On Dec. 16, a group of fighters filed a lawsuit in U.S. District Court for the Northern District of California against Zuffa, parent company of the UFC.
It accuses the UFC of being a monopoly that forces out rival promotions and limits fighters earnings.
The lawsuit currently has three named plaintiffs: Jon Fitch, Cung Le and Nate Quarry. If it is certified as a class-action antitrust lawsuit, it could eventually involve hundreds. The UFC is in the process of lawyering up to defend itself in a legal battle that could take three to five years to play out.
I spoke to ESPN senior writer and legal analyst Lester Munson to obtain answers to questions I had while reading through the 63-page lawsuit.
Brett Okamoto: The next step regarding this lawsuit is for the California court to certify it as a class action, correct? What does that mean exactly, and is it more or less a rubber-stamp process in this case?
Munson: Certification of the class described in the lawsuit will be one of the steps. It might not happen right away, but it does appear that certification of the class should be easy and routine. The only possible obstacle to certification of the class would be differences in the contracts that fighters signed. If the plaintiffs all signed the same form contract, then certification should be a simple matter.
Okamoto: The UFC will then file a motion to dismiss. Do you see any chance of the promotion successfully dismissing this case?
Munson: Like all companies accused in antitrust cases, the UFC will file a motion to dismiss. It is almost automatic. The UFC will claim it is not a monopoly, not a monopsony, not a cartel and not subject to the liabilities of antitrust laws. If the statements made in the lawsuit are correct, the court will deny the motion to dismiss. The motion-to-dismiss process alone will consume five to six months.
Okamoto: As a private company, the UFC is historically protective of its financial records. Is it the likely the promotion will request a gag order during the discovery process, citing sensitive trade secrets? Would a court grant one?
Munson: The UFC is likely to demand a gag order that will prevent media from seeing the documents and financial statements that will be exchanged with the fighters as litigation progresses. The discovery process will allow fighters to strip-search UFC records. It would be terrific information for public. UFC lawyers will claim the material is proprietary -- owned by the UFC and qualified as trade secret. Most judges will agree to sign the gag order. If fighters object to the gag order, it would be a very good thing. It could lead to the lifting of the gag order later. It would be even better if ESPN and other news organizations fought the gag order. Some judges will respond favorably to media intervention on the issue.
Okamoto: This lawsuit defends two classes: A "bout class," which alleges the UFC has driven down fighter pay as a result of monopoly power, and an "identity class," which alleges the UFC has taken unfair ancillary rights of its fighters in perpetuity. Do you see this as one lawsuit, or is it possible it's eventually broken up into two?
Munson: The UFC may move to "sever" the two claims. It is a maneuver that would make things more difficult and expensive for the plaintiffs. They would be working on two cases instead of one. Antirust litigation is typically a war of attrition, so breaking this into two cases rather than one would be beneficial to the UFC. The judge may rule that the two claims will be treated as one for the discovery stage (depositions and exchanges of documents) and then sever them into two trials.
Okamoto: The crux of this lawsuit essentially argues the UFC has engaged in illegal schemes to eliminate its competition. What is your initial impression? Are the business practices listed in this lawsuit -- allegedly demanding venues and sponsors sign exclusive agreements, counterprogramming other promotions, acquiring rival promotions -- considered illegal or fair game?
Munson: The business practices described in the lawsuit are aggressive and qualify as "sharp practices," the kind of practices that are technically acceptable but difficult to defend in front of a jury. If the plaintiffs can survive the pretrial skirmishes and move the case to trial, the UFC would be forced to consider settlement rather than face the prospect of defending these cutthroat practices. The counterprogramming is particularly egregious. It demonstrates the power of the monopoly and it causes damage to smaller businesses of the kind antitrust laws were designed to protect. If I were one of the attorneys on the UFC side, I would be worried about the counterprogramming.
Okamoto: The FTC Bureau of Competition opened an antitrust investigation on Zuffa in 2011, after its acquisition of Strikeforce. That investigation was closed in January 2012, with the FTC declining to take action. Does that investigation impact this lawsuit?
Munson: The impact of the FTC decision on the Strikeforce transaction is minimal. It gives the UFC some ammunition, but it is not conclusive. The FTC's standard for intervention in an acquisition is tougher than the standard the fighters must meet in their case. The fighters, moreover, are going well beyond the Strikeforce deal in their claims.
Okamoto: The lawsuit cites numerous boasts by UFC president Dana White regarding putting competitors out of business. Is this something that can actually be used against the UFC as proof of a monopoly, or is this fight-promoter hyperbole?
Munson: The plaintiffs will certainly try to use White's statements against him. His assertion of "We're the NFL, there is no other guy," can be powerful evidence in support of the plaintiffs' claims the UFC is a cartel. UFC lawyers will argue the statements were made as a marketing ploy and part of a macho sales campaign. In the O'Bannon vs. NCAA trial, admissions like this were instrumental in the players' victory. An NCAA official (Wally Renfro) admitted that "the notion that athletes are students is the great hypocrisy of intercollegiate sports."
Okamoto: Are there other parallels between this antitrust case and O'Bannon v. NCAA?
Munson: Yes. In the O'Bannon trial, the NCAA argued that its restrictions on players (no pay beyond a scholarship) were reasonable because they accomplished important goals of higher education. Its importance to higher education was supposed to lead to the conclusion that its restrictions on player compensation were acceptable. Among lawyers and judges, this is known as using the "rule of reason." The UFC will argue that its practices were designed to develop and nurture the MMA market and enhanced the incomes of fighters. The rule-of-reason approach, with its detailed preparation for a jury trial, prolongs litigation -- a clear benefit to the UFC.
Okamoto: In 2014, lightweight Gilbert Melendez had exhausted his UFC contract and, in February, accepted a multi-fight deal with Bellator MMA. The UFC exercised its right to match the offer, effectively showcasing that a fighter was able to leverage one company's interest in him against the other to increase his value. How many "Melendez" cases does the UFC need to demonstrate that a fair market exists?
Munson: One may be enough. The Melendez/Bellator deal is just what the UFC needs to answer the charges of these fighters. The fighters will have difficulty explaining away the Melendez situation. Melendez was able to do what they claim they cannot do.