By William DeVinney, of Baker & Hostetler LLP
Throughout their history, professional sports leagues, including the National Football League, the National Basketball Association, and the National Hockey League, have generated high-profile antitrust litigation. The nascent sport of mixed martial arts now looks as if it will join that list, as two MMA fighters have brought a putative class action in the Northern District of California against Zuffa, LLC, a MMA fight promotion company that does business as Ultimate Fighting Championship (UFC). Le v. Zuffa, Case No. 5:14-cv-05484 (N.D. Cal., filed Dec. 16, 2014).
MMA fighters, like boxers, are represented by promoters who schedule bouts for their fighters, secure a venue to host the bout, contract for television or pay-per-view broadcasting rights, secure advertisers, and market the bout. The promoters then pay the MMA fighters a percentage of the proceeds collected from the bout. According to the complaint, Zuffa has violated Section 2 of the Sherman Act by monopolizing the market for promoting MMA bouts, and monopsonizing the market for representing elite MMA fighters. Thus, the top MMA fighters are forced to contract with UFC to promote their bouts or forgo any chance of becoming successful MMA fighters.
Until recently, the market for promoting MMA fighters was competitive, with several different companies vying to sign the top MMA fighters. According to the complaint, however, UFC consolidated the industry through a series of anticompetitive actions. Since its founding in 2000, UFC has acquired several MMA promoters that provided any competition for signing elite MMA fighters. To foreclose competitors that would not sell to UFC, and to prevent new entrants to the MMA promotion market, UFC has entered into a series of exclusive agreements with advertisers and hosting venues. UFC forbids any venue hosting UFC bouts from hosting any bout presented by other MMA promoters, whether on the undercard or on a separate date. UFC also requires its advertisers to deal exclusively with UFC for MMA bout promotion. Finally, UFC refuses to co-promote a bout between an MMA fighter represented by UFC and a fighter represented by another, competing promoter.
Those MMA promotion companies that UFC has not acquired or driven from the market have been relegated to serving as a minor league for MMA fighters. The remaining rival promoters represent only inferior or upstart MMA fighters attempting to win enough bouts, and gain a sufficient following, so that they can sign with UFC, which controls the majority of elite MMA fighters. In fact, those remaining promoters use exclusive agreements with their MMA fighters, but the contracts contain a clause that the fighter will be released from their agreement if they receive an offer from UFC.
The plaintiffs allege that UFC’s anticompetitive conduct has suppressed MMA fighters’ compensation such that MMA fighters earn from 10 percent to 17 percent of the revenue generated from the bout, whereas boxers and athletes in the four major sports leagues generally receive more than 50 percent of the revenue generated by their respective bouts or games. The UFC also, according to the complaint, has suppressed the compensation that they receive from the use of their names and likenesses. The complaint also alleges that UFC’s monopoly and monopsony allow UFC to impose restrictive contract terms, including some that extend beyond the expiration of the contract. For example, the standard UFC contract requires individual MMA fighters to assign the rights to the MMA fighter’s likeness to UFC in perpetuity. The standard agreement also requires the MMA fighter to grant a right of first refusal to match any offer the MMA fighter receives for a participating in a bout after the contract has expired.
One of the biggest challenges that UFC will face in defending itself will be addressing its executives’ public statements. Zuffa’s president, Dana White, made several statements on social media and at public events bragging about how UFC has eliminated its competition. For example, in an interview, White allegedly stated that “There was a time when [competition in the MMA industry] was neck and neck. That time is over. There were times when we were in dogfights, but everybody needs to just concede and realize we’re the [expletive] NFL. Period. End of story.” (Compl. ¶ 15.) White also posted a video to YouTube in which he held up tombstones of UFC’s rivals that had either been acquired by UFC or had folded. At a sports conference, UFC co-owners stood in front of a screen several feet high that contained a picture of the Earth and text that said “World F**king Domination; Reshaping the Sports World.” (Compl. ¶ 18.)
Although they can be characterized as hyperbole, these are the type of statements that get a complaint past a motion to dismiss or summary judgment, and grab a jury’s attention. Like MMA itself, Zuffa looks as if it will be entertaining.
This article was originally published on the Antitrust Advocate blog and is republished with permission by Baker & Hostetler LLP.
