UFC, MLS, markets and monopolies

UFC fighters may have several legitimate points about how they’re treated. The lawsuit against the UFC will, at best, force a stronger discussion of those issues and maybe even a few changes. But it’s going to be really difficult to get an outright court victory.

You’ll find a lot of good analysis on this suit — economist/antitrust guy Paul Gift at Bloody Elbow, Dave Meltzer at MMA Fighting (read especially from the Bellator reference onward to the end), sports law specialist Michael McCann warning in SI of the worst-case scenario of “unraveling” the UFC, a 90-minute chat with Luke Thomas, and Josh Gross with a few details I haven’t seen explored elsewhere along with the embedded lawsuit document itself. And generally, you should keep up with Bloody Elbow, where Brent Brookhouse and John Nash broke the story.

I’m going to come at it from this angle: Precedent, including the MLS players lawsuit against the league in the 1990s, tells us the antitrust argument will fall on one key word: “market.”

What’s the market for mixed martial arts fighters? Does the UFC have unfair control of it?

The MLS players lawsuit (covered in my book) failed to prove that MLS had unfair control of the soccer market. The suit is often portrayed as a challenge to the league’s “single-entity” structure, but the verdict and appellate court decision left several “single-entity” questions unanswered. The specific words from the appellate court, addressing a part of the suit the jury didn’t consider: “(T)he single-entity problem need not be answered definitively in this case.”

The suit unraveled when MLS convinced the jurors (and the appellate judges agreed) that soccer players could go elsewhere — Europe, Latin America, the A-League (which, like the current NASL, could occasionally pay an MLS fringe player more than he would make on an MLS bench), or even indoor soccer.

Cung Le et al will tie themselves in a knot trying to define the market. Here’s Gift’s take:

We haven’t heard from the UFC yet, but the fighters have already revealed their interest in a small geographic market by claiming “the relevant geographic market for both the Relevant Input Market and Relevant Output Market is limited to the United States and, in the alternative, North America.”

 

Legally interesting, practically absurd. (The fighters, not Gift.) The UFC would not have the clout it has today without signing the best fighters in the world. It’s almost as much of a Brazilian company as it is an American company these days.

In MMA, fighters can sign with smaller MMA promoters like Bellator or international promoters like One FC. The soccer marketplace is similar — players can sign with the NASL or hundreds of soccer leagues around the world. And that argument killed the player suit. Ridge Mahoney’s Soccer America summary: “Once the jurors decided both a global market existed and other domestic entities could compete with MLS for players, the players’ case collapsed. No further deliberations were necessary since the jurors had determined the monopoly alleged by the players did not exist.”

Note that the UFC lawsuit isn’t strictly a monopoly lawsuit. It introduces the word “monopsony,” which is more or less the inverse. The fighters aren’t really UFC employees. They’re contractors, and the UFC bids for their services. The UFC is in many senses a buyer, not a seller.

And the key to the case is not necessarily whether the UFC controls the marketplace. At Bloody Elbow, former FTC antitrust lawyer David Dudley puts it like this:

Outside the merger context, the question or market power is considered alongside the particular conduct at issue. The worse the conduct, the less evidence is necessary to establish market power. Conversely, the more benign the conduct, the greater the necessary showing of market power.

That’s good news for the fighters in a way: Everything the UFC does wrong in its contracts is fair game. The fighters wouldn’t have much of a case if the UFC was treating fighters well, even if it controlled 99% of the marketplace. (Of course, they probably wouldn’t be suing in the first place if that were true.)

But it’s bad news in the sense that, as Gift says, the UFC isn’t doing anything wrong by simply beating the competition. The allegations on pages 47-50 of the lawsuit look weak. The UFC didn’t “force” Affliction out of the fight promotion business; Affliction overpaid for fighters and was unsustainable. Near the end of the suit, when the plaintiffs seek “injunctive relief barring Defendant from engaging in the anticompetitive scheme alleged herin,” we need to ask, “How?” Quit holding fights the same night as Bellator fights?

Here’s another problem: What would MMA look like without the UFC?

In the MLS lawsuit, players were unable to convince district judge George O’Toole that someone else would’ve formed a Division I soccer league operating at anything comparable to MLS level if MLS hadn’t done it. In other words, MLS essentially created the market. To argue that MLS monopolized the U.S. Division I soccer market is a bit like me inventing some sort of palatable peanut butter wine and then monopolizing the peanut butter wine market.

In the MLS suit, the players brought out some sports economists to make dubiously specific claims that having multiple Division I leagues in the USA would have sent player salaries skyrocketing. That led to one of my favorite Paul Gardner quotes:

For an entire session, this totally fictitious exercise dragged on, as the good Professor Zimbalist revealed charts and calculations to ‘prove’ what must have happened had a whole series of improbable conditions existed. They never did exist.

That “whole series of improbable conditions” would include having two leagues in a spending war with each other that were somehow not splitting the previously nonexistent (since the NASL died) Division I soccer market. With MLS bleeding red ink and nearly going out of business in 2001-02 (just after the initial lawsuit verdict but before the appellate ruling) even with the power of a “monopoly,” those conditions were beyond improbable. They were impossible.

And in sports, monopolies (or monopsonies) aren’t necessarily a bad thing. Would the World Cup be the World Cup if we had two competing organizations, with Germany winning one and Brazil winning another? As much as everyone with half a brain and a payola-free bank account wishes FIFA would see the light on basic ethics, no one wants a world with a disputed world soccer champion. No one wants to see Serena Williams and Caroline Wozniacki on separate tennis tours.

With the demise of PRIDE and other organizations, few people would dispute that the UFC’s champions are generally the best in the world. That’s a good thing.

So what happens next?

After the players lost the lawsuit against MLS, they formed a union, and they have collectively bargained since then. (They’re doing so right now, trying to race against the expiration of the current CBA to get the next season started on time.) Fighters may need to form an association rather than a union — I’m hazy on the details, frankly — but perhaps we could see an end result like that.

As Luke Thomas says, “Keep in mind what success actually means.” Baseball player Curt Flood lost before the Supreme Court, but the cause of free agency was ultimately successful.

In the UFC’s case, their position as the top promotion in the world isn’t cast in stone. It’s impossible to imagine someone challenging Major League Baseball’s supremacy at this point. It’s not impossible to imagine top fighters opting for Bellator or some other promotion instead of the UFC.

So the UFC needs to think about “success” as well. Winning in court won’t be enough. They’ll need to “win” in the sense of continuing to have the goodwill of fighters and fans that recognize it as the top promotion in the world. And the UFC has done a few things that don’t look good in the all-important court of public opinion:

  • Imposing a Reebok sponsorship on its fighters on top of harsh restrictions on sponsors that have helped fighters in the past.
  • As alleged in the suit (the UFC may argue differently), sponsors may either be exclusive to the UFC or banned from the UFC.
  • “Ancillary rights” clauses giving the UFC rights to likenesses in perpetuity.
  • Starting fighter pay: $6,000 to show, $6,000 to win? That’s not much. And fighters often have to pay training expenses out of that money.
  • And even if you’re a fringe UFC fighter with only two bouts in a given year, you can’t go taking a bout on someone else’s fight card.

To date, the UFC has been tone-deaf in reacting to fighters’ concerns. A “tepid piece on fighter pay,” to quote the ubiquitous Luke Thomas, on ESPN’s Outside the Lines drew a hysterical response from the UFC.

That approach can’t fly any more. The fighters may not be able to win in court. But if the UFC doesn’t recognize their leverage, everybody loses.

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