Caged Law: UFC vs. The Federal Government The MMA Corner Staff February 1, 2012 News Recently, sports behemoth ESPN aired an expose on the UFC’s business practices. Many legal issues were raised in the nearly 10-minute long segment, including antitrust business practices, fighter wages, a fighters’ union and many more. For those who have not seen the program, it is strongly recommended, for it provides a well-rounded, albeit slightly slanted, tutorial of the business of MMA. Although most would agree the UFC has done more good for the sport than disservice, there is still a sense of discontent with those involved in the MMA community. Some contend the UFC is actually stifling MMA due to squashing the competition one way or another: by purchasing rival organizations, folding rivals, counter-programming television airings, etc. As of yesterday, the Federal Trade Commission (FTC) closed it’s investigation into the Zuffa Inc., (the UFC parent company) purchase of Strikeforce. The investigation was probing whether the UFC violated Section 7 of the Clayton Act addressing business monopolies or section 5 of the Federal Trade Commission Act, which addresses unfair or deceptive business practices. The FTC’s investigation did not conclusively determine any violations and therefore the investigation has currently been concluded. However, the FTC’s official letter did provide a cliffhanger, “[t]he Commission reserves the right to take such further action as the public interest may require.” Althought the FTC has concluded their investigation, it is important to note that they have reserved the right to take further action and additionally, it is important to note, the FTC’s investigatoryscope was limited to the recent Strikforce purchase. Meaning, if further investigations occur, they may delve into other aspects of UFC’s business practices. A thorough analysis, probing whether or not the UFC has committed any antitrust violations in the past or moving forward, would invoke a discussion which would be too long and torturous, similar to watching Ken Shamrock laying on Royce Gracie in the Superfight at UFC 5. Among the dissenters of UFC’s business practices is the boxing industry. Sidebar conversation occurred even prior to the FTC’s investigation, stemming from the boxing industry’s reaction to the fan switch from the “sweet science” to the modern-day gladiator. In the wake of the fan’s exodus from boxing, boxing insiders have been vocal with respect to UFC’s status in the sports and entertainment world, alleging monopolistic practices. It is quite perplexing that the boxing industry, of all people, would be vocal on the UFC’s business practices. The boxing business elite such as Bob Arum and Gary Shaw have publicly stated their displeasure for the UFC and support for the FTC’s investigation. Now, Arum and Shaw clearly have a vested interest in slowing the growth of the UFC so they once again can reclaim a market share had whence ago. Despite their motivation, it is ironic since is was the conduct of players like Arum, Shaw and Don King that led to government oversight of their industry. Seemingly, it is a case of the kettle calling the pot black as the same practices employed by boxing promoters during the sport’s golden years are not too dissimilar to the current business practices of the UFC. Namely, fighter pay, contract standards and medical coverage. UFC’s practices have taken the form of potential antitrust violations (although tempered for now); whereas boxing, never having one hegemonic power, nevertheless came under the government’s scrutinizing eye, resulting in the Muhammad Ali Boxing Reform Act. In general, the Ali Act mandates certain contract requirements and health and safety standards. The federal government’s regulation of the boxing industry begs the question of whether the government could or should seek oversight over the UFC. In the past, the UFC has sought out regulation and often touts such history to present a diplomatic image, willing to work with state and local government entities. The difference that would come with enacting regulation similar to the Ali Act would be the impact on the UFC’s liberty as a private business entity. The UFC’s acceptance, and at times, proactive approach to regulating the sport came with the desire of gaining acceptance as a legitimate sport. Here, the regulatory elements of the Ali Act would drastically change how the UFC would be able to contract with fighters. For instance, the UFC’s status of a private business allows it to withhold certain information that is usually public in professional leagues. Some of the information that is being withheld is fighter pay in the form of revenue sharing and more specifically fighter bonuses. Anonymous UFC fighters have stated that UFC’s discretionary bonus pay structure creates a method of control over the fighters. Under the Ali Act, a promoter must disclose any and all bonuses being paid to a fighter. Moreover, the promotion company must disclose the profits realized from an event. In MMA, no such regulation exists. Many more components of the Ali Act would place restraints on the UFC and its free will as a private business entity. One thing we have learned over the last decade is that the UFC likes to be in top position and ground-and-pound anyone that gets in its way or offers any form of reproach. Perhaps the UFC has met its match in the Federal Government that may seek to keep the fight standing, play on its preferred terms, and extend a far-reaching jab and regulate the company. For now, round one is scored 10 – 9 in favor of the UFC as the FTC has had to retreat to their corner, regroup and take a new approach to the inevitable second round, because this saga is not over. Proving the UFC’s posture is UFC president Dana White’s comments after the investigation results were released, “It what it is. We’re going to do it the way that we do it, the way that we want to do it, no matter who says what, no matter who does what. If the government wants to come in and look inside, take a peek and look around – more than welcome. Many of you have heard stories and all kinds of things. Mark my [expletive] words, right here, right now, today: We’re not going anywhere.” The UFC will continue to grow and if they utilize the same business practices witnessed in their short history, the public and the MMA community’s sentiment will fester evermore. The UFC’s staunch stance and the growing discontent will possibly invoke the ” further action as the public interest may require” referred to in the FTC’s official statement. Next week, we will discuss how the Federal Government has standing to regulate the UFC and why the UFC does not have the exemption status enjoyed by other professional sports leagues, namely the major four: football, basketball, baseball and hockey. Photo: UFC president Dana White (Josh Hedges/Zuffa LLC) This piece was authored by Chase Buzzell. You can find Chase via his LinkedIn Profile.