Five Things We Learned From UFC Antitrust Hearings

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Back in December of 2014, several former Ultimate Fighting Championship fighters including Jon Fitch, Cung Le and Nate Quarry, banded together to file an antitrust class-action lawsuit against the UFC. The claim alleged that the UFC had unlawfully monopolized the markets for promoting live professional mixed martial arts bouts by various methods, including locking fighters into long term exclusive contracts, purchasing its rivals, and suppressing fighters’ overall compensation. Despite attempts by the UFC to have the case dismissed, the presiding judge, Richard Boulware, elected to schedule evidentiary hearings to determine whether or not the plaintiffs were warranted class certification, which would ultimately decide if the case would move forward or effectively die where it stands now.

Which brings us to this past week. Judge Boulware has heard the expert witnesses from each side defend their respective findings, and the court will now recess until Sept. 12 when more experts will come forward to testify. Although there will undoubtedly be much more judicial procedure to come, the hearings so far have given us some key insights into the case and answered some questions about how things might proceed going forward. Here is what we’ve learned so far:

The Hearings Went Well for the Fighters

According to those who attended the hearings in person, overall this week was a win for the plaintiffs. While expert witnesses Dr. Robert Topel and Dr. Hal Singer’s papers were both strong and explained the arguments for the UFC and the plaintiffs respectively, Dr. Singer appeared to articulate his ideas more clearly on the stand by a wide margin. The UFC’s attorneys certainly seemed to have their moments in weakening the theory set forth by the plaintiffs, but overall the lawyers for arguing on the side of the fighters were much happier than those defending the UFC -- which says a lot in itself.

We’ll still have to wait and see how the next set of expert testimony goes come Sept. 12, but it appears as though right now the judge is leaning in the favor of class certification for the fighters.

Compared to Other Combat Sports Promotions, Fighter Wage Share in the UFC is Low

Fighter compensation is what this lawsuit is really all about. Class certification hinges on whether or not the court used wage levels vs. wage shares as the basis for damages, as wage levels in the UFC seem to rise over time while wage share seems to be fixed and lower than in other promotions. The unredacted report of Dr. Singer points out the fact that UFC wage has share averaged around 19-20 percent of total event revenue while in Bellator MMA and the now-defunct Strikeforce average wage share was 44.7 percent and 63 percent respectively up through the year 2016 (or until 2010 in Strikeforce’s case).

In boxing, the wage share tends to be even higher. Golden Boy Promotions wage share for boxers averaged around 62 percent while Top Rank wage share averaged a staggering 71 percent during the same time period. Well known boxing promoter Lou Dibella, who has managed such well-known boxers as Bernard Hopkins and Paulie Malignaggi, stated that “70 percent is common” when it comes to wage share in boxing. To give an idea of the impact of that discrepancy in wage share, between December of 2010 and June of 2017, the UFC paid out a total of $626 million in fighter compensation -- less than Floyd Mayweather made during the same time period from boxing.

Endeavor and the UFC are Actively Trying to Keep Wage Share Capped at 20 Percent

Possibly the most important piece of information that was revealed during the hearings wasn’t the fact that fighter wage share in the UFC was around 19-20 percent of total revenue—it was that the promotion was adamant about keeping it in that range. According to Dr. Singer’s report, WME-IMG created a presentation for potential investors before they acquired the MMA promotion that stated the risk of rising fighter compensation was something the firm would need to actively manage. Singer’s report also noted that questions surrounding fighter pay were the biggest concern from financing sources and that Zuffa management, “intend[ed] to “contain” fighter costs at no more than 20 percent of revenue.”

This type of strategy is something current and future fighters should take serious note of. As long as the company is doing well, wages should hypothetically continue to rise, but if the industry were to take a downturn for any reason, you’d expect unfavorable negotiations or cuts to come down on lower-tiered or particularly expensive athletes. It also means that the more superstar type fighters you have, i.e. the Conor Mcgregors, Brock Lesnars, etc., the less there is to go around for the everyone else, making it a zero-sum game.

If the UFC Loses at Trial, the Court’s Remedy Could Change MMA Forever

While these are just the evidentiary hearings, there has been some discussion on possible remedy should the court find that the UFC has been using unlawful practices. According to Dr. Singer’s regression model, monetary damages could range anywhere between $800 million and $1.6 billion, with Singer testifying he believed the number was $894 million. Given that treble damages in civil suits allow the court to triple damages, hypothetically the UFC could end up paying more money to the fighters than WME-IMG paid for the promotion.

If the monetary payout wasn’t big enough, things really get interesting when it comes to the court’s possible remedy for fighter contracts. As discussed by Pepperdine Economics Professor Paul Gift and Bloody Elbow Business Analyst John S. Nash on the Show Money program, Judge Boulware has hinted at possibly putting a limit on the length of time a promotion can hold an athlete to an exclusive contract. If the court were to rule that fighter contracts were say, a maximum of one year, champions and top-ranked combatants would significantly more leverage in contract renegotiations than the present situation, where the UFC can technically keep a fighter under contract in perpetuity. This would also apply to all other MMA promotions as well, tipping the scales in contract negotiations for fighters across the board.

The Lawsuit is Still Nowhere Close to Being Resolved

Even though the hearings this week were certainly important, the lawsuit still has a ways to go to being finished, outside of the fighters and the UFC somehow reaching a settlement. Regardless of how Judge Boulware rules after these hearings are concluded, his decision will almost certainly be appealed by the losing side, meaning an appellate court will have review the information again and conclude whether or not Judge Boulware’s decision should be upheld. If the civil suit got to a point where class certification was granted and upheld, then the case would move to trial.

At trial, a number of things could happen. Under mounting pressure, the UFC could offer the plaintiffs a settlement, not willing to take the risk of what might happen if the case went to a jury. The UFC could be granted summary judgement, with the court ruling that even though there was enough evidence for class certification, there isn’t enough to proceed with the argument that the UFC engaged in unlawful behavior and violated antitrust law, meaning the case would end right then and there for the UFC would walk away unscathed. The trial could go to a jury and depending on the verdict could yet again be appealed and have to be reviewed by a higher court.

Any way you look at it, we’ve still got a ways to go and nothing is set in stone, so expect more to come from this landmark case -- just hopefully not five years from the time of this writing.