Is there a Place in the Octagon for Antitrust Laws?

December 18, 2015

Commercial

By Leah Seneviratne – Thompson Rivers University JD Student

If consumers are receiving the best product, is an alleged monopoly still harmful? American antitrust laws are in place to prohibit agreements that restrain trade and result in a monopoly. The intended result is the promotion of a competitive marketplace and protection of consumer welfare. However, monopolies in professional sports are rarely portrayed as harming consumer welfare. Rather, they have come to be expected of the most popular American sports leagues, evidenced in the domination enjoyed by the NBA, MLB and NFL. As a result, we are left with the question of whether antitrust laws should still have a place in professional sports businesses, if they still manage to produce the best possible product for consumers.

In a recent court decision, the Ultimate Fighting Championship’s parent company, Zuffa LLC, failed in their application to dismiss a class action lawsuit filed by various current and former fighters for allegedly anticompetitive business practices. The plaintiffs have brought their action under section 2 of The Sherman Act, and claim that Zuffa’s scheme has resulted in fighters being paid a fraction of what they would earn in a competitive Mixed Martial Arts market. As Dana White, the president of Zuffa, once stated, “There is no competition. We’re the NFL. There is no other guy”.

The alleged scheme of Zuffa was to directly acquire potential rival companies who were unable to compete profitably, as well as to impair competition by locking their professional MMA Fighters into lifetime exclusive contracts that bar them from working with up and coming MMA promotion companies. The scheme also included refusing to contract with any sponsor who agreed to work with an actual or potential MMA promotion rival, and requiring major physical venues to supply their services exclusively to the UFC. This greatly impedes the ability of potential UFC rivals to attract enough viewers and money to be profitable and avoid acquisition. The plaintiffs also allege that professional MMA fighters are deprived of an opportunity to make a comparable salary to those of boxers, or even NFL players, who at least have the benefit of multiple teams competing to acquire them.

What is noteworthy is that despite being part of one of the fastest growing professional sports, the latest Forbes’ list of the, “Top 100 Highest- Paid Athletes in the World” revealed a complete lack of professional MMA fighters, while boxers and soccer players dominated the list. Forbes Magazine reports the annual revenue of the UFC to be from $350-450 million, while they estimate the median fight payout for a fighter to be between $17,000 and $23,000.

So to answer the question, should the same antitrust laws be applied when it comes to the area of professional sports, where Zuffa is allegedly taking actions that result in a monopoly? In the end, the answer lies in the nature of the business practices. Section 2 of the Sherman Act is violated where there is monopolization, an attempt to monopolize, or combination or conspiracy with another person to monopolize a part of trade or commerce. It is behaviour that amounts to an exclusion of an actual or potential rival that is prohibited by The Sherman Act. If the allegations of the plaintiffs are correct, then we have a market in which a company with massive power and resources willfully obstructs competition. This type of exclusionary behaviour has allegedly resulted in a substantially increased difficulty of survival for competitors, as well as reduced bargaining power for professional fighters in contract negotiations. If the legislation clearly values competition and preventing the restriction of business transactions, then antitrust laws need to be taken seriously in the area of professional sports, in order to prevent the anticompetitive tactics that undermine them. The allegations facing Zuffa emphasize the necessity of antitrust laws in professional sports, which include preventing harm to both the competitor and the player.

 

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