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Fighters Win Key Ruling Clearing Way For Legal Bout With TKO Group’s UFC

A legal showdown between Ultimate Fighting Championship and more than 1,200 fighters suing for wage suppression is headed to trial.

A federal judge, in an order issued on Thursday, turned down a bid to dismiss the lawsuit accusing UFC of engaging in an illegal scheme to build and maintain a monopoly by systematically eliminating competition from rival mixed martial arts promoters. U.S. District Judge Richard Boulware pointed to evidence that the company may have “foreclosed a large share of fighters,” especially those who are top-ranked, from the market.

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At the center of the case: Allegations that UFC used longterm, exclusive contracts to substantially delay, or in some cases, totally prevent free-agency; coerced fighters into re-signing deals; and acquired or closed down multiple competing MMA promoters in violation of antitrust laws.

As a result of the alleged scheme, the class action argued UFC wields “monopsony power” — a dynamic in which a single buyer owns a monopoly, allowing it to purchase labor under market value. A pivotal ruling in favor of fighters came down last year when the court certified a class of 1,214 fighters who competed in bouts from 2010 to 2017, though a separate class of plaintiffs whose identities were allegedly exploited by the Dana White-led outfit weren’t allowed to proceed.

A trial expected to last four weeks is expected to start on April 15, with damages pegged at roughly $1.6 billion. Combined with a down market for media rights renewals, the trial may impact business operations by TKO Group — born out of the marriage between UFC and WWE, with the aim of becoming a sports marketing powerhouse. Stephen Glagola, an analyst at TD Cowen, said in a report issued last week that it presents an “underappreciated risk catalyst that warrants investor focus” and an “impediment” to share repurchases in the fourth quarter, though it didn’t account for plaintiffs in December dropping a claim for injunctive relief seeking structural remedies, like a ban on long-term contracts.

TKO has indicated that it doesn’t expect the case to obstruct the repurchasing of shares or implementing a dividend.

In a ruling denying summary judgment for UFC, the court found there’s “no reason to deviate from its prior reasoning and findings” clearing the way for trial. It concluded there’s “direct evidence of market power” showing that UFC may have suppressed wages, rejecting arguments that the company didn’t underpay fighters since the raw numbers for bouts, promotions and compensation increased.

That argument was raised by Apple when it was sued by Epic Games over allegations that it owns a monopoly in the mobile games market. In that case, the U.S. 9th Circuit Court of Appeals explained that prices and outputs steadily increasing doesn’t disprove antitrust claims.

Responding to arguments that UFC didn’t prevent competitors from signing fighters, Boulware cited evidence from plaintiffs that it foreclosed more than 90 percent of fighters and between 91 to 99 percent of top-ranked fighters from entering the market. Among the considerations was multi-bout, exclusive contracts that effectively lock in fighters in perpetuity.

UFC had argued that its practices actually promote competition and are justified by legitimate business concerns, contending that the way it structures its contracts are necessary to allow promoters to invest in fighters. Such deals, it added, encourage promotion and provide the requisite roster of fighters to produce more, higher-quality events. Other defenses included claims that its right-to-match clause with fighters facilitates higher pay and that its mergers with competitors didn’t drive rivals out of the market.

“In the Class Certification Order, the Court reviewed substantially the same arguments and found that Plaintiffs had established Zuffa willingly engaged in anticompetitive conduct to maintain or increase its market power,” wrote Boulware, who noted that there’s “no reason to deviate from its prior reasoning and findings.”

William A. Isaacson, a lawyer representing UFC, said, “The undisputed evidence shows UFC pays its fighters more than any other MMA promotion and has created countless opportunities for athletes to achieve success with UFC or with competing promotions.”

On the $1.6 billion damages estimate, he responded that the figure is based on testimony from plaintiffs’ expert economist Hal Singer, whose “work in this case is flawed in many respects that violate longstanding economic principles and defy basic common sense.”

Allegations that companies under the TKO Group umbrella violates antitrust law aren’t new. In December, WWE settled a suit brought by a rival accusing it of monopolizing the professional wrestling media market. Terms of the deal weren’t disclosed.

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