Each Friday, The Legal Blitz features an article from our good friends at Sport-In-Law in our effort to fulfill our promise to provide the most comprehensive sports law content on the Web. This week’s feature deals with how the UFC’s continued expansion and takeover of its competitors might bring it closer to being considered an unlawful monopoly even though the Federal Trade Commission has ended its investigations for now.
The (FTC) has closed its non-public investigation of the Ultimate Fighting Championship (UFC). After the UFC merged with four of its competitors, the FTC was reviewing possible violations of Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act. Strikeforce, viewed as the UFC’s closest competitor in North America, was the UFC’s latest merger.
With the purchase of Strikeforce, Zuffa, UFC’s parent partner and sports promoter, can be argued to be a monopoly. The company has taken the reigns from their top competitor in Strikeforce, and now the UFC seemingly has no competition. However, the argument David Nelmark makes is that the UFC cannot be a monopoly because the “entertainment” field is broad with different types of media, such as video games. He went on to say that if you narrow the field to “sports entertainment,” the UFC still competes with other major professional sports. For Zuffa to have a clear monopoly, the market would probably need to be defined as “pay-per-view MMA.”
While the UFC was merging with the other MMA companies, the FTC was undergoing investigation into the UFC for violation of two acts: the Clayton Act and Federal Trade Commission Act.
The Clayton Act was enacted to add antitrust law to prevent monopoly-like behavior. The FTC was investigating violations under Section 7 of the Act. The central concepts of Section 7 covers are the common methods of promoting a monopoly and companies whose primary focus is to hold stocks of other companies. The Clayton Act’s Section 7 amendment covers a merger’s asset and stock acquisitions.
Section 5 of the Federal Trade Commission Act [15 U.S.C. §45] prohibits entities from unfair or deceptive practices in interstate commerce. A practice of unfair commerce of the FTC Act is considered in violation if it causes harm to consumers that (1) is substantial; (2) is not outweighed by benefits to consumers and competition; and (3) consumers could not reasonably avoid the practice. I think that one could argue that the UFC and Zuffa, LLC may have violated parts of the FTC Act, but clearly not enough of it for the FTC to consider pursuing the now closed investigation.
The UFC continues to grow at a high rate with the acquisition of the World Fighting Alliance, World Extreme Cagefighting, Pride Fighting Championships and now Strikeforce. It has partnerships with FOX, Spike and pay-per-view events, along with the reality show; it seems the organization has no limitations. A question that should be begged is whether the small market MMA companies will be able to survive while the UFC flourishes.