Sports world facing antitrust scrutiny along with tech giants

Antitrust law is back in the spotlight. As market concentration has increased across the economy, the tools of the Gilded Age are in vogue. Politicians from both sides of the aisle are deriding tech giants for smothering competition. Mergers in health care have drawn increased scrutiny. State attorneys general are getting involved. Legislation has been introduced.

The sports world has not escaped the scrutiny, and the next high-profile antitrust case to go to trial may involve mixed-martial-arts fighters. Earlier this month, a judge from the U.S. District Court for the District of Nevada indicated he would certify an antitrust case brought by Ultimate Fighting Championship fighters as a class action. Cung Le v. Zuffa LLC, 2:15-CV-01045 (D. Nev., filed June 3, 2015).

The fighters accuse the UFC of illegally gaining and abusing monopoly power to suppress the fighters' labor market. The case could be a multi-billion dollar one, and it will be a critical one for those attempting to use antitrust laws to open up competition in labor markets -- both within and outside sports.

The fighters first moved for class certification over two years ago. They argued that the UFC required fighters to sign, what were essentially, perpetual contracts that prevented them from fighting elsewhere, and that the UFC acquired and then shut down rival promotors of mixed martial arts. Once the UFC gained market power, the fighters claim the UFC then limited the number of bouts and decreased the percentage of the purse paid to the fighters, all in violation of the Sherman Act.

The parties vigorously fought over the economic models submitted in support of class certification. At a hearing on Dec. 10, District Judge Richard Boulware indicated that the fighters sufficiently demonstrated that common questions would predominate over individualized ones, and that he intended to grant class certification. The class is expected to cover over 1,000 fighters.

In a statement, Joseph Saveri, a San Francisco-based attorney for the fighters, stated: "We are grateful to Judge Boulware for recognizing the importance of the class issues in this case, and for indicating his intention to grant class certification."

The six-year-old case is hardly the first antitrust challenge to a sport's labor market. In multiple suits spanning over a decade, college athletes have sought to loosen the NCAA's grip on what they allege is another example of a monopsony -- a market in which there is but one buyer for a type of services. Those cases resulted in two decisions from the 9th U.S. Circuit Court of Appeals. The most recent one held that the NCAA could not limit compensation and benefits tied to education for Division I football and basketball players. It spurred the introduction of bills in legislatures across the country, many in favor of the college athletes but some against. And the Supreme Court will soon review the case after it granted the NCAA's cert petition just last week.

Given the stakes, the 9th Circuit may review the UFC case as well. Once the district court formally issues its class certification order, the UFC will almost assuredly attempt to appeal under Federal Rule of Civil Procedure 23(f). Such appeals of class certification orders are discretionary, though, and federal appellate courts deny more of those petitions than they grant. If no interlocutory appeal takes place, the parties will begin the march towards trial.

The UFC case has another thing in common with the NCAA cases: Neither set of athletes have a union representing them. Both college athletes and UFC fighters have tried to unionize in recent years. If they had succeeded, then these cases would likely be dead on arrival -- at least for conduct that post-dates the formation of a union. Federal common law has long recognized an exemption, the non-statutory labor exemption, for activity subjected to collective bargaining.

Then again, if the fighters had a union, they may not need to bring an antitrust suit. Banded together, they would likely be better equipped to push back against the alleged monopsony that is the UFC and to demand better contracts. One need look no further than Major League Baseball, whose players achieved the first collective bargaining agreement in sports history in 1966. Even though MLB, unlike other sports, enjoys a longstanding antitrust exemption, the players' union achieved free agency through less than a decade of collective bargaining. Once freed from the chains of perpetual contracts, teams began competing for players, and salaries have since increased by over 2,800% (accounting for inflation).

Yet unionizing a group of workers, whether in sports or otherwise, is far from easy. Indeed, the percentage of workers represented by unions has declined for decades, meaning most workers do not enjoy the protections of collective bargaining. That's where antitrust laws come into play when either a monopolistic employer or a group of employers working in concert stifles competition.

And that should be true no matter if the worker is delivering packages or delivering punches in the UFC's Octagon. 