UFC Retains Anti-Trust Law Firm for Rumored Federal Investigation
by Mike Fagan on Aug 22, 2011 9:49 PM EDT
in UFC News
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Back in March, Zuffa effectively put a stranglehold on the major league MMA market with its purchase of Strikeforce. So, it wasn't surprising to hear rumors that the Federal Trade Commission was investigating the company over past trade practices.
That story has more legs now that the UFC has hired a New York City-based law firm specializing in anti-trust cases. Full Contact Fighter reports:
Zuffa, LLC, the parent company of the Ultimate Fighting Championship (UFC), has retained Axinn-Veltrop-Harkrider, LLP, a New York City-based law firm specializing in anti-trust litigation, as defense against an on-going probe by the Federal Trade Commission (FTC) into the purchase of UFC competitor Strikeforce, FCF has learned.
...
"It is true that Zuffa has retained my law firm, but I will not comment further," said Stephen Axinn, the firm's senior partner. "As I am sure you know, people generally do not want to comment where there may be possibly some sort of investigation going on."
UFC President Dana White and Chairman/CEO Lorenzo Fertitta brushed off anti-trust worries during a conference call to announce the Strikeforce purchase (audio and transcription by Youtube user dotcomaniac):
Lorenzo Fertitta: Obviously we wouldn't have done the transaction if we felt we were. I think at the end of the day as I mentioned before (laugh), there is literally thousands of of other promotions... thousands of options for fighters. It just so happens that with the groundwork that we've put in place over the last 10 or 11 years, that we happen to be the most successful. And one again, there is plenty of competition and there is literally no barrier to entry.
Anybody that wants to get into the business they can go file for a promoters license and put up some capital and go sign fighters and go get a television contract. There is plenty of options there to. So it's a wide open market for anybody who wants to get involved.
Dana White: Ya, Lorenzo literally said it. All you got to to is go out and raise some cash and jump into the business. All you got to have is some big balls. Some big balls and some money behind you and you can get into the MMA business.
I won't masquerade as some anti-trust expert, but some of the principles of a monopoly are often misunderstood by people. For starters, a company does not need 100% control of goods and services (or 100% control of buying goods and services in the case of monopsony) to be deemed a monopoly.
At the same time, a monopoly is only in danger of suffering penalties if said monopoly abuses the power. In this case, there's certainly a strong argument that a UFC monopoly/monopsony does more good than harm.
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Isn't it only baseball that has the anti-trust exemption?
It was awarded the exemption in response to its attempt to destroy the Federal League in 1915. The Supreme Court ruled that “personal effort not related to production is not a subject of commerce” and thus wasn’t subject to federal regulation.
Since then, both congress and the courts have routinely regulated as commerce things that are not production, but baseball’s exemption pre-dated those changes, so it persists until someone takes it away.
The NFL doesn’t have an antitrust exemption. The NBA doesn’t have an antitrust exemption.
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by The American Ronin on Aug 23, 2011 3:33 PM EDT up reply actions
This isn't a rumor.
The investigation is on full force and tons of people have already been questioned.
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Damn
Why aren’t NFL, NBA, MLB, etc. looked into for monopolization?
Let the fighters fight, let the referees ref, but dear God, don't let the judges judge.
They've had big league legal for a long time.
The smartest people in all of Zuffa are their legal staff. They are also the scariest.
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You can say that about most corporations...
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by Scott C. Broussard on Aug 22, 2011 10:16 PM EDT up reply actions
Most companies don't also employ Dos Santos, Maximo Blanco, Shogun, Jones...
I’d rather be in the blue corner of the cage than the defendants table of a courtroom with somebody working for Zuffa.
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So you're saying they are gonna challenge the government to an 8 man tournament?
by HaterSlayer on Aug 22, 2011 10:38 PM EDT up reply actions 1 recs
That's a silly suggestion.
UFC doesn’t co-promote or do tournaments.
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by pdl on Aug 22, 2011 10:44 PM EDT up reply actions 6 recs
Aren’t the UFC competing against boxing, football, baseball, hockey, etc.? Sports is the industry and MMA is just a niche sport and not an industry in and of itself. There are tons of substitute products out there.
FTC just doing its job. I don’t think this is a big deal.
Yep
And if the WWE can get away with having the only major wrestling promotion for years(before TNA came around) then the UFC should be fine
by HaterSlayer on Aug 22, 2011 10:40 PM EDT up reply actions
WWF purchased WCW in 2001. TNA formed in 2002 and had a national broadcast deal by 2004.
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Yep
There’s nothing stopping other MMA promotions trying to do something similar. Whether they’re successful or not isn’t down to Zuffa unless they’ve gone out of their way to put barriers in place (which they haven’t).
The investigation into Zuffa is likely more procedural bureaucracy and nothing more.
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Any anti-trust action that busts the UFC would scare the hell out of communications companies, sports leagues, music labels, and pretty much anyone in the entertainment business. I’m not sweating it.
"an excellent example of why most MMA "journalism" is a joke. Pseudonyms like "toxic" and shitty writing like that dopey article"--- Joe Rogan.
Does anyone know the exact reason why the other leagues have an expemption?
Is it because of the players’ union?
"So he basically called me a Jew. I was confused because I'm black and Methodist."
I’m guessing it’s cause there’s a lot of sports fans in the federal government. Also, an organization having a chokehold on professional football players doesn’t exactly threaten the public welfare, since it’s just a sport.
"an excellent example of why most MMA "journalism" is a joke. Pseudonyms like "toxic" and shitty writing like that dopey article"--- Joe Rogan.
And what if they forgot those three dollars?
Let the fighters fight, let the referees ref, but dear God, don't let the judges judge.
The problem with this suit is that to be subject to anti trust lawsuits you need to have prohibitive barriers to entry which considering the number of promotions that have entered the market and competed, these clearly aren’t obstructive enough
by Rabbit915 on Aug 22, 2011 10:31 PM EDT via mobile reply actions
Having prohibitive barriers to entry is not a requirement for an entity to be subject to antitrust suits, simply proving anti-competitive behavior is.
"Life is tough, but it's tougher if you're stupid." -John Wayne
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by The American Ronin on Aug 24, 2011 12:36 AM EDT up reply actions
I doubt this becomes an issue
While some people may scoff at the money getting paid to undercard fighters, it’s still competitive to what they’d be making outside the UFC in smaller promotions. They aren’t a predatory promotion that buys all competitors, they’ve just happened to use their parent organization to buy the biggest competitors with the best rosters to this point.
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A much larger waste of taxpayer money
Is the BULLSHIT that the U.S. gov’t has done to internet poker.
by supermario305 on Aug 22, 2011 10:53 PM EDT up reply actions
Actually, what the US governement is doing to internet poker will equate to billions of dollars going back into the country/government.
What an absolutely idiotic thing to say. Because it’s not regulated as it should be, it’s not taxed (properly, if at all). You’re daft if you think it won’t eventually be totally legal, it will just be taxed a lot – which it should be.
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The only real monopolistic things the UFC's done
is some of Dana’s hardball tactics with sponsors and fighters who deal with other promotions and merchandising (the whole “so-and-so will be banned from the UFC forever if they appear in such and such”). Perhaps you could also point to their efforts to undercut other promotions in terms of pressuring venues and counterprogramming, but I don’t see much else. I’m sure the government will be more interested in the purchases of Pride and Strikeforce.
by Trust Doesn't Rust on Aug 22, 2011 11:21 PM EDT reply actions
theres really no case here
absolutely none, this wont develop into anything
"I have smoked weed with alot of UFC champions" - Joe Rogan
"Você ta fudido. Se vai levar muita porrada, ta ligado?" - Anderson Silva
The NFL, MLB,NBA skirted around these issues in large part because whenever
their is a labor disupute in court it claimed as a union-employer issue whenever the players filed suit in court against them. There is no union in the UFC which will be a problem. Yes this def shows the UFC made it but just like the big boys they will need to set up a union for its employees (fighters) to legitimize their league and have issues like this dismissed.
yea the nfl, mlb, and nba also needed to skirt around the issue
because they control nearly 100% of the professional leagues for their respective sports
the UFC doesnt control the sport of mma, there are countless other promotions out there. the fact that they have top perceived top talent is totally irrelevant in these matters.
"I have smoked weed with alot of UFC champions" - Joe Rogan
"Você ta fudido. Se vai levar muita porrada, ta ligado?" - Anderson Silva
As soon as Bellator ends up on Spike, I don’t think the government will have a leg to stand on.
by discoandherpes on Aug 22, 2011 11:35 PM EDT reply actions
as soon as bellator ended up on mtv2
and dream on hdnet, there wasn’t a leg to stand on.
still won’t prevent the wheels of bureaucracy from churning
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by Cory Braiterman on Aug 22, 2011 11:39 PM EDT up reply actions
there isnt much of a leg to stand on anyway
the only possible case agaisnt zuffa would be if they were pressuring venues, sponsers, television outlets, and reporters to not cover or provide any services to other promotions.
"I have smoked weed with alot of UFC champions" - Joe Rogan
"Você ta fudido. Se vai levar muita porrada, ta ligado?" - Anderson Silva
It’ll be interesting as there were claims at one point from both the IFL and Affliction that services (marketing I believe) were either denied or interfered with in some way. Proof of that will be hard to find and Affliction will likely keep quiet now. But those issues combined with the image rights ‘threats’, organisational acquisition and counterprogramming with free events certainly tread a fine line.
Pretty much...
I can just smell when Mike Fagan writes something. Even his hows taste my tweet tweets are getting heavy handed. I can’t immediately recall one Mike Fagan article that concentrated on an aspect of the MMA game that he thinks is aesthetically pleasing. Now, it’s just monopoly, and politically charged articles…. NEXT.
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Educate yourself about the things that you’re whining about.
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by lowellthehammer on Aug 22, 2011 11:54 PM EDT up reply actions
That was quick, Felix Unger. Quotes, vice twit, twit. And the unfunny snarkiness that encapsulates them.
I was sitting at my laptop, comment typed out and cursor hovering over the post button for ten minutes, hoping that you wouldn’t catch on that I’d been rapid fire refreshing the page to yell at the first person to whine about Fagan. But you’re too smart for me! You saw right through the bullshit. Kudos.
What everyone needs to do is calm down, take a deep breath, and prepare their bodies for the Thunderdome.
by lowellthehammer on Aug 23, 2011 12:06 AM EDT up reply actions
As Fagan pointed out in the article the fact that there are other promotions besides the UFC doesn’t prevent the UFC from being legally labeled a monopoly or negate any monopsony charges against them, no matter how much Dana or Lorenzo claim otherwise. To be accorded the status of monopoly they just need to have an overwhelming control and influence on the industry. I believe 95% control of MMA revenue qualifies. Of course, being a monopoly doesn’t automatically mean the FTC will do anything but having looked into this for some time – and spoken to some knowledgeable people – there are a few actions that the UFC has taken that may come back to haunt them:
1) using their control of the market place to limit the sponsorship of outside vendors, This could be constrained as means to lower the income of fighters outside their promotion giving them greater negotiating leverage.
2) The purchase of Pride and Strikeforce. There is nothing wrong with purchasing companies for sale, but if Zuffa has been overpaying for these companies so as to make sure they are taken off the market and thus helps suppresses wages, well that’s an anti-trust violation. That is similar to the suit that got Google and Apple, where they colluded to not go after each others employees.
3. The fact that the UFC is now synonymous with MMA and probably really are the NFL of the sport actually makes it more likely they could be declared a monopoly, There’s already precedent for that (I’ll have to go through my notes to find the case).
4. Their contracts, which could be looked at as restraints of trade, especially in comparison to boxing with the Ali act.
5. The whisper campaigns they have reportedly used to damage fighters standings.
All told, that’s a lot to hold against them, but I doubt anything more than a slap on the wrist happens. These kind of actions, illegal or not, are pretty common and tolerated in todays business clime. Still, while there might not be fire there is smoke.
by John Nash on Aug 22, 2011 11:49 PM EDT reply actions 8 recs
Could the FTC or another investigative body take a look at the EA Sports/making fighters sign away their likeness issue?
That always seemed blatantly illegal to me, you’d think if the UFC was more high profile when this originally happened someone would’ve looked into it. I can’t see how a company can compel it’s employees to sign away their likeness for life- and even less how they could make independent contractors do it. And no fighters are actually paid for signing away, right? Maybe the Ali act needs an updating for the digital age
by knockout_ned on Aug 23, 2011 12:02 AM EDT up reply actions
You make
phenomenal points and have knowledge on particulars that I don’t know. however, the capitalist pig in me wonders quite simply what is so bad with one big boy and lots of little/medium sized boys. the fertitas and dana risked their capital, and lots of it, way back when people couldn’t spell mma.
where was the government then stepping up and saying “oh here UFC here is millions of dollars to stop the bleeding…” they didn’t. UFC innovated a product and an industry that now helps to further grow fighters salaries, not to mention all the other spin off jobs that stem from the UFC and mmas popularity.
I just can’t stand when success gets punished or potentially punished. I gotta believe successful and intelligent people like couture and rich franklin to name a few would be nowhere similar as to where they are today.
I mean look at what couture has been able to spawn off of his and the ufc’s success…a gym franchise, nutrition supplements, acting career…etc.
Couture is on the successful end of the bell curve, and maybe I’m going on a tangent, but my point is we are probably not posting on bloodyelbow if not for the ufc. to punish their success and other leagues failures is unfair.
obviously ufc runs their operation well cause all I ever seem to hear on strikeforce interviewed from fighters when asked the difference post zuffa is “much more organized”.
sorry for length…
by shootfirstaskquestionslater on Aug 23, 2011 12:40 AM EDT via mobile up reply actions 1 recs
dude
“phenomenal points and have knowledge on particulars that I don’t know. however, the capitalist pig in me wonders quite simply what is so bad with one big boy and lots of little/medium sized boys.”
look up the history of our anti-trust laws. in the ninteenth century america was dominated by monopolies, to the detriment of everyone in society (except their owners).
if you are really a “captialist pig” you should believe in economic competition, which is what these laws are designed to promote.
now of course, different considerations apply to a sports league than to, say, oil or steel monopolies. but the same basic principle applies. people should not compire to destroy their competition, or to fix prices, etc. we TRIED doing things that way, and believe me, it didn’t work. like i said, you can look it up.
by Clifford J on Aug 23, 2011 8:22 AM EDT up reply actions 1 recs
Reminds me of the suit where Microsoft went against the European Trade Union for bundling Internet Explorer with Windows 98 I( think it was at the time), and they argued that the inclusion of IE was unfair to other browser competitors because it leveraged their dominance of the operating system market against the browser market, and thus also leveraged their dominance of the operating system market even further.
I’d imagine a parallel could be drawn that the UFC limiting sponsors could be construed similarly in that they are using their dominance in the industry to create leverage over the rest of the industry.
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Great comment
It might be interesting if the investigation gets far enough if action is taken. Something like allowing active fighters to participate in grappling tournaments, or even paying them more.
But I’m pretty sure nothing will come of this. It just means they have reason to put a big retainer down at a law firm.
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This could and should force the UFC to allow fighters to form a union
If it were hit with an anti-trust lawsuit from a group of its own fighters or former fighters it could very well take a huge hit. Its why you see mlb, nfl and nba operate with a functioning union and why when their players decertify and file a trust lawsuit the courts side with the leagues b/c its ruled as a union-employer issue. There is no Union in the UFC so the courts wont give them the same leniency.
Its why you see mlb, nfl and nba operate with a functioning union and why when their players decertify and file a trust lawsuit the courts side with the leagues b/c its ruled as a union-employer issue
MLB has an antitrust exemption, so theirs is a unique case, but it was largely because the NFLPA decertified and players filed an antitrust suit, with its threat of triple damages, that the owners gave in so much from what they initially offered.
At the end of the day, everyone involved on the legal side knows that the leagues are in the wrong on the antitrust issue, but everyone is better served by resolving it through collective bargaining than leaving all of their fates tied up in the courts for years, not to mention the example of the the USFL’s clear legal victory, only to have said victory be followed by the awarding of $1 in damages (trebled to $3 by antitrust law)…
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by The American Ronin on Aug 24, 2011 12:47 AM EDT up reply actions
not a complete thought
but the way the UFC strongarmed sponsors a month or two ago probably doesn’t help matters in the investigation. that showed they knew they were the big boys and could jerk people around.
by heymanhowsitgoing on Aug 23, 2011 3:31 AM EDT reply actions
This issue has been beaten to death on many other sites already with multiple articles written by lawyers who know anti trust law, all of whom agree the UFC is not a monopoly.
by thenutman69321 on Aug 23, 2011 11:36 AM EDT reply actions
You can make a pretty strong argument that the UFC possesses "market power"
which is the test for antitrust. Luckily for them though, they really only possess market power in the United States, which is the most lenient country in the developed world toward monopolistic practices.
Virtually all of the big antitrust judgments against companies over the past decade have come out of Europe, which is considerably more aggressive in pursuing antitrust violations. But it would be tough to argue that the UFC exerts market power in Europe.
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Just a thought but...
If Mircosoft can avoid violating antitrust law when their closest compeitor according to Mr. Gates himself only accounts for 10% of the market share (hahah take that Apple! :P just kidding Mr. Jobs I love your iPhone, just hate your computers for gaming reasons) with that in mind I think the UFC will be just fine.
These investigations come and go. Most of them happen with out most people even noticing. Its just like pretty much any other regulatory body there are so many people in the backgrounds will to be paid or bought off that most things in the States goes unchecked (ie: BP oil spil & de-regulation of Banking Industry)
Although I would be intrested to see if Bellator and all the other MMA promotions in the USA even come close to a 10% market share… together!
by Canadian Maverick on Aug 23, 2011 8:40 PM EDT reply actions
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