Culinary Union Encourages Federal Trade Commission To Investigate Zuffa

Representatives of Culinary Workers Union, Local 226 in Las Vegas, Nevada today released a letter sent by their Research Director, Ken Liu, to Richard Feinstein, Director of the Bureau of Competition at the Federal Trade Commission (FTC), encouraging Feinstein to launch an investigation of Zuffa, LLC over alleged anti-competitive business practices. Zuffa is the owner of the Ultimate Fighting Championship (UFC).

The surprising move by the Culinary Union ratchets up the already tense and adversarial relationship it has with members of the UFC brass. While the Union has never publicly acknowledged any role in thwarting the UFC's effort to gain mixed martial arts sanctioning in the state of New York, UFC President Dana White has stated publicly numerous times their lobbying and advocacy to key lawmakers in New York is the only impediment to sanctioning.

In addition to suggested involvement by the Culinary Union in MMA sanctioning efforts in New York, the Union is currently at odds with Station Casinos over alleged unfair employee treatment and the inability to unionize its workforce. Station Casinos' largest shareholders are Frank and Lorenzo Fertitta, also co-owners of the UFC.

Within the FTC, the Bureau of Competition "champions the rights of American consumers by promoting and protecting free and vigorous competition" and is tasked with:

• reviews mergers and acquisitions, and challenges those that would likely lead to higher prices, fewer choices, or less innovation;
• seeks out and challenges anticompetitive conduct in the marketplace, including monopolization and agreements between competitors;
• promotes competition in industries where consumer impact is high, such as health care, real estate, oil & gas, technology, and consumer goods;
• provides information, and holds conferences and workshops, for consumers, businesses, and policy makers on competition issues and market analysis.

A copy of the letter (which can be downloaded here: Culinary Union letter), suggests the following alleged business practices by Zuffa are at issue:

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.

The letter also suggests whereas other sports leagues "justify restraints on athlete mobility by arguing that such restraints are necessary to maintain a competitive balance among teams, and thereby maintain spectator interest", "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". Liu argues 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".

White and Fertitta have maintained Zuffa and the UFC are not a monopoly, telling USA TODAY in June the marketplace is open for other promoters and there are no barriers to entry:

People always say "monopoly." The people who say that don't know enough about the sport. … If you go state to state and called the athletic commission in every state where we're sanctioned and ask them how many MMA events were held there this year and how many times did the UFC come, the answer is going to be once or zero. We're not a monopoly. We're just the best. We do what we do the best.

MMA Nation has reached out to UFC officials for comment. Zuffa officials declined comment at this time.

More on this story as it develops.