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Text of FTC letter suspending/closing investigation into Zuffa #ufc
By Zach Arnold | January 31, 2012
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Office of the Secretary
January 25, 2012
Stephen Axinn, Esq.
Axinn Veltrop, and Harkrider LLP
1330 Connecticut Ave., NW
Washington, DC 20036
Re: Acquisition of Explosion Entertainment, LLC (Strikeforce) by Zuffa, LLC (UFC)
FTC File No. 111 0136
Dear Mr. Axinn:
The Federal Trade Commission’s Bureau of Competition has been conducting a nonpublic investigation to determine whether Zuffa, LLC’s acquisition of Explosion Entertainment, LLC may violate Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act.
Upon further review of this matter, it now appears that no further action is warranted by the Commission at this time. Accordingly, the investigation has been closed. 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.
By direction of the Commission.
Donald S. Clark
Secretary
Topics: Media, MMA, UFC, Zach Arnold | 18 Comments » | Permalink | Trackback |
And 2 minutes after this letter was released, the following letter was sent out.
Dear Bellator,
Game On.
Sincerely,
DFW
And thats the type of fight that Dana is prepared for.
🙂
Much better.
No surprise there, the only people better at their jobs than Dana and Lorenzo are their lawyers. These people know what they are doing anyone doubting that at this point is just deluding themselves.
It takes a serious leap of idiocy to assume the FTC would ever proceed with some silly “anti trust” issue against UFC. C’mon now. Glad to get official closure so the tinfoil hats will STFU.
Maybe people will stop with the whole “UFC is a monopoly” thing? Too much to ask for probably.
They probably are a monopoly. This was a very overlooked piece by a former FTC antitrust lawyer a few months ago: http://www.bloodyelbow.com/2011/10/25/2513472/how-the-government-will-analyze-the-ufc-strikeforce-merger
To simplify greatly, they’re a monopoly based on the fact that MMA is a distinct market with a distinct fanbase and that Zuffa owns like over 95% of the revenue associated.
HOWEVER HAVING MONOPOLY DOES NOT EQUAL BREAKING ANTITRUST LAW and god people really need to make that distinction. This is why
It would appear the government determined that they aren’t engaging in any “anti-competitive practices” directly as a result of the Strikeforce acquisition (and the Strikeforce buyout is what triggered this). Basically if they aren’t doing anything new to negatively affect employees/fighters or their customers and clients (not just consumers but also advertisers and tv networks), they’re fine. Whether this is true or not I don’t know but I can see why the government would conclude as such. The minimum contracts appear to actually have gone up, and they aren’t doing fewer events, among other things that would constitute anti-competitive practices.
There is no barrier to entry in the MMA world. I could go to a few local gyms tomorrow, find 20 fighters, and put on a MMA card. I would probably lose money, but MMA is one of the easiest sports to enter into.
Not to mention that just on American TV there is Bellator and HDNEt, which houses many promoters from around the world.
And then there are all of the companies over the years who entered the MMA landscape. The IFL, Strikeforce, WFA, Bodog, EliteXC, YAMMA, & more. None of those went out of business because of the UFC. Some of them were purchased by the UFC. But they were going out of business or trying to be sold anyways.
The UFC does it the best. Doesn’t mean they are a monopoly.
As for Strikeforce sale specifically….. The parent company was looking to sell. This wasn’t some hostile takeover with stock. The UFC was just the highest bidder.
I’m not saying UFC did anything wrong.
But the people complaining aren’t saying they literally forced them out of business with hostile takeovers. They’re complaining about stuff like their counter programming against rivals’ shows. Stuff like popping up the Anderson Silva vs James Irvin Spike show out of nowhere to run against the Fedor vs Tim Sylvia PPV. The people complaining are comparing that to Microsoft’s business tactics that got them a monopoly investigation. None of that was found to be illegal, but it’s a little different than saying “They didn’t have blood on their fans from WFA and BoDog.”
“There is no barrier to entry in the MMA world. I could go to a few local gyms tomorrow, find 20 fighters, and put on a MMA card. I would probably lose money, but MMA is one of the easiest sports to enter into.”
Because someone can put together townball league doesn’t mean MLB doesn’t have monopoly. Under almost any legal definition the UFC is a monopoly, “A business or inter-related group of businesses which controls so much of the production or sale of a product or kind of product to control the market, including prices and distribution.”
The UFC dominates something 90-95% of all MMA revenue in North America. They dictate prices and wages with no influence by others in the industry.
The question isn’t is the UFC a monopoly but are they a natural one. If they are a natural monopoly, who have risen solely because they produce a better product than anyone else and not because of uncompetitive tactics, then they are beyond the reach of any antitrust laws.
“There is no barrier to entry in the MMA world. I could go to a few local gyms tomorrow, find 20 fighters, and put on a MMA card. I would probably lose money, but MMA is one of the easiest sports to enter into.”
This right here displays that you have ZERO understanding of the subject matter. You should just move along, because this is hilariously off base along with the rest of your analysis.
Doesn’t stop you from having an opinion on it of course, because what would America be without it allowing someone that had no knowledge of an issue to stand up and spout off their own opinion as decisive fact.
Can people stop acting like the Irvin vs Silva card was some crime against humanity? Counterprogramming happens every second of every day on TV, and every week in the movie theaters, and in every other aspect of the entertainment industry.
Besides all of that, the card with the live counterprogrammed outperformed the card that didn’t have it, so I’m not really sure how it hurt anyone.
nottheface & The Gaijin,
You really missed my point on that one, so I will be more specific. Of course my ability to put on a MMA show has nothing to do with the UFC.
But look at the last 7 year history of MMA. There were no barriers of entry into putting on shows for many start up companies. The WFA, IFL, Bodog, Strikeforce, Affliction, Sengoku, DREAM, Bodog, and many other companies had no problems putting on events. If you have money and want to take a chance, MMA is actually one of the easiest sports to start a new organization with.
So under no legal definition of monopoly will the UFC ever be at risk to the nature of the sport itself.
What it comes down to is that MMA has NEVER been a long term profitable business around the world, with the exception of the UFC. Not in Japan, not in England, not in Brazil, not in Canada, and certainly not in America.
Companies fail at MMA because it’s just something that is extremely hard to sell to the public. Zuffa is the only ones who have figured out the formula to get it right. And all of these organizations failing around them had very little to do with them and everything to do with those companies own pitfalls. Heck, the UFC didn’t even try to counter offer for guys like Sylvia and Arlovski with Affliction. They just knew enough about the business to know they were overreaching and let them fall flat on their faces. Same with Strikeforce. They never overpaid for talent like Strikeforce did. And Strikeforce’s parent company finally had enough and put the company on the market to be sold.
If I own a hotdog stand in a city with 20 other hotdog stands…. And year after year they all go out of business…. Am I a monopoly? Nope. And neither is the UFC.
With that said…. They are now going to f#ck with Bellator in a perfectly legal way. They couldn’t do anything while the FTC investigation was going on. But now that it’s over, it’s going to get real interesting.
Then again, SpikeTV is count programming Bellator this year, so if they fall, let’s blame Viacom on this one….
@45 Huddle
Please stop. You are well outside your depth. Please refer both to the article I originally cited and to FTC Horizontal Merger Guidelines section 5.2 pertaining to Market Share, located here: http://www.ftc.gov/os/2010/08/100819hmg.pdf.
Barrier to entry is not the issue, and actually why yes, with Zuffa having almost every top fighter under contract they have created barriers for entry that did not exist several years ago when all those promotions you listed started up. That is irrelevant though as they have an established monopoly on market share. You missed the point and then accused others of missing your own non-sequitur (and inaccurate) points.
THE UFC INDEED HAS A LEGAL DEFINITION OF A MONOPOLY AS DEFINED BY A FORMER FTC ANTITRUST LAWYER. THAT DOES NOT NECESSARILY EQUAL COMMITTING ANTICOMPETITIVE PRACTICES AND THAT WAS WHAT THEY WERE BEING INVESTIGATED FOR. Do I have to put that in bright bold neon letters for you to get it? How overdefensive of Zuffa can you be? They have a monopoly and that’s actually not illegal if they follow certain guidelines and don’t commit technical abuses of said monopoly.
This is one of the reason why I think Dana White is kind of a genius. He knows what will and will not be talking point issues to the fans and that most of them won’t bother to make distinctions like this. He knows that if he says “we haven’t done anything legally wrong” that it would be accurate, but it would cause a lot of people to jump down his throat anyway so he says “we’re not a monopoly” and most people focus on that instead and it redirects everyone.
And this is from someone who supports most of the things the UFC does.
Patting Zuffa or their lawyers on the back for this is a little much.
To my knowledge no sports league has ever been found to be a monopoly because they all successfully have pointed to the minor leagues and called them competition. So when you’ve got a dozen solid precedents, they didn’t have to break a sweat defending themselves as long as there was one other MMA promoter actively running shows.
Your knowledge is pretty wrong.
MLB is a monopoly, but the Supreme Court allows it. The NFL lost a lawsuit that declared it an illegal monopoly, but nothing happened because the USFL shot itself in the foot, and the players can’t bring up antitrust stuff because of the CBA, just like the other major sports.
This is less clearcut than you might think. The NFL has an exemption under Title 15 that allowed the NFL AFL merger in the first place.
Furthermore, I’m not sure what law suit the NFL lost declaring it to be an “illegal monopoly”–to my knowledge no such suit has ever existed.
In 2010, the SCOTUS held in American Needle Inc. v. NFL that the NFL was *covered* by the Sherman Act sect. 1 (restraint of trade), i.e. the holding was that the NFL’s licenscing action constituted concerted action that was not categorically beyond the coverage of s 1, but NOT that the NFL had violated sect. 1. Moreover, Section 1 deals w/ “restraint of trade” and not w/ monopolization, which is sect. 2. To sum all that up, the NFL lost a suit that would have granted them a sort of exemption from ordinary Antitrust analysis, but the issue of whether they were actually violating the Antitrust Act wasn’t reached–though the SCOTUS hinted heavily that the NFL was fine.
Bottomline as concerns MMA, the UFC almost certainly just fine under current US Antitrust law.
When the USFL sued the NFL the jury said they were an illegal monopoly.
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