cLast week I noticed a great deal of “debate” on Twitter between supporters of Project Spearhead and members of the Mixed Martial Arts Fighters Association. Since combat sports, monopoly, and labor are three of my favorite subjects to discuss, (and if you follow me on Twitter, you know I am not joking) I was looking forward to seeing the two sides thrash it out.
I didn’t find the back-and-forth, though, that informative. Instead it was mostly boilerplate talking points, misinterpretations, some wild accusations, and a lot of insults. This is unfortunate, for the two groups are proposing disparate strategies, which, if enacted, could easily result in very different outcomes for fighters. For that reason they deserve to be thoroughly examined.
It is understandable that most people have not really spent much time pondering the implications of the choices fighters are being asked to consider. Employee or independent contractor status? Trade association or labor union? Collective bargaining or antitrust? Usually questions of labor in MMA is presented as extremely simple (“Just make a union!”) but in truth it is anything but. Each of those choices comes with a pro and a con. Since there has been little discussion of what is actually being proposed and how it would actually play out in our current climate, I thought perhaps it would help to take a deep look at these questions.
A warning: this won’t be brief.
We’ll start with Project Spearhead, the newest effort to organize fighters, which comes on the heels of the apparently abandoned attempts by the PFA and MMAAA as well as the MMAFA’s still ongoing campaign. Started by UFC bantamweight Leslie Smith, with the assistance of attorney Lucas Middlebrook, Project Spearhead is a remarkably simple undertaking: they are asking for UFC fighters to sign union authorization cards with the hope of attaining signatures from at least 30% of the roster. If they accomplish that, they won’t suddenly be a union, but instead they will have triggered a review by the National Labor Relations Board to determine if they are employees or independent contractors.
Zuffa currently classifies the fighters as independent contractors, but just because someone says that, it doesn’t make it fact. The relevant factor when determining employee status is control and freedom in the relationship between the worker and the business, and for UFC fighters it seems as if there is a lot of control over them while they have very little freedom.
Like almost all MMA fighters UFC fighters are bound by exclusive contracts, limiting their services to the UFC during the duration of their contract. And unlike fighters in other MMA promotions UFC fighters are also required to wear a “uniform”, do not have their own in-cage sponsors, have relinquished their image rights, and are required to follow a strict USADA drug testing policy. The question is, does that add up to be enough for the NLRB to rule fighters employees? If not and they are ruled to be independent contractors, then a union is off the table, since only employees can form labor organizations.
But if the NLRB determined that the fighters have been misclassified and are really employees, that would change a lot of things. First, with employee status comes additional legal protections, the ability to collect unemployment or collect workers compensation, the responsibility by the employer to supply healthcare for full time workers and to withhold payroll taxes. There could also potentially be some compensation to fighters for past FICA taxes not withhold, unpaid overtime, or reimbursement for business expenses. Most importantly though, having already collected 30% of the rosters signatures, if determined to by employees they could now vote to authorize a union.
An election would be supervised by the NLRB, and if more than 50% of UFC fighters voted “yes” they would now be represented by a union that could start bargaining with management.
Of course, this assumes there are no hurdles put up in the fighters way. With the heavy turnover of fighters in the UFC getting 30% of the current roster to sign might be harder than it sounds. And with the current administration’s appointees apparent hostility to labor unions, the NLRB could very well decline to change the fighters classification or refuse to accept their union vote.
In other words, the whole process would likely be a fight but one that, if successful, would lead to fighters as a group having greater bargaining power than they do now.
An astonishing supportive statement for a union came from Zuffa’s own expert, Dr. Roger Blair, a Professor of Economics from the University of Florida, who blamed the low share of revenue paid to fighters (an estimated 17 percent versus the roughly 50 percent paid to the athletes in the four major leagues) on the fact that they weren’t represented by one. Here’s what Blair wrote in his expert report for the Le et al v Zuffa, LLC antitrust lawsuit.
[T]he athletes in the four major leagues are unionized and bargain collectively with management, while MMA athletes are independent contractors and are not unionized. Collective bargaining likely impacts compensation in the four comparator sports leagues in myriad ways, but at minimum, one would expect that unionized athletes would have increased leverage to demand higher pay, which would impact the percentage of revenue they receive.
It doesn’t get much clearer than the UFC’s own expert economist arguing that fighters’ low pay was due to not having a union — one they can’t organize because they are independent contractors! Project Spearhead seems like the perfect solution to solve both these problems in one fell swoop. Who could be opposed to that?
Well, members of the MMAFA for one.
THE MIXED MARTIAL ARTS FIGHTERS ASSOCIATION
It’s worth highlighting that the MMAFA is advocating for a trade association and not a labor union (In the major leagues the athletes are represented by unions despite referring to themselves as players associations). An association does not represent the employees of a workplace but instead an industry or profession. And since they do not have to win an election and be certified by the NLRB, they are much easier to form. At the same time, it can not collectively bargain (negotiating pay with the businesses their members work with is potentially collusion) nor do they have any protections against reprisals by management if they attempted to strike. The main tools available to them is lobbying for legislation that impacts their profession, and taking legal action on behalf of their members since they have standing in court.
The MMAFA’s opposition to unionizing is based on the idea that even before any attempt to collectively bargain is undertaken competition needs to be improved, otherwise fighters will be unable to increase their wage share. It follows in many ways the arguments made by preeminent sport’s economist, Dr. Andrew Zimbalist, who wrote in his rebuttal to Blair:
Dr. Blair also asserts that the team sport cannot be compared to the UFC, because the athletes in the UFC are independent contractors, have no union, and do not collectively bargain. However, the presence of collective bargaining in the team sports does not undermine their comparability as yardsticks. This is because the primary way that the players’ unions have helped the athletes obtain a larger share of the league’s revenues is by negotiating for rules that increase the ability of athletes to become free agents and benefit from labor market competition. (emphasis mine)
While collective bargaining and the ability to strike are important tools, they by themselves were not responsible for the huge rise in athletes pay we have seen since the 1970s. Instead, this is primarily the result of the players unions overcoming the sports leagues’ monopsonies.
NOT MONOPOLY BUT MONOPSONY
A monopsony is the reverse of a monopoly. Where monopoly refers to one seller of a product, monopsony is a situation in which there is only one buyer. In this case, by banding together as a cartel, the teams of the major sports leagues are the sole buyers of their sports’ elite level professional athletes. (It’s good to keep in mind that when speaking about monopoly or monopsony, as defined in our legal system, there doesn’t literally have to be only one seller or buyer. Instead one has monopoly or monopsony power if they control such a large proportion of the market that they have power over the price.)
The major leagues often had monopsony power over players thanks to contract stipulations like the ‘Reserve Clause.” These were designed to limit players wages by restraining negotiating to only one team, thereby restricting competition for their labor.
As a result, [MLB] teams did not compete for players. Estimates by Scully (1974) and others indicate that rate of monopsonistic exploitation was very high during this era — players were paid less than half of the value of their contribution to output, and possibly as little as one-seventh.
– Monopsony in American Labor Markets by William M. Boal, Drake University and Michael R. Ransom, Brigham Young University
Because athletes are a big part of the product being sold in sports, we would expect in markets less distorted by monopsony to see them paid close to their Marginal Revenue Product. This is the amount of additional revenue they add by their playing. For example: on an assembly line, who is working makes little difference to someone purchasing the microwave produced on it, but who is on the court for an NBA game has tremendous impact on why someone chose to view it. In a competitive market, a player would receive a wage equal to – or at least very close to – his or her MRP, which is the increase in team revenues the player produces. It’s for this reason that we often use wage share over wage level when discussing athletes pay. In fact, increased wage levels coinciding with a decrease in wage share is viewed as potential evidence of market power.
We see evidence of the monopsony exploitation in the major league sports primary when looking at the shift in wages that result from changes in intra- or inter-league competition. When rival leagues appear, introducing inter-league competition, we see a rapid rise in players wage levels and wage shares. When those rival leagues disappear we see those wage shares decrease. Following the removal of restrictive contract clauses that limits free agency we see increased Intra-league competition for players and that also leads to higher wage levels and wage shares.
For those interested in more details on how free agency and competition impacted players wages, what follows is a look at the history of the four major leagues and their struggle versus the owners’ monopsony power. It is rather lengthy, but to understand what potentially could happen in the UFC and MMA I thought it important to examine what actually transpired in the other sports. For those who would rather get to the point, feel free to skip ahead to when the discussion gets back to MMA.
MAJOR LEAGUE BASEBALL
In 1968, only two years after the election of Marvin Miller to Executive Director of the Major League Baseball Players Association, MLB and its players entered into their first Collective Bargaining Agreement. This CBA raised minimums salaries from $7,000 to $10,000. We don’t have average salaries for 1968 but in 1967, the year before the CBA was signed — and the first year we have firm data thanks to the NFLPA collecting it — it was $19,000 (about $143,000 today), and by 1969 it was $24,909. By 1976 the minimums had risen to $19,000 and the average MLB players salary was $51,505, or about $230,000 today.
That means that from 1967 to 1976 the average MLB players’ salary saw a Compound Annual Growth Rate of 11.72% (although only 6% in real, inflation adjusted terms). During this same period, three CBA’s were signed by the MLB and MLBPA, while one strike in 1972 and one lockout in 1973 also took place. While the players saw increases in minimum salaries and cash allowances for meals and impartial arbitration (which we’ll soon see was their most important achievement), they were unable to accomplish Marvin Miller’s primary goal: the elimination of the “Reserve Clause.”
The Reserve Clause was a stipulation in players’ contracts that stated that if a player and team could not come to terms, the team could unilaterally renew the player’s contract for one year. This clause gave teams tremendous leverage in negotiations and effectively blocked players from every testing the intra-league market.
The monopsony power granted by this restriction on free agency was the primary reason that the salary share of total baseball revenue going to players was only 17.6% in 1974 — a percentage very close to what UFC fighters are thought to receive today. And for baseball players, this was actually a decrease from the 22% it had been two decades earlier.
Players in the early 70s were therefore seeing increases in their wage levels (the amount of money earned), but their wage share (the share or percentage of league revenue going to the players) remained low. This would soon change.
Curt Flood would go down in history as the first player to contest the Reserve Clause, filing suit in 1969. His case would make its way to the Supreme Court in 1972, where the Court ruled in favor of the MLB, affirming their antitrust exemption (although they also ruled that this antitrust exemption was only applicable to baseball.) The decision was not a complete loss for the players, for the Court’s ruling also established that the reserve clause could be negotiated in collective bargaining. Miller’s insistence to include arbitration in the CBA now proved to have been a very wise strategic move.
Grievances were filed by Andy Messersmith and Dave McNally over clause 10-A (the Reserve Clause) and in December 1975 the arbiter ruled that a team could reserve a player for only one season. Free agency would now be available to players.
With the league’s monopsony power seriously weakened, both wage levels and wage shares skyrocketed.
The rise of free agency in the 1976–77 period had a powerful impact on the salaries of baseball players. The average real increase in baseball salaries was from 0–2 percent per year from 1973–75. In 1976 the average real salary increase was almost 10 percent; in 1977, the first year under the new collective bargaining agreement, 38 percent (!); in 1978, 22 percent, before falling back into single digits growth in 1979.
– The Sports Business as a Labor Market Laboratory by Lawrence M. Kahn
By 1982, league minimums were set at $33,500 and the average players salary had risen to $241,497, a nominal CAGR of 29.74% (18.5% real) from 1976 to 1982. More impressive still was the salary share of total baseball revenues going to the players. In 1977, the year free agency hit in earnest, it had ticked up to 20.5% of $231 million in total revenues. By 1982, when free agency was in full swing, it was 41.1% of $421.8 million.
This was not the end of baseball’s labor struggles, as MLB went through a period of owner collusion during the off-seasons of 1985, 1986, and 1987. During this time, the owners worked together to drive down wages by secretly agreeing to limit contract offers to players. Due to this collusion, the players’ share dropped from 40% of $791.9 million in 1986 to 31.6% of $1.241 billion in 1989. For the first time since the start of free agency, the average major league salary declined. In 1987, the average free-agent salary dropped by 16%, while at the same time MLB reported revenues were increasing by 15%.
The collusion was ended after a series of grievances were filed by the players. The collusion in 1985 cost the owners $10 million in damages; 1986’s collusion cost them $64.5 million; the 1987 collusion arbitration ended with the owners agreeing to pay the players $280 million in damages. Post collusion, the players’ share of revenue almost doubled to 57.8% of $1.585 billion revenue by 1992.
THE NFL, NBA, AND NHL
The other leagues story is somewhat different in that inter-league competition and antitrust law all played a much larger role than it did with baseball. Unlike MLB, which hasn’t had a major rival league since the Federal League folded just before the United States’ involvement in the First World War, the NFL, NBA, and NHL all contested with rival leagues between 1960 and 1985.
The National Football League was the first to face major competition, in the form of the American Football League which debuted in 1960. By 1967, the competition between the two had driven wages up to a point where NFL players had the highest salaries of all of the major league athletes, averaging $25,000 and share of over 40% of the revenue. The very next year, the NFLPA was certified and a CBA was negotiated after a brief lockout. The merger in 1970 between the NFL and AFL, and the NFLPA’s inability to end the “Rozelle Rule,” (a restrictive contract provision that required a team signing a free agent to compensate the team that he left, making any free agent much less attractive) retarded wage growth in the decade that followed. By 1977, they were the lowest paid professional athletes, averaging only $52,888, a less than 1% growth in real terms from 1970.
The National Basketball Association had recognized their player’s union, the NBPA, since 1957, when the first CBA was signed. While the players were able to negotiate pay for exhibition games, a per diem increase, and introduced a pension plan, salaries remained relatively low. That would change with the appearance of the American Basketball Association.
During the ABA’s war with the NBA, basketball players’ pay rose faster than other athletes during that period. In 1967, the first year played by the ABA, the average NBA player’s salary was $20,000. Over the next 10 years their salaries increased at 21.7% CAGR, reaching $143,000. In real terms, that’s a 300% increase over that timeframe. The players’ share of league revenue also increased dramatically during this time, from 30% in 1967, to 46% in 1971 and finally reaching 66% by 1977.
In 1970 the ABA and NBA had attempted a merger but Oscar Robertson, the president of the NBPA, had filed suit against the NBA, contending that the draft, option clause and other rules restricting player movement were violations of antitrust law. The lawsuit blocked the merger, and players continued to benefit from the ABA-NBA competition for 6 more years. The merger finally did go through in 1976 after a settlement was reached where the league agreed to allow free agency in exchange for giving their old team “right of first refusal” in which they could match any offer they might receive. Even then, without the competition of the ABA, players wages stagnated, with the average salary in 1977 of $143,000 rising to $215,000 by 1982, an almost 10% decrease in real terms. Much of this can also be blamed on sagging television viewership and ticket sales that followed the closing of the ABA. This would soon turn around with the arrival of new stars in the NBA, and the players would be well positioned to leverage their newly attained free agency for concessions.
The National Hockey League also went through a period of intense competition. From 1972 to 1976 they were challenged by the upstart World Hockey Association. Over the course of its struggle with the WHA, NHL players become the second highest paid athletes amongst the four leagues. Their salaries increased from $25,000 in the 1970-71 season to $96,000 by 1977-1978, a 21.2% CAGR over those 7 year and a more than 150% increase in real terms. In 1979, the two leagues merged and the players salaries stagnated from lack of competition between teams. A major reason for this was the NHL’s rules that required a team signing another team’s free agent to compensate his former team. As obviously intended, this greatly decreased bidding for players. From the 1977-78 season to the 1988-1989 season, the average NHL wage increased from $96,000 to $188,000, a CAGR of 6.3%. Adjusting for inflation, the average player’s salary had actually decreased slightly during that time.
The last gasp of major inter-league competition was provided by the United States Football League, which had its debut on March 6, 1982. Several prominent NFL players jumped to the USFL and a robust competition ensued. According to Zimbalist, “While real average NFL salaries increased at an annual rate of 4 percent between 1977 and 1982 and at 5 percent per year between 1985 and 1989, during the three years of competition with the USFL average salaries grew at a 20 percent annual clip.”
As we can see from the examples, competition from rival leagues dramatically increased players compensation, often at a rate 300 to 500 percent more than during years it didn’t exist. With the end of this inter-league competition, the major league players associations turned to new strategy: increasing intra-league competition.
The NHLPA, whose wages had remained stagnant since the folding of the WHA, was finally able to secure some limited free agency after a successful strike in 1992. Players share of revenue increased from 30% in 1990 to 40% of league revenues in 1993, and by 1996 one-half of NHL revenues was going to the players. During the 1990s the NHL salary growth was 21.2 % CAGR, a number very similar to what was attained through inter-league competition.
In the early 1980s, coinciding with the arrival of Magic Johnson and Larry Bird, revenue began to rise for the NBA. Salaries too were starting to climb rapidly for star players as they took advantage of the post ABA merger free agency rules. These rising salaries though began to threaten the viability of smaller market teams.
In 1983, NBA players agreed to a landmark four-year CBA that would begin in the 1984-85 season. While it constrained the rapidly rising competitive salary growth by introducing a salary cap, it also guaranteed the players a fixed share of 53% of the gross television, radio, and gate revenue. The average player salary went from $275,000 in the 1983-84 season to $865,645 for 1990-91. This 17.8% CAGR was close to what the league experienced during its heavy competition with the ABA.
The salary cap and revenue sharing was introduced by the owners, not the players, as a means to guarantee competitive balance. The players accepted it because they knew it was in their best interest to have more teams be economically viable.
The NBPA initiated an interesting tactic in their 1988 CBA negotiations. The union contended that the NBA’s salary cap, right of first refusal, and college draft were all in violation of antitrust laws and NBPA President Junior Bridgeman plus several players filed an antitrust suit. Since unions themselves are monopolies, they cannot sue for antitrust damages, so the NBPA threatened to decertify, allowing the players to file independently. Instead of risking an unwanted outcome, the owners opted instead to come to terms. One of their conditions was the expansion of the definition of revenue to include those “derived from, related to or arising out of the performance of players in N.B.A. basketball games.”
Following this new agreement, players cost as a share of total NBA revenues increased from 40.6% in 1989–90 to 60% by time of the 1998–99 lockout season.
The NFLPA was quick to follow up on the NBA’s antitrust strategy. Their strike in 1982 had shortened the season by 7 weeks but had won little in the way of concessions, while their 1987 strike failed to win free agency. Instead, the owners had turned to “scabs”, along with 15% of the NFLPA’s own members who willingly crossed the line, to keep the games going. The NFLPA, realizing the owners wouldn’t give them free agency through regular bargaining channels, turned to antitrust.
After the 1987 strike ended, the NFLPA filed an antitrust suit, but the court found that NFL owners were exempt from antitrust laws under a labor exemption. The court’s reasoning was that since the NFL players were operating under a collective bargaining agreement (CBA), the NFL owners could not be violating antitrust laws since the players had bargained for it with their own antitrust exempt entity.
Subsequent to the ruling in Powell v. NFL, the NFLPA decertified as a players union (and would remain decertified for 6 years) and then refiled the antitrust lawsuit, this time against the NFL’s new “Plan B” free agency. As a defense, the owners alleged that the NFLPA decertification was a “sham” — that the NFLPA was not a union in name only, solely to allow the players to bring an antitrust lawsuit. In 1992, the court ruled for the players and the NFL’s system of free agency was ruled a restraint of trade. Shortly afterwards, the NFLPA recertified as a players union.
The agreement, along with the doubling of TV rights between 1990-1993, had an immediate impact on player salaries, increasing wages for the 1993 season by 38 percent. From 1970 through much of the 80s, players had received less than 40% of the leagues revenue. By 1994 it had risen to 64%. To protect themselves, the owners negotiated a salary cap and a revenue sharing plan.
BACK TO MMA
(For those skipping our long segue into the history of professional sports leagues’ monopsony and wages, we’re finished and you can rejoin us now.)
There is a couple of lessons that we can draw from this history of sports wages. One, that wages rise when there are competing leagues but — and this is a big but — those competing leagues do not last (although often teams from them end up merged into the incumbent league). The reason for their not lasting has to do with what’s called the “network effect”. A simple explanation of how the network effect usually works in sports is that because one league has the better players or teams, more fans start watching that league, which means more of those better players continue to sign with the teams in that league in order to benefit from the greater viewership. This process continues until the other league can no longer compete.
(If you’re interested in learning more about what the network effect is and how it works, check out this discussion I had with Paul Gift and David Dudley, where we describe it in some detail and to how it relates to MMA specifically.)
The second take from our history lesson is that wages dramatically rose when the player associations were able to increase inter-league competition. This was mostly accomplished through collective bargaining and strikes by the stronger unions (MLBPA) or through antitrust actions by the weaker (NFLPA).
MMAFA supporters look at that history and come to the conclusion that if getting fighters a greater share of their marginal revenue product is the goal than increasing competition has to be the priority and that can only be done by weakening the UFC’s monopsony.
I don’t think there is any debate that the UFC has a great deal of monopsony power over their fighters. The only debate to be had is whether they attained it legally through providing a superior product, innovation, or business acumen or if it was achieved by exclusionary or predatory behavior. That debate will be decided in a Federal court in Nevada though, not on Bloody Elbow. But one needs to only look at the share of revenue going to fighters wages (which I estimated at no more than 17%) or the way in which every fighter on the roster has conceded to unilateral changes in sponsorship, uniforms, image rights, or drug testing, to find prima facie evidence of monopsony power akin to what the major league sports once had.
Now obviously unions, as evidenced by what we’ve seen in our major leagues examples, have worked before to lower monopsony. But the MMAFA’s argument is that the unique nature of the UFC and the current state of the MMA market makes a union not only ineffective but also counterproductive. That is because the UFC is a single entity monopsony. With a single entity there is only one owner so you can not create the intra-league competition between multiple team owners that the other sports leagues were able to when they removed the Reserve Clause. Worse still, at least according to the MMAFA, a union would negate what they think are their two best tools for accomplishing their goals: expanding the Muhammad Ali Reform Boxing Act to include MMA fighters, and preventing damages from antitrust litigation.
THE ALI ACT
The MMAFA have been big supporters of the Muhammad Ali Expansion Act, repeatedly backing it on social media, in interviews, and even traveling to Washington, DC to lobby members of Congress. Their hopes for the bill is that it can do what nothing else has successfully done so far and that is create competition in the market. This, after all, was the original intent of the bill.
The reforms proposed by the legislation should increase competition in the industry, due to a reduction in anti-competitive restraints of trade. There would be increased free market bidding by promoters seeking to sign boxers, which will benefit boxers, as will a more consistent and legitimate ratings system.
Boxing too has had monopoly problems in the past. There was the International Boxing Club of New York in the 1950s that had to be broken up in an antitrust lawsuit and later there was Don King’s near monopoly in the 80s and 90s. In fact, the ability of promoters to use contractual provisions to monopolize the championships was cited by Congress as one of the reasons for the bill. While the effectiveness of the Act has often been questioned, on the subject of preventing monopolies, so far it seems to be working. Since its passage, no promoter has come close to capturing the market share those earlier examples had. The most recent accusation of attempted monopolization was directed at the Premier Boxing Champions, who appeared to have been partly stymied by the Federal law when it blocked them from issuing their own titles.
The MMAFA’s apparent hope is that by separating the titles and rankings they can create competition in MMA. In effect, make the sport of MMA an intra-league with multiple promoters acting as teams competing for the titles through their fighters. “Fighters would compete for titles, and promoters would compete for fighters.” In a way, this is how boxing works. The more robust competition between boxing promoters is why pugilists receive a much higher share of the revenue than MMA fighters (over 60% of the revenue from major promoters like Golden Boy and Top Rank go to their boxers) and why, especially the top boxers, are paid much closer to their MRP. That being said, there is also a strong argument to make that many unranked UFC fighters are actually being paid above their MRP.
The major difference between the kind of “inter-league” competition we see in boxing compared to those of the other league sports, is that with four major sanctioning bodies, promoters may function similar to teams but these are teams that can jump between rival leagues – and not just between seasons but week to week. This prevents the network effect from foreclosing on competition but it also prevents the very things that fans find desirable about the network effect in the first place. Namely all the best players and teams competing in the same “league.”
The MMAFA does offer a potential solution to this last problem through their association. It is also the solution to any questions concerning how the Act would even be enforced, since there has been a noticeable lack of enforcement in boxing by officials. Since the Ali Act provides the right of private action and associations have standing in courts on behalf of its members, an association itself could sue the violators. This would make enforcement by state commissions or Federal agencies no longer necessary. Right now, the right of private action is used almost exclusively by boxers at the very top of the hierarchy, but a powerful enough association could guarantee more widespread protection.
The association could also be the answer to those worried that expanding the Ali Act to MMA would lead to a splintering of the titles: where instead of the one title everyone recognizes as the most important — the UFC title — it would instead resemble boxing, with multiple belts of equal prestige (and some would say of also lesser prestige to a single title.) A strong association could make sure that only one belt became the de facto world title by writing up guidelines that lead to a single sanctioning organization being endorsed. This would in some ways be similar to the actions taken by the Association of Tennis Professionals in 1988, when players stood together to create the ATP Tour, effectively choosing one tour over another because it met their requirements.
For those that view the expansion of the Ali Act as essential, Project Spearhead presents a potential hazard. One simple reason for concern could be that if they were successful at attaining employee status, then Rep. Markwayne Mullin might very well withdraw the bill, something he told me he would do.
Even more perilous would be the organizing of a union and the signing of a collective bargaining agreement. In fact, one of the reasons given by Congress for why the Act was needed, was boxers lack of players association representation like athletes in other sports had. With a CBA, the promoter would attain an antitrust exemption, but would this exemption override the protections against restraints of trade in the Act? And would mandatory bouts, one of the primary ways the Act was intended to increase wages in boxing, apply to fighters under a CBA? Would a union fighter working in a promotion with a CBA even accept a bout with a promoter for which the union had no agreement? Collective bargaining therefore raises many questions about its compatibility with the Ali Act and might even negate many of its key protections.
None of this will be a concern though if the Act isn’t passed, and as of right now there is no guarantee it will happen. Where a great deal of progress was made in 2017, with some 58 members of the House of Representatives signing on as cosponsors, that has all come to a halt as our Nation’s Capital has been preoccupied with one pressing emergency after another. Thus, no one can be sure that the bill will get another hearing, let alone pass both houses, any time soon. And if the bill can’t pass, it obviously can’t do all the things its supporters expect it to do.
An even bigger obstacle might be the fact that the idea of independent rankings or titles separate from promoters seems to be extremely unpopular amongst not just MMA fans but many fighters as well. If most fighters prefer the UFC having a monopoly on their titles (and if what we prefer about the current system is that we have only one real world championship and the UFC owns that championship than yes they have a monopoly on it) it’s hard to see how you can successfully introduce legislation to overturn that. We can point to Marvin Miller and his struggles with convincing players of the need to remove the Reserve Clause — many MLP players at the time thought it would ruin the game — but at some point you have to be able to convince them. In the case of the fighters, I have yet to detect a groundswell of support. We see very few active UFC stars willing to voice public support, let alone show up in Washington to lobby. If the bill is not supported by the fighters why should it be made into law?
The other potential drawback on expanding the Ali Act to MMA is that much of the MMAFA’s expectations for the bill seem dependent on having a relatively effective association. While boxing legal experts like Leon Margules, Pat English, and Kurt Emhoff all expressed the sentiment that combining an association with the Ali Act could be a game changer, there is the matter of actually organizing that effective association.
To make sure the Act is enforced for more than just a very few star fighters who have the resources to litigate it themselves, you would need an association to police it. Without that association enforcement, it seems likely that while a handful of the biggest stars might benefit, we wouldn’t see the robust competition that would drive up the purses of other fighters ranked in the top 10 or 15. And without competition for those fighters, you wouldn’t have the market necessary to potentially raise the wages of prospects.
Even with an association, there is no way of knowing how many fighters would benefit from the increased competition. While it seems very likely that most of the top 10 or top 15 fighters in each division, as well as blue chip prospects would profit from it, there is no guarantee that those lower on the rankings would see any rewards. In fact, there are reasons to doubt they would.
There are possible ways to expand the size of this group of fighters that benefit. Some suggestions have included endorsing a second title for those fought under Pride-style rules in a ring — which would double the number of ranked fighters and set up lucrative champion vs champion bouts — or having the association itself serve as the sanctioning organization, earmarking fees to pay healthcare and pensions for its members (although there are some questions as to whether this would also be an antitrust violation.) Of course, these suggestions are again dependent on the association being powerful enough to implement them.
A lack of an effective association could also lead to what many dread: a system more like boxing with its numerous titles, none of which represent the universally acknowledged world champion. For those that credit the UFC’s self contained model as a major reason behind MMA’s popularity, this could potentially be a catastrophe, with fans’ interest plummeting as fighters no longer compete under the same organizational umbrella.
In my opinion, the most likely outcome of passing the Ali Act without some sort of association to enforce it is that it fails to change much of anything. The gulf between the UFC and everyone else is so vast with regard to revenue and profits that even if the Ali Act is expanded, without a means to keep the sanctioning organization honest, you could expect at least one of them to realize the money is with Zuffa and start acting as the UFC’s de facto title. In which case, nothing really has changed.
The MMAFA also faces a free-rider problem, something MMA seems particularly susceptible to. For a real life example of this one only has to read Tito Ortiz’s attorney’s comments, where he explains how it was in his clients best interest not to participate in the antitrust suit against Zuffa since he would still benefit if they won. This seems to be a fairly common viewpoint held by fighters. In the case of an association, because there is no requirement to join, and because other fighters assume that the association will still conduct lawsuits or other actions that will advance the Act with or without their participation — and therefore without risk or cost on their part — they won’t join. And if enough fighters take this approach then the association can’t garner the necessary support they are counting on for success.
The MMAFA are also major proponents of antitrust litigation. While they are not conducting the current antitrust case against the UFC, Le et al v Zuffa, LLC, they are obviously very closely connected to it. All of the class representative plaintiffs have become members of the association and the founder of the MMAFA, Rob Maysey, is the attorney that instigated the suit (along with former UFC fighter Carlos Newton) by bringing it to the other firms involved. While they were dependent on major firms to file this suit, future suits could be conducted by an association itself.
So what can an antitrust suit do? There are a couple of ways it can benefit the fighters. The first is compensation. If fighters are being underpaid because the UFC has abused their monopsony then antitrust gives them a means to recover those losses. The second is by changing the UFC’s behavior. If the UFC loses this suit and continues to engage in the same behavior that led to the first lawsuit it’s likely there will be a new filing roughly four years from now. If that’s the case, depending on the damages, fighters may not mind a UFC monopsony as long as they continue to be awarded money because of it.
There has been some some evidence that the UFC’s behavior has indeed changed since the filing of the suit. While there is no way in knowing for sure if it’s connected, the timing surely raises suspicions. In the past, when a fighter retired or just stopped fighting for the UFC the promotion would freeze their contract – in “perpetuity”. Heath Herring was a prime example of this kind of action. He last fought for the UFC back in 2008, yet they held on to their contractual rights on him until 2016.
Over the last few years numerous other fighters have also seen the UFC wave their rights on them. Besides Heath Herring, Wanderlei Silva, Randy Couture, Chael Sonnen, Cung Le, and others have seen the UFC relinquish their contractual rights. In addition, attorney and boxing manager Kurt Emhoff reported that he had seen at least one UFC post-lawsuit contract that had a five-year maximum duration, something practically unheard of before.
There is also the matter of the “tolling provisions.” In the past it was not uncommon for fighters or their management to report to me that they had been notified by the UFC matchmakers of addition time being added to their contract due to unavailability for a particular date. But for the last two years I have not heard of any incidences of this. It seems very possible that many of Bellator’s recent signings could be partly credited to the UFC discontinuing these practices.
While the antitrust suit is touted as a solution, it’s worth keeping in mind that really only works if you win. There is no guarantee that the fighters will prevail and collect any damages whatsoever. Remember, the UFC’s monopsony is only a problem if the court rules they attained it through anticompetitive behavior or if they abused their market power. If the court rules they didn’t, then they can keep on with their actions, monopsony or not. And even with a win, if the amount in damages is too low, there will be no incentive for the UFC to change. A $100 million or even $200 million in damages would likely be looked at as merely the price of doing business by Zuffa, not as a sign to change the way they operate. It would take something substantially higher to really weaken the UFC’s monopsony hold.
Of course, if the fighters win, then antitrust becomes a tool in negotiations as demonstrated by the other major league sports. The MMAFA, though, fears that any CBA between the UFC and a union would defuse that tool. The problem in the case of the UFC, is that as a single entity monopoly, they don’t have the same weakness those leagues have. In order to function as a competitive league, the other sports engage in all manners of fundamentally anticompetitive practices. Such practices include restrictions on player salaries, rules regarding player free agency and draft rights. Though aimed at preserving a competitive balance and the viability of many of the teams, such practices limit the ability of teams and players to compete within the marketplace — which the Sherman Act is designed to remedy.
So when the NFLPA threatens to decertify, the owners are faced with a decision. They could continue to hold games but risk potentially huge damages if the players, now acting as a trade association, file a suit over their uncompetitive practices. Or they can come to a compromise with the players so they preserve the practices they feel are necessary to keep the league functioning. It’s for this reason the owners will lock the players out if a new CBA is not agreed to: in many ways they need a union in place more than the players in order to protect them from any antitrust charges.
The UFC does not need to protect those same policies to maintain competitive balance, because there is no league; only the one owner. And because a union cannot sue an employer for antitrust violations, as long as a CBA is in effect there can be no possible damages. So from the MMAFA’s POV a CBA would serve only to forfeit future damages, the one thing that might get the UFC to change its behavior (or compensate the fighters if the UFC decides to continue with that behavior.)
THE MONOPOLY FACE AND THE COLLECTIVE FACE
So what can a union do?
According to Richard Freeman and James Medoff in their aptly named book “What Do Unions Do?,” there are two faces to unions: the Monopoly Face and the Collective Voice Face. The Monopoly Face refers to union’s ability “to raise their members wages above their competitive levels by use of market power.” It is viewed negatively, but this is not unique to unions; all monopolies have similar negative effects on the market. It’s the major reason why union workers make more than non union workers ($1,041 a week vs $829 a week in median full time wages last year) and it is through this Monopoly Face that athletes are able to overcome the monopsony power of the major leagues to increase their wage shares to the point that it is close to their marginal revenue value.
The other side, the Collective Voice Face, is viewed as the socially positive side of unionism. It’s what allows workers to speak with one voice, to also speak without fear of retribution because the union offers protection. Through collective bargaining, grievance and disputes procedures, union also open up channels of communication between workers and management which in turn can lead to a better working conditions or environment.
When analyzing any potential UFC union, it seems apparent that its Monopoly Face will have very little power. While the major league unions had a great deal of success eliminating the Reserve Clauses that limited free agency and using the threat of antitrust to increase their wage shares dramatically they have been undertaking a rear guard action for years now as the owners chip away at those gains. Any UFC union would not be able to attain inter-league free agency to drive up wages or count on the owners desire for an antitrust exemption to negotiate a revenue split. Instead they would be dependent almost solely on the force of the “strike threat.”
A strike is a powerful weapon for unions. With losses in revenue and customer loyalty, a business significantly suffers every day work is stopped. Owners will therefore withstand this strike as long as they know they can recoup the losses over time, versus what they’ll lose if expenses are raised to meet the workers demands. Employees too can continue with a strike as long as they know they can recoup their short term losses from not working over the rest of their careers’ life.
In many ways, this describes why the NFLPA are thought to have the weakest union of the four major sports. With the lowest paid players on average and the shortest careers, any strike represents a significant risk to most players lifetime earnings. The rank and file are therefore the quickest to agree to the owners’ offer, not wanting to jeopardize what may end up being a large portion of their career.
Earning less money, with shorter careers (according to Prof. Hal Singer, the median career duration in the UFC is less than 1 year) and no licensing revenue to speak, UFC fighters would be at even more of a disadvantage than NFL players. Any strike would have to count on the solidarity of a large number of fighters whose careers might not last long enough to make any strike worthwhile in the first place.
While the Monopoly Face of a UFC fighter’s union might not be able to help much, the opposite is true of the Collective Voice Face. Over the years the UFC has made a number of unilateral decisions regarding their fighters. The banning of sponsors in the cage, the signing over of image rights, the merchandising agreements, five round non title fights, Reebok uniforms, and USADA drug testing were all decisions made with next to no fighter input. All of them would surely have been implemented differently (or not at all) if a union had been in place to represent the fighters interests.
MAJOR LEAGUE SOCCER, THE OTHER MAJOR LEAGUE
To see what a UFC union might look like, one only has to look at the Major League Soccer Players Association for the athletes of both sports are competing in a single entity structure. While MLS has numerous teams, none are individually owned. Instead the league owns all the teams so that it is onebusiness entity, just as the UFC is a single promotion.
This single entity structure protects Major League Soccer from charges of collusion as confirmed by Fraser v. Major League Soccer. This means that where the owners of other leagues are forbidden from deciding together that certain players should not be bid on or what the most is that can be offered to a player at a certain position, this would perfectly legal for MLS to do. And since the UFC is also a single entity and not a cartel like the NFL or MLB, the threat of collusion would not exist for them either. Neither MLS nor the UFC has to worry about losing hundreds of millions of dollars in damages like Major League Baseball did.
(In fact, a potentially crafty strategy for a single entity would be to cave in on some demands made by its athletes, such as a higher rate of minimum pay, then use its monopsony power to claw back that cost by lowering the wages of higher earning athletes so that the concession cost them nothing.)
Because of this lack of competition within the league, MLS has a great deal of monopsony power over its players, only limited by the presence of the overseas leagues. Professors Twomey and Monks, in a 2011 article, described Major League Soccer as a “monopsonistic structure that was designed to eliminate competition for players across teams within the league,” with the league devoting “only about 25 percent of its revenues to player salaries, compared to 50 to 60 percent in most other U.S. professional sports and professional soccer leagues.” This share of revenue is also dwarfed by other major professional soccer (football) leagues.
While the MLSPA has been unable to do much to capture a larger share of the revenue, it has worked to bring benefits to its members. The establishment of a 401k, a family health insurance plan, higher minimums, and arbitration for disputes have all been negotiated by the MLSPA with the League. While these have not lead to the large salaries seen by other athletes, they still are examples of successful use of the Collective Face Voice to decrease inequality and look out for the general welfare of its members.
The conclusion I draw from all this is that there is no perfect solution. If you were expecting there to be one, I apologize, but unfortunately neither Project Spearhead’s or the MMAFA’s proposals can satisfy everyone, no matter what you read on Twitter.
If you think that the UFC keeps too much of the money generated, and that fighters deserve a much larger share, then the best solution is probably to try and introduce some kind of competition. And if you want to see greater input by fighters on the UFC’s decisions or a safety net of some kind and think that any attempts to introduce competition is impossible and/or undesirable, then collectively bargaining under a union is likely your best option.
The one truth though is both can’t be accomplished. There is no magic fix that will assuage everyone’s concerns. Probably the only comfort in all this is knowing that the proposed solutions of either groups are better than the current status quo.
“Baseball And Billions: A Probing Look Inside The Big Business Of Our National Pastime” by Andrew Zimbalist
“What Do Unions Do?” by Richard B. Freeman and James L. Medoff
Expert Report of Andrew Zimbalist (redacted)
Expert Rebuttal Report of Andrew Zimbalist (redacted)
“Monopsony Exploitation in Professional Sport: Evidence from Major League Baseball Position Players, 2000-2011″ by Brad R. Humphreys and Hyunwoon Pyun
“Monopsony and Salary Suppression: The Case of Major League Soccer in the United States “by John Twomey and James Monks
“The New NBA Collective Bargaining Agreement, the Median Voter Model, and a Robin Hood Rent Redistribution” by J. Richard Hill and Peter A. Groothuis
“The Sports Business as a Labor Market Laboratory” by Lawrence M. Kahn
“Why decertification of the NFLPA and other unions could pay off big” by Dominique Foxworth
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