Today Cung Le, Nathan Quarry and Jon Fitch filed a lawsuit against the UFC alleging anti-competitive practices.  The lawsuit was filed in US Federal Court and seeks Class Action status.  I have obtained a copy of the filed Complaint and it can be found here: Le v. Zuffa Anti Trust Class Action Complaint

I’ve reviewed this and here are my initial thoughts -

1. The lawyers involved are perhaps as important as the fighters named.  The team of lawyers include class action and anti-trust lawsuit specialists who have taken on high profile defendants before such as Apple, Google, Intel, Adobe Systems, Pixar, Lucasfilm.  The idea of staring Zuffa down in a drawn out, expensive legal battle will not be a barrier to this legal team. (You can click here to read the Biography of the Plaintiffs and Lawyers involved in the suit)

2.  There are three named Plaintiffs but this list will undoubtedly grow as this litigation continues to receive press.  Whether or not other fighters come forward the claim seeks to be certified as a class action and with the Courts permission will represent two broad classes.  A “Bout” Class which is defined as follows:

All persons who competed in one or more live professional UFC promoted
MMA bouts taking place or broadcast in the United States
during the Class Period. The Bout Class excludes all persons who are not
residents or citizens of the United States unless the UFC paid such
persons for competing in a bout fought in the United States.

and a “Identity” Class which is defined as follows:

Each and every UFC Fighter whose Identity was expropriated or
exploited by the UFC, including in UFC Licensed Merchandise and/or
UFC Promotional Materials, during the Class Period in the United States.

3.  The lawsuit labels the UFC as a monopoly and monopsony of MMA.  The lawsuit is clever and does not claim that the UFC enjoys monopoly and monopsony power over all MMA, rather only over “Elite Professional MMA“.  The lawsuit goes on to acknowledge that there are other players in the industry but only the UFC is “elite” and that they have no competition, either as the buyer of MMA services or the vendor of the MMA product to the public at this level.

4.  The lawsuit paints a damaging picture of the UFC alleging they obtained their market position through a series of anti-competitive practices and have secured approximately 90% of the global share of all MMA revenue.   The lawsuit alleges that fighters are only paid 10-17% of total UFC revenues generated from Bouts.

5.  The alleged anti-competitive practices include

  • artificially reducing compensation for elite professional MMA fighters
  • tying down their roster to long term exclusive contracts with little access to true free agency
  • further tying down their most valued fighters through a “champion’s clause”
  • artificially suppressing open market bidding through “right of first offer” and “right to match” clauses
  • preventing fighters from financially benefiting from their reputations by obtaining Identity Rights in perpetuity
  • imposing promotional obligations on their fighters with no additional compensation
  • obtaining the rights of retired fighters in perpetuity
  • tolling provisions which extend fighter contracts during periods of injury and retirement
  • blocking sponsors from working with fighters through a “sponsorship and endorsement clause”
  • eliminating actual or potential rivals
  • relegating all remaining MMA promoters to ‘minor league’ status
  • adding contractual ‘unilateral demotion in pay’ clauses
  • unfairly threaten, intimidate and retaliate against MMA fighters who work with or for would be rivals
  • Using exclusive contracts with fight venues and sponsors that “impair and foreclose would be rival MMA promoters”

6.  The lawsuit seeks to avoid choice of law and arbitration clauses in Zuffa fighter contracts by arguing that the lawsuit is not seeking to enforce any contractual rights, but rather that the contracts, taken as a whole, “form part of the UFC’s anticompetitive scheme to impair actual or potential rivals” from fairly competing in the industry.

7.  The lawsuit seeks significant damages and further seeks court orders prohibiting the UFC from engaging in further alleged anti competitive practices

The UFC has yet to provide a substantive response to the lawsuit.  When they do you can expect then to argue that

  • they are not a monopoly and point to the higher profile rival promotions such as Bellator, the World Series of Fighting and One FC
  • that fighting is a choice, not a requirement and fighters are free to not sign these contracts
  • that while they are the most prestigious MMA organization, that they gained this position through business acumen and hard work, not anti competitive practices
  • that the FTC investigated alleged anti competitive practices a few years back and closed their investigation without charges

This lawsuit, whether successful or not, will create a prolonged and focused audit of Zuffa’s business practices. As previously discussed, when a sporting organization obtains the market power of the UFC they gain a significant bargaining advantage over the talent.  Eventually this creates a critical inequality in contract rights.  This is a reality and the stronger the UFC’s market position becomes the more important it will be to balance this with collective bargaining rights through some sort of MMA fighters association.

Zuffa wants the UFC to be the NFL of MMA, a quote which is thrown back at them multiple times in the lawsuit.  They can achieve this status and enjoy the benefits that come from market dominance but not without embracing athlete collective bargaining rights that also come at this elite level.  This lawsuit is a powerful accelerant in this direction.

In 2012 the US Federal Trade Commission closed their investigation into the UFC for alleged anti competitive practices.  The investigation ended with the vagueness that only the executive branch of government can give noting “This action is not to be construed as a determination that a violation may not have occurred, just as the pendency of an investigation should not be construed as a determination that a violation has occurred. The Commission reserves the right to take such further action as the public interest may require.“.

In short, as organizations grow, the threat of anti-trust lawsuits are an open ended possibility.

Since the FTC closed their investigation the UFC has continued to consolidate their power as the premier MMA organization in the world.  In the latest demonstration of their influence over the MMA landscape, the UFC announced an exclusive apparel deal with Reebok which impacted fighter sponsorship opportunities and was met with mixed reviews by the MMA community.

The UFC now is rumoured to be on the receiving end of an ‘imminent‘ class action anti trust lawsuit.  Bloody Elbow broke the story reporting as follows:

We have been able to confirm that the suit will be based on accusations that the UFC has violated antitrust laws by abusing their “market power” to intentionally and systematically cripple the free market. Several of the individuals we spoke to compared it to the recent San Jose hi-tech employee and NCAA antitrust cases. The manager of one high profile fighter who wished to remain anonymous has informed Bloody Elbow that the plaintiffs will be seeking damages for potentially hundreds of millions of dollars due to reduced fight purses, video game rights fees, and other sources of income.  The final amount could even be greater, with statutes awarding “treble damages” in antitrust cases.

Few details are publicly known about this rumoured litigation.  What is known is lawsuits such as this are the major force influencing change in major league sports creating a balance between owners and athletes.

With any sports league the market ultimately demands that there be one and only one truly elite league.  Think NHL, NFL, PGA MLB etc.  Yes these leagues are not immune from competition in the broadest sense of the word but in reality these leagues are the unrivaled pinnacle of their respective sports.

When an organization obtains this market position they gain significant bargaining advantage over the talent.

There comes a time of critical inequality in contract rights.  This eventually gets balanced by collective bargaining rights or a powerful athletes association.

This is an eventuality for top level MMA.   Lawsuits like this are usually the triggering events to such change.  Whatever your thoughts are on the UFC and their current position in the market, the reality is the stronger it becomes the more likely a lawsuit like this will succeed in creating greater athlete rights.

This week the UFC announced a 6 year deal designating Reebok as “the exclusive outfitter and apparel provider” for the UFC.

The deal requires Reebok apparel to be worn and prohibits athletes from having “outside sponsor logos on athletic apparel during UFC fight week official events, including fight night, UFC-produced content or other official UFC events.
And individual sponsor banners will no longer be permitted for the walkout or inside the Octagon beginning with the UFC event on July 11, 2015“. In exchange for this fighters are to be compensated based on a formula determined by Zuffa.

Professional fighters had mixed reactions to the announcement.  From a strictly legal perspective I was asked to review a Zuffa fighter contract to determine if a fighter currently under contract can be forced to comply with this requirement.  The short answer is probably.  Here’s the breakdown.

Zuffa contracts contain standard “entire agreement” provisions meaning that if the contract does not specifically address the above neither side can impose such terms on the other.  The clause reads as follows “This Agreement sets forth and integrates the entire understanding between Fighter and ZUFFA, and supersedes any and all prior or contemporaneous written or oral agreements or representations between the parties with respect to the subject matter hereof…This Agreement may not be altered, amended or discharged, except by a subsequent writing signed by the parties hereto“.

In short this means if the fighter did not agree to wear clothing selected by Zuffa, Zuffa cannot force them to do so.

The next question is does the contact contain such a clause?  Sort of.  The contract reviewed had no clause expressly granting Zuffa the power to dictate an athlete’s apparel, however, the “Fighter Conduct” provision reads as follows:

Fighter agrees that during a Bout, or while training for a Bout, as well as during any Pre-Bout Events or Post Bout Events, neither Fighter or any of his managers, trainers and assistants shall wear any clothing…which conflicts with a ZUFFA sponsor“.

Any non Reebok brand would likely conflict with this exclusive sponsorship.  Arguably a fighter can protest by refusing their share of the Reebok money and wear a no-label brand however even this may run afoul of the above broad language.  Zuffa appears to have theirs ducks in a row from a legal perspective on this deal.

Adding to this site’s archived caselaw summaries of combat sports PPV piracy prosecutions, two decisions were released this month by the US Federal Courts granting default judgement in cases of alleged cable and satellite theft.

In the first case (Joe Hand Promotions Inc. v SlackTV) the Plaintiff obtained default judgement against the Defendant for alleged satellite and cable theft.  The court assessed damages at $62,010 and in doing so the Court provided the following reasons:

On November 27, 2012, Plaintiff filed its complaint, alleging Defendants’ wrongful acts, which violated Plaintiff’s rights as the exclusive domestic commercial distributor of the transmission signal for certain television programming under Title 47 U.S.C. §§553 and 605, and conversion. On April 12, 2013, a Clerk’s default was entered against Defendants James Pasko and Slack TV, LLC, respectively. (Dkts. 17, 18). Plaintiff now moves for a default final judgment. Plaintiff seeks statutory damages pursuant to 47 U.S.C. § 605(e)(3)(C)(i)(II) in the amount of $10,000; additional damages pursuant to 47 U.S.C. § 605(e)(3)(C)(ii) from Defendants in the amount of $50,000.00; and attorneys’ fees from Defendants in the amount of $1,500.00 and costs in the amount of $510.00 relating to the prosecution of this matter.

The Court agrees that Plaintiff is entitled to statutory damages in the amount of $10,000; additional damages pursuant to 47 U.S.C. § 605(e)(3)(C)(ii) from Defendants in the amount of $50,000.00; and attorneys’ fees from Defendants in the amount of $1,500.00 and costs in the amount of $510.00. The complaint alleges with specific details and facts Defendants’ numerous willful violations of the relevant statutes. Defendants’ failure to appear or defend this action amounts to an admission of these alleged violations. Therefore, it is the Court’s conclusion that Plaintiff’s motion for default judgment should be granted.

In the second case (Joe Hand Promotions, Inc. v. Serrato) similar allegations were made and again the Plaintiff obtained default judgement.  In assessing damages and costs at $8,610 the Court provided the following reasons:

Accordingly, plaintiff’s motion for default judgment (DE #16)is GRANTED, and the clerk is directed to ENTER FINAL JUDGMENT in favor of plaintiff Joe Hand Promotions, Inc. and against defendants Miguel Serrato, individually and d/b/a Miguel’s Mexican Fusion Grill, and Miguel Mexican Fusion Grill, LLC, an unknown business entity d/b/a Miguel’s Mexican Fusion Grill, jointly and severally on Count I of plaintiff’s complaint for $5,500.00 in damages, plus attorney fees and costs of $3,110.00, for a total judgment sum of $8610.00

 

Earlier this year Manitoba passed an Order in Council setting out how amateur ‘prize fights’ are to be regulated in the Province.  Oversight of all karate prize fights was handed to Karate Manitoba.

Today Karate Manitoba sent the below e-mail setting out their regulatory framework for the sport.   I should note that the e-mail is somewhat overly broad.  It is not accurate to say that “all amateur karate competitions in Manitoba must be approved by Karate Manitoba”  This statement is only true to such karate competitions that can be deemed as ‘prize fights’ under s. 83 of the Criminal Code.  A karate competition that does not include ‘prize fighting’ is not caught by Karate Manitoba’s regulatory powers.  In any event, here is their e-mail with links to their policy and application forms.

Hello Karate Clubs Recent changes to both the Federal and Provincial legislation have impacted the entire karate community in Manitoba.  One of the key impacts of the Provincial Order-In-Council is that all amateur karate competitions in Manitoba must be approved by Karate Manitoba prior to implementation.   To read more please click on link OIC Letter to Karate Clubs

Competition Hosting Policy Competition Application Form

If you have any questions and or concerns please feel free to contact the office.

John Diedrich, reporter for the Milwaukee Journal Sentinel continues to ask questions following the death of amateur kickboxer Dennis Munson Jr.

The potential legal consequences from this tragedy are ongoing with the police apparently “investigating why video of kickboxer Dennis Munson Jr.’s fatal fight — submitted to detectives as evidence — was missing 32 seconds at a crucial moment“.

Additionally, Munson’s family apparently is planning to file civil complaints against individuals involved in the oversight of the bout.

In his ongoing reporting Diedrich obtained a copy of a letter from Assistant District Attorney Mark Williams who conducted a legal analysis into the death and declined to file criminal charges finding that the requirements for proving criminal recklessness likely could not be made out in the circumstances particularly given the issue of consent in the realm of combat sports.

Williams full letter can be found here – ADA Letter Declining To File Charges in Dennis Munson Jr Death

His legal analysis is as follows:

Legal Analysis

In examining the actions of those in control of the fight, as to their conformity to the law, it is difficult to find criminal violations at this time. From the video,it seems apparent from the middle of the second round to the end of the fightthat Mr. Munson was in some distress. He was wobbly on his feet, he occasionally staggered, and between the second and third round his head dropped several times and had to be lifted by his corner man. In the third round he appeared to have little aggression and it seemed his opponent eased off, recognizing the lack of aggression by Mr. Munson.

The act of being reckless in the State of Wisconsin is defined in Wisconsin Statute 939.24(1). The actor must create an unreasonable and substantial risk of death or great bodily harm to another human being and must be aware of that risk. These elements of recklessness are found in both 941.30(1), First Degree Recklessly Endangering Safety and 940.30(2), Second Degree Recklessly Endangering Safety.

There is also the matter of consent and assumption of risk when one enters into a combat fight. You certainly consent to be hit and possibly knocked out. The question arises as to what is too far, and if the standard of criminal recklessness overcomes assumption of risk. In looking at the video tape of the fight most people would agree the fight should have been stopped in the third round, and perhaps at the end of the second round. Some people including the referee in the fight, and Mr. Munson’s trainer/manager believed that the fight should continue, though it was apparent that Mr. Munson had been impaired by receiving blows during the fight. Despite receiving the numerous blows, Mr. Munson attempted to keep fighting, though rather ineffectively.

Looking at the totality of the whole fight, and what happened directly afterward, the State believes at this time it cannot prove that anyone involved in the fight created an unreasonable risk of death or great bodily harm to Mr. Munson, and were aware of that risk considering that the context of the injuries were inflicted during a consensual kick boxing match.

Finally, it appears the opponent of Mr. Munson actually became less aggressive during the third round of the fight possibly realizing Mr. Munson was hurt.

 

Contrary to popular belief, most deaths in combat sports occur in lower weight classes as opposed to the heavier hitting classes.  One of the likely contributors is the brain dehydration that comes with rapid extreme weight cut practices associated with combatants making weight.

A tragic recent death in amateur kickboxing occurred earlier this year in Wisconsin and dehydration may have, yet again, played a role.

The Wisconsin Journal Sentinel has the story which is worth reading in full.  In short, amateur kickboxer Dennis Munson Jr. died after hours after his debut bout.  There are reportedly a myriad of issues which could have been better handled, among these were a difficult weight cut by the inexperienced athlete.  When addressing the role dehydration may have played the Sentinel reports as follows:

They weighed in on the morning of the bout, giving them only hours to replenish weight lost to fight in a lighter class. It is a less expensive option for the promoter because officials don’t need to be paid to be there the day before.

But the state views that approach as more dangerous. In MMA matches in Wisconsin, officials require weigh-ins to be done the day before a fight. That allows more time for fluids to be replenished including around the brain, where they increase protection from blows…

In the weeks prior to his first bout, Munson worried about being able to make weight. Fellow fighters wondered if he was ready.

Five weeks before the fight, Munson committed in a contract to compete at 135 pounds, Joffe said. Fighters who don’t make weight can face “punitive fines” from the promoter.

It’s unclear how much weight Munson had to cut; Joffe said it was about eight pounds.By all accounts, it was a struggle for the already lean young man.

“He was stressing,” said Cody Heck, who was on the fight team with Munson. “We all talked to him and told him, ‘You gotta eat.'”

Weight-cutting is a widespread tactic in combat sports, but comes at a risk as fighters try to replenish lost fluids between the weigh-in and the fight.

Some states are considering increasing scrutiny of the weight-cutting process. In California, fighters would weigh in twice and be limited in the percentage of weight they can cut between weigh-ins, said Andy Foster, executive officer of the California State Athletic Commission.

“It allows for healthy rehydration but not ridiculous rehydration,” Foster said.

Several high-profile MMA and kickboxing fighters have collapsed following weight cuts in the past several years. Last year, a fighter in Brazil died after he suffered a stroke while in a sauna cutting weight.

Joffe said the Roufusport fighters are told how to safely cut weight.

“All you can do is tell them what to do, but you can’t force them to do it,” he said.

Some fighters said there were no classes on weight-cutting at Roufusport. The amateurs learned from the professional fighters.

They talked about “eating clean,” focusing on fish and spinach and other healthy foods. But if that doesn’t get them all the way down, they shed water weight. Fighters may sit in a sauna, work out while wearing plastic bags, stop drinking water. Derrick Munson later told policethat his brother wore extra clothes when he worked out and skipped meals.

Dennis Munson also struggled with his fighting skills, which is common for newcomers. He was fast, but he had trouble keeping his hands up as a defense.

“It takes a long time to get comfortable with people punching at your face,” said Johnson, his teammate. “You panic and don’t react properly, and that’s what happened with him.”

The weigh-in for the March fight was held at the Eagles Club, about eight hours before the event. A nurse did the prefight exam, which amounted to checking fighters’ vital signs.

Had it been a state-regulated event, Munson and the others would have received a full physical from a doctor in the weeks prior to the fight.

About 11 a.m., Munson texted his brother, Derrick, the good news that he made weight. Derrick said he would drive him to the fight later in the day.

On their way to the fight, according to the police report, Dennis Munson had one complaint: He was thirsty.

Derrick didn’t see his brother drink anything before the fight.

From the Sentinel’s reporting it appears many factors played a role in this unfortunate ring death.  The tolls of dehydration and weight cutting, unfortunately, yet again appear to have played a role.

Section 83 of Canada’s Criminal Code prohibits ‘prize fights’ as a default position and sets out ways in which Provinces can legalize various amateur and professional combat sports.

While section 83’s recent amendments were generally a positive development as they paved the way for legal MMA in Canada, the section is poorly drafted and led to a variety of ambiguities such as whether professional kickboxing can be legalized in Canada.

I recently had to consider whether Provinces can legalize amateur Muay Thai contests.  For those unfamiliar with the sport, Muay Thai is a kickboxing sport which also allows the use of elbows and knees.

The reason why the question arose is s. 83 of the Criminal Code defines ‘prize fight’ as “an encounter or fight with fists, hands or feet between two persons who have met for that purpose by previous arrangement made by or for them“. Notably missing from the section are the words ‘elbows’ and ‘knees’.

So can a Province legalize an amateur Muay Thai contest given this omission?  The answer is  yes.   Some Provinces, such as BC, already have.  Sections 83(2)(a)(b) and (c) discuss how Provinces can legalize amateur prize fights.  There is nothing in these sections limiting a sport using elbows or knees.  These sections are simply triggered if the sport in question uses “fists, hands or feet.”.   If so, the sport in question must comply with the Criminal Code.

If anything, the exclusion of the words ‘elbows’ and ‘knees’ means if two people get together and decide to have a fight exclusively using elbow and knee strikes, that would not, be definition, be a prize fight under this section!

MMA Regulatory Roundup

Posted: November 6, 2014 in Uncategorized

A quick roundup of recent regulatory punishments of note this week in the world of MMA.

The penalty for Gonzalez is perhaps the most noteworthy.  The positive marijuana test did not result in overturning his victory and only brought a modest fine.  This can be contrasted with the competitors who tested positive for drugs with performance enhancing qualities where the result was overturned.

 

Following Bellator 127 the California State Athletic Commission tested all 22 fighters on the card.  This widespread testing apparently caught many of the fighters off guard and according to one source, “people back stage were freaking out.“.

The results are now in and, as reported by Sherdog, 4 of the 22 fighters tested positive for prohibited substances.  That’s 18% of the roster competing that night.

As the Nevada State Athletic Commission has proven, unexpected testing results in a far greater number of positive PED findings in MMA.  The reported CSAC findings bolster the conclusion that PED abuse is far more widespread than revealed with predictable PED testing.

Given that conventional PED testing in the sport is fraught with obvious and glaring weaknesses” hopefully other commissions will follow this example and test more combatants when they do not expect it.

Earlier this week the Combat Sports world was dragged in to a lawsuit with allegations of neglect in the face of brain injury and condoned rampant steroid use.  Neglectful PED testing policies will put both promoters and athletic commissions in the cross hairs of a lawsuit in the future unless meaningful actions are taken to clean up PED use from the sport.  The CSAC’s actions of testing all licensed fighters is a step in the right direction and hopefully other regulators of the sport take notice.