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How Zuffa’s Purchase of Strikeforce is Not a Monopoly

“Monopoly”.  Lately, that dirty word has been tossed around quite a bit, and almost always to describe the hold Zuffa now has over the marketplace after its purchase of main competitor Strikeforce.  But does such a condition – long considered unfavorable to free trade and made illegal with the Sherman Antitrust Act of 1890 – exist in this case?  The short answer is no.  Not yet, at least.

And now… the long answer.

According to Black’s Law Dictionary (8th edition), a monopoly is “the market condition existing when only one economic entity produces a product or provides a particular service.”  American Jurisprudence (2nd edition, volume 54A), an encyclopedic series of texts on US federal law, further states that “a monopoly is the practical suppression of effective business competition which thereby creates a power to control prices to the public harm.”  However, over a century of case law and legislation has determined that, to exist, a monopoly must possess three components: a single seller, market power wielded by that seller, and high barriers to entry into the marketplace.

Now consider the facts.  Zuffa, with its unstoppable MMA-producing factory (i.e., the UFC), has long dominated the market – just take a look at their pay-per-view and television schedule and count the number of offerings.  But they’ve been far from the only “seller”.  Strikeforce had a strong position in the relevant market, producing national-level shows for a broad audience.  And though it’s been absorbed into the Zuffa fold, others remain, like Bellator, Shark Fights and whatever events are aired on HDNet.  There is no single seller of mixed martial arts.

“Market power” is the ability of a producer to alter the price of its product without fear of losing customers to its competitors.  In this instance, Zuffa is the producer and their events are the product.  While Zuffa may charge close to fifty dollars for a pay-per-view, there’s no arguing that if the cost exceeds what the market is willing to bear, people just won’t buy it.  Unlike an essential good, a UFC on pay-per-view is a luxury that’s easy to forgo.  Plus, there are often cheaper options available.  Whether they be a twenty-dollar Moosin on pay-per-view or a fight show on MTV2, they’re out there.

The last component of a monopoly, “high barriers to entry”, means that there are legal or economic obstacles keeping a potential competitor out of the MMA business.  (Note that it does not mean that there are barriers keeping a promoter from being as successful as Zuffa, only that the barriers prevent competition.)  The continued existence of other MMA organizations (again, like Bellator, Shark Fights, or whatever events are on HDNet), and the fact that new ones continually sprout up, prove that this essential component of a monopoly is not present.

Finally, if attorneys with the Department of Justice (which prosecutes antitrust issues) were to ever consider investigating Zuffa for a potential monopoly, the first speed bump they’d encounter is the federal case of United States v. Syufy Enterprises (1990).  Syufy Enterprises was a successful movie theater “mogul” who in the early 1980s bought up nearly all the movie theaters in Las Vegas.  What remained was one lone competitor, a discount movie theater that ran older films.  The Department of Justice took Syufuy Enterprises to court, claiming that by buying out its competitors it gained monopoly power.  They lost, with the court saying that no barriers to entry existed.

When confronted by allegations of a UFC monopoly in a recent media conference call, Zuffa chairman Lorenzo Fertitta was quick to retort with: “There’s plenty of competition and there’s really no barrier to entry.”  Clearly, when it comes to antitrust law, he’s been doing his homework.

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