Two weeks ago, I dissected the details of the lawsuit filed against the UFC (here and here) from the perspective of someone who used to provide expert witness support in these exact types of antitrust cases. The intent was to translate the plaintiffs’ legal arguments into everyday English and cover the likely ways the UFC will rebut and attack the claims.
The length of the UFC’s exclusive contracts was an important issue and I’ve since received feedback that UFC contracts may not be long term from a business perspective but are a lifetime in the typical career of an elite, professional MMA fighter – thus benefiting the plaintiffs’ position and hurting the UFC. While it feels important, short fighter careers would actually either be benign or help the UFC. The reason has to do with the raising rivals’ cost claim the plaintiffs are making and the way economics and antitrust view harm to competition.
Emotionally, we feel for these fighters and being under an exclusive contract for an entire, short career just feels like it matters. But we can tell from the plaintiffs own words that it doesn’t. They make 55 pages of claims against the UFC and not one has to do with the length of a fighter’s career – not even a placeholder. If it were relevant, you can be damn sure something would be in there. So let’s quickly revisit the plaintiffs’ allegations and then see why short MMA careers would, if anything, help the UFC’s defense.
The plaintiffs accuse the UFC of having monopsony power in the input market for elite, professional MMA fighter services and anticompetitively maintaining and enhancing that power by raising rival MMA promotions’ costs
“The UFC denied actual and potential rivals necessary inputs to run effective professional MMA Promotion companies, raising their costs and making it impossible for them to compete effectively.” (emphasis added)
They allege the UFC foreclosed rival MMA promotions from access to a resource critical to compete – elite, professional MMA fighter services. This foreclosure occurred through the use of long term exclusive contracts.
“The UFC’s illegal monopsony position is sustained, in part, through the use of exclusive dealing agreements with UFC Fighters that lock in Elite Professional MMA Fighter services perpetually and exclusively for the UFC. The UFC’s exclusive contracts foreclose would-be rival promoters from vital inputs-namely Elite Professional MMA Fighter services with the notoriety needed to sustain a successful live Elite Professional MMA promotion.”
“By dominating the market for live Elite Professional MMA Fighter services through the scheme alleged herein (including through long-term exclusive agreements with MMA Fighters and other exclusionary and anticompetitive acts), the UFC controls the talents of Elite Professional MMA Fighters, who are popular with national audiences.” (emphasis added)
While it’s only mentioned once in the complaint, the long-term nature of the contracts is a critical ingredient to any successful claim of exclusionary conduct. The main idea is that you’re maintaining and enhancing your monopsony power not because you have a better product or make better business decisions, but because you’ve locked up something that’s absolutely critical to compete and kept it from your rivals. As noted in Part 2 of my dissection:
The fighters’ strategy has just been clarified. If a credible economic argument is to be made about raising rivals’ costs with exclusive contracts, they must be long term. This is an absolutely essential component to the story. In my experience, exclusive contracts in the range of three years or less are usually viewed as short term. 4-8 years is debatable and 8-10 years or more is generally viewed as long term. This is because contracts don’t expire all at once. They’re generally staggered.
If we take the Eddie Alvarez contract as a baseline, the maximum length of a non-champion’s contract is 3 years 4 months. The UFC will argue this means about 1/3 of its fighter contracts should expire every year so rival promoters aren’t foreclosed from access. The plaintiffs’ position looks weak in this regard, which is my guess as to why they didn’t emphasize “long term” more in the complaint.
The fact that three years may capture the full length of a typical fighter’s career in elite, professional MMA unfortunately isn’t relevant to the economics of the story being told. This is one of those situations where what we feel personally is different from the economics. It’s like ATM surcharges – every single one of us hates them but that doesn’t mean banks’ reasons for using them are flawed.
Short fight careers matter to fans and the people grinding out a living in the cage, but the plaintiffs’ are arguing that fighter compensation has been artificially depressed due to anticompetitive actions that foreclosed rival MMA promotions. This is the perspective from which contract length matters – that of rival MMA promotions and their access to fighters. If a typical fighter’s career is shorter than three years, this doesn’t hurt the UFC’s position.
Using FightMetric’s database, the average length of a UFC, WEC or Strikeforce fighter’s career from their first documented bout in any of these promotions to their last is 533 days. They typically fight in 3.3 bouts. This distribution has heavy positive skew but courts often work with simple averages for this type of calculation.
Distribution of Careers Lengths in Major MMA
Note: I try to exclude fighters whose careers are still ongoing by only running the analysis on those without a documented fight since the end of 2012.
Technically we should be looking at the length of time fighters tend to be under UFC contract, but we’re dealing with imperfect data here. The discovery process should give the parties access to more precise information on fighter signings, releases, contract expirations and renewals. For right now we’ll say the average length of a fighter’s career in major MMA is about 1 ½ years or 3.3 bouts.
The plaintiffs likely didn’t raise the issue of career length because they knew it wouldn’t help. If does arise in the lawsuit, expect the UFC to argue that contract lengths of 3 years 4 months are still short term, but an average career of 1 ½ years means the free and open competition to discover new talent is extremely important. They’ll argue it shows they replenish a large portion of their elite, professional MMA roster in a very short amount of time and rival promotions are free to compete to sign these fighters.
Had the plaintiffs defined their relevant market differently, the strategies and arguments could be different. I’m going off what we’ve got in the complaint. As it stands, the plaintiffs’ lawsuit isn’t frivolous but it isn’t strong either. Their biggest problem is they’re fighting against conduct (exclusive contracts) that’s legitimately used every single day in business and therefore has a much higher legal standard to clear (rule of reason), opening up a wide range of defenses to the UFC.
The plaintiffs’ relevant output market will be attacked vigorously (and is extremely shaky in my opinion) and their relevant input market is arguably expansive and the UFC will fight like hell to expand it even more. They also have a real problem with contract length and from the wording of the complaint it’s clear the plaintiffs’ legal team knows this and has undertaken a strategy to counter by arguing the 10 champions can be extended indefinitely and the remaining 490 fighters are prohibitively costly to rival MMA promotions due to the UFC’s likeness rights clauses. This strategy isn’t meritless but will be a tough sell. The UFC will attack every little detail while arguing their legitimate business justifications, superior product and superior business acumen.
At the end of the day, the plaintiffs seem to have a very settle-able case. But antitrust settlements can often be disappointing, so be ready. Electronic Arts (EA) was sued in 2008 for allegedly using exclusive licenses to foreclose rival football video game producers resulting in a Madden 2006 price increase from $29.95 to $49.95. The case settled in 2013 and consumers got some money while EA agreed not to use exclusives for arena and collegiate football for a whopping five years. Meanwhile, EA’s exclusive NFL license for Madden was completely unaffected.
If a settlement occurs, the lawyers will get paid. The fighters may get some money but probably not “many, many thousands of green people from history times.” At the moment, the most realistic hope is for reasonable contractual changes going forward, kind of like what happened when poker players settled their lawsuit with the World Poker Tour.
Paul is an economics professor, former provider of expert witness support in antitrust cases and Bloody Elbow’s analytics writer. Follow him @MMAanalytics. Fight data provided by FightMetric.
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