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The FTC investigation of Zuffa/UFC: The plot thickens like a good reduction
by Mike Olenski on September 01, 2011

The largest hurdle in the expansion of the UFC has been New York State. For years now Dana White, Lorenzo Fertitta, and many others involved have been petitioning for New York to get on board with the growing sport of Mixed Martial Arts.

Despite the massive revenue for the state, and the Unified Rules keeping a check on the brutality, the bill to legalize MMA has been shot down year after year. White has placed the blame on corruption and politics, saying it has nothing to do with the safety of the sport.

"It has nothing to do with Mixed Martial Arts. Of all things it is the Culinary Union that's keeping us out of New York," White said in a radio interview with Boomer and Craig on WFAN. "They're powerful guys here."

You may ask why a culinary union would want to stop MMA from taking place in New York. Well, funny you ask that. The Culinary Union isn't opposed to MMA at all, they are opposed to Zuffa. Zuffa is owned by the Fertitta brothers, the same men who own Station Casinos in Las Vegas. Station Casinos is one of the largest non-union Casinos in the country, and as you would expect, the Culinary Union is not too fond of them.

In the last week or so, rumors of the Federal Trade Commission investigating Zuffa on anti-trust issues have been swirling. It has been confirmed that Zuffa has retained the services of one of the best anti-trust law firms in the country.

The reports coming in are that the buy out of StrikeForce raised flags with the FTC in the realm of collusion. It can be viewed that the largest MMA organization (UFC) merging with the second largest MMA organization (StrikeForce) is putting a strangle hold, or rather a rear-naked choke, on the MMA world.

Now the Culinary Union is throwing their weight around this topic, issuing a letter to the FTC in support of an investigation of the business practices of Zuffa. FiveKnuckles.com gained access to parts of this letter, and here are some excerpts:

Key Complaints:

a) "Automatic renewal" contract provisions such as the "champion's clause," which extends the contract of an athlete who becomes a champion. Such clauses effectively prevent some athletes who sign contracts with Zuffa from becoming free agents and negotiating for higher pay.

b) Exclusive negotiation and "right to match" clauses that lock athletes into negotiating with Zuffa for a period after their contracts have expired. These clauses diminish the ability and incentive of smaller promotions to bid for top mixed martial arts athletes.

c) Merchandise and ancillary rights agreements that require athletes to forfeit their image and likeness rights "in perpetuity," or forever. These far-reaching agreements deprive athletes of the freedom to make money from their own success and further bind them to Zuffa indefinitely.

They expand a little:

These contractual restraints can have the effect of forcing some athletes under contract with the UFC to negotiate with one buyer, depriving them of any real barganing power and depressing pay below competitive levels. The Mixed Martial Arts Fighters Association estimates that professional mixed martial arts athletes received just 5.7 percent of total gate and pay-per-view revenues at five UFC events in 2009 while athletes who compete in other pro sports organiations receive 50 percent or more of revenues.

More on how they feel Zuffa blocks competition:

Professional sports leagues have sought to justify restraints on athlete mobility by arguing that such restraints are necessary to maintain a competitive balance among teams, and thereby maintain spectator interest. In some cases, courts have agreed. In American Needle v. the National Football League, the U.S. Supreme Court ruled that competitive balance is "unquestionably an interest that may well justify a variety of collective decisions made by the teams."

However, Zuffa does not operate as a professional league, and thus cannot justify its restrictive behavior as being necessary to preserve a competitive balance in mixed martial arts. Zuffa is a private limited liability partnership that promotes and produces professional mixed martial arts events for the benefit of its owners. The anticompetitive restrictions it imposes on athlete mobility serve no legitimate business justification beyond stifling competition and increasing Zuffa's already dominant position in the market.

http://www.fiveknuckles.com/mma-news/The-FTC-investigation-of-ZuffaUFC-The-plot-thickens-like-a-good-reduction.html