It’s been six years since three former UFC fighters—Cung Le, Nathan Quarry and Jon Fitch—sued the MMA promotion company for allegedly using monopoly power to suppress fighters’ earnings. The federal case, which began in California and is now in Nevada, is likely years away from resolution. Yet an important pretrial ruling is soon expected: U.S. District Judge Richard Boulware’s decision on whether to certify the lawsuit as a class action.
Unpacking the case against the UFC
As the fighters tell it, the UFC has long abused its dominant market position. The promotion company has allegedly crushed competition, thereby leaving elite fighters with no choice but to accept artificially low purses and relinquish valuable name, image and likeness rights. Meanwhile, the UFC has grown dramatically since it was bought by Endeavor (formerly called WWE-IMG). The UFC sold for $4 billion in 2016 and has inked nearly $500 million in ESPN deals.
The fighters depict the UFC as violating the Sherman Antitrust Act’s Section 2, which concerns monopolies. When achieved through skill and merit, monopolies can operate lawfully. Certain utility and waste management companies function as monopolies or near monopolies, while the NFL, NBA, MLB and NHL can similarly be thought of as legal monopolies. They lack meaningful competition, at least in North America, and their success deters potential competition.
Monopolies become legally problematic when they lead to higher prices, fewer market choices and reduced incentives for innovation and quality assurance. This can prove true when the monopoly is a buyer of services and unlawfully restricts opportunities for sellers (a concept known as monopsony power).
Le, Quarry and Fitch describe themselves as selling “elite professional MMA fighter services” to MMA promotion companies. They insist the UFC, as a buyer of these services, has obtained “ill-gotten monopoly and monopsony power.” It has allegedly done so through a “scheme” that involves, among other purportedly anti-competitive practices: aggressively purchasing competitor MMA companies, contractually requiring venues which host MMA bouts to only host UFC-affiliated bouts and refusing to do business with sponsors that work with other MMA companies.
To bolster their case, the fighters underscore public statements made by UFC president Dana White. The brash executive has been known to hype the UFC as unrivalled. To illustrate, White mocked the “death” of a trio of MMA organizations—the International Fight League, Elite Xtreme Combat and Affliction Entertainment—that the UFC had purchased in 2008. The complaint also cites White proclaiming in 2010 that “there is no competition. We’re the NFL.”
The fighters contend the UFC controls about 90% of revenues derived from elite MMA bouts both domestically and globally. They also complain that only a small slice of UFC revenues generated from bouts goes to fighters. While the actual share of revenue to fighters remains a matter of debate—the UFC hasn’t yet offered a number in the litigation—expert analysis suggests the percentage is likely around 20%.
If proven accurate, such a figure would be well below the percentage of revenue paid to athletes in the NBA, NFL, MLB and NHL (48% to 50%). It would also trail percentage shares to other MMA fighters. Court filings indicate that Bellator and Strikeforce fighters have earned 45% and 63%, respectively, of their leagues’ revenues.
Understanding the UFC’s key defenses
The UFC possesses a range of rebuttals.
First, it rejects the gravamen of the fighters’ case that the UFC is an illegal monopoly. In court filings, the UFC notes that it faces continuous competition for MMA fighters, sponsors, broadcasters and venues. It points to several well-funded MMA promotion companies such as Bellator, which is owned by ViacomCBS and is broadcast on CBS Sports Network, and Legacy Fighting Alliance, which appears on UFC Fight Pass after previously airing on AXS TV.
Second, the UFC maintains that it relies on well-established conventions in contracting—including exclusive multi-year deals. Such contracts, UFC attorneys argue in court pleadings, “are common with performers in entertainment and sports and with television networks that televise shows exclusive to their network.”
Those attorneys also stress that UFC competitors could have competed to sign the same fighters and could still sign “other talented athletes.” Likewise, the attorneys argue that the UFC signing an exclusive deal with one company doesn’t corner the market. The promotion’s contract with Reebok, UFC attorneys write, “says nothing about whether competitors can compete for other major apparel providers, such as Nike, Under Armour, Adidas, Puma, Everlast, Champion and countless others.”
Third, the UFC asserts that fighters’ intellectual property rights are handled in an ordinary manner for professional athletes. Fighters grant a “narrowly tailored” permission to use their name and likeness in UFC-licensed properties and programs.
Fourth, the UFC insists the fighters’ math doesn’t hold up under the scrutiny of either common sense or antitrust law. According to a UFC spokesperson, average UFC fighter compensation has risen by over 600% since 2005. Average compensation per bout is now more than $100,000.
Also, characterizing the fighters’ pay as a percentage of revenue is arguably misleading. While fighter pay varies by number of bouts, victories, purses and other factors, there is empirical evidence the UFC generally pays fighters more than other MMA leagues. In other words, even if another MMA league pays a fighter a higher percentage of revenue, he or she would be “worse off” financially if the amount of revenue was relatively low.
It’s also not established under antitrust law that workers have an inherent right to a percentage of their employer’s revenue. It’s true that players in major pro leagues receive about 50% of revenue. However, they are members of unions that have collectively bargained a fixed percentage with their respective leagues.
Whether UFC fighters can and should unionize (they are classified as independent contractors, though that classification is vulnerable to recent and pending changes to independent contractor-employee law) is a separate—and important—topic. Yet in the absence of collective bargaining, expect the UFC to contend there is no legal right to a fixed amount of an employer’s revenue and that ruling otherwise would trigger unintended consequences for businesses.
The long road ahead
The two sides await a ruling by Judge Boulware on whether the plaintiffs—none of whom is a current UFC fighter—can sue on behalf of those who have fought in UFC bouts over the last decade. Last month, the judge signaled that he intended to certify the class. Certification would make the case more threatening to the UFC. A loss at trial could force it to pay untold millions to thousands of fighters.
However, Judge Boulware may not have the last word on certification. The UFC would appeal Judge Boulware’s certification to the U.S. Court of Appeals for the Ninth Circuit (a process that normally takes about two years). From there, a certification could spark a petition to the U.S. Supreme Court, or the case could be returned to Judge Boulware for summary judgement arguments. The merits of the case will probably remain undecided for years.
In fact, unless the two sides reach a settlement, the case could continue into the mid 2020s. The final bell won’t be rung for a while.
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