UFC’s New Legal Team Gets Ready for Battle with the FTC
By Bryanna Fissori
After months of speculation, fight fans and industry sources have acquired proof that Ultimate Fighting Championships’s parent company Zuffa, LLC, is at least concerned if not already in the midst of an anti-trust investigation by the Federal Trade Commission (FTC).
Thank you to Full Contact Fighter, who was the first to break the news that the company has retained the law firm Axinn-Veltrop-Harkrider, LLP in addition to their own in-house legal counsel. The firm is based in New York and specializes in anti-trust litigation. Zuffa typically employs eight or so of its own in-house counsel members, half of which work full-time for the company.
Zuffa, LLC is the parent company of both the Ultimate Fighting Championship (UFC) and Strikeforce MMA promotions, making them the undisputed, largest market-share holder in the business. Following the acquisition of Strikeforce earlier this year, words like “monopoly” and “anti-trust,” began to be used casually when referring to the company, but took a more serious undertone as rumors of an actual FTC investigation began to flourish.
“It is true that Zuffa has retained my law firm, but I will not comment further,” said Stephen Axinn, the firm’s senior partner to Full Contact Fighter. “As I am sure you know, people generally do not want to comment where there may be possibly some sort of investigation going on.”
BoxingInsider.com contacted FTC personnel who stated their policy is to refrain from publicly verifying an investigation until it has been acknowledged by the company being investigated.
Aside from Strikeforce, over the years Zuffa has acquired a number of promotions including World Fighting Alliance (2006), World Extreme Cage Fighting (2006), Pride Fighting Championship (2007), International Fight League (2008) and though they did not acquire the Affliction promotion (2009) Zuffa was a key player in its rise and fall.
Despite their large market share of the promotion business, the company also excels in other areas including pay-per-view and television event showings for the sport, merchandising, media to name a few. Any one of these areas could be singularly disputed if market share is in-fact at issue, though a successful case is not by any means a sure thing.
Using television market share as an example; though Zuffa has recently signed a deal with FOX, they could argue that Bellator has successfully broadcast events on MTV2. Strikeforce shares Showtime with M-1 Global, and Shark Fights has even begun to air events on Fuel TV which is part of the FOX Sports Media Network. Therefore their presence in the market has not prevented others from entering or succeeding. There are a number of other professional promotions in existence, and though none have close to the market share of Zuffa, they are likely enough to provide a solid defense, and it appears that Zuffa may already have their new legal team preparing one.
In general, having a monopoly is not illegal, but monopolistic business practices are.
So, equally if not more likely is that the issue under the suspected investigation is focused on the manner in which the market share was acquired or negotiations were conducted. If the FTC finds that the company is conducting business in a way that unfairly restricts commerce or interferes with the contractual or business relationship of another party, they may have a valid claim. It is no secret that Zuffa does not like to share.
“Tortuous interference” is a likely a cause of action given the nature of the company’s contractual and/or business relationships. In order to succeed on a claim of such, the FTC would have to prove that the UFC convinced a party to breach a contract or prevented them from fulfilling their contractual obligations. Zuffa must have also had knowledge the party’s existing contract. The interference with business relationships claim is only available when the tortfeasor (Zuffa) does something to prevent parties from establishing or maintaining business relationships.
One general example where this may be evidenced by Zuffa is in their business strategy involving sponsorship which prohibits sponsors from sponsoring any other MMA event. The UFC is known to ban sponsors for virtually any reason including sponsoring others in the industry regardless of if they already have a known contractual obligation to that company or fighter. The FTC would have to prove that Zuffa had knowledge and intent in this situation to find tortuous interference and the extent of the interference would be taken into consideration. Given the public nature of the company’s relationships with sponsors it is unlikely that there actions would constitute unlawful dealings as for the most part, the cards are all on the table.
Even when referring to individual fighter contracts, when signing on with the UFC there is little to no room for negotiation of terms. In 2008 UFC competitor Jon Fitch refused to sign over lifetime rights to use his image in video games and DVDs as stipulated in the contract and he was immediately cut by the UFC. Fitch had just lost to competitor Georges St. Pierre, therefore the UFC could legally terminate him pursuant to the terms of his contract, though it was understood that the loss was not the real reason for his termination. In November 10, 2008 interview with Yahoo! Sports Fitch stated, “We tried to negotiate five- or 10-year deals with them, but it wasn’t good enough. It was all or nothing. He wanted our lifetime. He wanted our souls forever.” The “he” that Fitch references in his statement is UFC President Dana White. Fitch eventually signed the agreement.
White has done a great of evading the question of an investigation with all the elegance of a true politician.
“There are a lot of people poking around,” said White in an interview earlier this summer with MMA Fighting. “Let me tell you what, because this thing has been so successful, there are a lot of people who are come after us and are taking shots at us and the reality is we took something that was absolutely dead and turned it around and turned it into this. It was done by investing a ton of money and the Fertititta actually having the balls to do it and to stay behind this thing when it didn’t look like it was going to turn around.”
It is undoubted that White and the Fertitittas (co-owners of Zuffa) have been more than instrumental in the growth of the sport. Now their new team of attorneys will be the ones training hard for a fight to prove their influence has not exceeded the legal boundaries.