Credit: Zuffa LLC
The Ultimate Fighting Championship (“UFC”) has once again reached a settlement agreement in an antitrust lawsuit with a group of former fighters. A federal district court judge rejected the UFC’s previous attempt to settle the long running lawsuits, tossing out a $335 million settlement offer agreed to by the parties. Now approved, the new settlement agreement ends a process that began a decade ago with the filing of a lawsuit on the part of three former fighters alleging the UFC held monopsony power on the purchasing and promotion of elite mixed martial arts (“MMA”) fighter’s performances.
The original lawsuit filed in 2014 alleged that the UFC is engaged in an “illegal scheme” which enables the UFC to pay their fighters a fraction of what they would earn in an otherwise competitive marketplace. Further allegations include exclusivity agreements with venues to prevent competition from other MMA promotions, perpetual rights to the names and likenesses of fighters, and the relegation of rival promotions to pseudo-minor league status.
In an effort to alleviate some of these issues and damages from a potential trial, the UFC made several changes to its basic fighter contracts in 2017. These changes included items such as a compromise on the issue of likeness rights, a sunset clause, and the removal of an exclusive negotiating period. The changes led to a second antitrust suit which separated the fighters into groups based on whether they competed in the UFC before the 2017 contract changes (the Le class) or after (the Johnson class).
The UFC drives a hard bargain with its fighters and is no stranger to contract disputes. In a 2023 contract dispute with Francis “The Predator” Ngannou, the reigning heavyweight champion took advantage of the new sunset clause and fought out his contract allowing him to exit the organization. Ngannou stated, “In that contract, I have no rights. I have no power. I hand over all the power to [UFC], and I've seen in the past how [UFC] can utilize that power.”
Judge Boulware’s rejection of the first settlement agreement stems from his belief that the offer was too low in comparison to damages estimated by expert witnesses and concerns that the post-2017 (Johnson) class of fighters lacked adequate representation in the negotiations. Paul Gift, an associate professor of economics at Pepperdine Graziadio Business School, stated, “Boulware seemed to be the only person in the courtroom who thought the plaintiffs’ case was strong. It appears he feels the Le case is too strong to warrant what would’ve ultimately been a net $193.5 million payment to its fighters.” Judge Boulware noted that he had certified damages up to $1 billion and expressed “serious concerns” over the amount of monetary damages going to the Le class of fighters. Plaintiffs’ Attorney Eric Cramer tried to reiterate to Judge Boulware that in his thirty years of practice this offer was the “highest share of single damages in any Section 2 case [he had] ever seen or known about.”
The UFC is not the first major American sports organization to come under antitrust scrutiny. According to the Federal Trade Commission (FTC), the purpose of antitrust legislation is “to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.” Major League Baseball was famously granted an exemption from the Sherman Act, the first of three federal antitrust acts, in Federal Baseball Club v. National League and several subsequent cases that left baseball’s fate to Congress. Other major American sports like football, basketball, and hockey were also granted specific antitrust exemptions in the Sports Broadcasting Act of 1961. There does not seem to be any similar congressional reprieve on the horizon for the UFC’s present case.
Investors recognized the looming threat of a trial and responded positively to the news of the initial settlement offer in March 2023. Upon news of the original $335 million settlement offer, the stock price of UFC’s parent company, TKO, jumped at least 5%. The most recent offer was limited to just the pre-2017 (Le) class of fighters. If it had been rejected again, the UFC would have faced the prospect of trial, where a decade of work could culminate in the UFC potentially owing even more than the $375 million agreed upon.
The approval of the most recent settlement offer is a weight off UFC’s shoulders and could be a windfall for the plaintiffs who have waited ten years for this moment. However, the settlement allowed the UFC to avoid a trial which could have potentially forced the promotion into a more athlete-friendly posture on par with other American sports. The UFC is well on its way to establishing itself as the premier league of worldwide professional MMA. With the conclusion of the former fighter’s lawsuit, UFC will have cleared one more hurdle on the path to total domination of the marketplace.
So, what’s next for the UFC? Will UFC be under fire from more antitrust suits now that it has been able to strike a deal with the former fighters affected by its alleged illegal activity? The next few years will set the precedent for what is to come with the future of the UFC in the antitrust context.
*The views expressed in this article do not represent the views of Santa Clara University.
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