||03-16-2011 10:08 AM
Ask the Cage Counsel: Is UFC-Strikeforce a monopoly? Could a fighters' union follow?
The MMA world is still abuzz about the UFC's parent company, Zuffa LLC, acquisition of Strikeforce.
Although the purchase has far-reaching implications for both fighters and fans, the legal ramifications are not as significant as one might think.
In our latst Ask the Cage Counsel installment, legal columnist David Nelmark dives into some of the particulars, including whether this constitutes an MMA monopoly and whether a fighters union is a possibility.
What happens to the contracts that Strikeforce has with fighters, Showtime, Frank Shamrock, etc.?
Unless a contracts has a provision prohibiting its assignment to a new owner of Strikeforce (which is highly unlikely), both sides still are bound by the terms of the contract. Zuffa can certainly choose not to <i>renew</i> a particular Strikeforce contract – or to exercise its right to terminate a contract if certain conditions are met (such as a fighter losing a bout) – but officials cannot simply decide not to honor a particular contract.
Does Zuffa now have a monopoly?
A loose definition of a "monopoly" is an enterprise that has enough power in the relevant market to control prices. The key question here is how the relevant market is determined.
If the market is "entertainment," Zuffa definitely is not a monopoly due to other entertainment options such as video games and movies. If it's narrowed to "sports entertainment," Zuffa still competes with other big-time professional sports such the NFL.
Even if it's narrowed to "combat-sports entertainment," there are lots of other options out there, especially boxing.
If the market is defined as "mixed martial arts," it starts to become a closer question. But Zuffa still can point to the hundreds of regional MMA promotions around the country. Restricting the market even further to "televised MMA" still would include Bellator Fighting Championships, MFC and others.
Thus, for Zuffa clearly to have a monopoly, the market probably has to be defined as "pay-per-view MMA." In that arena, Zuffa does have a truly dominant market share, notwithstanding the internet PPV offerings of companies such as Shark Fights and the occasional televised PPV from companies such as Shine Fights.
Additionally, UFC president Dana White thinks the few barriers are easily overcome for someone to launch a competing entity.
"All you've got to do is go out and raise some cash and jump into the business," White said. "All you've got to have is some big balls – some big balls and some money behind you."
Is having a monopoly illegal?
If a company creates a new product and happens to be so good at delivering it that no one else enters the marketplace, it means the entity is successful. It doesn't mean officials are breaking the law. To be liable for antitrust violations, a company with market power needs to engage in "anti-competitive conduct."
In some cases, a merger or acquisition that creates a monopoly can itself be considered anti-competitive conduct. That said, if a court determines that Zuffa only has a monopoly when the market is defined as "pay-per-view MMA," the purchase did not increase Zuffa's market share because Strikeforce was not yet putting on PPV events.
How does the purchase impact the likelihood of a fighters' union?
Hardly at all.
The inability to use the threat of going to Strikeforce as a bargaining chip in negotiations with the UFC might increase fighters' desire for a union, but it does not impact (positively or negatively) their ability to create one.
On a federal level in the U.S, the National Labor Relations Act governs employees' rights to unionize. Generally speaking, it dictates that if at least 30 percent of a company's employees express interest in unionization in a document submitted to the National Labor Relations Board, the NLRB will oversee an election.
At that time, if more than 50 percent of employees then vote in favor of a union, the employer then must engage in "collective bargaining" with the union, a process in which the union can secure certain rights for all employees rather than each employee having to negotiate for something on an individual basis.
The first obstacle for a "Zuffa fighters' union" is the fact that fighters are not presently classified as Zuffa "employees." Rather, they are "independent contractors." White and the Fertittas have said that it's up to the fighters whether they want a union.
"I think that's up to the fighters if ... [they] do a fighters' union," White said. "The problem in the fight business is this isn't really a team sport. I don't think you're going to see some of the guys who are making the big, big money wanting to kick some of their money down to these guys who might never make it or might never be. But that isn't up to us; that's up to them."
But I find it unlikely that Zuffa voluntarily would reclassify fighters as employees because it would have negative tax consequences for the company.
Setting aside the independent contractor issue, Zuffa fighters hoping to unionize still would face many more hurdles than, for example, employees at a manufacturing plant. Fighters do not all live in the same town, which makes education and coordination difficult.
Additionally, the fighters with the clout and money necessary to spearhead an international unionization effort have the least to gain from doing so because they are already at the top of the pay scale.
The fighters who would most benefit from a union are those who toil away for small, sometimes-unscrupulous promoters. But even a national union might not help those competitors much.
As a comparison, the Actors Equity Association, which represents stage actors, has critical mass in New York such that it can negotiate minimum-wage scales for everyone who steps on a Broadway stage. If a producer failed to adhere to AEA rates, he would have difficulty getting enough quality performers because all AEA members have to agree that they will not work on any non-union project.
The local playhouse in the Midwest does not face the same pressure. Similarly, your local Xtreme Mortal Combat Caged Fury Fighting League likely can fill out a card by just hiring non-union fighters.
Interesting read I thought.