FTC Investigation of UFC Requested in Letter From Las Vegas Arm of Culinary Workers Union

NEW YORK NY - JANUARY 13: Dean Murray New York State assemblyman speaks at the podium as Scott O'Neil Frankie Edgar and Dana White (L-R) look on during a press conference to announce commitment to bring UFC to Madison Square Garden and New York State at Madison Square Garden on January 13 2011 in New York City. (Photo by Michael Cohen/Getty Images)

One of the underlying stories of the UFC's attempts to get the sport legalized in the state of New York has been the claims by UFC president Dana White that the Culinary Union is behind much of the trouble with the state. Being a powerful union, White thinks that old grudges are at play and keeping the sport from the last important market in the United States. MMA Weekly explains the politics at play:

White believes it is because his partners at Zuffa (the company that owns the UFC), Frank and Lorenzo Fertitta, are also involved in the casino business. Their company, Station Casinos, is one of the largest non-union casino companies in the United States.

This is where the rubber meets the road. The Culinary Union has been trying for years to unionize Station Casinos, but thus far, has been thwarted. This is why White believes they are using their vast resources - the Culinary Union boasts approximately 60,000 members - to stop the Fertittas from bringing their mixed martial arts business to New York.

In a rather aggressive move, the Culinary Workers Union, Local 226 has sent a letter to the Federal Trade Commission requesting they investigate the UFC for violation of antitrust laws.

There had already been plenty of rumors that the FTC was putting together an investigation over the previous months and then on the 21st it was reported that the UFC had retained the services of Axinn-Veltrop-Harkrider, LLP, a firm with an extensive background in these types of cases.

So, the culinary union letter is less an actual plea for investigation as it is a powerful player putting their weight behind the idea that an investigation is necessary.

The truly interesting thing about the letter is that Local 226 is the Las Vegas branch, so they're going at things right from Zuffa's base. One of the biggest stories on the front page of the Local 226 website is a story about Station Casino firing Latino workers.

Bloody Elbow was provided a copy of the letter (which was dated August 31, 2011) and have provided excerpts after the jump.

The letter talks at length about the union's perceived problems with:

a) "Automatic renewal" contract provisions such as the "champion's clause," which extends the contract of an athlete who becomes a champion. Such clauses effectively prevent some athletes who sign contracts with Zuffa from becoming free agents and negotiating for higher pay.

b) Exclusive negotiation and "right to match" clauses that lock athletes into negotiating with Zuffa for a period after their contracts have expired. These clauses diminish the ability and incentive of smaller promotions to bid for top mixed martial arts athletes.

c) Merchandise and ancillary rights agreements that require athletes to forfeit their image and likeness rights "in perpetuity," or forever. These far-reaching agreements deprive athletes of the freedom to make money from their own success and further bind them to Zuffa indefinitely.

They continue:

These contractual restraints can have the effect of forcing some athletes under contract with the UFC to negotiate with one buyer, depriving them of any real barganing power and depressing pay below competitive levels. The Mixed Martial Arts Fighters Association estimates that professional mixed martial arts athletes received just 5.7 percent of total gate and pay-per-view revenues at five UFC events in 2009 while athletes who compete in other pro sports organiations receive 50 percent or more of revenues.

More on the claimed anticompetitive behavior:

Professional sports leagues have sought to justify restraints on athlete mobility by arguing that such restraints are necessary to maintain a competitive balance among teams, and thereby maintain spectator interest. In some cases, courts have agreed. In American Needle v. the National Football League, the U.S. Supreme Court ruled that competitive balance is "unquestionably an interest that may well justify a variety of collective decisions made by the teams."

However, Zuffa does not operate as a professional league, and thus cannot justify its restrictive behavior as being necessary to preserve a competitive balance in mixed martial arts. Zuffa is a private limited liability partnership that promotes and produces professional mixed martial arts events for the benefit of its owners. The anticompetitive restrictions it imposes on athlete mobility serve no legitimate business justification beyond stifling competition and increasing Zuffa's already dominant position in the market.

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