On March 13, the Ultimate Fighting Championship settled several lawsuits, including Cung Le v. Zuffa, which was scheduled to go to trial in April. The plaintiffs in Cung Le had accused the mixed martial arts organization of several anticompetitive behaviors that led to the suppression of fighter wages. Stephen F. Ross and Gurtej Grewal recount the facts of the case and what the settlement might mean for the industry.
Recently, Ultimate Fighting Championship (UFC) settled a slate of antitrust lawsuits alleging that the mixed martial arts (MMA) organization had monopolized the industry to the detriment of its fighters. In this article, we discuss the context of these complaints, particularly Cung Le v. Zuffa, and what the recent settlement means for the industry.
In 1993, UFC began as a professional mixed martial arts (MMA) organization and has since revolutionized the fight business. Today, UFC is the world’s largest Pay-Per-View (PPV) event provider. The brand produces more than 40 live events annually in prestigious arenas around the globe. UFC programming is broadcast in over 165 countries and territories, via more than 60 global broadcast partners, to more than 1.1 billion households with televisions.
The UFC has established itself as the leading premier MMA fighting organization as reflected in viewership, revenue, and profit. According to their latest financial report, the company raked in a record high $1.3 billion in revenue in 2023—a 13% increase from 2022. However, its athletes have not seen an increase in their share of that revenue. Indeed, over the last year the company reduced athlete costs, driving total revenue share for its athletes to approximately 13-15% from 16% in 2022. In comparison, athletes in other sports leagues based in the United States (such as the National Football League, the National Basketball Association, and the National Hockey League) receive approximately 50% of league revenues based on collective bargaining agreements, and European soccer leagues offer as much as 70% of revenues to players.
In December 2014 , three former UFC fighters (Cung Le, Nate Quarry, and Jon Fitch), sued the UFC, alleging that the company’s anticompetitive acts have made (and maintained) the UFC as the only viable option for MMA fighters who want to pursue a career in the profession. Specifically, the plaintiffs alleged that UFC: (a) used exclusive contracts with specific provisions to retain fighters; (b) used its market power in both the input (purchase of MMA fighter labor) and output (promotion of live MMA bouts between MMA fighters) markets to render fighter contracts effectively perpetual; and (c) acquired or drove out rival promoters. According to the plaintiffs, the alleged effect of UFC’s conduct was to establish such overwhelming market dominance that it could pay its fighters substantially less than what they would have been paid in a competitive market for their services.
Essentially, the plaintiffs’ argument boiled down to one key multifaceted inquiry—whether UFC’s anticompetitive conduct has created an illegal monopsony. Monopsony is an economic term used to describe a market involving a buyer with sufficient market power to exclude competitors and affect the price it pays for a product—it is the counterpart to a monopoly, which has power over the price at which it sells a product. As a result of a monopsony, a sole purchaser has the power to set the price it pays for a service, in this case the labor of MMA fighters, and since the supplier has no other market for its product, it is forced to sell at the price the purchaser has set.
To grant class certification and prove violation of monopsony power under Section 2 of the Sherman Act, plaintiffs had to show, by a preponderance of evidence, that UFC: (1) “possessed monopsony power in the relevant markets,” (2) “willfully acquired or maintained its monopsony power through exclusionary conduct,” and (3) “caused antitrust injury” through such conduct. Last August, a U.S. district court sided with plaintiff’s arguments on each issue in its class certification order.
As to the first element, the court found that plaintiffs provided sufficient circumstantial evidence that UFC maintained dominant power in both the input market and output market. The court heard plaintiff’s expert witness on the issue (the economist Hal J. Singer) testify as to how, from December 2010 through June 2017, UFC’s share of the Relevant Input Market fluctuated between 71 and 99% and rejected UFC’s arguments to the contrary.
To come to his conclusions, Singer used databases of MMA fighters to show that from December 2010 through June 2017, UFC’s share of the relevant input market fluctuated between 94 and 99% (using one industry measure) and between 71 and 91% (using another industry measure). UFC attempted to rebut this analysis by raising two points: (1) that Singer’s analysis “pulls from metrics databases that do not include everyone in the sport” and (2) that the analysis fails to consider the ways promoters help fighters develop. Finding UFC’s arguments factually unpersuasive, the court noted Singer utilized the database FightMetric, which is a database business that provides information to third parties about fighters, and correctly only included those who have commercial appeal to promoters, as indicated by their popularity and career prospects. Second, the court found that UFC failed to establish any reliable metric or so called “promoter acumen” to which it could offer to explain how market power was obtained meritoriously (e.g. through innovation or efficiencies). Thus, by statistical analysis, the court held that plaintiffs presented, by a preponderance of evidence, that UFC had anticompetitive market dominance.
Indeed, the court found that the plaintiffs established that UFC willfully engaged in anticompetitive conduct to maintain or increase their market power. Specifically, the court found that UFC: (a) used exclusive contracts with specific provisions to keep fighters “locked up” in an anticompetitive manner, negating their ability to negotiate with rivals; (b) used extracontractual methods—such as controlling the timing of bouts, the pairing of a fighter with opponents, and deciding whether a bout would be televised—to make fighter contracts effectively perpetual; and (c) acquired or drove out rival promoters. This evidence proved antitrust illegality, because UFC “evinced a clear intent to acquire and maintain monopsony power,” and failed to present “sufficient evidence that these exclusionary contracts and coercive tactics [and horizontal acquisition of competitors] were procompetitive or contributed to the overall development of the sport.”
The court was particularly critical of certain provisions in fighters’ contracts that restrict competition. For example, an exclusion clause requires a UFC fighter to fight only for the UFC and not rival MMA promoters. Other clauses that drew the court’s attention include a “right-to-match” clause, which allows the UFC to match a contract from a competitor, an “exclusive negotiation” clause, which supplies the UFC with a 30-to-90-day window to negotiate exclusively, and a “champion’s clause,” which empowers the UFC to unilaterally extend a fighter’s contract twelve months if the fighter becomes a title-holding champion.
Finally, to the third element, the court agreed with plaintiffs that both the “exclusive contracts” and “coercive tactics” used by UFC were commonly applied to all class members. It also agreed with the fighters about the impact of the UFC’s horizontal acquisitions of other promoters, which further limited exit options for fighters. The court found Singer’s expert testimony credible and rejected UFC’s effort to challenge his statistical model.
Ultimately, the court granted class certification, allowing the case to proceed on behalf of a “Bout Class” of current and former UFC fighters who allege that the UFC unlawfully monopolized the market for MMA promotion by, among other things, locking up fighters with exclusive contracts and acquiring its rival promotions, thus eliminating other potential competition organizers who could bid for the fighters’ services and leading to suppressed compensation for the fighters. Notably, the court wrote that for the class to proceed, the claims brought by the former fighters need only be “reasonably coextensive” and not “substantially identical” to other former and current fighters. Because both former and current fighters share the overarching goal of obtaining more compensation, the court decided this shared goal satisfactory for the class to be grouped together. Thus, this certification means both former and current fighters who fought during the class period—December 2010-January 2017—were eligible to receive a portion of damages should the plaintiffs prevail.
As to those rival promoters, the UFC has a long history of buying up its competitors and eliminating other organizations. The court portrayed the UFC as head and shoulders above other MMA promotions in terms of providing fighters a chance to pursue a professional career. The court even noted that with the exception of Bellator, and now the Professional Fighters League, other MMA options for fighters tend to be “small regional outfits” that “consider themselves to be minor leagues” for the UFC, and sometimes even offer “UFC-out” clauses for their regional fighters. Ultimately, the court agreed with plaintiff’s argument and used data provided by their expert witness, which showed that the UFC has near-complete domination in the relevant market of professional MMA fighters.
In rejecting UFC’s arguments to dismiss the case summarily, the Court explicitly found that the plaintiffs had raised genuine factual disputes as to each element of the monopolization claim under Section 2. The court’s reasoning suggested it found plaintiffs’ arguments to be far more persuasive in illustrating how UFC’s specific practices were illegally exclusionary, precluding fighters from pursuing a career in MMA with other promotions. The class certification order marked a key pre-trial win for plaintiffs. With a trial scheduled for April 15, 2024, the parties reached a significant settlement. As this article goes to press, the full details have not been disclosed but public reports indicate that the plaintiffs (and their lawyers) will receive $335 million, reflecting damages incurred by the plaintiffs from under-market compensation because of UFC’s monopsony power.
In the wake of the settlement, there has been little public speculation on whether it includes a remedy to the key antitrust spear in the plaintiff’s arsenal: the use of long-term exclusive contracts to preclude new entry. In competitive markets, long-term contracts can provide stability and security to both parties. As was recognized over fifty years ago in litigation involving a new rival to the National Hockey League, vibrant rivalry requires the possibility that new entrants can compete by signing enough athletes to make their competition viable. If the Department of Justice Antitrust Division had brought the complaint against UFC, they likely would have insisted on a system of staggered multi-year contracts, so that in any given year 25-35% of fighters could opt to join a rival competition. Under the theory that the plaintiffs’ articulated in pre-trial motions, if the only result of this litigation is compensation for victimized fighters, the predicted result is that in a few years a new set of plaintiffs will be back in court and consumers will not benefit from business competition between rival MMA promoters.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
