Antitrust in Mixed Martial Arts

December 9, 2015

contract, employment

By Edward Hulshof – Thompson Rivers University JD Student

The UFC’s legal woes continue as the Le et al v. Zuffa antitrust lawsuit enters discovery. Zuffa, LLC (“Zuffa”), the corporate entity who owns the Ultimate Fighting Championship brand, has been the subject of staunch criticism for anticompetitive practices and the use of coercive adhesion contracts for several years. Zuffa recently lost a motion to stay document discovery proceedings – the document production obligations a part of the normal course of litigation – and with it, potentially, the shroud of mystery ensconcing its promotional and venue agreements with fighters and event hosts. If the antitrust lawsuit is successful, Zuffa could see fundamental reforms to its UFC brand and increased competition from market competitors such as Bellator MMA, a competing MMA promoter.

At issue is whether or not Zuffa’s business practices amount to “anticompetitive, illicit, and exclusionary acts,” which illegally acquire, enhance and maintain its dominant position in the market for promoting elite level professional MMA bouts as well as its control of MMA fighters. The Antitrust Class Action Complaint, filed December 16, 2014, (the “Complaint”) hinges on economic considerations, namely Zuffa’s control of “output markets,” that is, promoting MMA events, and “input markets,” fighter contracts.

The Complaint specifically alleges that “[t]he UFC has used the ill-gotten monopoly and monopsony power it has obtained and maintained…to suppress compensation for UFC Fighters in the Bout Class artificially and to expropriate UFC Fighters’ identities and likeness inappropriately.” This isn’t the first time Zuffa has been called to answer for its use of career suffocating fighter contracts.
Indeed, in 2008, well-renowned UFC fighter Ken Shamrock sued Zuffa for breach of contract when, it is alleged, Zuffa refused to extend Shamrock’s contract when he returned from retirement. (The court ruled against Shamrock, interpreting a key provision in the contract as providing Zuffa with the right to suspend and terminate the contract.)

More recently, Zuffa underwent intense media scrutiny when its confidential fighter contract with Eddie Alveraz was produced in a New Jersey lawsuit. The contract provided for extensive ancillary rights to Zuffa for the purposes of promoting the UFC brand and bouts. Additionally, and more troublingly, the contract granted Zuffa certain exclusive rights in perpetuity for promotional purposes, closing the door on Alvarez’s right to exploit and promote his own image outside the octagon and with other MMA promoters. Zuffa’s fighter contracts, it appears, choke the supply of inputs into competing MMA promoters.

It should come as no surprise then that MMA fighters are contemplating unionizing in an effort to strengthen their bargaining position with Zuffa and the UFC. The movement is a reflection of the repetitions of history, being reminiscent of the movement in boxing in the 90s which ushered in the Mohammed Ali Boxing Reform Act, legislation designed to rectify anticompetitive practices and coercive contracts between boxers and promoters. With Zuffa as the most powerful MMA promoter with a collection of fighters signing contracts with renewal options in favour of Zuffa, it is not surprising that many fighters are seeking to regain control of their careers. Zuffa, it appears, likes control. Even if the antitrust lawsuit is unsuccessful, it should serve as a signal to Zuffa to reform its contract practices and marketplace strategies ahead of the shifting balance in power that has been the source of tension between promoters and athletes for years.

 

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