Antitrust Law Daily Wrap Up, ANTITRUST NEWS: “Ultimate fighting” promoter allegedly suppressed fighter compensation through exclusive contracts, (Dec 17, 2014)

By Linda O’Brien, J.D., LL.M.

A promoter of live mixed martial arts events engaged in an anticompetitive scheme to suppress compensation for the event combatants or “fighters” through the use of exclusive contracts that restricted the fighters’ ability to work for rival promoters and assigned the rights to their names and likenesses in perpetuity, according to a complaint filed in the federal district court in San Jose, California (Le v. Zuffa, LLC, December 16, 2014).

Zuffa, LLC, doing business as Ultimate Fighting Championship (UFC), promotes professional mixed martial arts (MMA) contests or “bouts” for live audiences as well as television, Internet, and pay-per-view broadcasts. The UFC also licenses and distributes merchandise and promotional materials, including video games, fitness products, apparel, photographs, collectibles, and digital media products.

Elite professional MMA fighters are athletes who compete in live professional bouts by using multiple disciplines of martial arts and typically train for years before competing professionally. Such bouts are registered with and conducted according to the rules of the athletic commission for the state in which the bout is held. Cung Lee, Nathan Quarry, and Jon Fitch are elite professional MMA fighters who have fought in bouts promoted by the UFC and had their identities exploited for use by the UFC.

According to the complaint, the UFC has illegally obtained and maintained its monopoly position though an anticompetitive scheme to exclude actual or potential rival MMA promoters so they do not have access to MMA fighters to sustain and grow a profitable rival promotion company. Its monopsony position is maintained through the use of exclusive dealing agreements with UFC fighters that lock in their services perpetually and exclusively for the UFC. These exclusive contracts foreclose rival promoters from accessing MMA fighters’ services.

Elite professional MMA fighters are typically compensated for participating as combatants in MMA bouts. Due to its anticompetitive scheme, the UFC has been able to suppress fighters’ compensation to a very low percentage – 10 to 17 percent – of the revenues generated from the bouts. Athletes in sports such as football, baseball, basketball, and hockey, generally earn more the 50 percent of league revenue, which is a significantly higher percentage of revenues than those paid to UFC fighters, the complaint states.

The UFC uses standard form agreements with all of its MMA fighters that require exclusivity and assignment of rights to the fighters’ identities. Elite professional MMA fighters are forced to accept the UFC’s exclusionary terms if they want to earn a living as elite professional MMA fighters. Moreover, the UFC’s exclusionary scheme included the use of threats, intimidation, and retaliation against MMA fighters who work with would be rival promoters, the complaint charges.

The complaint states that the UFC has used exclusive contracts with top event venues to impair and foreclose rival MMA promoters from holding live elite professional MMA events. As a result, competing MMA promotions were forced to use less desirable venues, thereby inhibiting their ability to promote successful events, sell tickets and merchandise, and secure major television distribution outlets. The UFC has also allegedly suppressed competition by acquiring competing MMA promotion companies. In 2008, the UFC acquired the assets of International Fight League, Elite Xtreme Combat, and Affliction Entertainment and put those MMA promoters out of business. Similarly, the UFC acquired and shuttered Pride Fighting Championships promotions.

MMA is a highly specialized and unique sport engaged in by athletes with years of cross-disciplinary training. There are no reasonably interchangeable sports to which elite professional MMA fighters can substitute when their compensation has been artificially suppressed below competitive levels. Other martial arts disciplines do not have the audiences necessary for fighters to earn competitive wages or even to be paid at all, the complaint alleges.

The plaintiffs assert claims for monopolization and monopsonization in violation of Section 2 of the Sherman Act. The action seeks declaratory relief, treble damages, and any other just and proper relief.

The case is No. 5:14-cv-05484-EJD.

Attorneys: Joseph R. Saveri (Joseph Saveri Law Firm, Inc.), Robert C. Maysey (Warner Angle Hallam Jackson & Formanek PLC), Benjamin D. Brown (Cohen Milstein Sellers & Toll, PLLC), Eric L. Cramer (Berger & Montague, P.C.), and Frederick S. Schwartz (Law Office of Frederick S. Schwartz) for Cung Le, Nathan Quarry, and Jon Fitch.

Companies: Zuffa, LLC

News: Antitrust CaliforniaNews