UFC antitrust lawsuit developments explained

All the most important points of the UFC antitrust suit developments are broken down to their atoms.

By: John S. Nash | 1 month ago

After years of waiting, Judge Richard Franklin Boulware II, the court justice overseeing the Cung Le v. Zuffa antitrust lawsuit, has granted class certification to the case addressing the UFC’s payment and treatment of fighters. Below, we discuss who is now involved with this development, the details behind why it’s important, and what the outcome of this lawsuit means for the future of MMA. Be sure to catch the full audio over on our Substack.

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Lawsuit’s class-action status could affect thousands of fighters

“It’s no longer the small group of fighters, five fighters, suing the UFC. It is now every UFC fighter that fits the definition of a class member of the bout class that got certified. They are now automatically enrolled as plaintiffs in the case. They’re not named plaintiffs, so they’re not the ones that are going to have to show up to court. But they’re automatically enrolled, so if the plaintiffs win, all those fighters are eligible for damages. So, that’s massive.”

Who is included in the “bout class”?

“The bout class is those fighters that fought in the UFC or under Zuffa in North America, or televised in North America between the dates of December 16, 2010 and June 30, 2017. So roughly 1,200 people fit that definition of fighters that fought in the UFC. They’re in the bout class.

The accusation is that the UFC used their market power, their monopsony power and monopoly power to suppress the wages of those 1,200 fighters who fought in the UFC at that time. The fights that they had during that time are eligible for damages as the case goes forward.”

Contracts and compensation

“[Judge Boulware] talked about something that’s not brought up a lot. And one [point] is that the fighters have no control over their careers in the contract. The UFC dictates terms all the time, right? That’s a big, big part of the problem: the power. They also pointed out that the UFC & Zuffa utilized a tiered system of payments, so for independent contractors, this was good evidence that the UFC basically could dictate the price, because they knew what every guy would get paid, based on where they are on the scale.

“They talked about how the fighters are not employees, they’re independent contractors, and because of that, they have to pay for their own training, all their own expenses. And because their careers are short, [and thus] they’re more dependent on the UFC. The fighters typically sign contracts to Zuffa either for a minimum period of time or a specific number of bouts.

“Most importantly, pursuant to the contracts, that timing of bouts and matching of bout opponents was determined unilaterally by Zuffa, right? Consequently, this means that the professional promotional agreement, generally does not guarantee, for instance, a minimum number of fights per year and does not guarantee a minimum salary for each fighter.

“The whole thing about three fights a year that they have to guarantee, the courts are pointing out, that is not the truth. There’s no guarantee of how many fights you have to get, and that means that you fighters have no idea what they’re going to make per year going in. All that shows how little leverage the fighters have in this situation.”

The class-action suit targets the UFC, not the revenue

“The idea of the case is not to weaken the UFC, the promotion or the revenue, because the whole idea is to give the fighters more power so they can get more revenue, but also [in a way] so the UFC does not have the ability to do what they’re doing [now], because the UFC has all the fighters, all the money.

“Again, we know it’s the UFC telling these commissions not to report this stuff, right? The only way this case would affect disclosure of pay is if it goes all the way through the end, the fighters win, and the UFC’s no longer as powerful in the space [to where] they can dictate that the commissions do that. Then indirectly, because of this case, the athletic commissions might decide to start revealing pay again. But it would not be the result of the case directly, per se.”

Market power & the UFC’s tremendous share

“[The court] basically stated how the UFC has a market share of approximately 90% of the revenue since 2008, which is de facto market power. Market power means you control the industry, you control how prices are set. The UFC has 90% of the revenue. That’s almost twice the necessary amount you need to basically go, ‘Yep, that’s someone with market power, that has monopoly and monopsony power.’ In fact, for almost the entire period since they started the class-action, the big three rivals of the UFC: Strikeforce, Bellator and World Series of Fighting, never once combined for more than 9% of the [total market] revenue.

The UFC has a monopoly, not the ‘special sauce’

“[Judge Boulware] talks about how the promoters’ acumen, or the ‘special sauce’ is basically unsupported. In other words, the UFC’s position is not because they’re just amazing promoters, they don’t have some special secret, they don’t know what they’re doing so much better than everyone else. He knocks that down. He says they have market power, they dominate the market because of their actions.

“These corporate findings demonstrate the defendants’ dominance in the input and output market. It further establishes that Zuffa’s dominance in the output market—the selling—enhanced its ability to suppress compensation in the input market. Now the court has found that the plaintiffs have established the defendants’ dominance in the market, the court moves on to analyze evidence and competitors’ natural and artificial barriers of entry.

“In other words, right there they state that basically the UFC has dominated the market as a monopsony and monopoly. It’s a foregone conclusion that they have market power.”

Barriers of entry: How the UFC maintains dominance

To break it down, the barriers of entry are the coercive contracts, lack of co-promotion, and dominance in the headliner market.

“The coercive contracts is, you cannot get access to these fighters because they’re all signed to exclusive contracts to the UFC that they can’t get out of. The lack of co-promotion is, let’s say you have a great fighter, right? And you want to put on a big fight and build up your fighter and make revenue. The UFC will never co-promote, so your fighter has no access to these top fighters that can make him a bigger star.

“And finally, they are dominant in what’s called the headliner market. All the top fighters are signed with the UFC, so even if you’re building a fighter that could have the potential to be a massive star, all the headliners are assigned to the UFC. All the other fighters that we put against to make that guy a star or a bigger star are with the UFC, preventing you from building up your competing promotion.”

UFC purchased rival promotions to keep fighter pay low

“They bought out these rivals and they made claims that we went to get them the fighters, but [Judge Boulware] really buys into the argument that in their purchase of these rivals, there was no justification on the basis of competent competitive reasons.

“In other words, the UFC didn’t buy them because it gave them stronger competition, or [because] it built up the MMA sphere in some way to make MMA better. They bought them up to take these fighters or these promotions off the landscape, so that the fighters themselves couldn’t use them to push up their wages, and also that way, those promotions could never build themselves into a potential rival to the UFC.

“So again, kind of a damning statement. [They did this] mostly through exclusionary contracts, which kept the fighters locked up. They also did it through extra contractual methods, making fighters’ contracts effectively perpetual. They did all these things so the fighter couldn’t leave the contract, couldn’t get out.”

The Sherman Act and its consequences for the UFC

“I think this is the part people miss. This is the behavior that they’re arguing is in violation of the Sherman Act. You can have a monopoly. There’s nothing illegal about monopoly power. You can have market power, monopoly or monopsony power. It’s not illegal if you acquire it in a certain way. What is illegal is intentionally going out of your way to acquire it, right? What is also illegal, is using methods to retain that amount of market power and abusing it.

“This is what they’re claiming that the UFC did. They are violating the Sherman Act not by merging with a parallel promotion, but in this case, putting out of business and taking off the landscape potential rival promotions or other promotions that have top fighters or name value. It’s just a tremendous amount of control over a fighter.

“It’s not like knowing ahead of time on your contract what your responsibilities are going to be. It’s basically, you are at the whim of your promoter with how your career is going to go from this point on, and that gives them a lot of control. As we’ve seen, fighters won’t talk about anything that pisses them off publicly. They won’t say [anything] because they’re at risk that the UFC will not give them one of those bonuses or a better contract or sponsorship.

The Stephen Thompson situation is a real-time example

“Because Zuffa fighters did not get paid unless they fought, [the case] we’re talking about is Stephen “Wonderboy” Thompson. This enabled Zuffa to use various strategies relating to the timing, placement, and opponents of a fighter’s bout to coerce fighters into renewing their contracts early or extending their contracts in order to earn a paycheck.

“There’s our real-world, real-time correlation right there. Stephen Thompson is a perfect example that’s happening right now.”

Wage share and its potential for combat sports

“No one really is paid on wage share. That’s the argument the defendants have made. But the court has agreed with the plaintiffs that wage share is proper. One reason is because the fighters are the product, so the product has a portion of the revenue.

“And they point out, one of the closest comparisons is boxing. Wage share is used all the time to figure out the contracts, to talk about how the business is doing. And with the UFC, what also is damning to them is in their own documents, that’s how they measure their business. They talk repeatedly about how much of the money is going to the fighters.

“What percentage of this event went to the fighters? What percentage of that? How low can we keep it in the future? So the court has decided, in this case, and this is something I’m sure they’ll appeal, is that wage share is of proper use in this case, and this case could be cited in the future if this holds up.”

Injunctive relief and its consequences for the UFC

“Because three of the fighters were active at the time the original suit was filed, it’s proper that they have injunctive relief. They’re still eligible for injunctive relief. And what that means is, the court can grant damages to the plaintiffs if they win.

“And damages are huge because their experts estimate that the UFC owes them for the bout damages of between $811 million to $1.6 billion. And if it goes to trial, and you win in trial in an antitrust lawsuit, the damages are trebled, or tripled. So that $811 million becomes $2.433 billion to $4.8 billion.

Injunctive relief could potentially change the course of MMA contracts

“What’s equally threatening to the UFC is this injunctive relief, because what that means is the judge could order them to do certain things because the court has found that they’ve abused their monopsony power so much. What the plaintiffs have suggested in their previous filings, is that they would like the court to order the UFC to have their contracts limited to just one to two years max. No extensions, no tolling provisions, nothing beyond that point.

“So, as we’ve seen with Nate Diaz, who took six years to get out of his contract, and Francis Ngannou with five years, one or two years is pretty simple for stars to wait out. So, you could have big-name fighters fight once or twice, and then instead of finishing up their contract, they say, ‘I’m just gonna wait the one year, six months, whatever.’

“And then, not only can I ask the UFC for more money to go somewhere else, but I know there’s gonna be several other big-name fighters available to do the same thing, and so big fights now are potentially easy to move somewhere else. Both of those would just completely change the current landscape of MMA.”

The outcome of this suit, and when it might be reached

“Losing the appeal and having the Ninth Circuit pick it up could be just devastating for the defendants. That’s where we’re at right now.

“I think within sometime next year, we get a settlement. At that point, the UFC might have merged with WWE. Guess who’s responsible for all those damages? What I’ve found in the SEC is that the UFC is responsible, so that means the new company with WWE would be responsible for those damages.

“You know, the shareholders will be stuck with it, so I’m kind of imagining that if it goes that way, and it’s going to go on to trial, they’re going to want to settle, because the valuation of that company is going to completely plummet if the UFC has to pay out billions of dollars in damages AND their contracts are completely rewritten to where they’re only a year or two long. Max.

“Now for the UFC, of course, they hope to get the appeal, and then they want to drag this out as long as possible, to the point where the fighters—aka the plaintiffs—say, ‘We will settle for some peanut butter cups’, because it doesn’t cost UFC really anything to drag this out. The longer it goes, the cheaper it is for the UFC.”

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John S. Nash
John S. Nash

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