in UFC fights between December 16, 2010, and June 30, 2017, met these criteria and was certified. Specifically, the court determined that there were over 1,200 members in the Bout Class, making joinder impracticable, and that the claims of the representative parties were typical of the class.
Conversely, the Identity Class, consisting of UFC Fighters whose identities were exploited in UFC Licensed Merchandise and/or UFC Promotional Materials in the United States during the same period, did not meet the requirements for certification.[17] This decision was based on several factors, including the failure to demonstrate a common methodology for proving common impact or injury resulting from the alleged anticompetitive conduct. Additionally, the court noted the variability in fighters’ notoriety and the lack of evidence supporting a consistent internal pay structure for identity payments.
For the Bout Class, the plaintiffs relied on regression analysis conducted by their expert, Dr. Singer, to demonstrate common injury.[18] Dr. Singer’s regression model uses revenue share (or wage share) as the dependent variable and foreclosure share (percentage of the MMA market controlled by Zuffa) as the independent variable.[19] The analysis aims to employ a scientifically reliable method to demonstrate that foreclosing a substantial share of the relevant input market had the impact of suppressing the amount of revenue share paid to fighters. The defendants contested the use of wage share as a proxy for fighters’ marginal revenue product.[20] However, the Court found this measure appropriate, given the unique nature of the MMA industry, where fighters directly contribute to revenue generation.[21]
The defendants contested the class certification, particularly highlighting the judge’s reliance on the “wage-share” theory, which they considered unprecedented and inappropriate.[22] They argued that UFC’s success in the marketplace leading to disproportionate compensation growth compared to fighter earnings did not necessarily indicate anticompetitive behavior. Furthermore, they disputed the methodology used to measure market foreclosure and challenged the applicability of class action treatment for individualized compensation assessments. However, the Ninth Circuit’s refusal to hear their appeal allowed the case to proceed forward towards trial. The single-page order came down stating “the petition for permission to appeal is denied.”[23]
Other Motions:
Throughout the legal proceedings, the court addressed various motions, including those to strike and exclude expert testimony, a motion to shorten time, and a motion for summary judgment, in addition to the class certification issue.[24] The plaintiffs opposed Zuffa’s attempts to exclude certain expert witnesses, characterizing them as delaying tactics aimed at diverting focus from trial preparation. Specifically, the court found Zuffa’s motions regarding Dr. Singer and other experts untimely and substantively insufficient.[25]
The court then addressed Zuffa’s motion for summary judgment, which aimed to resolve the case without trial. However, the court found genuine issues of disputed fact.[26] Zuffa presented several theories.[27] First, it argued that increased raw numbers for bouts, hiring, and compensation during the class period meant Plaintiffs couldn’t establish direct evidence of wage suppression. However, the court found Plaintiffs provided sufficient evidence of market power. Secondly, Zuffa argued there were no barriers to entry, but the court found evidence suggesting otherwise, such as restrictions on the supply of fighters available to competitors, lack of cross-promotion opportunities, and Zuffa’s dominance in the market for headliner fighters. Thirdly, Zuffa claimed it didn’t prevent other competitors from signing fighters, but Plaintiffs presented evidence of significant foreclosure.[28]
Conclusion:
The settlement, subject to court approval, would mark the end of litigation that began in 2014, benefiting over 1,200 fighters involved in UFC bouts during the lawsuit’s specific periods. The $335 million settlement would not only bring closure to a prolonged legal battle but also underscores the broader implications of anticompetitive practices in the MMA industry. Despite potential flaws in the Plaintiff’s argument, the UFC’s willingness to settle highlights the significant pressure posed by the prospect of substantial damages, especially if trebled.[29]
This settlement serves as a catalyst for examining the regulatory framework governing professional sports and the role of antitrust enforcement in ensuring fairness and competition within the sports industry. Approval of the settlement could lead to changes in fighter contracts to foster greater competition and avoid future lawsuits.[30] Although the settlement’s tax implications and business effects are yet to be fully determined, it removes uncertainty surrounding the litigation and is viewed positively by analysts as it resolves a longstanding legal dispute for TKO Group Holdings.[31] In light of these developments, all deadlines and hearings in the case, including the trial date, are temporarily vacated.[32]
Katelyn Kohler is a second-year law student at Suffolk University in Boston, specializing in Sports & Entertainment, Labor & Employment, and Intellectual Property Law. She holds dual degrees from Ithaca College in Business Administration.
[1] See Katie Arcieri, UFC’s $335 Million Settlement With Fighters Ends Wage Dispute, Bloomberg Law (Mar. 20, 2024, 4:34 PM EDT), https://news.bloomberglaw.com/antitrust/ufc-fighters-see-335-million-settlement-finalized-in-september.
[2] See Le et al. v. Zuffa, LLC, No. 2:15-cv-01045-RFB-BNW, 2023 U.S. Dist. LEXIS 138702, at *10 (D. Nev. Aug. 9, 2023)
[3] See Complaint, Le et al. v. Zuffa, LLC, No. 2:15-cv-01045-RFB-PAL (N.D. Cal. Dec. 16, 2014), Document 1. Page 1. includes alleged violations of Section 2 of the Sherman Act, 15 U.S.C. § 2. Id.
[4] Amended Joint Stipulated Pre-Trial Schedule, Le et al. v. Zuffa, LLC, No. 2:15-cv-01045-RFB-BNW (D. Nev. Feb. 27, 2024), Document 990. Page 2. Trial was set for April 15, 2024. Id.
[5] See Complaint, supra note 3 at page 32 (quoting famed boxing promoter Bob Arum).
[6] See Order, Le et al. v. Zuffa, LLC, No. 2:15-cv-01045-RFB-PAL (N.D. Cal. Aug. 9, 2023), Document 839. Page 69. “Applying these benchmarks to Zuffa’s event revenue for the Class Period, Plaintiffs estimate the damages to be between $811 million (Bellator benchmark) and $1.4 billion (Strikeforce benchmark).” Id.
[7] See Complaint, supra note 3 at page 1. (noting civil antitrust action seeking treble damages).
[8] See Le, et al. v. Zuffa, LLC, No. 2:15-cv-01045-RFB-BNW, 2023 U.S. Dist. LEXIS 138702, at *16 (D. Nev. Aug. 9, 2023) (noting acquisitions of rival promoters).
[9] Endeavor Announces Close of UFC® and WWE® Transaction to Create TKO Group Holdings, a Premium Sports and Entertainment Company, World Wrestling Entertainment, Inc., (Sep. 12, 2023), https://corporate.wwe.com/news/company-news/2023/09-12-2023.
[10] See Cung Le v. Zuffa, LLC, 2023 U.S. Dist. LEXIS 13870 at *17-18.
[11] See Complaint, supra note 3 at page 6.
[12] See Id. at *14-15.
[13] See Id. at *12-13.
[14] See Petition For Permission To Appeal From Order Granting Class Certification Pursuant To Fed. R. Civ. P. 23(f), Zuffa, LLC, v. Le, et al., No. 23-80074, (9th. Cir. Aug, 23, 2023), Dkt. Entry 2-1. UFC argued that compensation per bout grew by 18% annually from 2005 to 2016, with top athletes experiencing a 21% increase from 2011 to 2016 and lower-ranked athletes seeing a 50% increase. Id. The organization invested significantly in enhancing the MMA industry, operating at a loss initially to establish unified rules, improve medical care, and gain regulatory recognition. Id. Additionally, UFC employed innovative marketing strategies such as producing programs, extensive athlete advertising, and broadcasting on platforms like Facebook, which contributed to the surge in MMA’s popularity. Id. By 2016, MMA had become legal in all 50 states and was rapidly expanding as a sport. Id.
[15] See Le, et al. v. Zuffa, LLC, No. 2:15-cv-01045-RFB-BNW, 2023 U.S. Dist. LEXIS 138702, at *4 (D. Nev. Aug. 9, 2023).
[16] See Fed. R. Civ. P. 23.
[17] See Le, et al. v. Zuffa, LLC, 2023 U.S. Dist. LEXIS 138702, at *5-6.
[18] See Id. at *21-23.
[19] See Id. at *85-91.
[20] See Id. at *93. Both sides’ experts agree that fighters’ compensation levels are best determined by assessing their marginal revenue product, particularly in combat sports like MMA and boxing. Additionally, the Court notes that boxing, which closely resembles MMA, also relies on revenue share to gauge player compensation.
[21] See Id. at *74-75. (holding the anticompetitive nature of the contracts, the use of extracontractual coercion techniques, and the intentional horizontal acquisition of prospective market competitors demonstrates Defendant’s willful acquisition, and maintenance, of market dominance through anticompetitive conduct in the relevant input market).
[22] See Petition For Permission To Appeal From Order Granting Class Certification Pursuant To Fed. R. Civ. P. 23(f), supra note 14. (arguing district court upheld an unprecedented theory, asserting that the predominance requirement could be met because UFC’s revenues outpaced its athletes’ collective earnings over the years).
[23] See Le, et. al. v. Zuffa, LLC, No. 23-80074, 2023 U.S. App. LEXIS 29036, at *2 (9th Cir. Nov. 1, 2023).
[24] See Order, Le, et. al. v. Zuffa, LLC, No. 2:15-cv-01045-RFB-BNW, (D. Nev. Jan. 18, 2024), Document 959. Before the Court were various motions including Defendant Zuffa, LLC’s renewed Motion for Summary Judgment (ECF No. 878), Defendant’s Motions to Exclude concerning Dr. Singer (ECF No. 929), Plaintiffs’ Motion to Strike (ECF No. 933), Plaintiffs’ Motion to Shorten Time (ECF No. 934), and a Joint Stipulated Proposed Pre-Trial Schedule (ECF No. 928).
[25] See Id. at 2-3. The Court found that Zuffa’s justifications for its late filing are inadequate to explain its delay. Id.
[26] See Id. at 6. In the previous Class Certification Order, the Court determined that Plaintiffs had provided enough evidence to show that Defendant had violated the Sherman Act on a classwide basis. Id.
[27] See Id. at 7-8. The Court considers the evidence submitted for both class certification and summary judgment as overlapping and admissible, finding genuine factual issues under the summary judgment standard due to the substantial similarity in evidence presented by both parties. Id.
[28] See Id. at 10. Evidnece shows that Zuffa ‘foreclosed’ a large share of fighters (greater than 90 percent), especially top-ranked fighters (91–99 percent), from the market. Id.
[29] See Michael McCann & Brendan Coffey, “UFC’s $335M Antitrust Settlement Details Remain Unknown,” Sportico (Mar. 20, 2024, 3:13PM), https://www.sportico.com/law/analysis/2024/ufc-fighters-settlement-legal-analysis-1234771740/. Fighters argue that they receive around 20% of revenue, contrasting sharply with the roughly 50% that players in major sports leagues like the NFL, NBA, MLB, and NHL receive. Id. Unlike athletes in these leagues, who negotiate revenue shares through collective bargaining agreements, UFC fighters, as independent contractors, lack this similar union representation. Id.
[30] See Id. (noting UFC and other MMA leagues may revise fighter contracts to enhance competition and mitigate further legal actions.
[31] See TKO Group Holdings, Inc., Current Report (Form 8-K) (Mar 13, 2024) (describing $335 million settlement reached on March 13, 2024, to resolve claims from two consolidated class actions, Le et al. v. Zuffa, LLC, and Johnson et al. v. Zuffa, LLC et al., subject to court approval, to be paid in installments and expected to be tax deductible); see also Justin Barrasso, Despite Settlement, UFC Wins Antitrust Battle, Sports Illustrated (Mar. 20, 2024), https://www.si.com/fannation/wrestling/ufc/despite-settlement-ufc-wins-antitrust-battle#:~:text=Trial%20was%20set%20to%20begin,regarding%20fighter%20contracts%20and%20pay. “Unsurprisingly, TKO stock jumped after the news of the settlement became public.” Id.
[32] See Minute Order, In Chambers of the Honorable Judge Richard F. Boulware, II, Le, et. al. v. Zuffa, LLC, 2:15cv1045, (D. Nev. Mar. 20, 2024). Document 1012.
