Are UFC's Practices Anti-Competitive?

[ford_prefect04]

This is a very difficult claim to prove, particularly when the other possible claimant, Strikeforce, is in the UFC fold. But that might actually work in Bellator's favor because it shows UFC's intent. But it all comes down to whether the UFC is intentionally overpaying Bellator fighters. If I were on the jury, I would vote yes.

Can predatory bidding occur in relation to contracted employees' compensation?

Even if we assume the UFC's intent is predatory, the claimant would still have to show that the UFC's offer is too high a price for Alvarez, and that he couldn't cover the cost. Not sure how they could definitely link him to some % of UFC revenue.

And they'd have to show that the UFC would be able to recoup those losses via monopoly profit. If the UFC pays Alvarez $700k, you can bet their other top fighters would demand as much; the UFC either gives in, and can't recoup their losses, or they try to exercise monopoly power to drive contracts back down....which might threaten their monopoly as fighters balk and potentially leave. Either way, it's tough to see how the claimant could prove the UFC would recoup losses.

But all that is just a layman speculating. Interesting argument.

 

[apoth]

The Game of Thrones is over, Dana White sits upon the Iron Throne and the UFC rules King's Landing.

 

[cooks6161]

Everyone fight in the UFC and form a union..... Duh!

 

[ocarey2]

Has anyone got a source for these reported wages being offered? and a break down of how the proposed contracts might actually work.

As an aside Bellator engage in shady practices also with particular regard to screwing over fighters who are tied into a contract. A prime example is Jim Wallhead

 

[johndhi]

Wow, am i still on sherdog or what? Great thread. I'm a lawyer too but don't tt know antitrust too well. What are the basics of a sherman violation in this context? Don't MLB etc play by special rules, or are they subject to the same doctrines as eg Microsoft?

 

[johnsq316]

Wow, am i still on sherdog or what? Great thread. I'm a lawyer too but don't tt know antitrust too well. What are the basics of a sherman violation in this context? Don't MLB etc play by special rules, or are they subject to the same doctrines as eg Microsoft?

MLB has an anti-trust exemption, so they are not a reasonable comparison.

NFL, NBA, NHL etc. do not have anti-trust exemptions, so any of those would be valid comparisons.

See some of my previous posts, I gave a layman's outline of what would be required to prove an anti-trust violation.

 

[PabloZed]

Can predatory bidding occur in relation to contracted employees' compensation?

Even if we assume the UFC's intent is predatory, the claimant would still have to show that the UFC's offer is too high a price for Alvarez, and that he couldn't cover the cost. Not sure how they could definitely link him to some % of UFC revenue.

And they'd have to show that the UFC would be able to recoup those losses via monopoly profit. If the UFC pays Alvarez $700k, you can bet their other top fighters would demand as much; the UFC either gives in, and can't recoup their losses, or they try to exercise monopoly power to drive contracts back down....which might threaten their monopoly as fighters balk and potentially leave. Either way, it's tough to see how the claimant could prove the UFC would recoup losses.

But all that is just a layman speculating. Interesting argument.

Good question. Yes, predatory bidding can occur in employee contracts.

As I have said, it is a difficult claim to prove. I should not have gone way out on that limb - while I do believe the UFC is anti-competitive, I am less sure there is a claim based on these contracts. Perhaps, my emotions overwhelmed my reasoning because I simply can't make sense of the Alvarez contract.

 

[johnsq316]

Good question. Yes, predatory bidding can occur in employee contracts.

As I have said, it is a difficult claim to prove. I should not have gone way out on that limb - while I do believe the UFC is anti-competitive, I am less sure there is a claim based on these contracts. Perhaps, my emotions overwhelmed my reasoning because I simply can't make sense of the Alvarez contract.

What can't you make sense of?

It's about what I would expect for a bid on a Free Agent who is generally regarded as one of the 5 best in his division in the world, is in his athletic prime, and seems readily marketable and charismatic.

It is one of the rare MMA contracts that the full terms of are publicly known, so maybe that's the surprising part.

 

[sobermonkey]

Enter the parade of Keyboard lawyers.

As Anti-trust law in the United States is a highly specific area which even many members of the bar do not understand, I am excited to see what our special Sherdog legal team is able to come up with.

/popcorn

*edit - we have at least one legitimate lawyer who has posted so far. I am relatively familiar with the area, but it is in Canada, and we still use the oldest t antitrust statute in the western world (The Competition Act 1889) so I would not be able to contribute much to the debate. What johnsq316 says seems to be on par up here though, as anti-competitive principles must be balanced with the importance of free-market economics. Making an offer to a free agent would not be violate anti-competition laws in any jurisdiction I know of.

 

[FrodoFraggins]

The UFC is currently offering Bellator's Eddie Alvarez a deal that would make him the highest paid in the division. Previously, the UFC signed Hector Lombard, whose Bellator contract had expired, to a deal that paid him $700,000 + for his first fight, a disappointing loss. He has since rebounded. Bellator's Rebney said that Bellator could not afford to match the Lombard offer, but seems to be trying to match the UFC's offer to Alvarez. It is difficult to imagine them succeeding.

Lombard and Alvarez are both exciting and highly ranked fighters, but I do not believe either is an actual contender. The only way to measure their worth is not by what the UFC is willing to pay them, but by what the UFC pays its own fighters. If Alvarez is worth what the current offer is alleged to be, it is difficult to argue that the current top 2 or 3 UFC fighters deserve less. Put another way, is Alvarez worth more to the UFC than its current champion in the division?

There is, unfortunately, another possible explanation, which is that the bid for Alvarez and the one for Lombard are attempts to monopolize the sport. Instead of fighting over Alvarez's contract, Rebney should hire an anti-trust attorney. The UFC's practices have been anti-competitive for awhile now. To pre-empt the obvious question, the anti-trust claim would be for predatory bidding. A predatory bidding claim alleges that the predator (UFC) overpaid for talent and caused prices to rise to drive Bellator out of business. Once Bellator (remember Strikeforce is already basically gone) is out of business, the UFC can reap monopoly profits and pay fighters what it wants, making up for what it overpaid earlier.

This is a very difficult claim to prove, particularly when the other possible claimant, Strikeforce, is in the UFC fold. But that might actually work in Bellator's favor because it shows UFC's intent. But it all comes down to whether the UFC is intentionally overpaying Bellator fighters. If I were on the jury, I would vote yes.

Um. Since when is offering the most for an athlete considered anti competitive?

The UFC isn't a monopoly yet. If they become one, I could see the government pushing them to have their fighters be unionized just like all of the other monopolistic US sports.

 

[snugglecakes]

Why is eddie even worth this much at all. It's not like he was unstoppable over in bellabore. He lost his belt.

 

[PabloZed]

The size of the talent pool does not prove anti-competitive (in a legal sense) practices. There is a similarly small talent pool for football players (relative to the number of players required to field a team/fill a fight card). Many NFL players are also drafted by the CFL. The NFL "out-bids" the CFL team for the player 99.9999999% of the time. This is not, in and of itself, anti-competitive. It's simply a fact of the relative bankrolls of the two leagues.

In order to prove an anti-competitive claim Bellator would have to be able to prove that the signing of Eddie Alvarez had nothing to do with his in cage talent and was intentionally designed to cripple Bellator. That's a tough claim to prove on a number of levels. They would have to prove that there was intent, which could be proved through discovery if they got their hands on an e-mail from Lorenzo to Dana saying as much. They would have to prove that the loss of Eddie Alvarez would demonstrably cripple their business, which would also be hard - they've thrived without him and have a new TV deal.

You are trying to take me into deeper waters than I am prepared to swim in. But here goes.

The size of the talent pool matters in the same way it matters when bidding for any rare good. If there were more Alvarez's around, Bellator would let him walk and the UFC would not be bidding so high. I also think we all can agree that Alvarez is more valuable to Bellator than to the UFC, which would normally suggest Bellator would be willing to pay a premium for him. The fact that the UFC is paying a premium is suspicious. Sure, one could argue the UFC simply wants the best fighters, but the question is at what cost.

The NFL has caps on team payrolls, luxury taxes, and other means of keeping team salaries relatively competitive. The NBA has similar restraints. But the most important point is that the NFL, NBA and MLB are leagues with teams that compete for talent amongst themselves as well as with outside organizations. Essentially, the UFC is a league that hires all the players. Bellator is another league. Because MMA is a relatively small sport, the talent pool and the competition for talent is simply not as great as in the major league sports. Thus, that allows one org to exercise quite a lot of power.

I may indeed be blowing smoke. The UFC may be on the verge of granting large contracts to its top fighters, which would negate any predatory bidding allegation. I suspect UFC fighters are hoping that is true and are waiting to see. We will know soon because Bendo's manager, if a new deal is not offered by the UFC, should call Rebney and ask if the terms of the deal he offered Alvarez are on the table.

 

[vs4drutg]

Your argument is no different than the argument that can be made against the NBA, NFL, or MLB.

It's totally different.

The UFC pay their fighters directly - the NFL et al. do not - it is the teams within the NFL that each pay their own respective players.

With regards the OP it is fairly clear that is what the UFC is trying (and succeeding) to achieve. Interesting to see how things develop in the coming years.

 

[PabloZed]

What can't you make sense of?

It's about what I would expect for a bid on a Free Agent who is generally regarded as one of the 5 best in his division in the world, is in his athletic prime, and seems readily marketable and charismatic.

It is one of the rare MMA contracts that the full terms of are publicly known, so maybe that's the surprising part.

I had no expectations. My response is mostly based on the comments UFC fighters have made suggesting the terms of the deal are "generous."

Everything you say about Alvarez is also true of Bendo and other UFC fighters. Bendo has the advantage of holding the belt and, I suspect, being better known. Nothing I say is intended to be a slight to Alvarez or to even suggest UFC fighters necessarily deserve the same deal. I am trying to understand the economics. I don't believe the terms make sense unless the UFC views Alvarez as the future champion. Being merely top 5 should not command higher than market value.

 

[Shaddows]

The UFC is currently offering Bellator's Eddie Alvarez a deal that would make him the highest paid in the division. Previously, the UFC signed Hector Lombard, whose Bellator contract had expired, to a deal that paid him $700,000 + for his first fight, a disappointing loss. He has since rebounded. Bellator's Rebney said that Bellator could not afford to match the Lombard offer, but seems to be trying to match the UFC's offer to Alvarez. It is difficult to imagine them succeeding.

Lombard and Alvarez are both exciting and highly ranked fighters, but I do not believe either is an actual contender. The only way to measure their worth is not by what the UFC is willing to pay them, but by what the UFC pays its own fighters. If Alvarez is worth what the current offer is alleged to be, it is difficult to argue that the current top 2 or 3 UFC fighters deserve less. Put another way, is Alvarez worth more to the UFC than its current champion in the division?

There is, unfortunately, another possible explanation, which is that the bid for Alvarez and the one for Lombard are attempts to monopolize the sport. Instead of fighting over Alvarez's contract, Rebney should hire an anti-trust attorney. The UFC's practices have been anti-competitive for awhile now. To pre-empt the obvious question, the anti-trust claim would be for predatory bidding. A predatory bidding claim alleges that the predator (UFC) overpaid for talent and caused prices to rise to drive Bellator out of business. Once Bellator (remember Strikeforce is already basically gone) is out of business, the UFC can reap monopoly profits and pay fighters what it wants, making up for what it overpaid earlier.

This is a very difficult claim to prove, particularly when the other possible claimant, Strikeforce, is in the UFC fold. But that might actually work in Bellator's favor because it shows UFC's intent. But it all comes down to whether the UFC is intentionally overpaying Bellator fighters. If I were on the jury, I would vote yes.

problem with your post is that you assume most retards here would understand the issue.

They swear by UFC and WANT UFC to monopolize MMA.
They do not understand the difference of Zuffa and MLB or NBA. They think UFC standing alone will be like those leagues.

Yhey also forget that Zuffa is not = MMA.
Zuffa is a company that only cares about profit, not nescessarily furthering the sport of MMA.

Call me purist, but IMO it is what it is.
UFC is already a monopoly. Anyone that claims different is just making up excuses. They take the best talents of any promotion that dares to hype a fighter, and leaves them with lesser competition.

The only way UFC would not succeed is to have all other promotions merge and help each other (monetarily if need be) and have tournaments among each other as to grow together and have a wider talent pool.

As it is now, no one can compete with UFC.

 

[Nerfherder]

This is one area where MMA should be compared to Pro Wrasslin'.

WCW, WWF, ECW, and hundreds of smaller orgs all vying over the same talent pool.

It wasn't anti-competitive back then.

 

[Face Stab]

As long as the UFC doesn't try to eliminate the competition, they are allowed to compete.

 

[buda2]

The UFC is a monopoly but it's a natural monopoly. Meaning the UFC is a monopoly due to its success not because it obstructs other companies from entering the market.

Pride and Strikeforce its greatest competitors were bought up because both organizations collapsed from within.

Monopolies are not necessarily a bad thing. The major sports in the US are oligopolies. The only difference between oligopolies like the NFL is that each team is separately owned rather than the entire league. Nonetheless each league functions essentially as a cartel which is when oligopolies work in concert. And as far as how they impact their markets the difference between monopolies and cartels is the same.

My point being that it seems that in sports markets consumers prefer monopolies and cartels because it ensures that the best possible athletes are competing against each other.

 

[johndhi]

The fact that the UFC is paying a premium is suspicious.

Hey PabloZed I really like this thread, thanks for posting. I'd also like to point out something here.

The title of the thread, "are the UFC's practices anti-competitive?" asks a somewhat different question from what the other poster named john (who seems to know antitrust law at least somewhat well) is answering. He's assessing whether the Alvarez dealings violate the antitrust laws. You seem to sort of be thinking about the UFC's motives underlying the Alvarez deal. Both are interesting considerations; if the other john is to be believed, though, this deal probably doesn't amount to a violation. If, as he says, the antitrust authorities would have to "prove that the signing of Eddie Alvarez had nothing to do with his in cage talent," that's obviously very hard to do. Clearly, the signing has at least SOMETHING to do with Alvarez' talent.

The thing is, it's probably also the case that UFC has ulterior motives and is engaging in the most anti-competitive behavior it can without violating the law. That's one particularly weird part about antitrust law - competition itself is inherently a sort of anti-competitive enterprise; you're always trying to beat the other guy. But the laws says there are certain methods to beat the other guy that are "unfair." According to the other poster named john, what UFC has offered Alvarez isn't one of those unfair methods.

 

[johndhi]

The UFC is a monopoly but it's a natural monopoly. Meaning the UFC is a monopoly due to its success not because it obstructs other companies from entering the market.

...

My point being that it seems that in sports markets consumers prefer monopolies and cartels because it ensures that the best possible athletes are competing against each other.

haha, woah this is like a law school class!

Isn't a "natural monopoly" (http://en.wikipedia.org/wiki/Natural_monopoly) when it's just simply naturally efficient for only one company to exist? what reason is there for MMA to be like that? I guess that's kind of what you're getting at with the end of your post...