Hal Singer Report With Zuffa Proposed Redactions
Hal Singer Report With Zuffa Proposed Redactions
Hal Singer Report With Zuffa Proposed Redactions
Exhibit 2
Expert Report of Hal J. Singer,
Ph.D. (August 31, 2017), with
Zuffa’s Proposed Redactions
Case 2:15-cv-01045-RFB-BNW Document 675-4 Filed 06/28/19 Page 2 of 233
Qualifications ................................................................................................................................ 11
I. Industry Background......................................................................................................... 13
A. The MMA Industry ............................................................................................... 13
B. Academic Literature on MMA.............................................................................. 19
C. Forms of Fighter Compensation Paid by Zuffa to Members of the Bout Class ... 21
1. Show and Win Purses ............................................................................... 21
2. Discretionary and Performance Pay.......................................................... 22
3. PPV Royalties ........................................................................................... 23
4. Letters of Agreement ................................................................................ 23
D. Forms of Fighter Compensation Paid by Zuffa to the Identity Class ................... 24
Plaintiffs in this case are MMA fighters (“Fighters”), and include Cung Le, Nathan Quarry, Jon
Fitch, Brandon Vera, Luis Javier Vazquez, and Kyle Kingsbury. 1 Plaintiffs allege that Defendant
implemented an anticompetitive scheme to acquire, maintain, and enhance its monopoly power in
1. I interviewed named plaintiffs Cung Le, Nate Quarry, and Javier Vazquez on May 23, 2017. On June 2, 2017,
I interviewed named plaintiffs Jon Fitch and Kyle Kingsbury.
the market for promoting professional MMA bouts (the “Relevant Output Market”), and its
monopsony power over the Fighters appearing in those bouts (the “Relevant Input Market”). 2 I
have measured the Relevant Input Market using two industry-accepted databases: (1) MMA
Fighters who are tracked by FightMetrics (the “Tracked” Relevant Input Market); and (2) MMA
Fighters who are ranked by FightMatrix (the “Ranked” Relevant Input Market). I also have defined
a relevant input submarket consisting of all Fighters ranked one through fifteen in any of the major
MMA weight classes (the “Relevant Input Submarket,” or “Headliners”), using industry-accepted
2. Plaintiffs allege that Zuffa’s anticompetitive scheme has foreclosed potential rival
MMA promoters and impaired their ability to compete with Zuffa in the promotion of professional
live MMA Events (“Live MMA Events”). Specifically, Zuffa is alleged to have: (1) eliminated
potential rival MMA promoters through horizontal acquisitions; (2) deprived potential rivals of
key inputs (the Fighters themselves) by entering into allegedly exclusionary contracts with the vast
majority of top Fighters; and, (3) taken other steps to use its alleged dominance to impair potential
rivals. 3 Plaintiffs allege that these actions, taken together (the “Challenged Conduct”), have
enabled Zuffa to harm competition in the Relevant Output and Input Markets, 4 thereby
maintaining and enhancing Zuffa’s monopoly and monopsony power, causing anticompetitive
effects, and resulting in antitrust injury to Plaintiffs and members of the two classes defined
below. 5
2. United States District Court District of Nevada, Cung Le, et al. v. Zuffa, LLC, d/b/a Ultimate Fighting
Championship and UFC, 2:15-cv-01045-RFB-(PAL), Consolidated and Amended Antitrust Class Action Complaint
(Dec. 18, 2015) [hereafter, CAC].
3. Id. ¶1; Part VII.A.
4. Id. Part VII.B.
5. Id. Parts VII.C-VII.D.
All persons who competed in one or more live professional UFC-promoted MMA bouts
taking place or broadcast in the United States during the Class Period. The Bout Class
excludes all persons who are not residents or citizens of the United States unless the UFC
paid such persons for competing in a bout fought in the United States. 6
Each and every UFC Fighter whose Identity was expropriated or exploited by the UFC,
including in UFC Licensed Merchandise and/or UFC Promotional Materials, during the
Class Period in the United States. 7
Plaintiffs define the “Identity of a UFC Fighter” as “the name, sobriquet [nickname], voice,
persona, signature, likeness and/or biographical information of a UFC Fighter.” 8 Plaintiffs have
defined the “Class Period” as beginning December 16, 2010, and continuing until the Challenged
Conduct ceases. 9 Plaintiffs claim that through the Challenged Conduct, Zuffa has injured members
6. Id. ¶39. I have been instructed by Class Counsel to interpret the phrase “a bout fought in the United States,”
as used in the Bout Class definition, to mean any fight taking place within the United States or broadcast live (with or
without a tape delay) into the United States. Given that all of the bouts in the data I am using to assess foreclosure,
impact, and damages either took place within the United States or were broadcast live in the United States (albeit some
with slight tape delay), I did not need to exclude any fighter from the Bout Class, nor did I need to remove data
reflecting any potential non-qualifying bouts in assessing impact or damages. If, however, the class definition were
interpreted to be limited only to those class members who fought in a bout that physically took place within the United
States during the Class Period (regardless of whether or not it was broadcast live into the United States), 12.7 percent
of the Bout Class members would be excluded (154 out of 1,214 Fighters). These 154 Fighters account for 1.5 percent
of the aggregate Bout Class damages. Additionally, 33.1 percent of all Bout Class damages are associated with bouts
fought outside the United States (but which were broadcast live into the United States).
7. Id. ¶47. Consistent with the definition of the Bout Class, I limit my analysis to Fighters participating in one or
more Zuffa Live MMA Events broadcast in the United States during the Class Period. This includes numbered UFC
pay-per-view events (for example, “UFC 196: McGregor vs. Diaz,”) as well as non-pay-per-view UFC events (for
example, “FOX 7: Henderson vs. Melendez”). Events are considered live if broadcast either in real time or with a tape
delay for events held in foreign time zones. (For example, UFC 138, held in the United Kingdom, was tape delayed for
US audiences. See http://www.mmaweekly.com/ufc-138-tv-ratings-match-past-tape-delays). I do not include taped
bouts from The Ultimate Fighter (“TUF”), Zuffa’s reality-TV show; however, TUF finales, which are live, are
included (for example, “TUF 21 Finale: Thompson vs. Ellenberger”). Finally, Live MMA Events by acquired
promoters (such as Strikeforce), in which Fighters received compensation from Zuffa, are also included. See ZFL-
2603701
8. CAC ¶27.
9. Id. I understand Plaintiffs claim that the Challenged Conduct is ongoing.
of the Bout and Identity Classes by compensating them for bouts and Identity rights, respectively,
below levels that would have prevailed in the absence of the Challenged Conduct. 10
4. I have been asked by counsel for Plaintiffs to determine whether Zuffa possessed
monopoly or monopsony power (or both), and, to the extent necessary or helpful to make such
determinations, to define one or more relevant antitrust markets (along both product and
geographic dimensions) for assessing the claims in this case. I have also been asked to assess
whether the Challenged Conduct foreclosed competition and generated anticompetitive effects. I
have also been asked to determine whether the Challenged Conduct: (1) caused members of each
Class to be compensated below levels that would have prevailed in the absence of the Challenged
Conduct; and (2) caused injury in the form of under-compensation that was widespread across
members of each Class (that is, to assess whether the Challenged Conduct generated a “common
impact” on each Class). Next, I have been asked to calculate the aggregate amount of
undercompensation to members of each Class attributable to the Challenged Conduct. I was also
asked to review and assess potential procompetitive justifications for the Challenged Conduct that
Zuffa, or economists acting on its behalf, have asserted in other fora, including in proceedings
before the Federal Trade Commission (FTC). Finally, for each prong of my analysis, I was asked
to determine whether addressing it would involve methods and/or evidence common to Class
Members (as opposed to evidence or methods that would vary from one Class Member to another).
10. Id. ¶21. I estimate that, as of June 30, 2017, there are 1,214 Fighters in the Bout Class and at least as many
Fighters in the Identity Class. As explained in Part V, infra, my analysis of the Identity Class focuses on two
subgroups. The first of these subgroups consists of Fighters who received positive, nonzero compensation from Zuffa
in exchange for use of their Identities during the Class Period. There are at least 826 Fighters in this first subgroup.
The second subgroup consists of Fighters who executed a Promotional and Ancillary Rights Agreement with Zuffa
during the Class Period. There are at least 791 Fighters in this subgroup. There is substantial overlap between these
two subgroups. Approximately 64 percent of the members of the first subgroup are also members of the second
subgroup, and approximately 67 percent of the members of the second subgroup are also members of the first
subgroup.
SUMMARY OF CONCLUSIONS
time. I reserve the right to supplement my opinions in the event that new evidence becomes
available.
• Zuffa has had significant monopoly and monopsony power at least since the
beginning of, and extending throughout, the Class Period, and is widely recognized
as the dominant promoter of professional Live MMA Events.
• At least since the beginning of, and extending throughout, the Class Period, Zuffa’s
Fighters have accounted for a large share in the Relevant Input Market (under both
of my measurements) and Relevant Input Submarket, indicating Zuffa’s monopsony
(buying) power. Zuffa has also accounted for a large and dominant share in the
Relevant Output Market at least since the beginning of, and extending throughout,
the Class Period, indicating its monopoly (selling) power. Rival MMA promoters
face substantial barriers to entry and expansion in the Relevant Output Market, due
in part to the Challenged Conduct, including Zuffa’s staggered, long-term exclusive
contracts with Fighters. At least since the beginning of, and extending throughout,
the Class Period, Zuffa has had no close competitors in the Relevant Output Market
or in the Relevant Input Market or Submarket.
• The Challenged Conduct fits within the standard economic framework of Raising
Rivals’ Costs (“RRC”). 11 Under the RRC framework, a dominant firm engages in
11. Steven C. Salop, The Raising Rivals’ Cost Foreclosure Paradigm, Conditional Pricing Practices and the
Flawed Incremental Price-Cost Test, 81(2) ANTITRUST L.J. 371-421, 376 (2017) (“The RRC foreclosure paradigm
generally describes exclusionary conduct that totally or partially ‘forecloses’ competitors from access either to critical
• Access to a broad stable of MMA Fighters from the Relevant Input Market and
Submarket is a critical input necessary to stage successful Live MMA Events in the
Relevant Output Market. The Challenged Conduct ensured that Zuffa’s would-be
rivals lacked access to this critical input. Zuffa leveraged its staggered, exclusive
contracts with Fighters to make its exclusionary provisions effectively perpetual for
Fighters that Zuffa wished to retain.
• At least since the beginning of, and throughout, the Class Period, as a result of the
Challenged Conduct, Zuffa foreclosed high shares of the Relevant Input Market
(under both measurements) and Submarket, and MMA promoters were unable to
compete effectively with Zuffa. Lacking access to a critical input (top MMA
Fighters), the Challenged Conduct prevented non-Zuffa MMA promoters from
staging successful Live MMA Events that could compete on the level of the UFC,
and substantially constrained the ability of other MMA promoters from offering
competitive compensation or promising career paths to top MMA Fighters.
inputs or customers, with the effect of causing them to raise their prices or reduce their output, thereby allowing the
excluding firm to profit by setting a supra-competitive output price, with the effect of harming consumers.”).
12. Id.
13. Id.
members of both Classes that Zuffa possessed significant market power, and I demonstrate with
classwide evidence that the Challenged Conduct substantially foreclosed competition and
generated anticompetitive effects. In Parts IV and V, I show, using classwide evidence, that the
harm flowing from the Challenged Conduct was widespread across members of both proposed
Classes and thus can be said to have caused common impact across each Class. In Part VI, I
calculate, using classwide evidence and methods, aggregate damages to members of each Class. In
Part VII, I review efficiency defenses of the Challenged Conduct that Zuffa has put forth in prior
proceedings, and I explain (based on classwide evidence and analyses) why these claims do not
undermine my findings.
7. The opinions expressed in this report reflect my review of evidence, data, testimony
and other relevant materials to date. I reserve the right to supplement or amend my opinions should
QUALIFICATIONS
University’s Institute for Public Policy, and I have served an Adjunct Professor at Georgetown
University’s McDonough School of Business (where I have taught Advanced Pricing to MBA
candidates).
Economics, and before that, I was Chief Executive Officer of Empiris, a litigation and regulatory
10. I am the co-author of the e-book The Need for Speed (Brookings Press 2013), and
the book Broadband in Europe (Springer Press 2005). My articles, several of which pertain to
exclusive dealing, 14 have appeared in dozens of legal and economic journals, as well as economic
textbooks.
11. I have testified before Congress on the interplay between antitrust and sector-
specific regulation. My scholarship and testimony have been widely cited by courts and regulatory
agencies. In agency reports and orders, my writings have been cited by the Federal
Communications Commission, the Federal Trade Commission, and the Department of Justice. I
merger in the television industry. My economic practice has been recognized by the American
Antitrust Institute, and I have been a frequent speaker and author for ABA Antitrust Section events
Administrative Law Judge pursuant to section 616 of the Cable Act) on behalf of independent
cable sports networks: MASN (the network of the Baltimore Orioles and Washington Nationals),
NFL Network, and Tennis Channel. I also served as an expert for the National Football League in
(and continue to serve) as a valuation expert for the Baltimore Orioles in their ongoing revenue-
division dispute with the Washington Nationals, arbitrated by Major League Baseball.
13. I earned M.A. and Ph.D. degrees in economics from the Johns Hopkins University
14. See, e.g., Kevin Caves, Chris Holt & Hal Singer, Vertical Integration in Multichannel Television Markets: A
Study of Regional Sports Networks, 12(1) REV. NETWORK ECON. (2013); Kevin Caves & Hal Singer, Assessing
Bundled and Share-Based Loyalty Rebates: Application to the Pharmaceutical Industry, 8(4) J. COMPETITION L. &
ECON. (2012); Kevin Caves & Hal Singer, Analyzing High-Tech Employee: The Dos and Don’ts of Proving (and
Disproving) Classwide Antitrust Impact in Wage Suppression Cases,” ANTITRUST SOURCE (2015).
outcome of this case. I am being compensated for my work in this case at the rate of $695 per
hour. A list of the materials upon which I relied in forming my opinions for this report is provided
in the Appendix.
I. INDUSTRY BACKGROUND
15. In this section, I provide a brief summary of the MMA industry, the related
academic literature, and the forms of compensation that Class Members receive from Zuffa.
16. MMA is a term for the modern-day, full-contact competitive sport that mimics
unarmed combat between two individual Fighters. MMA blends different combat styles,
incorporating the most effective striking, wrestling, and disabling maneuvers from other stand-
alone martial arts such as boxing, kickboxing, judo, and wrestling, into a single contest of physical
supremacy. With its origins in the “no-holds-barred” scoreless competition of fighting until
cockfighting” 15 into a popular competitive sport with its own rules and scoring systems. 16
17. Similar in many ways to boxing, modern MMA fights (or “bouts”) between
competitors are timed rounds in which opponents attempt to disable their opponents. A bout can be
won by either knocking out an opponent via striking the head, or by forcing the opponent to submit
(“tap out”) via a wrestling hold or lock that causes extreme pain. In the event neither Fighter has
15. Robert J. Szczerba, Mixed Martial Arts and the Evolution of John McCain, FORBES, Apr. 3, 2014, available
at http://www.forbes.com/sites/robertszczerba/2014/04/03/mixed-martial-arts-and-the-evolution-of-john-
mccain/#27d42ac91a3b.
16. Trevor Collier, Andrew L. Johnson & John Ruggiero, Aggression in Mixed Martial Arts: An Analysis of the
Likelihood of Winning a Decision, in VIOLENCE AND AGGRESSION IN SPORTING CONTESTS: ECONOMICS, HISTORY AND
POLICY SPORTS ECONOMICS, MANAGEMENT AND POLICY 4 (R. Todd Jewell, ed. Springer Science + Business Media
2011) [hereafter Aggression in MMA].
capitulated by the end of the last round, the winner is determined by a scoring system employed by
judges. 17 Today, Fighters are divided into ten major weight classes. 18 The top Fighter of each
division is awarded a championship belt. In a title fight, a challenger is matched against the
promoter specific: The UFC awards championship belts to Fighters within its own organization,
and there are no independent sanctioning organizations that declare champions or regulate the rules
as to who is declared a champion. To date, the UFC has never cross-promoted a Live MMA Event
in conjunction with another MMA promotion. 21 However, there exist third-party ranking systems,
often relied upon by MMA promotions and the MMA press, that rank all MMA Fighters (across
different MMA promoters) relative to one another, both within weight classes and on an overall
“pound-for-pound” basis. 22
18. State athletic commissions determine rules for Live MMA Events (weight divisions,
fouls, equipment, etc.), and sanction each bout of a Live MMA Event individually. 23 Athletic
commissions operate independently, sanctioning bouts under differing sets of criteria. 24 Generally,
athletic commissions are primarily concerned with Fighter safety, considering factors such as
matched Fighter’s relative experience level and quality. 25 As of 2009, athletic commissions
typically adopted the Unified Rules of Mixed Martial Arts when sanctioning events. 26
19. Live MMA Events are produced by promoters such as the UFC, which plan and
execute MMA bouts for commercial entertainment. Live MMA Events are multi-hour productions
consisting of a series of bouts between pre-matched Fighters. Unlike in boxing, which frequently
pits two boxers from competing promoters against each other, all participants in a given Live
MMA Event are typically affiliated with the same promoter. 27 This series of bouts (the “Fight
Card”) occurs sequentially from the bottom, with the most anticipated fight of the night generally
20. MMA promoters rely on high-profile, highly-ranked Fighters at the Top of the Card
to draw audiences to Live MMA Events. 28 A Live MMA Event that lacked these key inputs would
have difficulty drawing an audience, television distributors, and advertisers. 29 Fighting at the Top
of the Card is the primary career objective for an MMA Fighter. Thus, the most successful Fighters
accumulate enough wins with the goal of being matched against other prominent Fighters, and
eventually a chance at winning a championship belt and obtaining a top ranking. 30 Of course, most
Fighters do not become champions or fight at the Top of the Card. The median career length for an
21. Zuffa assumes responsibility for the costs of the event’s production, including
paying Fighters, whom it treats as independent contractors. In the UFC, Fighter pay is dependent
on, among other things, a Fighter’s performance, with Fighters typically receiving a predetermined
“show” amount to participate in a bout, and a “win” payment if the Fighter is declared the victor.
Show and win payments are typically the same amount; winning a bout typically doubles a
Fighter’s base pay. 32 UFC Fighters may also receive discretionary, performance-based bonuses; in
limited cases, certain top-tier Fighters (such as defending champions) may also receive a share of
the total revenues generated by the event, usually via a share of Pay-Per-View (“PPV”) revenue. 33
MMA Fighters are generally tethered to Zuffa by contract for a time period (which, as discussed
below, is often expanded by Zuffa by invoking certain contractual provisions designed to lock
Fighters in as well as through other tactics) as well as for a specified number of bouts (“multi-bout
contracts”); during this period (which can be indefinite in the case of retirement or extended
29. Id. See also WME_ZUFFA_00031950-60 (“History tells us that for a pay-per-view to do big numbers, it
needs marquee names… sales estimates from the last nine years make it clear that it’s the name at the top of the card
that sells pay-per-views.”).
30. Deposition of Jon Fitch, February 15, 2017, at 112:7 – 112:9 (“Fighters fight for titles. The most coveted title
is the UFC title.”).
31. See II.C.2, infra.
32. See Part I.C, infra.
33. See Part I.C, infra.
2016 for approximately $4 billion. 40 Many of the key innovations that accompanied MMA’s
evolution from its “no holds barred” origins into mainstream acceptance were developed before
Zuffa purchased the UFC: Record evidence indicates that key rules and regulations, the use of
appropriate gloves, timed rounds, weight classes—even the use of the octagonal ring—predate
24. Prior to its sale to WME-IMG, Zuffa was privately owned and operated by a small
group of individuals, initially consisting of Frank and Lorenzo Fertitta, who each held 45 percent
equity in the venture, and Dana White, who owned the remaining 10 percent. Lorenzo Fertitta
functioned as UFC’s CEO with Dana White as President. Other Zuffa executives included Joe
Silva, who served as chief matchmaker (until his retirement at the end of 2016), Kirk Hendrick,
Zuffa’s Chief Legal Officer, Ike Lawrence Epstein, Zuffa’s Chief Operating Officer and John
Mulkey, Zuffa’s Chief Financial Officer. 42 According to Lorenzo Fertitta, Zuffa generated over
$600 million in revenue in 2015. 43 As explained in Part III.A.5, Zuffa’s market share in the
Relevant Output Market has been approximately 90 percent by revenue since at least 2008. Zuffa’s
40. See Darren Rovell & Brett Okamoto, Dana White on $4 billion UFC sale: ‘Sport is going to the next level,
ESPN, July 11, 2016, available at: http://www.espn.com/mma/story/ /id/16970360/ufc-sold-unprecedented-4-billion-
dana-white-confirms.
41. Deposition of Joseph Silva, June 7, 2017 at 83:22-84:2 (“Q. What I’m trying to get at is the basic idea for the
sport and the octagon and the early rule book, those were all in existence prior to Zuffa’s purchase of the UFC; is that
right? A. That’s correct.”); id. at 79:17-84:2 (Silva describes the iterative process he and others used in developing the
rules and regulations in force between 1994 and 2001).
42. See Hendrick 30(b)(6) Tr. at 15:3-13 (describing executive structure); Deposition of John Mulkey, April 19,
2017, at 11:22-12:6 (describing his role); Deposition of Ike Lawrence Epstein pursuant to Rule 30(b)(6) V.I, Dec. 2,
2016 at 10:10-21 (same); Silva Dep. at 15:3-5 (stating he retired at the end of 2016). See also ZUF-00096950;
Deposition of Joseph Silva, June 7, 2017, at 76:22-84:2. See also ZFL-0000113 at 20; ZFL-0000136 at 24.
43. Jesse Holland, Lorenzo Fertitta: UFC will generate record-high $600 million revenue for 2015, MMA
MANIA, Dec. 28, 2015, available at http://www.mmamania.com/2015/12/28/10675158/lorenzo-fertitta-ufc-will-
generate-record-high-600-million-revenue-2015-mma; see also ZFL-1514966 (showing revenues through November
2015 of $542 million).
dominant position in the promotion of professional Live MMA Events is widely recognized around
the world. 44
25. In a book chapter published in 2011, economist Trevor Collier and his co-authors
provide an overview of the MMA industry, and analyze the factors influencing the likelihood of a
Fighter winning a bout by decision (as opposed to winning by knockout, TKO, or submission) in
the UFC. 45 Using data on individual fights from FightMetric, the official statistics provider for the
UFC, 46 the authors find that knockdowns and damage inflicted have the largest marginal effect of
influencing judges’ decisions. 47 The authors analyze only UFC bouts while ignoring other MMA
promoters; they note that the UFC is “the largest and most successful organization within the
industry.” 48
26. In a 2014 working paper, economist Paul Gift models round-by-round scoring
performance characteristics, to test for certain behavioral biases among MMA judges. 49 The author
analyzes “all UFC, WEC, and Strikeforce events promoted under the Zuffa banner” 50 between
44. See Part III.A.8, infra. See also ZUF-00162329-382 at 382 (“…the UFC holds the dominant market position
within the sport and continues to do so even as a highly fragmented group of competitors have entered the market in an
attempt to emulate UFC’s success”). See also Matthew Miller, Ultimate Cash Machine, FORBES, Apr. 17, 2008,
available at https://www.forbes.com/forbes/2008/0505/080 html.
45. Aggression in MMA, supra.
46. See http://www fightmetric.com/.
47. Aggression in MMA, supra, at 97.
48. Id.
49. Paul Gift, “Performance Evaluation and Favoritism: Evidence from Mixed Martial Arts,” Pepperdine
University Working Paper (2014), available at http://www.fightmetric.com/company.
50. Id. at 7.
September 28, 2001 and November 17, 2012 in Nevada and California. 51 His results provide
evidence of bias towards heavy favorites and the Fighter who won the previous round. 52
27. In a 2012 master’s thesis, Jeremiah Johnson correlates win/loss outcomes of MMA
bouts using fight statistics from FightMetric. 53 The author’s data set includes “every UFC event, as
well as every event from other prominent promoters and events deemed to be significant.” 54
Johnson finds that the count of knockdowns, takedowns, positional advances, and submission
attempts are all positively and significantly correlated with a Fighter winning a bout, while a count
28. In a 2015 article published in the Journal of Business and Economics, Richard
McGowan and John Mahon estimate an econometric model analyzing the determinants of PPV
buy rates for UFC events. 56 The authors’ data set encompasses 105 UFC PPV events, beginning
with UFC 57 in February 2006 and ending with UFC 170 in February 2014. 57 Based on their
The results of our study are not good news for the UFC as a company. The most important
takeaway is that the identities of the fighters competing matter more than any title they
would be competing for. Thus, when it comes to generating abnormally high PPV buy
rates, the fighter has more drawing power than the brand. This conclusion could be used as
an argument for fighters to get a larger percentage of the PPV revenue, since the fighters
themselves, not the UFC titles, are what truly drive PPV buy rates. 58
51. Id.
52. Id. at 1.
53. Jeremiah Douglas Johnson, Predicting Outcomes Of Mixed Martial Arts Fights With Novel Fight Variables,
Thesis Submitted to the Graduate Faculty of the University of Georgia in Partial Fulfillment of the Requirements for
the Degree Master Of Science (2012), available at https://getd.libs.uga.edu/pdfs/johnson jeremiah d 201208 ms.pdf
54. Id. at 6.
55. Id. at 23.
56. Richard McGowan and John Mahon, Demand for the Ultimate Fighting Championship: An Econometric
Analysis of PPV Buy Rates 6(6) J. BUS. & ECON. 1032-1056 (2015) [hereafter “McGowan & Mahon”].
57. Id. at 1042.
58. Id. at 1047. See also 1046 (“For example, while Georges St. Pierre welterweight champion of the UFC, the
welterweight title had a hugely positive coefficient. However, the coefficient’s value was such not because of the
importance of the welterweight belt, but because of the drawing power of St. Pierre. After the addition of the fighter
ID control variables, only the heavyweight title still has a statistically significant positive coefficient in both Model 1
additional “win” purse is also awarded if the Fighter is declared the winner of his or her bout.
. 62
31. Zuffa sometimes awards discretionary and performance pay following a fight
deemed crowd-pleasing by Zuffa. These include bonuses for the “Fight of the Night,” exceptional
“Performance,” the “KO [Knockout] of the Night,” and the “Submission of the Night.” 63 These
payments are awarded based on a subjective evaluation of various factors. Sean Shelby, one of
UFC’s two “Talent Relations” employees 64 responsible for matching Fighters and lining up the
card (or “matchmakers”) explains that in awarding discretionary pay, “[t]here is a bit of a grey
area, but simply, the more spectacular, higher level of difficulty, and the higher level of
competition and stakes all factor in.” 65 Because Zuffa is not contractually bound to make any such
payments, Zuffa Fighters cannot be certain as to whether they will receive any such compensation
62. ZFL-0000003. See also Deposition of Lorenzo Fertitta, March 23, 2017 at 174:20-179:10; Deposition of Sean
Shelby, April 12, 2017 at 208:9-209:17 (describing to the standard “show and win money” structure); Silva Dep. at
32:16-18 & 262:12-17 (same).
63. ZFL-0000003. See also Fertitta Tr. 175:5-15.
64. See ZUF-00096950.
65. ZUF-00140700 (“Fight of The Night, KO of The Night, & Sub of The Night Bonuses are mostly based on the
level of competition and difficulty of technique. If a prelim has a great fight but the main event is a great fight too, it
will almost always go to the main event where more is on the line. If a guy gets a win with a guillotine but another
wins by a flying triangle, it will go to the guy with the flying triangle. If a guy subs someone who has never been
subbed before and has incredible submission defense, that counts as well. There is a bit of a grey area, but simply, the
more spectacular, higher level of difficulty, and the higher level of competition and stakes all factor in. What can’t get
lost through is this is something that is merely extra. It’s Zuffa going above and beyond and is not contractually
obligated to do this.”).
66. Id.; see also Fertitta Tr. 180:19-22.
sponsor” of the UFC, Zuffa would negotiate with individual Fighters on that sponsor’s behalf and
would make payments to Fighters for services performed on behalf of a particular sponsor. 83 These
services included wearing the sponsor’s logo in the Octagon and making other appearances on
36. Some Fighters received compensation for their appearance in UFC-branded video
games. 85 In September 2006 86 and June 2012, 87 respectively, Zuffa entered into agreements with
two game publishers (THQ and Electronic Arts) to develop five video games featuring named
Fighters from 2006 to the present. Of these, Zuffa provided specific payment data for three: UFC
2009 Undisputed, UFC 2010 Undisputed, and UFC Undisputed 3 (2012). Two more video games,
EA Sports UFC and EA Sports UFC 2, were produced in 2014 and 2016, respectively. 88 Finally,
beginning in June 2009, 89 Zuffa began selling trading cards containing Fighters’ likenesses without
82. Batchvarova Dep. at 32:5-34:20 (“[W]e came up with the methodology which is currently actually employed
which is assigning by tenure, which is objective.”).
83. 30(b)(6) Deposition of Michael Mossholder (December 1, 2016) at 143:19-146:121 (“Mossholder Dep.”). See
also id. Exhibit 36-A at 29 (“Some sponsors prefer to deal only with Zuffa and have them handle all payments, even to
athletes.”). This was the arrangement Zuffa had with certain large sponsors such as Anheuser Busch. The identity
“assets” that Zuffa licensed on behalf of Fighters include “their individual IP, their ability to do appearances,
production days, use of their individual social media, use of their individual digital, their fighter kits.” Id. at 156:12-16.
84. Id.
85. ZFL-1023959.
86. ZFL-0871571.
87. ZFL-1394078.
88. See ZFL-0000259 and the list of UFC branded video games, available at
https://www.giantbomb.com/ufc/3025-248/games/
89. ZFL-1825387 at row 123 of the Merchandise Licensing Tab. The Topps Trading Card Company Term is
listed as “6/5/08 - 5/1/2011 extended to 5/1/16.”
having merchandise rights agreements in place with each Fighter. It sought out separate
37.
. 91
38. In this section, I describe the Challenged Conduct. I begin by classifying the
Challenged Conduct according to its “horizontal” and “vertical” aspects, based on whether the
conduct involved other MMA promoters (horizontal) or whether the conduct involved MMA
“inputs” such as Fighters (vertical). I then explain how the Challenged Conduct served to initiate,
renew, and extend Fighter contracts, making Zuffa’s exclusionary provisions effectively perpetual
(or nearly so) for the vast majority of Fighters, especially in relation to Fighters’ relatively short
careers.
39. Economists and antitrust practitioners recognize that horizontal and vertical conduct
can have anticompetitive effects when undertaken by a firm with significant market power, and the
effects of each form of conduct can and often do amplify the other. In Parts III.A and III.B, I
demonstrate that Zuffa does possess significant monopoly and monopsony power in the Relevant
Output and Input Markets, respectively. In Parts III.C and III.D, I demonstrate that the Challenged
90. See ZFL-2536392 (August 13, 2012 email from Tracy Long notes: “Wow, that is a lot [of fighters missing
merchandize rights agreements.] How did we let it get to so many? I didn’t realize we did not have one for Cung Le.”).
91. See ZFL-2603704 (showing that 151 Fighters received sponsorship payments, 231 received video game
payments, and 333 received merchandise royalties). For counts of total Fighters, see ZFL-0000003; ZFL-2603701.
40. Since buying the UFC in 2001, Zuffa has acquired five MMA promoters.
Horizontal aspects of the Challenged Conduct include these horizontal acquisitions, as well as
Zuffa’s counter-programming of other Live MMA Events, and Zuffa’s agreements, including non-
compete agreements, with other MMA promoters. Economists and antitrust practitioners recognize
that horizontal acquisitions can have anticompetitive effects whenever they lessen actual or
potential competition with a rival or potential rival. 92 Non-compete agreements and collaboration
with horizontal competitors can also be anticompetitive, 93 as can strategic efforts to harm
41. In 2006, Zuffa purchased the World Fighting Alliance (“WFA”) 95 and World
Extreme Cagefighting (“WEC”). 96 WFA was a Las Vegas-based MMA promoter that put on four
92. U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines (2010) [hereafter
Merger Guidelines] §1 (“[M]ergers should not be permitted to create, enhance, or entrench market power or to
facilitate its exercise…A merger enhances market power if it is likely to encourage one or more firms to raise price,
reduce output, diminish innovation, or otherwise harm customers as a result of diminished competitive constraints or
incentives.”).
93. See, e.g., Department of Justice and Federal Trade Commission, Antitrust Guidelines for Collaborations
Among Competitors (April 2000), §2.2, available at
https://www.ftc.gov/sites/default/files/documents/public events/joint-venture-hearings-antitrust-guidelines-
collaboration-among-competitors/ftcdojguidelines-2.pdf. Although non-compete agreements frequently consist of
contracts between employers and employees, Zuffa’s non-compete agreements are essentially horizontal agreements
with potential competitors, as explained below.
94. See DENNIS CARLTON & JEFFREY PERLOFF, MODERN INDUSTRIAL ORGANIZATION (Pearson 2005 4th ed.)
[hereafter MODERN IO] at 386-87. As Professors Carlton and Perloff explain, strategic efforts to harm competitors are
more likely to be harmful when entry is difficult. This condition is satisfied here, given that Zuffa’s staggered, multi-
bout exclusive contracts constitute an artificial barrier to entry.
95. Deposition of Ike Lawrence Epstein pursuant to Rule 30(b)(6), Dec. 2, 2016 at 70:14-24 (discussing WFA
acquisition); see also UFC Acquires World Fighting Alliance, Inc., MMA JUNKIE, Dec. 11, 2016, available at
http://mmajunkie.com/2006/12/ufc-acquires-world-fighting-alliance-inc.
96. Ken Pishna & Ivan Trembow, UFC Buying World Extreme Cagefighting, MMA WEEKLY, Dec. 11, 2006,
available at
https://web.archive.org/web/20070929111019/http://www mmaweekly.com/absolutenm/templates/dailynews.asp?artic
leid=3053&zoneid=13.
Live MMA Events between 2001 and 2006. 97 Before its acquisition, WFA attracted headlining
Fighters such as Quinton Jackson and Matt Lindland. 98 WEC was a California-based MMA
promoter that produced 24 events between 2001 and 2006. 99 Zuffa announced its acquisitions of
WFA and WEC on the same day in December 2006. The WFA acquisition was structured as an
asset purchase in which Zuffa acquired select Fighter contracts, trademarks, and other intellectual
properties; 100 these assets were immediately absorbed into the UFC and WFA ceased to exist. In
contrast, Zuffa’s purchase of WEC left WEC with its former leadership intact. 101
42. Zuffa reportedly intended WEC “to serve as a venue in which to groom up-and-
coming talent” and as “a strategic maneuver to impede the chances of other MMA promotions
(specifically the IFL or Pride) to secure a national TV deal in the United States.” 102
,” 103
.” 104
. 105
43. Zuffa purchased Pride Fighting Championships (“Pride”) in April 2007. 106 Pride
was a Japan-based MMA promoter that produced 68 events between 1997 and 2007, two of which
occurred in Las Vegas starting in October 2006. 107 Zuffa has written that, “Pride was
widely…considered to be the second most recognized MMA brand worldwide when acquired.” 108
In an email to Frank and Lorenzo Fertitta detailing the result of acquisition talks with Pride’s
owners, Thomas Paschall, outside counsel for Zuffa during the acquisition of Pride, noted “the
strategic/preemptive nature of this acquisition (i.e., to stop others from buying it) and your having
seriously contemplated acquiring them only to shut down their business and utilize their Fighters
in the UFC.” 109 Within about six months of the acquisition, Zuffa fired Japanese staffers and
closed down Pride’s Tokyo offices. 110 When the Pride acquisition was underway, Zuffa paid $10
104. Id.
105. Id. See also ZUF-00377706 (T. Louis Palazzo Non-Competition Agreement); ZUF-00377712 (Ross C.
Goodman Non-Competition Agreement).
106. Epstein 30(b)(6) Tr. 88:5-7 (stating on behalf of Zuffa that Zuffa acquired Pride); id. at 100:10-12 (“And the
transaction didn’t close until, I guess, May of 2007…”); see also “Done deal: UFC owners purchase PRIDE FC,”
MMA MANIA, Mar. 27, 2007, available at http://www.mmamania.com/2007/03/27/done-deal-ufc-owners-purchase-
pride-fc. The actual agreement was consummated on April 18, 2007. See ZFL-1216165.
107. See http://www.sherdog.com/organizations/Pride-Fighting-Championships-3
108 See Goldman 30(b)(6) Tr. 125:5-14 (discussing Zuffa’s handwritten edits to a draft of the 2009 Deutsche
Bank Confidential Information Memorandum).
109. ZUF-00031544. See also Deposition of Drew Goldman pursuant to Rule 30(b)(6), April 28, 2017 at 73:17-
74:1 (testifying on behalf of Deutsche Bank that, based on conversations with Zuffa and materials provided by Zuffa,
Deutsche Bank’s interpretation was that “Each acquisition [Pride, WEC and WFA] had unique offensive and defensive
purposes at the time. However, both the WFA and Pride pending transactions resulted in Zuffa’s roster of elite fighters
expanding significantly.”).
110. Zach Arnold, PRIDE office in Tokyo shut down, all workers fired, FIGHT OPINION, Oct. 4, 2007, available at
http://www fightopinion.com/2007/10/04/pride-office-in-tokyo-shut-down-all-workers-fired/.
111. ZFL-1676293 at 96.
44. Affliction Clothing was a U.S.-based MMA clothing label and was one of the
primary clothing sponsors of Zuffa Fighters. Backed by prominent investors, AEG put on two
successful Live MMA Events. 112 In early 2008, Zuffa terminated its sponsorship relationship with
Affliction Clothing when Zuffa received information that Affliction was planning on entering the
MMA promoter business under their new subsidiary, AEG. 113 In reaction to Affliction’s decision
to get into the business of MMA fight promotion, Zuffa barred Affliction from sponsoring any of
its events or any of its Fighters. 114 This weakened Affliction, which ultimately decided to exit the
45. Zuffa purchased AEG’s assets and Fighters on July 23, 2009. The purchase
agreement stated that “AEG shall … cancel any and all future AEG Events or other Live MMA
Events that AEG is involved in [and] cease … any and all MMA promotional businesses and
endeavors by AEG….” 115 According to a final draft of a letter summarizing the agreement, the
deal involved Affliction “exiting the MMA professional business,” 116 transferring Fighters under
contract to Zuffa, and “creating some sort of promotional affiliation with the Ultimate Fighting
Championship (UFC).” 117 Record evidence indicates that Zuffa saw Affliction as a competitive
as the top story of 2009 by Sherdog.com, a popular Internet source of MMA news and
information. 126
48. UFC matchmaker Joe Silva sent an email setting forth the January 27, 2011
consensus rankings of MMA Fighters in major weight classes, noting that the UFC “Own[ed]
MMA.” 127 Those consensus rankings, however, showed that Strikeforce had 3 of the top 10 (and 6
of the top 25) heavyweight Fighters; 5 of the top 25 (and a top 10) light heavyweight Fighter; 2 of
the top 10 (and 4 of the top 25) middleweight Fighters; 2 of the top 10 welterweight Fighters; and
3 of the top 25 (including 1 top 3) lightweight Fighters. 128 No promotion other than the UFC had
as many highly ranked Fighters in late January 2011, just two months prior to Zuffa’s acquisition
of Strikeforce. 129
49. In or around October 2010, Dana White called the Strikeforce owners to inform
them that Lorenzo Fertitta wanted to acquire Strikeforce and, in November 2010, the Strikeforce
owners met with representatives of the UFC concerning the potential acquisition of Strikeforce at
the offices of WME. 130 At that meeting, Lorenzo Fertitta reportedly stated that he thought
“Strikeforce is building a great brand, but [Zuffa felt] there should only be one brand, so [Zuffa]
126. Id. at 11. See also Coker Dep. at 38:6-12 (Strikeforce “got on [the UFC’s] radar and I think they [Zuffa]
wanted to control the market share.”). In 2009, after Affliction exited the MMA promotion business and sold its assets
to Zuffa, Mr. Coker (Strikeforce’s founder) observed that “Affliction took the easy way out. [N]ow it’s UFC and
Strikeforce. If you can’t battle these guys it’s over for the MMA industry. UFC will be the only one left. We’re the last
chance. Otherwise, fighters’ purses will go down if UFC is the only one – is the only one period. We’re Luke
Skywalker and UFC is Darth Vader and the Death Star.” Coker Dep., Exh. 8; Coker Dep. at 95:10-20.
127. ZUF-00085896.
128. Id.
129. Coker Dep. at 121-10-23 (“I believe that the phone started ringing from Dana [White] because we had
signed [prominent heavyweight] Fedor [Emelianenko] and we announced the heavyweight tournament. It was clear
that although we were a very small company, much smaller than the UFC, but we were in the same business, that we
had a better heavyweight division than they did, and I think that was one of the considerations on their part.”). Coker
also testified that the light heavyweight division has always been the “strongest in MMA” and “heavyweights, to me,
would be just as important because everyone likes the heavyweights.” Id. at 106:2-9.
130. Coker Dep. at 114:22-118:15.
would like to buy [Strikeforce].” 131 For its part, Zuffa’s internal correspondence in 2012 indicates
that the UFC sought, by its Strikeforce acquisition, to eliminate it as a competitor. In a conference
call, UFC CEO Lorenzo Fertitta stated that: “Lawrence and Pete Dropick, who run Strikeforce for
us, went back to New York, had negotiated a separation agreement with Showtime to essentially
shut Strikeforce down. We would then pull all of those Fighters into the UFC which is essentially
what we want to do anyway.” 132 According to Zuffa, acquiring Strikeforce’s Fighter contracts was
50. According to Scott Coker, Strikeforce’s founder, Lorenzo Fertitta stated that his
plan was to “close [Strikeforce] down, and we would take all of the Fighters and bring them to the
UFC.” 134 Coker testified that, after negotiations stalled, Dana White threatened that he would
“come after [Strikeforce’s] fighters, and he would make our life hard, and, you know, give us a bad
time.” 135 Coker testified that, had Strikeforce not been sold to Zuffa, Strikeforce “would have
51.
.” 137
52. Record evidence shows that the UFC engaged in counter-programming in attempts
to suppress demand for events of other MMA promoters. According to one academic case study:
The UFC had a simple strategy for limiting the growth of its competitors; it scheduled free
counter-programming at the same time as their competitors with the intention of stealing
revenues. And although this approach was not profitable in itself, it worked by preventing
new competitors from both achieving profitable operations and recouping their investments
in high-profile fighters. 138
That Zuffa’s counter-programming was “was not profitable in itself” 139 indicates that the economic
impairing rivals in an anticompetitive manner, rather than to promote competition in the industry.
53. The UFC’s counter-programming appears to have been conceived in 2006 when the
UFC sought to counterprogram the WFA’s last event before they purchased the promotion. On
June 15, 2006, Kirk Hendrick wrote to Lorenzo Fertitta, Dana White and Craig Borsari that Spike
had agreed to air a taped compilation of UFC bouts on July 22, 2016 (the date of the WFA’s last
event). 140 Hendrick wrote: “Obviously, the idea would be: ‘free UFC on Spike TV … versus
whatever WFA charges for PPV.’” 141 A few years later, on November 24, 2008, Craig Borsari
wrote that “Dana [White] wants to counter program Affliction[’s pay-per-view event on] January
24 [2009]” with a re-run of a prior pay-per-view event on free television. 142 UFC President Dana
White openly admitted to counter-programming in a May 2009 ESPN article, according to which,
White had “thrown together the card [for Saturday’s Fight Night 14] in five weeks in an attempt to
138. Jesse Baker & Matthew Thomson, The Ultimate Fighting Championships (UFC): The Evolution of a Sport,
in CASES IN MARKETING MANAGEMENT 115 (Kenneth E. Clow & Donald Baack, eds. 2012).
139. Id.
140. ZUF-00153787.
141. Id.
142. ZUF-00153903. Zuffa did, in fact, broadcast the re-play of the UFC 91 pay-per-view card, bringing in an
average audience of 2.3 million viewers for the special. See UFC 91 replay on Spike TV peaks with 3.3 million
viewers, MMAmania.com, Jan. 27, 2009, available at https://www.mmamania.com/2009/01/27/ufc-91-replay-on-
spike-tv-peeks-with-33-million-viewers. Affliction did not have another event after its January 24, 2009 event.
“are we going to counter program this on Spike?” 149 An August 14, 2009 email from Joe Silva to
Dana White and Lorenzo Fertitta states: “I have stolen the following fights out from underneath
Strikeforce in the last couple of days: Joey Villasenor[,] Riki Fukuda[,] Joey Villasenor[,] [sic]
56. Explosion Entertainment, which owned Strikeforce, wrote in its 2009 business plan
that Strikeforce and other MMA promoters were increasingly “wary of UFC’s predatory instincts
and counter-programming clout.” 151 It further noted that UFC’s “arrogance has spawned business
practices that can be viewed as anti-competitive and restraints of trade.” 152 In a 2010 presentation
discussing the future of the company, one of the potential options was to “Go Hard after the UFC”
as opposed to becoming an MMA “minor league.” 153 One element under the “con” section of plan
was the threat of “UFC counter-programming (awake the sleeping giant).” 154 A March 3, 2010
email chain among Strikeforce executives expresses concern about UFC counter-programming
Strikeforce’s April 17, 2010 Nashville event, and even considers attempting to preemptively
reserve event venues in the metropolitan area. 155 At the time, Andrew Ebel at Strikeforce noted
internally that “I really feel that the potential of UFC holding an event in Nashville was and is
149. ZFL-2005388.
150. ZFL-2005616.
151. ZUF-00421380 at 386.
152. Id. at 387.
153. ZUF00447547 at 570.
154. ZUF00447547 at 562.
155. This idea was later abandoned as impractical due to the high number of potential venues. See ZFL-2595178;
see also ZFL-2586870, March 6, 2010 email from Andrew Ebel at Strikeforce (“UFC is playing dirty and may be
trying to put on a live MMA event in a different venue in Nashville on the same night as ours. We need to get our
media booked immediately so they don’t come in and literally buy up all the available media in the marketplace. We
need to move very quickly. This is very serious.”).
really hindering our ticket sales to date.” 156 UFC ultimately counter-programed the event by
rebroadcasting UFC 110 on Spike at the same time as the Strikeforce event. 157
57. One UFC estimate indicated that UFC counter-programming could reduce
comparing viewership of Strikeforce live events with its counter-programmed recorded events in
2010. 159 In April 2010, Sam Raimist, a financial analyst for Zuffa, sent an email to Zuffa
executives comparing ratings between Strikeforce and Zuffa events: “Overall UFC110 had a good
showing as a replay going up against a live event. In comparison to other shows we have used to
counter-program our competition, such as UFC107 and UFC100, UFC110’s numbers are slightly
down.” 160
58. Zuffa also targeted other MMA promoters. Jeremy Lappen, once the president of
fight operations at ProElite (which owned subsidiaries EliteXC, Cage Rage, and King of the Cage)
testified that UFC at various times counter-programmed Live MMA Events. 161
162
59. Record evidence indicates that Zuffa also used the threat of litigation to impair
would-be rivals. For example, IFL was an atypical MMA promoter in that matchups were team
affairs, with each team member facing off in a one-on-one bout. 163 IFL held 22 events across the
United States between 2006 and 2008. 164 It collapsed due to financial difficulties (in part, as
60. Before IFL had put on its first promotional Live MMA Event, Zuffa sued it,
alleging that the fledgling company had illegally hired some of its former employees who took
with them confidential trade secrets. 166 IFL co-founder Kurt Otto at the time stated that:
IFL counter-sued over allegations that UFC had threatened Fox Sports with a lawsuit if Fox were
to sign a deal with IFL. 168 Both cases generated substantial legal expenses for IFL. 169
61. The lawsuit also generated sworn statements from Patrick Miletich, a MMA trainer
and former UFC champion, who testified that UFC’s President Dana White threatened him and
others that individuals doing business with IFL would forfeit future opportunities with the UFC. In
two separate instances, White allegedly stated that “he was going to fucking crush these [the IFL]
guys,” and that “when the dust settles, anyone associated with the IFL would not be associated
with the UFC.” 170 Miletich further stated that White’s statements represented:
[A] threat to me and to my fighters who count on me to represent them and obtain
opportunities for them to fight in the MMA industry. Because of the virtual monopoly that
Zuffa has in the MMA industry, Mr. White clearly knew that cutting me and my fighters
off from the UFC would have a devastating economic impact…
Knowing Mr. White the way I do, I can honestly say that Zuffa’s intent in bringing this
litigation has nothing to do with protecting any confidential information. Rather, I believe
this litigation is about one thing and one thing only—stamping out legitimate and, indeed,
healthy, competition. 171
62. Record evidence indicates that Zuffa has entered into non-compete agreements with
other MMA promotions or their principals. In November 2010, Zuffa entered into a settlement
agreement with HDNet LLC and Mark Cuban resolving a dispute over distribution rights. The
settlement agreement included a “NON-COMPETITION” clause stating that “HDNet and Mark
Cuban would not engage in direct competition with Zuffa’s line of business until November 9,
2014. 172
63. There is also evidence suggesting that Zuffa and other MMA promoters sometimes
worked together to prevent Fighters from fighting bouts with other MMA promoters. During
Zuffa’s negotiations regarding the acquisition of MMA promoter, Pride, Pride’s management
170. Pat Miletich’s Statement in UFC-IFL Case, MMAWEEKLY, June 17, 2006, available at
http://www mmaweekly.com/pat-miletichs-statement-in-ufc-ifl-case.
171. Id.
172. ZFL-1225776 at 78.
offered to sign an exclusive contract with a well-known champion Fighter, Fedor Emelianenko, to
“keep him away from Bodog [a rival promoter] so the contract is exclusive … depending on what
you [Zuffa] want.” 173 In a February 2013 email to UFC CEO Dana White titled “heads up,”
Shannon Knapp, the president of Invicta (another MMA promotion) wrote, “I wanted to let you
know that we signed Zoila Frausta Gurgel (Bellator’s 125lb champion) exclusively away from
Bellator. We are not working with them or sharing talent with them. I always like to keep you in
64. Zuffa’s long-term exclusive PARs with Fighters constitute the primary vertical
component of the Challenged Conduct. My staff and I reviewed all Zuffa Fighter contracts
produced by Zuffa; this includes a total of 2,136 valid PARs spanning 2001-2015. 175 As explained
below, Zuffa’s long-term exclusive PARs barred Fighters from fighting for any other MMA
promoters for the duration of the PAR. In addition, Zuffa’s PARs have long contained a variety of
provisions permitting Zuffa to extend the duration of Fighter contracts unilaterally, which could
and did extend contracts beyond the stated “term” for many additional months or years, or
indefinitely. For example, when Fighters announce retirement or injury, their contracts are tolled
until their next fight for Zuffa, which might never happen.
65. Economists and antitrust practitioners recognize that vertical restraints such as
these, when used by a dominant firm, can harm competition by blocking or impairing access to key
inputs, thereby foreclosing firms that would otherwise provide competitive discipline to the
173. ZUF-00031544.
174. ZFL-1019758.
175. See Appendix, Table A1. Excludes two non-Zuffa contracts (from Invicta and EliteXC) that were also
produced by Zuffa.
C. Zuffa Exploited the Exclusionary Terms of the PARs to Make Exclusion Effectively
Perpetual
75. Zuffa exploited the exclusionary terms of the agreements to renew and extend
Fighter contracts, and to stagger them such that, to the extent any would ever expire, there would
never be a critical mass of Fighters available to a potential rival at any one time. From the
standpoint of Fighters’ relatively short careers, this allowed Zuffa to make its exclusionary
provisions effectively perpetual for those Fighters whom Zuffa wanted to keep.
76. Zuffa exploited various forms of bargaining leverage made possible by the Fighter
agreements and the other Challenged Conduct to restrict the quantity and quality of employment
opportunities for its Fighters. This created powerful incentives for Fighters to renew their contracts
before the prior contracts expired, on terms favorable to Zuffa. And Zuffa, in fact, made a practice
of using its leverage to approach those of its Fighters it wanted to keep before the last fight of their
contracts, so that Zuffa contracts rarely reached their end. Among other things, Zuffa could and did
(1) impose (or credibly threaten to impose) delays between bouts, particularly before the final bout
206. CG-UFC-00000005 (Item 204). See also Deposition of Joseph Silva at 59:14-20 (discussing May 2007
Confidential Information Memorandum, DB-ZUFFA—00006712) (“Q. Then it says: ‘Notably, only one marquee
fighter has ever defected from UFC to a competing MMA organization, and that individual later returned to compete
in the U.S.’ As of the date of that statement, is that accurate to your knowledge? A. To my knowledge.”).
of a Fighter’s contract, during which Fighters—who get paid only when they fight—could not earn
MMA income from any source; (2) pair (or credibly threaten to pair) Fighters against suboptimal
opponents or on unfavorable positions on a Fight Card; (3) lock up the most valuable Fighters at
the peak of their popularity by leveraging the presence of the champion’s clause; and, (4) impose
and enforce lengthy periods even after a Fighter had competed all of the bouts in his or her
contract, during which the Fighter would not be allowed to negotiate freely or without restriction
with other MMA promoters for the opportunity to fight for another MMA promoter.
77. Zuffa exercised significant discretion over the timing of bouts in a Fighter’s
contract. 207 Record evidence indicates that Zuffa’s ability to control the timing of a Fighter’s
matchups, the identity of opponents, and a Fighter’s placement on the Fight Card conferred a
negotiating advantage, particularly given that members of the Bout Class were compensated only
when they fought. 208 The ability to force a Fighter to wait longer before the final bout (also the
Fighter’s next payday) incentivizes the Fighter to agree to Zuffa’s terms for a new contract even if
he or she preferred to fight for another MMA promotion or merely wanted to test his or her worth
207. Deposition of Denitza Batchvarova, Zuffa’s Senior Vice President of Strategy, January 25, 2017, at 36:7-11
(“Q. And just to make sure I understand what you are saying correctly, so the UFC has discretion on how to structure
the card and wanted to maintain that discretion? A. Yes. Yes.”).
208. Deposition of Plaintiff Kyle Kingsbury, February 17, 2017 at 18 (“[T]hrough threats and direct punishment,
Dana really controlled how our careers went. And he could stick you on the undercard in your next fight against some
unfavorable opponent. If you’re on the undercard, you would make far less. If anything in sponsorship because you
weren’t on TV. He might sit you on the bench for a while. That’s happened to numerous fighters. And then give you
an unfair brutal opponent on an undercard. There were a number of different ways that Dana would use his power to
our disadvantage.”). See also Silva Dep. 405:12-19 (“Q. So everything’s equal. And the only thing you know now is
that this guy’s main card worthy and he has agreed to re-up, versus, it’s the same situation, main card worthy where
he’s not agreed to re-up. You’d more likely give the main card in a better position to the guy who has agreed to re-up
as opposed to the one who hasn’t; right? A. Yes.”); ZFL-2496215 (July 2012 e-mail exchange between Joe Silva,
Michael Mersch and Tracy Long discussing the fact that it was Quinton Rampage Jackson’s last fight on his contract,
would not sign a new deal and that Zuffa used its discretion to not make Jackson’s bout the main event).
209. Deposition of Plaintiff John Fitch, February 15, 2017 at 105 (“Q: Okay. And in this case, I think we’ve
established that had you fought two fights [(of three)] and then renegotiated the contract? A: Correct.”). See also id. at
. 239
85. In the economic literature, contractual terms such as Zuffa’s right to match clause
are known as the “Right of First Refusal” (“ROFR”). 240 Economists have shown that ROFRs,
under certain conditions, can be beneficial to buyers (in this case, Zuffa), and harmful to both
sellers (in this case, Fighters) and potentially competing buyers (in this case, other MMA
promoters). Because “the seller places himself in a disadvantageous position by awarding the
special buyer this right [of first refusal],” 241 economic analysis “offers prescriptive advice:
considerable caution should be exercised prior to granting a right of first refusal.” 242 Other
economists have shown that ROFR can reduce the incentives for other buyers to compete with the
favored buyer, which “reduces the marketability of the seller’s asset.” 243 As economist Michael
238. See Parts III.C.1-2, infra. Indeed, as discussed further below the UFC engineered its contracts such that their
possible expirations would be staggered, preventing other MMA promotions from being able to gain access to multiple
top-flight Fighters at the same time. See Part III.C.3, infra.
239. Deposition of John Fitch, February 15, 2017 at 121 (“Q: Okay, but outside of the re-up, if you really didn’t
want to sign the re-up, the contract would end after the duration of the contract, which in the case of Exhibit 51, I
believe is 18 months, and then -- A: 18 months without making a dime. That would retire a fighter. We don’t make
that much money. You don’t fight, you don’t work for 18 months, you’re not going to survive, you’re not going to
live. You don’t get a choice.”). See also ZFL-2642993 (January 2008 email from the agent for Andrei Arlovsky, a
former UFC Heavyweight Champion, stating that “It is extremely damaging to Andrei’s career to be shelved for such a
long period of time [more than one year]”).
240. Sushil Bikhchandani, Steven Lippman & Reade Ryan, On the Right of First Refusal 5(1) ADVANCES IN
THEORETICAL ECON. (2005).
241. Id. at 2.
242. Id.
243. Marcel Kahan, Shmuel Leshem & Rangarajan Sundaram, On First-Purchase Rights: Rights of First Refusal
and Rights of First Offer, 14 AMERICAN L. & ECON. REV. (2012). See also Leandro Arozamena & Federico
Weinschelbaum, A note on the suboptimality of right-of-first-refusal clauses, 4(24) ECON. BULLETIN (2006) 1-5, at 1
(“We show that, under independent private values, no mechanism that includes an ROFR clause can maximize the
Leeds and his co-authors explain in The Economics of Sports, restricted free agency in professional
sports confers an ROFR to a player’s original team; as a consequence, “the expectation that the
original team will match any offers may reduce the size or number of offers a restricted free agent
receives.” 244
86.
87.
joint expected surplus of the seller and the right-holder. Adding such a clause to any given auction format, then, is
jointly suboptimal for the two parties involved.”).
244. MICHAEL LEEDS, PETER VON ALLMEN & VICTOR MATHESON, THE ECONOMICS OF SPORTS (Routledge 5th ed.
2016) [hereinafter ECONOMICS OF SPORTS].
245. See Part II.C.2, infra (documenting Fighters’ short careers); see also Hendrick Dep. V.I (“If [a fighter is]
ready, willing, and able to fight and they want to fight, 12 months I would say is a time period that is significant for a
fighter’s career.”).
246. See ZFL-1872579. In a February 2014 text message discussion between White and Lorenzo Fertitta
regarding re-signing Gilbert Melendez, Melendez’s contract with Zuffa was ending and he had come to an agreement
with Bellator. In response, Zuffa exercised the right to match clause to re-sign Melendez. See ZFL-1897652. Fertitta
texts White: “We gotta keep taking these fuckers oxygen till they tap out. We have sacrificed too much to let anyone
get traction now[.]” At his deposition, Fertitta testified that the term “fuckers” referred to Bellator, while the “oxygen”
referred to Fighters Gilbert Melendez and Eddie Alvarez, both of which Bellator was attempting to recruit. See Fertitta
Tr. at 291-92.
91.
253. See ZFL-1376378-79. See also ZFL-2642993 (January 2008 email from the agent for Andrei Arlovsky, a
former UFC Heavyweight Champion, stating that “It is extremely damaging to Andrei’s career to be shelved for such a
long period of time [more than one year]”); ZFL-2632955 (agent stating that “MMA fighters [] career primes are
generally short”). Zuffa’s corporate designee concurred that sitting out for 12 months is not a reasonable option given
Fighters’ typically short career durations. Hendrick 30(b)(6) Dep. V.I (“If [a fighter is] ready, willing, and able to fight
and they want to fight, 12 months I would say is a time period that is significant for a fighter’s career.”).
254. See ZFL-1376378-79.
255. Calculated using data obtained from Sherdog.com.
256. WME-ZUFFA-00001150 at *11 (showing that champions have, on average, 6.5 bouts remaining in their
contracts; Fighters ranked 1-5 have 5.5 bouts remaining on average; Fighters ranked 6-10 have 3.6 bouts remaining on
average, and so on).
257. Id.
92. Economists and antitrust scholars have identified criteria to determine whether
conduct is exclusionary and harmful to competition, and these criteria can be informed by
economic analysis. In this section, I lay out these criteria in detail, and I demonstrate that they are
satisfied here.
93. In Parts III.A and III.B, I demonstrate that Zuffa has significant monopoly and
monopsony power, using well-accepted “indirect” and “direct” methods of proof. Indirect proof of
market power involves defining relevant product (and geographic) markets, demonstrating that
Zuffa has high market shares within the relevant markets, and showing that substantial barriers to
entry exist. Direct proof is more straightforward, and simply requires evidence that Zuffa has in
fact exercised monopoly and/or monopsony power. It bears emphasis that product market
definition is a tool to infer pricing power—that is, the ability to raise prices above competitive
levels, or to suppress compensation below competitive levels. Because here we have direct
evidence that Zuffa exercised monopoly and monopsony power, indirect evidence is of secondary
importance. 258
258. See, e.g., Jonathan B. Baker & Timothy F. Bresnahan, Economic Evidence in Antitrust: Defining Markets
and Measuring Market Power, in Paulo Buccirossi, ed., HANDBOOK OF ANTITRUST ECONOMICS (2007) [hereafter,
“Baker & Bresnahan”], at 15 (“Historically, in the antitrust world, market power has most commonly been identified
through inference from a high market share. But direct evidence has increasingly become important as an alternative,
in part because academic economists have developed a number of econometric approaches for measuring market
power.”). Baker and Bresnahan also note that “quantitative methods of measuring market power through direct
evidence have parallels involving the use of qualitative evidence.” Id. See also Aaron S. Edlin & Daniel L. Rubinfeld,
Exclusive or Efficient Pricing? The Big Deal Bundling of Academic Journals, 72 ANTITRUST L.J. 119, 126 (2004)
(“Market definition is only a traditional means to the end of determining whether power over price exists. Power over
price is what matters…if power can be shown directly, there is no need for market definition: the value of market
definition is in cases where power cannot be shown directly and must be inferred from sufficiently high market share
in a relevant market.”). See also PHILLIP E. AREEDA, EINER ELHAUGE & HERBERT HOVENKAMP, 10 ANTITRUST LAW:
AN ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION 267, 325–28, ¶ 1758b. (1996 & Supp. 2003); see
also PHILLIP AREEDA, LOUIS KAPLOW & AARON EDLIN, ANTITRUST ANALYSIS: PROBLEMS, TEXT AND CASES ¶ 344
(6th ed. 2004).
94. In Part III.C, I lay out the criteria for demonstrating that the Challenged Conduct
foreclosed competition to a substantial degree, and I show that these criteria are satisfied here. In
Part III.D, I show that the Challenged Conduct generated anticompetitive effects.
95. In general, a threshold requirement for demonstrating that the Challenged Conduct
was exclusionary and harmful to competition is to show that the conduct at issue was undertaken
by a firm with significant market power. 259 As explained below, for my indirect proof of
monopsony power, I define a Relevant Input Market of MMA Fighters, which is measured in two
ways using industry-accepted databases. I also define a Relevant Input Submarket of “Headliners,”
consisting of all Fighters ranked one through fifteen according to industry-accepted databases in
96.
259. See, e.g., Salop, supra, at 374 (noting that “monopoly and dominant firm markets” are where potentially
exclusionary conduct “raise[s] the greatest concerns,” although this conduct “can allow non-dominant firms that lack
market power to achieve that power, particularly where parallel exclusion by multiple firms can lead to
anticompetitive coordination.”). See also IIIA PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 801, at
318 (2d ed. 2002); see also Einer Elhauge, Defining Better Monopolization Standards, 56 STAN. L.R. 253 (2003)
[hereafter, “Elhauge”], at 257-261; 330-339.
260. I consider the Relevant Input Submarket to be the top 15 Fighters in each class weight class. I choose 15, as
opposed to 10, 25 or some other number, because (1) FightMatrix.com only lists the top 15 for their “pound-for-
pound” fighter ranking (http://www.fightmatrix.com/historical-mma-rankings/generated-historical-
rankings/?Issue=111&Division=-1), (2) UFC’s internal fighter rankings display the top 15 fighters per weight class
(http://www.ufc.com/rankings?fb comment id=6086517324953#f17c6b2f929913), and (3) the top 15 are displayed in
USA Today/MMA Junkie’s ranking system (http://mmajunkie.com/rankings). Relatedly, as explained by Leon
Margules, President of Warriors Boxing Promotion, boxers ranked in the top fifteen by one of the major sanctioning
organizations are mandatory challengers for the title, and thus by definition championship-caliber. Margules Dep. at
85:17-86:13 (“Only … if they are ranked in the top 15 will they qualify.”).
261. This includes all Fighters in the Relevant Input Submarket as well, which is a subset of the Relevant Input
Market.
62
97. The DOJ’s and FTC’s Horizontal Merger Guidelines define a relevant antitrust
(output) product market as a product or group of products such that a hypothetical monopolist that
was the only present and future seller of those products could profitably impose a small but
significant and non-transitory increase in price (the “SSNIP”) over the competitive level. 263 The
SSNIP is normally taken to be five percent. 264 If enough customers view some products outside a
proposed product market as sufficiently interchangeable with products within the proposed market,
the hypothetical monopolist could not profitably raise prices by the SSNIP. The forgone profits
262. See HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY 82-83 (3d ed. 2005). There is no consensus as to
precisely how high a firm’s market share must be to convey monopoly power. If an industry has a competitive fringe
that imposes some competitive discipline on the dominant firm, many economists consider market shares in the range
of 30 to 50 percent to be too low to infer monopoly power. See MODERN IO at 644. In this case, the fringe of the
market is not competitive, as a consequence of the Challenged Conduct.
263. Merger Guidelines §4.1.1.
264. Id. §4.1.2 (“The Agencies most often use a SSNIP of five percent of the price paid by customers for the
products or services to which the merging firms contribute value. However, what constitutes a “small but significant”
increase in price, commensurate with a significant loss of competition caused by the merger, depends upon the nature
of the industry and the merging firms’ positions in it, and the Agencies may accordingly use a price increase that is
larger or smaller than five percent.”).
from the switching of consumers would exceed increased profits gained from the higher price paid
by remaining customers.
98. When it comes to input markets, market definition proceeds in an analogous fashion
for the analysis of monopsony power. In this case, a relevant (input) market consists of a product
or group of products such that a hypothetical monopsonist that was the only present and future
buyer of those products could profitably impose a small but significant and non-transitory decrease
in prices (or wages) below the competitive level. In the buying context, market definition turns on
“the alternatives available to sellers in the face of a decrease in the price paid by a hypothetical
monopsonist.” 265 If sellers enjoy “numerous attractive outlets for their goods or services,” 266 then
the hypothetical monopsonist would not be able to depress prices (or wages) significantly below
competitive levels. Conversely, the exercise of monopsony power will be profitable when sellers
have few competitive outlets to which to turn in response to a decrease in the price (or wage). 267
99. Following the Merger Guidelines, I define the Relevant Input Market and
Submarket based on the alternatives to which Fighters could reasonably substitute to counteract an
exercise of monopsony power by Zuffa. As explained below, I provide two alternative metrics of
the Relevant Input Market using two industry-accepted databases. The Relevant Input Submarket,
1. Under the Tracked measure, all Fighters fighting for an MMA promoter included in
the FightMetric database (which “tracks” Fighter performance) are included in the
Relevant Input Market. A hypothetical monopsonist over all Tracked Fighters could
profitably exercise monopsony power, because an MMA promoter without Tracked
Fighters would not be able to offer competitive matchups to advance a Fighter’s
career.
2. Under the Ranked measure, the Relevant Input Market is expanded to include (1)
all Fighters encompassed by the Tracked measure; and (2) any Fighter ranked in the
FightMatrix ranking database. This includes Fighters ranked from 1 through 650 in
any of the fourteen MMA weight classes in the FightMatrix database. The Ranked
measure also includes ONE Championship, as explained below. A hypothetical
monopsonist over all Ranked Fighters could profitably exercise monopsony power,
because an MMA promoter without Ranked Fighters would be even less able to
offer competitive matchups than an MMA promoter without Tracked Fighters.
3. Under the Headliner definition, the Relevant Input Submarket includes the top
fifteen Fighters in any of the ten major MMA weight classes, 268 as ranked by
FightMatrix. A hypothetical monopsonist over all Headliners could profitably
exercise monopsony power, because non-Headliners are, by definition, lower-
ranked Fighters that would typically provide sub-optimal matchups for Headliners.
100. As explained below, athletes from combat-oriented sports outside of MMA such as
boxing and wrestling are outside the Relevant Input Market, as are athletes from non-combat
sports such as football or hockey. A market definition that encompassed Fighters from all MMA
promoters would also be far too broad: The vast majority of these MMA promoters do not offer
counteract an exercise of (buyer) market power by Zuffa. As explained below, the evidence
indicates that even the most prominent non-Zuffa MMA promoters are at best distant substitutes to
Zuffa from the perspective of Fighters. 269 Nevertheless, both my Tracked measure and my Ranked
268. See Part I.A, supra The Headliner definition omits the following minor weight classes: men’s strawweight,
women’s featherweight, women’s flyweight, and women’s atomweight weight classes. However, these weight classes
are included in the Ranked measure of the Relevant Input Market.
269. See also Part III.A.8, infra.
fighting styles (for example, pitting a judo-trained Fighter against a boxer). 275 The highly
publicized boxing match, on August 26, 2017, between undefeated (and previously retired) 40-
year-old boxing champion Floyd Mayweather and Conor McGregor, the UFC lightweight (MMA)
champion, was the exception that proves the rule, representing an opportunity unavailable to the
vast majority of Zuffa Fighters (or boxers). Further, that the two fighters were boxing, and not
engaging in an MMA bout (which includes, but is not limited to, boxing) is a further indication
that MMA is a distinct sport that requires highly specialized training to compete at the highest
levels. 276
103. My conclusion that MMA is a distinct sport is even clearer for athletes in non-
combat sports. For example, in response to a question regarding whether Zuffa would consider
signing NFL player Greg Hardy to the UFC, Dana White stated: “It’s tough man. We’ve tried
some of these things, and they don’t always work out. You’ve got to understand, a lot of these
fighters have been training since they were kids, and this guy was training to play football and he
became great at it. But fighting’s a whole other ball game….” 277 Athletes who do attempt to
transition from non-combat sports to MMA do not instantaneously compete at the level of UFC
275. ZFL-1838367 at 95 (“In 2001, three fans of the sport saw past the spectacle of this multi-disciplined form of
combat to the true potential of MMA as a real sport where no one discipline would dominate, but rather in which
athletes would need to be cross-trained in all disciplines to be victorious in the Octagon.”).
276. See, e.g., Jason Gay, Mayweather and McGregor’s Mindless Summer Fight, WALL STREET JOURNAL, June
15, 2017, available at https://www.wsj.com/articles/mayweather-and-mcgregors-mindless-summer-fight-1497535595
According to an editor of Bloody Elbow, although mildly competitive through the first nine rounds, the fight was more
a spectacle, as McGregor was never close to a win. See, e.g., Mookie Alexander, Six takeaways from Floyd
Mayweather vs. Conor McGregor, BLOODY ELBOW, Aug. 27, 2017 (“McGregor was never going to have the stamina
to go the distance, and outside of the opening round counter uppercut and I believe a 9th round body shot (that looked
like a low blow), Mayweather never seemed particularly fazed by his punches. Once Mayweather knew what he was
getting from Conor after the first few rounds, he was willing to walk forward and land his own shots, and to me that
was the obvious sign that McGregor was on borrowed time.”).
277. Zuffa’s Response to Plaintiffs’ Requests for Admission No. 37.
Fighters, but instead accumulate years of training and experience at smaller MMA promotions. 278
A 2012 UFC Management Presentation states unequivocally that “[a]ll UFC fighters have previous
104. A market definition that encompassed Fighters from all MMA promoters would
clearly be too broad: Although there are hundreds of non-Zuffa MMA promoters, they do not offer
counteract an exercise of market power by Zuffa. As explained below, nearly all non-Zuffa
promoters are small regional outfits that have none of the top Fighters in any weight class and do
not even seek to compete with the UFC for talent. Indeed, even the most prominent non-Zuffa
promoters do not have access to a sufficiently deep pool of talented Fighters to provide
competitive matchups to advance a Zuffa Fighter’s career, thus making non-Zuffa MMA
promoters an inadequate substitute. Thus, even a (not so) hypothetical monopsonist controlling
only Zuffa Fighters would be able to exercise significant monopsony power. Because the Relevant
Input Market and Submarket encompass Fighters associated with non-Zuffa promoters, these
market definitions are likely overly broad and thus conservative, as explained below.
105. MMA promoters other than Zuffa are “highly fragmented” 280 and have not
disrupted Zuffa’s dominant position. In the words of one MMA promoter, non-Zuffa MMA
278. For example, Wes Shivers played three games in the NFL for the Atlanta Falcons in 2000, but did not begin
competing in MMA events until 2007. See http://www.sherdog.com/fighter/Wes-Shivers-49521; see also
http://www.pro-football-reference.com/players/S/ShivWe20 htm. Shivers fought for small promotions with the
exception of a single UFC exhibition bout (in 2009) and a single Strikeforce bout (in 2010). See
http://www.sherdog.com/fighter/Wes-Shivers-49521. Similarly, Steve Bossé retired from the North American Hockey
league to pursue a career in MMA in 2007, but did not make his debut in the UFC until 2015, after competing for
years in minor promotions. See http://www.ufc.com/fighter/steve-Bosse?id; see also
http://www.sherdog.com/fighter/Steve-Bosse-22732.
279. ZFL-2547712, at 27 (“All UFC fighters have previous combat experience. Many of the fighters are
collegiate and Olympic champions. Most have extensive experience in smaller organizations before fighting in
UFC.”).
Everybody that has tried to challenge the UFC has wound up on their butt. Nobody has
been able to do it. No one is going to take on Zuffa and win at this point. It’s just not going
to happen, and I have no aspirations to do that… I give every single fighter a ‘Zuffa Out’
clause… So yes, all of my guys have the ability to leave for the UFC, because every kid
training in MMA has the dream of being a UFC champion. I want to be part of the
292
facilitation of helping these guys get the fights they need.
Similarly, in April 2011, Zuffa drafted an internal “cooperation framework” memo between the
UFC and Legend FC, the purpose of which appears to have Legend FC serve as an MMA minor-
league training ground for potential UFC Fighters, and to give UFC exclusivity over promising
prospects developed within Legend. 293 Many MMA promoters have also sold or licensed their
content to Zuffa’s proprietary subscription streaming service (“Fight Pass”). A promoter who has
entered into an agreement with Zuffa to license or sell their content to Zuffa is unlikely to compete
108. To be conservative, I define the Relevant Input Market to include certain Fighters
from certain non-Zuffa promoters, based on data from industry-accepted tracking and ranking
databases. The first of these databases is FightMetric, which tracks the round-level fighting
292. See ZFL-2531156. In April 2015, Titan FC and Zuffa began negotiating a more explicit partnership such as
the one Zuffa entered into with Invicta, which would include Zuffa rights to Titan FC footage. See ZFL-2531156.
293. In exchange for support and training for Legend FC from the UFC, the UFC “gets sales rights to Legend
content outside of Asia[,]” a “50/50 revenue split” and “UFC signoff on all Legend media deals to ensure
complementary with UFC deals.” In addition, “Legend shall work exclusively with UFC (no other promotions) on
these initiatives” and “UFC has first rights to recruit any Legend fighters. Legend fighters may not fight in any other
promotions outside of Legend (and their home countries) without UFC approval.” ZFL-2554757 (email); ZFL-
2554758 (draft cooperation framework).
294. See https://www.ufc.tv/category/fightlibrary. Indeed, Zuffa appears to have negotiated exclusive licenses to
use the vast majority of the content it puts on Fight Pass, leaving promoters with few other options for broadcast
revenue. See ZFL-1704928 (a May 2015 spreadsheet listing MMA Library licensing status). For example, Titan FC’s
exclusive license agreement with Zuffa pays Titan $75,000 per show put on Fight Pass; the payment increases only if
Zuffa exercises an option to extend the contract after the third year. Aronson Dep. at 82:14-83:10. See also Aronson
Ex. 13, 14 (Fight Pass License Agreement for Titan FC). This gave Titan FC a strong incentive not to compete directly
against Zuffa for talent or do anything else that might jeopardize their “excellent relationship with the UFC.” Aronson
Dep. at 51:9-12; 92:8-93:16. Indeed, as Dana White explained the strategy in a January 2014 text to Lorenzo Fertitta:
“Our deal should be just like our fight pass deals we should have locked up all the rights to all the famous fighters like
Ali, Foreman, etc[.] We should start thinking about literally owning fighting/combat sports[.]” ZFL-2699678.
statistics of Fighters associated with the “most prominent [MMA] organizations in the world,” 295
and is the “the official statistics provider to the UFC.” 296 As noted above, FightMetric data have
been used in prior academic work. 297 In addition, Joe Silva testified that FightMetric data were
perceived in the industry as “very credible.” 298 The second database used to measure the Relevant
Input Market is FightMatrix (not to be confused with FightMetric), which is a global MMA
Fighter ranking system that ranks MMA Fighters by weight class, including up to 650 Fighters per
weight class. 299 FightMatrix is recognized by Zuffa itself as an authoritative source of MMA
109. Under the “Tracked” measure, all Fighters who fought for an MMA promoter
included in the FightMetric database (which “tracks” Fighter performance) are (conservatively)
included in the Relevant Input Market. In addition to the MMA promoters covered in the
FightMetric data, I conservatively designate all Fighters associated with MMA promoters acquired
by Zuffa in this measure of the input market. 301 As seen in Table 2, the Fighters covered under this
measure of the Relevant Input Market include those affiliated with Affliction, Bellator, Dream,
EliteXC, Pride, Strikeforce, UFC, World Extreme Cagefighting, and World Fighting Alliance. As
295. E-mail from Remi Genauer, Director, FightMetric, to Economists Incorporated (Nov. 19, 2016, 19:48 ET).
296. FightMetric, About the Company, available at http://www fightmetric.com/company. See also Trevor
Collier, Andrew Johnson & John Ruggiero, Aggression in Mixed Martial Arts: An Analysis of the Likelihood of
Winning a Decision, in 4 VIOLENCE AND AGGRESSION IN SPORTING CONTESTS, SPORTS ECONOMICS, MANAGEMENT
AND POLICY SERIES, 97-109, 98 (Springer 2011).
297. See Part I.B.
298. Silva Dep. at 162:19-164:18.
299. According to its website, the FightMatrix ratings system “takes an unbiased, objective look at all available
professional MMA results from day 1 to the present.” See http://www.fightmatrix.com/faq/.
300. See Deposition of Javier Vasquez, February 14, 2017 at 67, Exhibits 42-44.
301. Record evidence indicates that Zuffa’s acquisitions targeted perceived rivals, or promoters viewed as
potential rivals. See Part II.A (summarizing Zuffa’s horizontal acquisitions). This definition is likely over-inclusive: A
potential future rival is not the same as an actual rival. In addition, there is evidence that Zuffa sometimes acquired
rivals to “to serve as a venue in which to groom up-and-coming talent”—that is, to serve a more complementary role.
See Ken Pishna & Ivan Trembow, UFC Buying World Extreme Cagefighting, MMA WEEKLY, Dec. 11, 2006.
seen below, with the exception of Bellator, all of these promoters have gone out of business or
110. The second, “Ranked” measure expands the Relevant Input Market relative to the
first measure: The Ranked measure includes (1) all Fighters encompassed by the “Tracked”
measure; and (2) any Fighter ranked in the FightMatrix database. In addition, the Ranked measure
also includes the Asian MMA promoter ONE Championship. ONE Championship has a large
presence in Asia, and, according to Zuffa, is the only international MMA promoter that potentially
competes with Zuffa for talent. 303 Including ONE Championship is conservative, given that ONE
Championship has made only limited inroads outside of Asia. 304 According to FightMatrix, even
302. Although EliteXC was not directly acquired by Zuffa, its parent, Pro Elite, was acquired by Strikeforce
shortly after EliteXC ceased promoting bouts. See Coker Tr. 23:4-8 (“We went out, we bought Pro Elite, and with
buying Pro Elite came 40, 50 top fighters from around the world.”). Thus, Zuffa ultimately realized the benefits of that
acquisition when it acquired Strikeforce in 2011.
303. See Part III.A.3, infra.
304. For example, only a single Fighter from ONE Championship appears among the 165 slots delineating top-
ranked MMA Fighters in the USA Today/MMA Junkie ratings. See http://mmajunkie.com/rankings (accessed April 18,
2017).
an undefeated record in ONE Championship does not necessarily advance a Fighter’s rank, due to
111. It bears emphasis that both the “Tracked and “Ranked” measures of the Relevant
Input Market are quite conservative, given that even the most prominent non-Zuffa promoters are
inferior substitutes from the perspective of Fighters. The list of MMA promoters associated with
Fighters included in the Ranked measure includes the World Series of Fighting, M-1 Challenge,
King of the Cage, and many others; the list of MMA promoters varies substantially over time: As
of 2001, there were 83 MMA promoters. By 2009, there were 429. As of 2016, there were 213
MMA promoters associated with Fighters included in the Ranked measure. 306
112. Under the “Headliner” measure, the Relevant Input Submarket includes each of the
top fifteen Fighters in any of the ten major MMA weight classes tracked in the USA Today/MMA
Junkie rankings, according to the FightMatrix ranking database. 307 There are no close substitutes
for Headliners. As explained in Part I.A, MMA promoters rely on top-ranked Fighters at the Top
of the Card to draw audiences and viewers to Live MMA Events; for the same reason, fighting at
the Top of the Card is the primary career objective for an MMA Fighter. This objective can be
113. Additional evidence confirms that Zuffa relies heavily on Headliners to fill the Top
of the Card: In 129 of the 159 UFC PPV events from 2005 to May 2017, both of the Fighters at the
305. FightMatrix notes that “Fighters not in the UFC do not always have access to top competition. This can lead
to a gradual decline in rankings,” for example, “#33 Ben Askren has gone undefeated in One Championship, but his
ranking points have fallen from 376, when he signed, all the way down to 169.” Richard Mann, “Ranking Points for
Highest Ranked Fighter by Promotion” FightMatrix (August 3, 2016).
306. To clarify, not all Fighters affiliated with these promoters are included; only those that are ranked by
FightMatrix are in the Relevant Input Market.
307. The FightMatrix rankings are used instead of the USA Today/MMA Junkie rankings because the former are
consistently available over time.
308. Silva Dep. 129:10-21 (“Beating guys with crappy records won’t convince anyone [a fighter is] ready for the
big leagues.”); Margules Dep. at 85:17-86:13 (“Only … if they are ranked in the top 15 will they qualify.”).
Top of the Card were Headliners. At least one of the Fighters at the Top of the Card was a
Headliner in 158 of these 159 events. 309 Similarly, a Sports Business Journal analysis cited by
History tells us that for a pay-per-view to do big numbers, it needs marquee names: Chuck
Liddell, Brock Lesnar, Rampage Jackson and Georges St-Pierre. Even if you don’t know an
arm bar from a rear naked choke, you’ve probably heard of those four, who from 2006 to
today carried the highest pay-per-view averages of any main event fighter in MMA. During
that span, those four fighters [] accounted for 17 of the 25 highest-selling pay-per-views.
They held 11 of the top 14 slots, eight of the top 10, and six of the seven events that have
exceeded a million…Exciting fights and a strong UFC brand can drive ratings and sell
tickets, but sales estimates from the last nine years make it clear that it’s the name at the
top of the card that sells pay-per-views…“Stars matter when you look at buys, and that’s
not exclusive to the UFC,” said Alex Kaplan, vice president of revenue and product
marketing at DirecTV, who is responsible for pay-per-view at the company. 310
The significance of Headliners to Zuffa is further confirmed by Joe Silva’s use of consensus
rankings in 2011—showing that UFC Fighters accounted for the majority of the top twenty-five
and top ten Fighters in each of seven weight classes—to demonstrate the UFC’s dominance to
114. The Headliner measure of the Relevant Input Submarket is conservative because it
includes Fighters associated with many non-Zuffa promoters. The list of MMA promoters
associated with Fighters included in the Relevant Input Submarket includes Affliction, EliteXC,
Gladiator Challenge, King of the Cage, Pancreas, and more than 250 others from 2001 to 2016. As
of 2001, there were 47 MMA promoters associated with Fighters included in the Relevant Input
Submarket. By 2009, there were 44. As of 2016, only six remained: UFC, Bellator, Invicta, M-1
309. Over this time period, more than 80 percent of Zuffa’s Event Revenue was derived from PPV events.
310. WME_ZUFFA_00031950-60 (emphasis added).
311. ZUF-00085896-901 (2011 e-mail from Joe Silva to Dana White, Lorenzo Fertitta, and Sean Shelby, showing
that UFC Fighters account for the majority of the top twenty-five and top ten Fighters in each of seven weight classes;
subject line reads “We Own MMA”).
qualitatively from MMA in that the former consists of staged events with preordained outcomes.
Unlike MMA Fighters, professional wrestlers are “trained stunt performers,” 317 with a format that
“eschews real competition for scripted plotlines.” 318 MMA promoter contracts reflect a lack of
competition with professional wrestling. For example, a 2007 agreement between Zuffa and the
Endeavor Agency prohibits Endeavor from representing other MMA businesses, but explicitly
television license deal between WEC and Setanta Australia contains exclusivity language, but the
language does not apply to WWE (or to boxing). 320 MMA has also exhibited much faster growth
and greater profitability than professional wrestling, indicating that wrestling likely could not lure
118. Record evidence also indicates that customers view other, non-combat sports as
complements to Live MMA Events, rather than economic substitutes. Part of a 2011 agreement
between Zuffa and Fox included “intensive cross-promotion between UFC and FOX’s
317. Andrew Brennan, Professional Wrestlers Must Realize They Can’t Enter The MMA Or The UFC; It’s Not A
Scripted Fight, FORBES, Oct. 31, 2016.
318. Chris Smith, UFC Vs. WWE: How Much More Is Real Fighting Worth?, FORBES, July 12, 2016.
319. “Endeavor shall not represent any companies which own or control mixed martial arts businesses which
directly compete with [Zuffa’s promotions, Pride, WEC, and UFC]. By way of example only, businesses which
Endeavor could not represent during the term would include K-1 or Elite XC, but Endeavor may continue to represent
World Wrestling Entertainment.” See ZFL-2613931 at 32 (Pride agreement); ZFL-2613939 at 40 (WEC Agreement),
ZFL-2613946 at 47 (UFC Agreement).
320. See ZFL-2614687 at 88.
321. Chris Smith, UFC vs. WWE: How Much More Is Real Fighting Worth?, FORBES, July 12, 2016.
programming, likely including NFL, NASCAR and MLB broadcasts.” 322 Economic complements
cannot constrain the pricing of each other, and thus are not part of the same product market. 323
119. Finally, Live MMA Events featuring Fighters outside the Relevant Input Market are
not reasonable substitutes for Zuffa events. Non-Zuffa MMA promoters are poor substitutes to
Zuffa from the perspective of Fighters. 324 The same holds true from the perspective of audiences:
As explained in Part III.C.1 (below), non-Zuffa promotions lack access, among other things, to
the perspective of audiences. It bears emphasis that this definition of the Relevant Output Market
is conservative, for the same reason that my definition of the Relevant Input Market is
conservative: Events promoted by even the most prominent non-Zuffa promoters are distant
Asian MMA fans who have been pining for authentic Asian MMA action and on a world-
stage[.]” 329 Conversely, Cui stated in another interview that Fighters in the mold of UFC superstar
122. Starting with a single event in 2011, ONE Championship has grown rapidly in Asia,
and is scheduled to host 24 events in 2017. 331 Its website touts its “90% market share in Asia,” 332
“90% of the best world champions and fighters in Asia,” 333 and claims an “avid MMA fan base
across top Asian markets” of approximately 563 million. 334 As ONE Chairman Chatri Sityodtong
stated in an interview, “[w]e are focused on unearthing the greatest martial arts stars in each
country, so every country has a world champion, one of the best martial artists in the world to root
for that really links to their own history, heritage and their values....” 335 Sean Shelby, a
matchmaker with the UFC, also stated that fight promotions in Asia could have “their own set of
329. James Edwards, ONE Championship and UFC is the story of East and West in the MMA market,
INDEPENDENT, April 19, 2016 (“UFC has got a 90-percent market share in the [United] [S]tates. We’ve got a 90-
percent market share in Asia…[W]e’ve catered to our audience - the Asian MMA fans who have been pining for
authentic Asian MMA action and on a world-stage, to be showcased in front of potentially a billion viewers
worldwide.” When Cui referenced “the 1 billion viewers, he was speaking in part about the new TV deal they [ONE
FC] announced last weekend with the largest TV broadcaster in the Philippines, ABS-CBN.”).
330. Nick Baldwin, CEO Victor Cui explains why Conor McGregor isn’t suitable for ONE Championship,
BLOODY ELBOW, May 22, 2017, available at http://www.bloodyelbow.com/2017/5/22/15677574/ceo-victor-cui-
explains-why-conor-mcgregor-isnt-suitable-for-one-championship-mma-ufc-news (“A big part of what drives the
spirit of ONE Championship is really just the belief that martial arts makes the world a better place. Of course want it
to be successful business, of course we want to continue to grow in a successful business enterprise. That philosophy
of we’re making the world a better place permeates throughout the entire organization. I think it’s something our fans
really appreciate in Asia.”). According to ONE Championship chairman Chatri Sityodtong, McGregor’s demeanor
could be problematic for an Asian promoter. Id. (“Let’s say we had a press conference in China and he [McGregor]
threw a water bottle, I would go to jail. They’d put me in jail. I’m not kidding around.”).
331. See Tony Mogan, ONE Championship: Asia’s MMA powerhouse plays up its differences to UFC in battle
for supremacy, INTERNATIONAL BUSINESS TIMES, Jan. 21, 2017 (“UFC’s 4bn takeover symbolised the huge rise in
MMA in 2016 but that growth has not spread to the East. In 2014, they held five events in the continent. In 2015 it
shrunk to three. In 2016, it was just one. None are on the horizon for 2017. ONE, meanwhile hosted a single event in
2011 while in 2017 it will be 24.”).
332. See https://onefc.com/about-one/.
333. Id.
334. Id.
335. See Mogan, supra.
stand point (e.g. actively competing for talent with UFC in the region, and not allowing Fighters to
freely jump to UFC if offered a contract from us).” 345 ONE Championship has “occasionally
serv[ed] as a player for high-value free agents like former Bellator champion Ben Askren.” 346 Yet
Askren has seen his ranking slip, despite an undefeated record at ONE Championship, due to a
indicating that ONE Championship did not see itself as a direct competitor to Zuffa. 348
Furthermore, a Zuffa Executive Vice President and managing Director of UFC in Asia was quoted
in May 2013 as saying that he did not view ONE Championship as a competitor, but instead as a
minor league helping to increase interest in the sport. 349 Thus, the extent to which Fighters
345. Id.
346. Shaun Al-Shatti, ONE Championship’s Victor Cui: ‘We’ve gotten a lot of interest’ since UFC-Reebok deal,
MMA FIGHTING, May 21, 2015.
347. Richard Mann, Ranking Points for Highest Ranked Fighter by Promotion, FIGHTMATRIX. Aug. 3, 2016. See
also Shaun Al-Shatti, Where in the world has Ben Askren been? Well, it’s complicated… MMA FIGHTING (April 28,
2017) (“When Ben Askren signed with ONE Championship in late 2013, he was widely considered to be one of the
most talented welterweight fighters in the world. He quickly did what many observers expected him to do, too, blitzing
through back-to-back opponents to capture the ONE welterweight title with ease by mid-2014. But these days, nearly
three years after he became ONE’s welterweight king, Askren still has yet to defend his belt in any official capacity,
and not for a lack of trying.”).
348. In 2011, Victor Cui of One League wrote that “I believe that ONE FC is well positioned to be a feeder
organization to UFC and if you have an interest in any of our fighters, I would be more than willing to offer them to
UFC and to support you in as many ways possible.” See ZFL-1501599. Also, when Sean Shelby was trying to
organize a UFC fight in Singapore in 2013, he wrote that although “it’s not normally possible” to get One FC Fighters
released from their contract he would “see if I can pull [Leandro] Issa out from his one FC fight” to fight for Zuffa in
Singapore. ZFL-1886668; ZFl-1897060 at 158.
349. Zuffa’s Response to Plaintiffs’ Request for Admission No. 256, 263. In addition, when Mark Fischer at UFC
Asia noted in August 2012 that One FC “reportedly …[has] ‘teams’ of people running around Asia trying to lock up
fighters to 3-year or 5-year contracts, to corner the market vs all comers (including us)” that revelation appeared to
cause little concern among Zuffa executives. See ZFL-2552141 at 41-42 (“Anyway, if you guys don’t see a problem
with all this, then neither do I.”).
Market, as noted above, I conservatively include ONE Championship in my Ranked measure (the
128. To calculate Zuffa Fighters’ share of the Relevant Input Market and Submarket (or
Zuffa’s share as a buyer), I divided the number of Zuffa’s MMA Fighters by the total number of
MMA Fighters in the Relevant Input Market and Submarket. Fighters in the Relevant Input Market
were weighted by their associated promoters’ PPV and gate revenues per Fighter, to reflect
differences in the average quality of Fighters across different MMA promoters. 350 Using
unweighted Fighter counts makes little economic sense, given that Fighters (even within the
defined Relevant Input Market and Submarket) are not homogeneous, and instead vary in their
ability to attract viewers—and hence their value to an MMA promoter. For the Relevant Input
Submarket, I also calculate an alternative metric in which Fighters are ranked by the inverse of
129.
350. This approach is conservative because revenue data are available only for (relatively) large non-Zuffa MMA
promotions such as Bellator and Strikeforce, so that Fighters from smaller promotions (which lack such data) receive
the same weight as if they were affiliated with a larger promotion. Using public sources, I constructed a database of
PPV revenue and gate revenue by promoter. Zuffa Fighters were weighted by the average revenue per Zuffa Fighter.
Non-Zuffa Fighters were weighted by the average revenue per Fighter for non-Zuffa promoters. In the case of ONE
Championship, I conservatively assigned Fighters a weight equal to 25 percent of Zuffa Fighters’ weight, in light of
evidence that ONE’s valuation was reportedly “approaching” a valuation of $1B at approximately the same point in
time that Zuffa sold for $4B. See Appendix 2 for details. See also James Goyder, ONE Championship receives
multimillion dollar investment from Singapore fund, MMA MANIA, July 14, 2016 (“[T]he company is on course for a
billion-dollar valuation…The UFC was sold for $4 billion to a group led by WME-IMG and ONE Championship is on
course for an IPO in the next 12 to 18 months.”).
130. Zuffa’s market share in the Relevant Output Market is the ratio of Zuffa’s total
revenue in the Relevant Output Market to the total revenues of all (Zuffa and non-Zuffa) MMA
promoters in the Relevant Output Market. Although revenue data are not available for all non-
Zuffa promoters in the Relevant Output Market, the available estimates of Zuffa’s market share
from industry analysts and press reports consistently indicate that Zuffa’s market share has been
131.
352. James Edwards, ONE Championship and UFC is the story of East and West in the MMA market,
INDEPENDENT, April 19, 2016 (“UFC has got a 90-percent market share in the [United] [S]tates. We’ve got a 90-
percent market share in Asia….”). See also ZFL-1241786 at 789 (July 2012 presentation by Brazilian Bank BTG
Pactual estimating UFC has “more than 90% market share” and Elite XC, HD Net, Dream, Yamma, and StrikeForce
account for 10%); ZUF-00401766-779 at 768 (April 2010 presentation by KO Associates asserts UFC: 90% market
share by revenue”); ZUF-00421380-97 (August 2009 Strikeforce business plan cites Forbes Magazine for
estimate that UFC “account[s] for 85-90% of industry revenues”); Matthew Miller, Ultimate Cash Machine, FORBES,
April 17, 2008, available at https://www.forbes.com/forbes/2008/0505/080.html (“UFC is estimated to control 90% of
the mixed martial arts industry.”). See also ZUF-00157199 (internal UFC email from Randy Klein to Kirk Hendrick
(January 7, 2009), citing market share estimate of 90 percent). See also ZIF-00401766-779 (“Mixed Martial Arts: UFC
vs. Strikeforce” by KO Associates (April 28, 2010)) at 798 (showing market share estimate of 90 percent).
353. These figures are conservative because they are limited to Zuffa’s event revenue for events in North
America, and exclude all non-event-specific sponsorship revenue, which Zuffa does not disaggregate by geographic
region. At the same time, the data reflect all revenue recorded for Strikeforce and Bellator, regardless of source.
regularly dismissed the significance of other MMA promoters generally. 362 Similarly, a 2012
Deutsche Bank Report dismissed the competitive significance of other MMA promoters generally
In recent years in MMA, promotions that have tried to position themselves as the UFC’s
primary competitor, such as Bellator, have always failed. Bellator’s most recent event at
UC Irvine’s Bren Center attracted only 4,000 people…None of the Bellator fighters are
household names. 363
135. Other promoters disavow any attempt to compete directly with Zuffa. In an investor
prospectus dated September 2, 2016, Alliance MMA (formed through acquisitions of regional
promoters) states that “[u]nder the Alliance MMA umbrella, we expect that our regional MMA
promotions will identify and cultivate the next generation of UFC and other premier MMA
promotion champions….” 364 The Alliance prospectus clarifies its status as a “developmental
organization” that explicitly avoids even the appearance of direct competition with a “premier
[I]t is our intention to serve as a developmental organization for the UFC and other premier
national MMA promotions in the same fashion as college athletic programs serve as
“feeders” to professional sports leagues] … [s]hould the UFC or another premier national
MMA promotion view us as a threat they could use their significantly greater resources to
frustrate our business and growth strategy and materially and adversely affect our
business. 365
the greatest Christmas present of all: Bellator’s champ would jump from number ten to number one. Even just giving
their former champion an immediate title shot puts Bellator on a level they don’t deserve.” Silva Dep. at 216:21-217:5;
Silva Exh. 16. He further explained that would “benefit Bellator” because “every promotion wants to be able to claim
to be number one, to claim that you have the best fighters. That gives some teeth to that claim.” Id. at 220:8-12.
362. In an interview with FanHouse in December 2009, Dana White said “Let me ask you a question … Do you
think that there’s any guy we can’t get that we want? Other than Fedor [Emelianenko]?...But everyone else that we’ve
wanted, we got.” ZFL-2461790 at 90. Feb. 12, 2011 email from Joe Silva to Dana White, subject line, “We Own
MMA”, lists the MMA rankings from USA Today/SB Nation Consensus Rankings, which presents the top 25 Fighters
in MMA for the seven major weight classes, and lists the ratio of top Fighters in each weight class controlled by Zuffa.
ZUF-00085896. ZFL-2559292, 2010, Dana White news article quote noting that “other promotions…are not deep
enough. There are not enough good fighters over there for them to challenge. There is here [the UFC], that’s what
makes it fun and interesting.”
363. DB-ZUFFA-00006389 at 439.
364. http://www.nasdaq.com/markets/ipos/filing.ashx?filingid=11067618#V448288 424B1 HTM A 003
365. Id.
137.
370. Fighters that can no longer compete in (or are simply “cut” from) the UFC often end up in other “minor
league” promotions. For example, Jeff Aronson of Titan FC explained that “No one is going to take on Zuffa and win
at this point. It’s just not going to happen, and I have no aspirations to do that. I am very happy to do that carving my
place and my niche giving young fighters the best platform in the word to shine on, and giving vets the opportunity to
come and shine.” See also Aronson Dep. at 31:10-32:4; ZFL-1112933 at 33 (“Bellator has old ex UFC fighters that are
way past their prime.”); Ethan Finkelstein, WSOF New PPV Model to Award 50 Percent to Fighters, FANSIDED, Sept.
23, 2014 (“Considering that World Series of Fighting’s biggest names are currently former UFC contenders (notice
how I did not say champions), the situation looks bleak for now.”).
371. WME-ZUFFA-00001150 at *7.
372. Id.
373. Id.
374. Id.
375. Id.
There was a time when it was neck-and-neck. That time is over. There were times when we
were in dogfights, but everybody needs to just concede and realize we’re the [expletive]
NFL. Period. End of story. 376
In a May 2010 email string, Edward Muncey puts together bullet points “that reinforce[] why
Yahoo! Sports recognizes the UFC brand as the eminent entity in the sport of MMA.” The first
Like the other major sports properties (e.g. NFL, MLB, NBA, NHL) in their respective
categories, the UFC has no close 2nd place. As the NFL is the defining brand of Football,
377
UFC is the defining brand of mixed martial arts.
376. John Morgan, Dana White stands by ‘pay for rankings’ claim, says UFC is the NFL of MMA, MMA JUNKIE,
June 14, 2010, available at http://mmajunkie.com/2010/06/dana-white-stands-by-pay-for-rankings-claim-says-ufc-is-
the-nfl-of-mixed-martial-arts.
377. See ZUF-00395941.
138. In an interview with ESPN’s “Outside the Lines” released by Zuffa on January 16,
2012, Lorenzo Fertitta stated “[t]here never has been a comparable outlet [to the UFC]. There
never has been. When has there ever been a comparable outlet? We’ve dominated this, this sport,
alright? We’ve dominated the space[.]” 378 Similarly, in March 2014, at The Leaders Sport Summit
[A]t the end of the day, we really have kind of become the gold standard in a sense.
When you look at the top 10 in every division, we’ve got every fighter under our
umbrella. All the fighters want to be with us because they want to fight the best
competition. So from that standpoint, I think there is really—the competition isn’t really
379
relevant in that sense[.]
Third-party evaluators have also emphasized Zuffa’s market dominance, and the profitability that
comes with it. A 2009 Deutsche Bank report notes that “UFC holds the dominant market position
within the sport and continues to do so even as a highly fragmented group of competitors have
entered the market in an attempt to emulate UFC’s success.” 380 A 2012 Deutsche Bank report
states that the 2007 PRIDE acquisition “solidified UFC’s #1 position in the MMA market,” 381
140. In summary, the combination of dominant market shares and barriers to entry
allows me to conclude that Zuffa has significant monopoly power in the Relevant Output Market
9. All Indirect Evidence and Analysis of Zuffa’s Market Power Is Common to the
Classes
141. All of the indirect evidence of Zuffa’s market power, and my analysis of it, is
common to the Classes as a whole. If I were asked to analyze indirect evidence of market power
for any single member of either Class, the evidence and analysis would be the same.
142. The direct evidence reviewed here demonstrates that Zuffa has monopoly power
over Live MMA Events and monopsony power with respect to its Fighters. Direct evidence of
compensation, and to restrict the supply of Fighter services. Direct evidence of Zuffa’s monopoly
power includes evidence of Zuffa’s ability to profitably exercise its pricing power over Live MMA
Events, and to restrict the supply of Live MMA Events. Finally, there is direct evidence of Zuffa’s
143. The ability to suppress compensation below competitive levels constitutes direct
evidence of Zuffa’s substantial market power, and in particular, monopsony power. In Part III.D
below, I use regression analysis to show that there is a negative relationship between Fighter
compensation (measured as a share of event revenues) and the extent to which Zuffa’s long-term
exclusive contracts foreclosed its Fighters from rivals (a measure of Zuffa’s market power). This
analysis shows that, as the share of Fighters (key inputs to an MMA promotion) foreclosed by
Zuffa increases, Zuffa is able to pay its Fighters a lower share of its event revenues. The result is
highly significant in both a statistical and an economic sense, and the result holds after controlling
for a wide range of factors that may also influence Fighter compensation. Nothing in the record
indicates that Zuffa suffered significant Fighter defections as a result of reducing the share of
revenue paid to Fighters, suggesting that its exercise of monopsony power was profitable.
evidence that Zuffa has reduced the share of revenue paid to Fighters over time; (2) evidence that
Zuffa pays a significantly lower share of its revenues than Strikeforce (before the acquisition) or
Bellator; and (3) a natural experiment in which Zuffa unilaterally restricted Fighter compensation
by imposing a new sponsorship tax. 387 Again, nothing in the record indicates that Zuffa suffered
significant Fighter defections, suggesting that these exercises of monopsony power were
profitable.
145. The ability to restrict the supply of Fighter services below competitive levels
constitutes additional direct evidence of monopsony power. Zuffa restricted the supply of Fighter
services by consistently maintaining significantly more Fighters under contract than it could use,
creating forced periods of inactivity during which Fighters were not paid and were not available to
other MMA promoters to fight. In addition, Zuffa pursued a strategy of restricting the number of
146. If Zuffa lacked monopsony power, the excess Fighters on Zuffa’s roster could have
earned income from other promoters, rather than being bound to Zuffa during periods of forced
inactivity (during which they did not get paid). Similarly, in the absence of monopsony power,
Zuffa could not have restricted Fighter career paths, because Fighters would have defected to other
MMA promoters.
147.
. 389
148.
successful MMA events in the Relevant Output Market. The Challenged Conduct blocked Zuffa’s
would-be rivals from access to this critical input, and also impaired rivals in other ways. In this
way, the Challenged Conduct guaranteed that would-be rivals would not pose a significant
competitive threat to Zuffa. 393 Some of these would-be rivals have been acquired by Zuffa, others
have gone out of business, and others have been relegated to feeder leagues. 394 Both Zuffa and
third parties recognize that the Challenged Conduct has been so successful in excluding rivals that
Zuffa has no close competitors remaining in the market today. 395 The revenues and market shares
150. In summary, the direct evidence reviewed above allows me to conclude that Zuffa
5. All Direct Evidence and Analysis of Zuffa’s Market Power Is Common to the
Classes
151. All of the direct evidence of Zuffa’s market power, and my analysis of it, is
common to the Classes as a whole. If I were asked to analyze direct evidence of market power for
any single member of either Class, the evidence and analysis would be the same.
152. Given that Zuffa has substantial market power, the next question to consider is
whether the Challenged Conduct allowed Zuffa to exercise its market power to significantly
foreclose competition. I analyze four factors that inform this question. First, the conduct at issue
must totally or partially prevent competitors from accessing critical inputs, thereby preventing
rivals from competing effectively. 397 As explained below, in order to stage successful Live MMA
Events in the Relevant Output Market, access to a broad stable of high-quality MMA Fighters is
essential. But the Challenged Conduct ensured that Zuffa’s would-be rivals lacked access to this
critical input, and also impaired rivals in other ways. Thus, the Challenged Conduct guaranteed
that would-be rivals would not pose a significant competitive threat to Zuffa (as Zuffa and third
153. Second, if the resulting foreclosure represents a substantial share of the relevant
markets at issue, that would be a further indication that such foreclosure would have adverse
competitive effects. As explained below, the shares of the Relevant Input Market and the Relevant
Input Submarket foreclosed by the Challenged Conduct are well in excess of the 20-30 percent
thresholds that antitrust scholars have found are sufficient “to infer anticompetitive effects.” 398
154. Third, I understand that some courts have considered whether the duration of the
contracts at issue is sufficient to “prevent meaningful competition by rivals.” 399 That is so here,
given Zuffa’s ability to make its exclusionary terms in most of its Fighter contracts effectively
perpetual, given the ratio of the duration of the agreements to the average Fighter’s MMA career,
397. See, e.g., Salop, supra, at 376; see also Elhauge at 321-322.
398. See HERBERT HOVENKAMP, XI ANTITRUST LAW ¶1821, at 152, 160, 164-65 (1998). See also Einer Elhauge,
Tying, Bundled Discounts, and the Death of the Single Monopoly Profit Theory, 123 HARV. L. REV. 469 (2009) (“it
makes sense (when effects are not directly proven) to require the same 20-30% foreclosure share threshold that is
required to infer anticompetitive effects from exclusive dealing”).
399. ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 277 (3d Cir. 2012) [hereafter “ZF Meritor v. Eaton”].
and given that Zuffa’s contract expirations were staggered, further ensuring that other MMA
promoters could never have access to a critical mass of top-level Fighters at any given time
155. Fourth, I understand that courts may also consider evidence that the dominant firm
engaged in coercive behavior, and (relatedly) evidence on the ability of customers to terminate the
contracts. 400 These conditions are also satisfied, given (1) Zuffa’s ability to exploit provisions in
Fighter contracts to retain virtually any Fighter it desired; and (2) the fact that Zuffa’s Fighter
contracts contain one-way ratchets, giving Zuffa unilateral authority to bind Fighters to exclusive
1. The Challenged Conduct Blocked Rivals from Access to Key Inputs Necessary
for a Successful MMA Promotion
156. As explained in Parts I.A and III.A.1, MMA promoters rely on Headliners at the
Top of the Card to draw audiences and viewers to Live MMA Events. Of course, access to a single
Headliner would be insufficient for even a single bout; MMA promoters need access to
competitive pairings of Fighters. (In economic terms, Fighters are perfect complements in the
MMA bout production function.) Nor would access to a single pair of Headliners be sufficient: To
produce a stream of successful Live MMA Events over time, multiple pairings of Headliners are
obviously necessary. Further, not all Headliners can be matched against each other. For example, a
heavyweight Fighter cannot be matched against a lightweight. 401 Even two Headliners of the same
400. Id.
401. See Unified Rules and Other Important Regulations of Mixed Martial Arts at § 2, available at
http://www.ufc.com/discover/sport/rules-and-regulations#2 (“In non-championship fights, there shall be allowed a 1
pound weigh allowance. In championship fights, the participants must weigh no more than that permitted for the
relevant weight division.”); Deposition of Joseph Silva at 130:18-25 (“I have to convince athletic commissions that
this guy is reasonable. Especially at the heavyweight division, I have less guys, so … for him to come in, I have less of
a choice who to match him up against…”). See, also Hendrick 30(b)(6) V.I Tr. at 217:17-218:10 (stating that Zuffa
could not offer a strawweight a heavyweight fight because it is “not offering a legitimate fight”).
weight class may be a poor match if there is too much disparity in their relative rankings, or if they
have fought each other too recently. 402 As one review of the existing literature observes,
Superstars in the UFC don’t always draw high numbers; they need a competitive opponent
in order to garner the desired high buy rates. Anderson Silva, one of the UFC’s more
popular champions, drew only 300,000 buys in a squash match against Patrick Cote, but
drew 725,000 buys facing a much more threatening Vitor Belfort. 403
access to a stable of Headliners allows a promotion to create new Headliners. More generally, the
list of Headliners is fluid over time, with Fighters’ relative rankings shifting constantly with the
outcome of bouts, Fighter inactivity, injuries, retirement, and so on. 404 Therefore, access to a
sufficiently broad pool of top-level Fighters (who have the potential to become Headliners) is also
important to create and sustain a profitable MMA promotion capable of competing with the UFC.
158.
402. See, e.g., Silva Dep. 95:18-24 (“Q. [H]ow would you describe or define the term ‘contender’? A. That if
you have rankings as we have for some while now, it’s whoever the higher ranked fighters are who have not recently
fought the person who is already champion, would be the highest available contenders.”); id. at 94:25-95:13 (“Q. Now,
is it fair to say that if you have a top-ranked fighter on your roster, you want to try to have that top-ranked fighter fight
someone who is at least close to that fighter in rank? A. Yes, ideally. Q. And one of the reasons for that is to create a
competitive match-up; is that right? A. Yes. Also to help create more consensus contenders. When people go, well,
who should fight for the title next, well, if you go, these two high-ranked guys fought each other, and this was the
victor, it would make sense for him to… get a title shot soon.”).
403. McGowan & Mahon, supra, at 1036.
404. For example, the FightMatrix and USA Today/MMA Junkie rankings are generally updated weekly or
biweekly. See http://mmajunkie.com/category/mma-rankings (generally showing biweekly updates); see also
http://www fightmatrix.com/faq/ (“We usually update every Sunday or Monday.”).
Strikeforce, summarizing a meeting with Zuffa executives regarding the potential sale of
…he [White] would come guns a blazing now to steal our fighters. He said we were not
close to being profitable because we didn’t have enough fighters in our stable and that we
would feel the pain of his full attention if we didn’t sell. 426
Zuffa’s horizontal acquisitions and its Fighter contracts were mutually reinforcing. The
acquisitions bolstered the exclusionary effects of Zuffa’s Fighter contracts, placing more and more
top Fighters under exclusive contracts, thereby making it still more difficult for surviving MMA
promoters to compete effectively. Zuffa’s horizontal acquisitions deprived would-be rivals of the
acquired rosters. Once Zuffa acquires a roster of Fighters, those Fighters become subjected to its
exclusionary contracts, and the remaining non-Zuffa promoters are foreclosed from this pool of
talent. As Kurt Otto, President and founder of a now defunct MMA promotion called the IFL,
testified:
Q: Do you have an opinion about whether Zuffa’s acquisition of Pride and WEC and WFA,
in or about 2006 or 2007, made it more difficult or less difficult to compete with the UFC?
A: Well, you tell me. If I need to go get fighters that are bigger names, they’re not in the
woods somewhere up, in a tree, hiding, they’re in a fight organization. And if they’re
locked up in a contract prematurely or a contract that was transferred and assumed because
of the acquisition, I have no shot of getting that fighter. 427
163. The acquired rosters included several highly ranked Fighters. As seen in Figure 1 of
Part III.A.1, Zuffa’s share of the Headliner Submarket has increased steadily in the wake of the
Strikeforce acquisition, to more than 80 percent. According to FightMatrix, Zuffa has accounted
for at least fourteen of the top fifteen pound-for-pound Fighters worldwide since late 2010.
165. As explained in Part II.A.1 above, after the Strikeforce acquisition, Zuffa’s share of
the Relevant Input Market rose to over 90 percent under the Tracked measure, to over 80 percent
under the Headliner definition, and to over 70 percent under the Ranked measure. The Herfindahl-
Hirschman Index (“HHI”) for the Relevant Input Market and Submarket therefore exceeds 8,100
under the Tracked measure, 432 exceeds 6,400 under the Headliner Submarket, 433 and exceeds 4,900
under the Ranked measure. 434 Each of these HHI values fall well above 2,500, the threshold for a
166. The remaining components of the Challenged Conduct further reinforced its
exclusionary effects on rivals. As explained in Part II.A.2 above, record evidence indicates that the
intent and effect of Zuffa’s counter-programming was to harm competition by impairing rivals:
Although counter-programming “was not profitable in itself,” 436 it “worked by preventing new
competitors from both achieving profitable operations and recouping their investments in high-
profile fighters.” 437 As explained in Part II.A.3 above, record evidence suggests that Zuffa worked
with other MMA promoters to impair potential rivals by shutting off access to Fighters. As
explained in Part II.B.3 above, Zuffa also (1) prevented other MMA promoters from using clips of
Fighters’ past fights to promote Fighters who had left the UFC; 438 (2) prevented Fighters from
departing from the UFC without also losing their sponsorships; and (3) required venues, sponsors,
and broadcasters not do business with other MMA promoters as a condition for doing business
with Zuffa. All of this reinforced the exclusionary effects of the Challenged Conduct.
167. In this section, I present evidence demonstrating that Zuffa’s exclusive contracts
with Fighters substantially foreclosed competition. One of my foreclosure metrics is the share of
Headliners foreclosed by the Challenged Conduct. Given that Headliners are a critical input for
staging successful Live MMA Events, Zuffa’s foreclosure of Headliners impairs rivals and enables
Zuffa to exercise monopsony power over all Fighters in the Relevant Input Market. However,
given the uncertainty in determining which Fighters will become Headliners in the future, it is
logical that Zuffa would seek to foreclose a broad pool of top-level Fighters (who have the
potential to become Headliners) to ensure continued dominance over time. Indeed, Zuffa’s
exclusive contracts apply to all of its Fighters, not just the top-ranked Fighters. Accordingly, I
calculate Zuffa’s foreclosure of the Relevant Input Market (measured both ways), as well as the
168. As explained below, a large and increasing share of the Relevant Input Market
(between 68 percent and 98 percent during the Class Period) and the Relevant Input Submarket
(between 50 and 91 percent during the Class Period) has been foreclosed by the Challenged
Therefore, from Zuffa’s perspective it was “very important to be able to promote its fighters and its fights by using
video of fighters’ prior fights.” Silva Dep. at 25:2-4; 270:12-271:17.
Conduct. These foreclosure shares are well in excess of the 20-30 percent thresholds that antitrust
scholars have found are sufficient “to infer anticompetitive effects.” 439
169. To measure Zuffa’s overall foreclosure of the Relevant Input Market and
Submarket, I calculated the ratio of MMA Fighters foreclosed by Zuffa’s exclusionary Fighter
contracts to the total number of MMA Fighters in the Relevant Input Market (under both
measures) and Submarket. As in the market share calculations, Fighter counts are weighted by
170.
439. See HERBERT HOVENKAMP, XI ANTITRUST LAW ¶1821, at 152, 160, 164-65 (1998). See also Einer Elhauge,
Tying, Bundled Discounts, and the Death of the Single Monopoly Profit Theory, 123 HARV. L. REV. 469 (2009) (“it
makes sense (when effects are not directly proven) to require the same 20-30% foreclosure share threshold that is
required to infer anticompetitive effects from exclusive dealing”).
440
171. Under the second foreclosure definition, I conservatively classify Zuffa Fighters as
foreclosed if (1) the Fighter’s contract contained a champion’s clause (which all or virtually all
did), and (2) the contract had a sufficiently long duration of exclusivity. 441 Specifically, Fighters
were considered foreclosed if their contracts constrained them from fighting for and/or freely
negotiating with other MMA promoters for a period of at least 30 months. This represents an
economically significant share (the majority, or, in many cases, the entirety) of a Fighter’s
172. The 30-month threshold is conservative given that antitrust scholars have found that
exclusive contracts longer than twelve months in duration can have anticompetitive effects,
depending on the industry. 442 The 30-month threshold is also conservative given that Zuffa
routinely leveraged its bargaining power to induce Fighters to renew their contracts before the
prior contract had expired, as explained in Part II.C. For example, a Fighter forced to commit to
two sequential contracts of 20 months each is effectively foreclosed for 40 months, but would not
173.
ensuring that the agent would be made worse off by refusing them. 446 This can be accomplished by
exploiting a collective action problem, in which Fighters would be made individually worse off by
refusing Zuffa’s exclusionary terms, despite the fact that Fighters would be collectively better off
if Fighters coordinated in their refusal. 447 By this standard, Zuffa clearly engaged in coercive
behavior: As explained in Part II.C.1 above, Zuffa exploits its contract provisions to retain
virtually any Fighter it desired, and Fighters agreed to Zuffa’s terms because the Challenged
Conduct left them no better alternative. Similarly, the Challenged Conduct clearly involved
Fighters submitting to terms that asymmetrically restricted their ability to terminate their contracts:
As explained in Part II.B.1 above, Zuffa’s Fighter contracts contain one-way ratchets, giving
Zuffa, but not Fighters, the discretion to continue to enforce exclusivity or to discontinue the
contract if Zuffa had no further use for the Fighter. Moreover, Fighters were further restricted in
their ability to terminate the exclusive terms governing them, given Zuffa’s ability to leverage the
Challenged Conduct to renew and extend contracts, explained in Part II.C.1 above.
177. All of the evidence and analysis demonstrating that Zuffa foreclosed competition to
a significant degree is common to the Classes. If I were asked to analyze foreclosure for any single
member of either Class, the evidence and analysis would be the same.
178. Given that Zuffa had substantial market power and substantially foreclosed
competition, anticompetitive effects would be expected and can be inferred. Nevertheless, in this
section, I consider whether there is direct evidence that the Challenged Conduct generated
446. See, e.g., Ilya Segal & Michael Whinston, Naked Exclusion: Comment 90(1) AM. ECON. REV. 296-309
(2000).
447. Id.
foreclosure share increases, after controlling for other factors that might influence Fighter
Challenged Conduct restricted the supply of Fighter services in the Relevant Input Market and
Submarket, and (relatedly) the supply of Live MMA Events in the Relevant Output Market, in
179. I understand that some courts have found that the anticompetitive effects of the
conduct at issue should be “considered in light of any procompetitive effects.” 449 As explained in
Part VII below, the purported procompetitive justifications that Zuffa has proffered for the
Challenged Conduct in prior proceedings are unavailing. To the contrary, the experience of other
professional sports leagues suggests that halting (and remediation) of the Challenged Conduct
180. For the Bout Class, I estimated multivariate regression models in which the
dependent variable to be explained is the share of event revenue received by a given Fighter at a
given event, while the key independent variable of interest is Zuffa’s foreclosure share. For any
given bout in any given event, the total compensation each Fighter in the Bout Class receives can
be decomposed into four categories; these are (1) show and win purses, (2)
448. Salop, supra, at 376; 383 (“In the RRC foreclosure paradigm, the ultimate antitrust concern is not the harm
to the rivals, but rather the possible harm to consumers and competitive process from the resulting market power.”).
449. ZF Meritor v. Eaton at 24.
discretionary/performance pay, (3) PPV royalties, and (4) letters of agreement. 450 I define a
Fighter’s total event-level compensation (“Event Compensation”) as the sum across these four
categories.
181. The dependent variable in my regression model (“Fighter Share”) is equal to the
share of Zuffa’s event-specific revenue (“Event Revenue”) 451 paid to a given Fighter that
participated in a given event at a given point in time. Zuffa’s Event Revenues include revenues
from ticket sales, PPV and broadcasting fees, and other event-specific revenue streams. The
regression data set includes Fighter Shares for both Zuffa Fighters, and for Strikeforce Fighters
Sijt = β 0 + β i + β1 D jtz FS jt + β 2Winijt + β 3 HasRankijt + β 4 Rankijt + β 5 LOAijt + β 6 PPVijt + ∑ λk X ijtk + ε ijt (1.1)
k
Above, Sijt is the Fighter Share, equal to the ratio of each Fighter’s Event Compensation to Event
Revenue for Fighter i participating in event j at time t. The key variable of interest, FSt, is the share
of the Relevant Input Market or Submarket foreclosed by Zuffa as of time t. As explained in Part
III.C above, FSjt is defined as the ratio of MMA Fighters foreclosed by Zuffa’s exclusionary
contracts to the total number of MMA Fighters in the Relevant Input Market or Submarket, with
450. See Part I.B, supra; see also ZFL-0000003 (Zuffa Fighter compensation table).
451. The Event Revenues used in my regression analysis were calculated using Zuffa’s P&L statements, and
include Ticket Sales/Site Fees PPV/Broadcast Sales/Fees (including “Web Buys” and “Other”), event-specific
Merchandise, and event-specific Sponsorships.
452. The Appendix describes the construction of the regression data set, which makes use of all available data
from Zuffa at a sufficiently granular level to conduct my regression analysis, including the Strikeforce pre-acquisition
data produced by Zuffa. As explained below, the Strikeforce pre-acquisition data provide a benchmark for the share of
revenue that Fighters would receive in the but-for world.
Fighters weighted by PPV and gate revenues to reflect differences in the average quality of
183. The variable D jtz is set equal to one for all Zuffa events, and to zero for non-Zuffa
events (that is, Strikeforce events prior to Zuffa’s acquisition of Strikeforce). The coefficient β1
therefore captures two effects: (1) the effect of Zuffa’s increasing foreclosure share over time on
Zuffa Fighter Shares, relative to those of Zuffa Fighters in time periods with lower foreclosure
shares, after controlling for all other variables in the regression; and (2) the effect of Strikeforce
Fighter Shares prior to the acquisition exceeding Zuffa Fighter Shares (after controlling for all
other variables in the regression). Therefore, both the Strikeforce pre-acquisition Fighter Shares
and Zuffa Fighter Shares during periods of (relatively) low foreclosure effectively serve as
benchmarks for the Fighter Shares that Zuffa Fighters would have received in the but-for world.
As explained below, my regression results show that β1 is negative, and both statistically and
economically significant. This result confirms that Zuffa’s foreclosure of the Relevant Input
Market and Submarket suppressed compensation for the Bout Class: But for the Challenged
Conduct, Zuffa Fighter Shares would have been significantly higher. 454
453. My regression results are robust to different weighting schemes, even if Fighters are unweighted. In
particular, the regression shows a negative and statistically and economically significant relationship between Zuffa’s
foreclosure share and the Fighter Share of revenues if the foreclosure share is calculated in any of the following ways:
(1) weighting Fighters by revenue per Fighter; (2) weighting Fighters by the inverse of the Fighter’s rank; or (3)
simply using an unweighted count of Fighters.
454. Using Strikeforce pre-acquisition Fighter Shares as a benchmark is consistent with elementary economics,
which shows that competitive firms pay labor a share of revenue commensurate with labor’s productivity, based on the
marginal product of labor. See, e.g., ROY RUFFIN & PAUL GREGORY, PRINCIPLES OF MICROECONOMICS 331-336
(Harper Collins 5th ed. 1993); see also MICHAEL KATZ & HARVEY ROSEN, MICROECONOMICS 264-65, 276-77 (Irwin
McGraw-Hill 3rd ed. 1998). In contrast, firms that wield monopsony power pay a smaller share of revenue of labor, by
restricting both the amount of labor hired and the compensation paid to labor. Id. Therefore, although the Challenged
Conduct, by reducing revenue opportunities for rival promoters, might have suppressed the level of compensation that
Strikeforce (and other would-be rivals) could afford to pay to Fighters, the share of revenue paid to Fighters by
Strikeforce remains an economically relevant benchmark for estimating but-for compensation.
186.
187.
. 456
456. This measure of economic harm is conservative because it measures only the exclusionary effects of Zuffa’s
Fighter contracts, and not the exclusionary effects of other aspects of the Challenged Conduct reviewed in Parts II.A
and II.B above. As a result, this measure of economic harm is appropriate regardless of whether the other conduct is
found to be anticompetitive. Put differently, even if the Challenged Conduct consisted solely of Zuffa’s exclusionary
contracts, my analysis of foreclosure analysis the resulting estimates of economic harm would remain the same.
188. As explained below, additional evidence that the Challenged Conduct suppressed
Fighter compensation below competitive levels includes: (1) evidence that Zuffa has reduced the
share of revenue paid to Fighters over time (as the degree of foreclosure rose); (2) evidence that
Zuffa pays a significantly lower share of its revenues than Strikeforce (before the acquisition) or
Bellator; and (3) a natural experiment in which Zuffa unilaterally restricted compensation of its
Fighters by imposing a new sponsorship tax. In the absence of the Challenged Conduct, Zuffa’s
ability to suppress Fighter compensation in these ways would have been at least partially
189. Zuffa’s internal analyses indicate that Fighter compensation as a percentage of UFC
event revenue has decreased over time, peaking at 25.8 percent in 2007, decreasing through 2013,
and falling from 22.0 percent to 18.5 percent between 2010 and 2011, when Zuffa acquired
Compensation Inflation” 459 was “the most asked question by financing sources, and is a critical
cost that we must actively manage.” 460 According to the document, Zuffa management intends to
“contain” Fighter costs at no more than 20 percent of revenue. 461 Zuffa could not profitably control
the share of revenue going to Fighters unless it wielded monopsony power. In 2007, Deutsche
Bank marketing materials (prepared for Zuffa’s lenders) indicated that “[t]he UFC believes that its
dominant position in the MMA industry will allow them to contain fighter costs.” 462 Thus Zuffa
itself acknowledged it was able to suppress Fighter compensation as a result of its monopsony
190. Zuffa also pays Fighters a much smaller proportion of its revenue than did
Strikeforce, a reasonable proxy for the competitive compensation share in the MMA industry.
457. ZFL-1484035 (all events); ZFL-1484036 (non-PPV events); ZFL-1484037 (PPV Events). Another internal
Zuffa presentation estimates that Fighter compensation is 16% of total company revenue for all events occurring from
2006-2011. ZFL-1392468 at 69. One document indicates that 90 percent of Zuffa Fighters, including top tier Fighters,
are “unhappy with compensation.” See John Cholish: ‘90% Including Some Top Tier Fighters’ Unhappy With UFC
Pay, Full Contact Fighter (Friday, May 31, 2013), available at http://fcfighter.com/post/john-cholish-says-90-
including-some-top-tier-fighters-unhappy-with-ufc-pay.
458. WME-ZUFFA-00001150 at *11.
459. Id.
460. Id.
461. Id.
462. DB-ZUFFA-00030406 at 07.
463. In a competitive labor market, compensation is set revenue paid to labor is determined by the productivity of
labor, as opposed to the monopsony power of the firm that hires labor. See, e.g., ROY RUFFIN & PAUL GREGORY,
PRINCIPLES OF MICROECONOMICS 331-336 (Harper Collins 5th ed. 1993); see also MICHAEL KATZ & HARVEY ROSEN,
MICROECONOMICS 264-65, 276-77 (Irwin McGraw-Hill 3rd ed. 1998).
Prior to its acquisition by Zuffa, Strikeforce paid about 60 to 70 percent of its event revenue to
Fighters. 464 Scott Coker, the former CEO of Strikeforce, explained that Strikeforce paid “minimum
68 percent of our gross income to our athletes pay structure… when we structured Strikeforce, we
. 466
191. Zuffa has also unilaterally and substantially reduced other forms of Fighter
compensation profitably. Beginning in or about 2009, Zuffa began requiring that sponsors pay
Zuffa a brand affiliation fee or “sponsorship tax” for the right to sponsor Fighters at UFC
events. 467 Prior to that, UFC Fighters were free to encourage sponsors to pay them to advertise on
their uniforms in the Octagon, and many did so, earning substantial revenues. 468 Zuffa extended
the sponsorship tax to different categories of sponsors over time, increasingly diverting
sponsorship revenue to Zuffa and away from Fighters. 469 To be approved to sponsor a Fighter
464. In 2010, the year before it was acquired by Zuffa, Strikeforce paid fighters 72.5 percent of total event
revenues. In 2011, the year it was acquired, it averaged 63.7 percent of revenues paid to fighters. See ZFL-1472338.
465. “When I was in business with the Silicon Valley Sports & Entertainment Group and half the company was
owned by the group that owns the San Jose Sharks [i.e. pre-acquisition by Zuffa], we kind of set up our pay structure
based upon like a hockey union would do. We paid minimum 68 percent of our gross income to our athletes pay
structure. If there was a union, I don’t think that would take us off guard by any means because when we structured
Strikeforce, we structured based around kind of like if there was a union.” See
http://www mmafighting.com/2015/5/11/8581653/scott-coker-on-ufc-reebok-sponsorship-program-bellators-phones-
been
466. See Part VI.A, infra.
467. Batchvarova Dep. at 26:9-27:4 (“At the time apparel companies … that were sponsoring athletes going into
the octagon were paying an affiliation fee.”); see also ZUF-00017896, ZUF-00086103, LESPLAINTIFFS-0032374 at
74.
468. See Part I.D, supra.
469. See ZFL-2193737 (Aug. 4, 2009 email from Mersch to Nate Quarry: “The only changes in the sponsorship
world pertain to tshirt/apparel companies… in short, any tshirt company wishing to sponsor UFC fighters must join the
UFC approved sponsor program.”). See also ZFL-1974115 (Mersch writes: “NOTICE – For all Zuffa events going
forward, only approved on-line retailers will be allowed to sponsor fighters. To that end, you must have a separately
executed sponsorship agreement with Zuffa to be able to sponsor fighters for any events. This new policy will kick in
indicated that his client lost 55 percent of his promised net sponsorship amounts as a result of
192. Record evidence indicates that Zuffa suffered no significant Fighter defections as a
result of imposing the sponsorship tax. 474 In response to a January 2009 article concerning Zuffa’s
sponsorship tax, Strikeforce executives wrote that the “UFC will be able to impose this solely on
the basis that they are perceived as the pinnacle MMA organization for the majority of fighters as
of today.” 475 Strikeforce declined to impose a sponsorship tax, reasoning that this tactic “could
give [Strikeforce] a slight advantage in negotiations with fighters.” 476 However, only one Fighter
(Dan Henderson) actually defected to Strikeforce, and Henderson’s contract was eventually
transferred back to Zuffa when it acquired Strikeforce. Zuffa proceeded to apply its sponsorship
tax to Fighters from the newly acquired company. 477 Accordingly, Zuffa’s imposition of the
sponsorship tax constitutes a natural experiment demonstrating Zuffa’s ability to unilaterally and
profitably restrict Fighter compensation, with other MMA promoters unable to provide
competitive discipline in the labor market. In the absence of the Challenged Conduct, its ability to
473. Id. at 22-23 (“I know many promoters who do not ask for money and the fighters can get sponsors whoever
[sic] they like…” The agent estimates that a Fighter that had previously netted $200,000 “ends up with 130k less and
nets only 70K” because of Zuffa’s restrictive policies.). See also ZFL-2486240 (Unmarked document from
Batchvarova’s custodial files stating “Original structure – we take over apparel + sponsorship … Look at reducing the
numbers for the lower guys by 40%-50%.”).
474. See ZFL-2244949. In response to concerns aired by Nate Quarry over new sponsorship policies, Michael
Mersch wrote that: “I don’t agree that the UFC [is] ‘losing top fighters because of these policies.’”
475. ZUF-00418378.
476. Id.
477. See ZFL-1402822 at 23 (Agent for Alistair and Velnatijn complains on June 9, 2011 to Mersch that “What if
they cant [sic] pay these sponsors, this was never an issue before you guys took over.” Mersch responds “If they’re not
willing to pay for advertising like everyone else has to, that’s their choice.”)
.
young fighters could take to pursue careers in the sport of MMA seemed counter-intuitive,
especially while simultaneously attempting to grow the organization.” 484 In the absence of the
Challenged Conduct, Zuffa’s ability to restrict Fighter career paths would have been curtailed,
because these Fighters would have had more viable paths for pursuing their careers with other
MMA promoters.
197.
d.
198. Zuffa’s internal documents emphasize that the UFC has the “[t]op priced ticket in
U.S. sports,” with average PPV prices increasing from an average of $81 to more than $250 from
2001 to 2009. 485 Zuffa documents also indicate that UFC events were priced at a substantial
premium relative to the NFL, NHL, WWE, and MLB. 486 A 2012 presentation by The Raine Group
explains that “Fans Pay More for UFC,” 487 noting that “UFC events offer a premium consumer
484. Jesse Baker & Matthew Thomson, The Ultimate Fighting Championships (UFC): The Evolution of a Sport,
in CASES IN MARKETING MANAGEMENT 114 (SAGE Publications, Kenneth E. Clow & Donald Baack, eds., 2011). See
also ZFL-2499718 at 18 (November 2011 email from agent Leland Labarre on behalf of Josh Barnett to Sean Shelby
and Michael Mersch at Zuffa indicating that Zuffa was able to suppress the number of events that Fighters would
participate below what Fighters would otherwise prefer: “I am disappointed with the aggressiveness of your position.
As you know, a fight every 4 months or so would be typical for MMA fighters, whose career primes are generally
short. Conversely, a 4-fight deal with a 5-year exclusive term is unheard of. The interpretation you have provided is
simply unreasonable.”).
485. See ZFL-2508548, at 567. Another document states that PPV event ticked prices increased from $81 in 2001
to $299 in 2009. See ZFL-2279086 at 94.
486. See ZFL-2508548, at 567; see also ZFL-1243128, at 35.
487. See ZFL-1544038 at 62.
experience,” 488 and demonstrating that UFC’s average ticket price for major international live-
sporting events differs substantially from other sports including NFL, FIFA, and Formula 1. 489
199. One Zuffa document notes that “[p]rice increases for PPV transactions have also
shown inelastic demand characteristics, even during the economic slowdown.” 490 Zuffa’s market
200.
201.
488. Id.
489. Id.
490. October 2009 UFC Public Lender Presentation, ZFL-2279086 at 9; ZUF-00162329-382 at 43. At the
deposition of Deutsche Bank’s corporate designee, Drew Goldman, Deutsche Bank testified that Zuffa provided
Deutsche Bank with data demonstrating that price increases for “pay per view buys and that regardless of economic
conditions, that [Zuffa has] been able to continue to increase pricing.” Goldman 30(b)(6) Tr. 119:9-121:6 (discussing
October 2009 Confidential Information Memorandum, DB-ZUFFA-00056900, at -936). Zuffa was provided the
opportunity to edit that statement and did not. See Goldman 30(b)(6) Tr. 132:8-24 (discussing handwritten edits to the
October 2009 Confidential Information Memorandum, DB-ZUFFA-00043567, at 0572).
491. ZFL-2472830 at 1 (“Pay-Per-View Buys … Tracking to be the 2nd ranked event of all-time despite price
increase. HD market share does not appear to be impacted by price.”); ZFL-2530042 at 50 (June 2015 UFC Board
Update Presentation: “$5 price increase in the U.S., which was introduced with the January 3rd UFC 182 event, does
not appear to have negatively impacted buy rates.”). See also ZFL-1063442 (“We are modeling $5 SRP increases in
2015 and 2018. The $5 increase in 2015 is long overdue as we haven’t raised prices since 2006. We are not
particularly concerned with price sensitivity as we experimented with a one-time price increase with UFC 168 and still
generated the highest buys of 2013); ZFL-1084185 – 10/9/13 Mulkey says “our research shows the market will bear [a
price increase].”); ZFL-1056382 (02/21/15 Markup of financial statement and factual commentary by CFO John
Mulkey. “On January 3 (UFC 182: Jones vs. Cormier) we introduced a $5 price increase in the US which was met with
little to no discernible pushback [and will remain]” (handwritten note)); ZFL-1073120 (“On January 3, [2015] UFC
182, Jones v. Cormier, we introduced a $5 price increase in the U.S. which was met with little to no discernable
pushback.”).
492. See RAINE0018791 at 802.
202.
203.
493. WME-ZUFFA-00001150 at *9 (In 2010, Zuffa averaged 514,000 residential PPV buys per event over 15
events, for a total of approximately 7.7 million residential PPV buys).
494. See ZFL-2603702 (recording residential PPV revenue of $190.5 million in 2010).
495. WME-ZUFFA-00001150 at *22 (reporting $196 million in residential PPV revenue for 2015).
496. Equal to [6.4 million]/[7.7 million] – 1.
497. Equal to [196 million]/[191 million] – 1.
498. Let Zuffa’s 2010 residential PPV price and quantity be denoted P and Q, and denote Zuffa’s 2010 residential
PPV revenue as P*Q = R. In 2015, Zuffa’s quantity is equal to Q*(1 – 0.17), and its revenue is equal to R*(1 + 0.026).
Therefore, Zuffa’s 2015 price is equal to [R*(1.026)]/[Q*(0.83)] = [R/Q]*1.24 = [P]*1.24.
499. WME-ZUFFA-00001150 at *9.
204. In addition, as explained below, the Challenged Conduct has restricted the output of
Live MMA Events generally since 2010, a time period encompassing both a large increase in
Zuffa’s foreclosure of the Relevant Input Market and Submarket, and Zuffa’s acquisition of
Strikeforce. 501 This has caused industry output of Live MMA Events to fall (both in absolute terms
and relative to prior trends) because the output of Live MMA Events by non-Zuffa promoters has
fallen off sharply, with Zuffa’s supply of Live MMA Events not increasing by enough to make up
for the difference. This indicates that the Challenged Conduct suppressed the output of other MMA
promoters. In the absence of the Challenged Conduct, Zuffa’s ability to restrict industry output
would have been at least partially counteracted by other MMA promoters, who would have been
less constrained.
205.
206.
207.
208. All of the evidence of anticompetitive effects I have discussed in this report, and my
analyses of that evidence, are common to the Classes as a whole. If I were asked to analyze
anticompetitive effects for any single member of either Class, the evidence and analysis would be
the same.
209. In this section, I show that common impact can be demonstrated with respect to
Bout Class Members using two separate, mutually reinforcing, methods. The first method is a
standard, two-pronged, class-wide approach that has been accepted in prior antitrust litigation,
including in High-Tech Employee and in Arizona Travel Nurses. 502 Under this method, the first
prong involves a determination as to whether classwide evidence is capable of showing that the
Challenged Conduct had a generally suppressive effect on compensation Zuffa paid to members of
the Bout Class. The second prong of the first method involves determining whether there is class-
wide evidence of a mechanism that would transmit the artificially reduced compensation (found by
that that the vast majority of Class Members received lower compensation than they would have in
the but-for world. Under this second method, my econometric model compares the compensation
actually received by each Class member to the amount that he or she would have received in the
but-for world. Using this information, I then compute what proportion of Class members were
artificially undercompensated due to the Challenged Conduct. This method, like the first, has been
211. As explained above, the Challenged Conduct substantially foreclosed rivals from
key inputs necessary to compete effectively, including most importantly access to the top-ranked
502. I was the plaintiffs’ economic expert in Arizona Travel Nurses. I have also served as expert for plaintiffs in
other classes that have been certified based in part on my proof of common impact, including most recently In Re
Lidoderm Antitrust Litigation. The district court accepted my methodology for proving antitrust impact in Johnson v.
Arizona Hospital & Healthcare Ass’n, No. CV 07-1292-PHX-SRB, 2009 WL 5031334 (D. Ariz. 2009) at *8, 11. The
same “two-step” methodology utilized in Johnson was accepted by the court in In re High-Tech Employee Antitrust
Litigation, Case No. 11-CV-2509-LH, Order Granting Plaintiffs’ Supplemental Motion For Class Certification (Oct.
24, 2013) at 53 (“Plaintiffs noted that Dr. Leamer’s approach followed a roadmap widely accepted in antitrust class
actions that uses evidence of general price effects plus evidence of a price structure to conclude that common evidence
is capable of showing widespread harm to the class.”). See also, e.g., Johnson, 2009 WL 5031334 at *8, 11 (finding
predominance where conduct was alleged to suppress bill rates for nurses generally and evidence was presented that
bill rates were correlated with nurse pay rates); Caves & Singer, supra, at 5.
503. See, e.g., In re Air Cargo Shipping Servs. Antitrust Litig., No. 06-MD-1775 JG VVP, 2014 WL 7882100
(E.D.N.Y. Oct. 15, 2014).
Fighters. Because the Challenged Conduct impaired would-be rivals in their ability to compete,
Zuffa exercised its market power over Fighters to a greater extent than it could have otherwise. In
particular, the classwide regression analysis presented in Part III.D.1 above demonstrates that the
Challenged Conduct reduced the share of Event Revenue Zuffa paid to the members of the Bout
Class, thereby artificially reducing compensation to the Bout Class overall. The question for
common impact is whether this effect was transmitted broadly across the Bout Class.
212. As explained below, Zuffa’s compensation practices differed as between the bottom
80 percent of Fighters, whose pay was largely predetermined by fixed schedules, and those of the
top 20 percent, whose compensation was partially determined by similar formulaic aspects to the
bottom 80 percent, but also included components such as Letters of Agreement and PPV
agreements. My analysis shows that both groups would have seen higher Event Compensation 504
in the but-for world because Zuffa would have had to compete more aggressively against other
MMA promoters to secure the services of all Fighters. In other words, but for the Challenged
Conduct, more robust MMA rivals would have increased competition for all levels of Zuffa
Fighters, not just some limited subset. Fighters in the bottom 80 percent would have enjoyed
schedules. Fighters in the top 20 percent would also have benefitted from such adjustments to
standard compensation schedules, and would also have benefitted further from increased
bargaining leverage when determining the additional components of their compensation packages.
As Scott Coker, former CEO of Strikeforce and current President of Bellator, explained in his
504. As explained in Part III.D.1, Event Compensation includes compensation from (1) show and win purses, (2)
discretionary/performance pay, (3) PPV royalties, and (4) letters of agreement.
deposition, if Zuffa is the only viable alternative for Fighters (as he believed it would effectively
be after Zuffa’s acquisition of Strikeforce), 505 the effect is to depress compensation generally:
[I]f there’s only one place to have a job, and then, there’s only a certain amount of slots
available to have employment, the fighter purses naturally would go down because now
you’re in control of the marketplace. So now, you can dictate what an entry [level] fighter
would get and what a mid-tier fighter would get, what a top-tier fighter would get. And you
kind of control the marketplace at that point. 506
This generalized suppression of compensation as the number and vitality of bidders for workers’
services is reduced is just what is predicted by elementary economics, which shows that a
monopsonist suppresses compensation to all of its labor inputs, just as a monopolist raises prices to
all of its customers. Monopsony power is the mirror image of monopoly power; 507 the harm to
competition from monopsony is directly analogous to the harm from monopoly. 508 A monopolist
harms buyers by charging them a price above the competitive level; a monopsonist harms sellers
213. Another mechanism transmitting suppressed compensation across all or almost all
members of the Bout Class consists of a formulaic compensation structure, driven by observable
common factors such as such as weight class, Fighter rank, gender, placement on the card, win/loss
record, and so on, combined with (and mediated by) Zuffa’s implementation and enforcement of
the economic concept of “internal equity,” under which Zuffa ensured that similarly situated
505. As explained above, Coker likened Strikeforce to “Luke Skywalker” and the UFC to “Darth Vader and the
Death Star.” Coker Exh. 8; Coker Dep. at 95:10-20.
506. Coker Dep. at 97:18-99:3 (emphasis added).
507. U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines (2010) [hereafter
Merger Guidelines], §1; §12. See also MODERN IO at 107-110.
508. MODERN IO at 107-110; see also Merger Guidelines §1 (“Enhancement of market power by buyers,
sometimes called ‘monopsony power,’ has adverse effects comparable to enhancement of market power by sellers.
The Agencies employ an analogous framework to analyze mergers between rival purchasers that may enhance their
market power as buyers”). See also §12. See also Johnson v. Ariz. Hosp. & Healthcare Ass’n (AzHHA), No. CV 07-
1292-PHXSRB, 2009 WL 5031334 (D. Ariz. July 14, 2009); Vogel v. Am. Soc’y of Appraisers, 744 F.2d 598, 601 (7th
Cir. 1984) (stating that monopoly and monopsony are “symmetrical distortions of competition”) (quoted in
Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312, 322 (2007).
Fighters received similar compensation, and that differences in compensation could be explained
that laborers doing comparable work believe that they should receive similar compensation. As a
forthcoming article in the Quarterly Journal of Economics notes, “a long tradition in economic
notion that individuals also care about their pay relative to that of their co-workers.” 509 Because
structures that pay comparable compensation for comparable work. One textbook explains that
“[p]ay structure refers to the array of pay rates for different work or skills within a single
organization,” 510 and refers to examples of pay structures at companies such as Merrill Lynch and
Lockheed Martin. 511 Payroll software companies offer advice to employers on achieving internal
equity:
Internal equity is the comparison of positions within your business to ensure fair pay. You
must pay employees fairly compared to coworkers. Employees must also perceive that they
are paid fairly compared to their coworkers. Otherwise, they might feel unvalued and leave.
It is easy for employees to find out how much other employees earn via the Internet and
word of mouth. If an employee works hard but is paid less than her coworkers who do not
work as hard, she might become upset about her wages. When you adopt a straightforward
and honest payment system, your employees will believe that they are being paid fairly and
with equality. This boosts company morale and employee loyalty, bringing many benefits
in the long run….
509. Emily Breza, Supreet Kaur & Yogita Shamdasani, The Morale Effects Of Pay Inequality, QUARTERLY J.
ECON. (forthcoming 2017), available at: https://sites.google.com/view/ebreza/research. See also Caves & Singer,
supra; GEORGE MILKOVICH, JERRY NEWMAN & BARRY GERHART, COMPENSATION 69 (10th ed. McGraw-Hill 2011)
(“Internal alignment, also called internal equity, refers to the pay relationships among different
jobs/skills/competencies within a single organization.”) (emphasis in original).
510. Milkovich, et al., supra, at 69.
511. Id. at 69-73.
To create fair pay, you compare employees who do similar jobs for your company. You
should consider the tasks your employees do. If two employees perform similar tasks, they
512
should earn similar wages.
215. As explained below, there is substantial documentary evidence indicating that the
compensation paid to Zuffa Fighters followed a formulaic compensation structure driven, in part,
approximately three-quarters of the variation in observed Fighter compensation (in absolute levels)
is accounted for by observable common factors (as opposed to individualized factors). I also
demonstrate empirically that individual Fighter compensation per event moves together with the
per-event compensation paid to other Fighters, both within and across years. Put differently, the
gains (or losses) in compensation are shared broadly across Class members. 513 This evidence
equity, which implies that the compensation-suppressing effects of the Challenged Conduct were
not confined to a subset of Class members, but instead were broadly shared across the Class.
216. Record evidence indicates that Zuffa’s contracts specify formulaic schedules of
show and win payments. 514 According to a 2010 UFC Due Diligence presentation, UFC
compensation generally falls into different tiers, depending on the “ability and notoriety” of
512. Patriot Software, Payroll Blog: Payroll Training, Tips, and News, available at:
https://www.patriotsoftware.com/payroll/training/blog/what-is-internal-equity/ (emphasis added). See also Stacey
Carroll, “Does Your Company Have Internal Pay Equity?” available at: http://www.payscale.com/compensation-
today/2009/03/importance-of-internal-pay-equity
513. A similar approach was used to demonstrate a compensation structure in High-Tech Employee. See Caves &
Singer, supra, at 5.
514. I review the forms of Fighter compensation paid by Zuffa, including show and win payments, in Part I.C
above.
Fighters. 515 Fighters’ show and win purses are nearly always identical to each other; the winner of
a fight doubles his or her base pay. 516 A win in a prior bout typically entitles a Fighter to higher
show and win purses in the next event, with the increase occurring in fixed increments, typically
between $2,000 and $5,000. A loss in a prior bout typically does not lead to any guaranteed
increase in the show and win purses payable in the next bout. 517 In his deposition, UFC’s Joe Silva
confirmed that “under our standard agreements a fighter only moves up in compensation if he
wins. If a fighter does not win [and we] elect not to terminate the fighter his following bout stays at
217.
Joe
515. ZFL-1382453 (noting that compensation “varies depending on ability and notoriety of Fighters. Generally
Fighters are categorized into 3 tiers: a) Entry level - typically Fighters coming off The Ultimate Fighter Reality Show;
b) Mid-tier level - emerging stars; c) Top-tier - proven stars who on certain occasions receive a portion of pay-per-
view receipts”).
516. See, e.g., ZFL-0000003.xls (spreadsheet showing show and win purses).
517. See, e.g., ZFL-0198252, 257 (“Fighter’s Purse for the first Bout shall be Fifteen Thousand Dollars…If and
only if Fighter is declared the winner of the first Bout, Fighter’s purse for the second Bout shall be Seventeen
Thousand Dollars….”).
518. Silva Dep. at 341:11-20 (“Q. With respect to your question on how our compensation structure works, under
our standard agreements a fighter only moves up in compensation if he wins. If a fighter does not win [and we] elect
not to terminate the fighter his following bout stays at the same amount as previous fight? Do you see that? A. Yes. Q.
That’s accurate; right? A. Yes.”).
519. See, e.g., ZUF-00140700 (“Most any new fighter (not world ranked) at the lower weights will be coming
into UFC at 6k+6k.”).
520. See ZFL-0504268, 273-274 (contract signed 12/30/2008).
224.
225.
therefore relies upon common and objectively measurable factors only—such as weight class,
rank, gender, placement on the card, year, country, and venue—to explain variation in observed
Fighter compensation. The dependent variable is the natural log of a Fighter’s Event
beyond what can be explained by the sample average—is explained by common factors. This
provides further evidence of a compensation structure determined by factors common to the Class
as a whole. Given that those factors would likely be the same in the but for world, the same factors
that determine relative differences in compensation between Fighters would remain, and thus a
general increase in compensation in the but for world would likely affect all Class members. A rise
in some corresponds to a rise in all, just as a reduction in some would result in a reduction in all,
because the compensation structure interconnects the compensation of all or almost all Zuffa
Fighters.
compensation are broadly shared across the Bout Class. Similar to analyses performed by the
Plaintiffs’ expert economist in High-Tech Employee, these regressions measure the extent to which
an increase in the compensation paid to Fighters overall is statistically associated with an increase
in compensation for individual Fighters. 549 Specifically, I estimated regressions in which the
dependent variable was set equal to an individual Fighter’s annual compensation per event, and the
independent variable was set equal to either: (1) the average compensation per event paid to all
other Fighters in that year; or (2) the average compensation per event paid to all other Fighters in
549. See Order Granting Plaintiffs’ Supplemental Motion for Class Certification, High-Tech Employee Antitrust
Litig., No. 11-CV-02509 (N.D. Cal. Oct. 24, 2013), at 60-61. See also Caves & Singer, supra, at 5.
the prior year. Because the variables are measured annually, these regressions do not include the
same set of control variables as the regressions reported in Part III.D.1 above (such as controls for
Fighter performance within a bout, venue fixed effects, etc.). Instead, they include fixed effects by
Fighter, which control for all individual-specific, time-invariant Fighter characteristics. The
variable Trend is an annual time trend; this controls for secular trends over time that may be
229.
230. To provide further proof of classwide impact, I used standard econometric methods
common to the Class as a whole to determine whether the vast majority of Bout Class Members
received lower compensation than they would have in the absence of the Challenged Conduct.
Specifically, I used the regression models from Part III.D.1 to predict the but-for compensation
share for each Fighter in each event in the but-for world. I then compared the predicted but-for
compensation share with the share of Event Revenue that the Fighter actually received in that
event.
231.
234. As explained below, I conclude that all or almost all of Identity Subgroup One
suffered antitrust injury, based on the same, two-pronged method that was used to prove impact for
the Bout Class. With respect to Identity Subgroup Two, I conclude that all or almost all of these
Class members have suffered antitrust injury, because all or almost all of these Class members
would have received at least nominal, one-time payment at the time that their PARs were executed
235. As explained above, Zuffa has reduced the share of revenue paid to Fighters over
time. Further, Zuffa pays a significantly lower share of its revenues to its Fighters than Strikeforce
or Bellator pay to theirs. Moreover, Zuffa unilaterally restricted Fighter compensation by imposing
a new sponsorship tax, appropriating sponsorship revenue that Fighters had previously received
directly from sponsors. 553 In the but-for world, Zuffa’s ability to restrict Fighter compensation in at
least these three ways would have been curtailed, resulting in higher compensation for members of
236. Quantifying the effect of the Challenged Conduct on the Identity Class is
complicated by the fact that I do not have access to records of payments made directly from
sponsors to Fighters, which means that I cannot quantify the extent to which such payments
declined as Zuffa began to appropriate more sponsorship revenue for itself. As a result, my
analyses of harm to Identity Class members are conservative. The data available to me are limited
to payments in which Zuffa was an intermediary between the sponsor and the Fighter. Specifically,
Zuffa’s JD Edwards (“JDE”) database reflects various line-item payments that Zuffa made to
Fighters, including sponsorship payments, video game payments, merchandise royalty payments,
and athlete outfitting policy payments (“JDE Identity Payments”). 554 From the beginning of the
Class Period until December 30, 2016 (the last date for which JDE data were produced by Zuffa),
there are 820 Fighters who received at least some JDE Identity Payments, all of whom are
members of Identity Subgroup One. I supplement the JDE Identify Payments data with the
Merchandise Royalty Accrual data, which contains royalty accruals for Fighters with signed
merchandising agreements with Zuffa. This brings the count of Fighters in Identity Subgroup One
up to 826. 555
237.
554. The JDE data also include unrelated payments such as reimbursements for travel expenses, as well as bout-
related payments such as show and win purses. For purposes of my analysis here, I restrict the JDE data to sponsorship
payments, video game payments, merchandise royalty payments, and athlete outfitting policy payments.
555. See Appendix 2.
556. See Part III.D.1, supra.
238.
239. To estimate the amount of this nominal payment, I relied on a Zuffa document that
includes a schedule of nominal, one-time, formulaic recommended payments in exchange for the
use of their Identity in the UFC Electronic Arts video game series. 559 I understand that this
document reflects payments that Zuffa offered to Fighters in exchange for Identity rights that Zuffa
needed, but had neglected to acquire previously. According to the document, these payments were
made according to a formulaic schedule by dividing Fighters into various tiers. The recommended
payment ranges from $2,500 to $25,000 based on a Fighter’s “rating,” which included the
240. In the but-for world, all Fighters in Identity Subgroup Two would have received at
least the minimum (lowest-tier) payment, which is $2,500. 561 This estimate is conservative because
244. In summary, the Challenged Conduct suppressed compensation for both Identity
Subgroups, and there exist mechanisms to transmit this suppression broadly across Class
Members. Accordingly, all or almost all members of Identity Subgroup One and Two suffered
245.
246. It bears emphasis that, although Zuffa Fighters would earn higher compensation in
the but-for world, not all Zuffa Fighters would necessarily be fighting for Zuffa in that newly
competitive world. In the but-for world, other MMA promoters would have been able to attract
more Fighters, would have earned higher revenue, and would have paid competitive compensation
to those Fighters. Further, as shown in Part III.D.V above, output of Live MMA Events would
571. ZFL-0979654.
using a third benchmark that does not rely on any information from other MMA promoters.
Instead, the third benchmark is based on the statistical relationship between Zuffa’s foreclosure
share and its own Fighter Shares over time. To quantify this relationship, I estimated a regression
model similar to that presented in Part III.D.1, except that all data points for Strikeforce prior to its
acquisition by Zuffa are discarded from the regression model. I conservatively used the Ranked
250.
251. My fourth measure of aggregate damages uses the impact regression model
presented in Part III.D.1. By using the Strikeforce observations before Strikeforce was acquired by
Zuffa, this method generates a larger coefficient on the foreclosure share relative to the regression
model presented above. As before, I conservatively used the Ranked measure of the Relevant Input
252.
253.
254.
255.
and monopsony power for the good of the sport. But the evidence from other professional sports,
and the extensive sports economics literature, indicate just the opposite: Elimination of the
Challenged Conduct would likely benefit Fighters, consumers, and the MMA industry and sport
generally.
259. As explained in Part III.C, the Challenged Conduct restricted output in both the
Relevant Input Market and the Relevant Output Market. In contrast, Zuffa has claimed that output
has expanded as a result of its exclusive multi-bout contracts and its horizontal acquisitions.
260.
261.
263.
264.
266.
267. Professor Rodney Fort, one of Zuffa’s experts from the FTC’s first investigation of
Zuffa’s practices in 2011, claimed that Zuffa’s horizontal acquisitions of MMA promoters has
increased MMA output because “the number of Zuffa events has continued to increase following
Zuffa’s acquisition of WEC, WFA, Pride, and Affliction.” 596 Dr. Andrew Dick, another of Zuffa’s
prior experts from the FTC’s 2011 investigation, also pointed to increases in Zuffa’s output over
268. That Zuffa’s own output may have increased over time fails to demonstrate the
Challenged Conduct increased MMA industry output. Any firm that monopolizes an industry
through horizontal acquisitions (and/or other anticompetitive conduct) may find that its own output
has increased. From an antitrust perspective, however, the relevant question is whether industry
output is higher or lower than it would have been in the absence of Challenged Conduct. Professor
Fort also claimed that Zuffa’s horizontal acquisitions allow Zuffa to “stage higher quality fights by
leveraging a larger stable of fighters.” 598 Once again, this confuses conduct that is beneficial to
Zuffa with conduct beneficial to the industry as a whole. Zuffa’s ability to harm competition
hinges on its ability to deny rivals access to the inputs necessary to stage high-quality fights, which
leaves Zuffa as the only promoter capable of consistently staging high-quality fights. 599 In any
case, my analysis shows that the Challenged Conduct restricted the supply of Live MMA Events in
the Relevant Output Market: The decline is driven by a drop in non-Zuffa events, with Zuffa’s
supply of Live MMA Events not increasing by enough to make up for the difference. 600 For
example, the supply of Fights featuring Headliners has declined significantly since the Strikeforce
acquisition. 601
269. The claim that the Challenged Conduct is necessary to produce high-quality
matchups also incorrectly assumes that two high-quality Fighters signed under different promoters
cannot be matched against each other. But there is nothing that inherently prevents matchups
between Fighters from different promoters. This is standard practice in boxing, and could occur in
a more competitive MMA industry. In the current environment, Zuffa relies on the Challenged
Conduct to maintain its dominant position, and thus Zuffa faces clear disincentives to avoid cross-
promotional matchups, which might allow other MMA promoters to challenge its dominance.
Tellingly, in a market in which Zuffa is not dominant (boxing), Zuffa revealed its willingness to
pursue a matchup with another promoter (albeit a non-MMA promoter), having agreed to co-
promote the Conor McGregor vs. Floyd Mayweather boxing match. In other words, in a
stage the most competitive bouts, even if that means matching Fighters from different promoters.
That is not true in MMA today due to the Challenged Conduct, but would be true in the absence of
that conduct.
270. As explained in Part III.C, the Challenged Conduct afforded Zuffa the power to
substantially suppress compensation paid to its Fighters. In contrast, Zuffa’s experts have
elsewhere claimed that Zuffa pays competitive compensation to Fighters. As explained below,
1. Zuffa’s Claim That Increased Fighter Compensation Over Time Shows That
Fighter Compensation Is Competitive
271. Dr. Dick has pointed to “steadily increased fighter compensation” over time as
evidence that Fighter compensation is competitive. 602 Dr. Dick’s analysis is based on changes in
the levels of Fighter compensation between 2005 and 2010 for Zuffa Fighters at the 25th, 50th, and
75th percentiles. 603 For example, Dr. Dick’s data show Zuffa’s median Fighter compensation per
event decreasing from approximately $10,000 in 2001 to $6,000 in 2005, then increasing to
approximately $22,500 by 2010. 604 Similar patterns are observed for the 25th and 75th
percentiles. 605
272. Dr. Dick’s analysis fails to control for the fact that Zuffa’s revenues—and Zuffa’s
revenues per Fighter—have increased very substantially over time. This means that Fighter
productivity (or “marginal revenue product”) has increased, which would predict under
competitive circumstances an even greater increase in Fighter compensation. Over the time period
studied by Dr. Dick (2001-2010), Zuffa’s Event Revenue per Fighter per event has increased by
more than a factor of ten. 606 Yet Dr. Dick’s own data show that Fighter compensation has
increased by significantly less than this over the same interval, by a factor of about two to three. 607
Thus, Dr. Dick’s own data indicate that Fighter compensation has failed to keep pace with
increases in Fighter productivity, indicating that Zuffa has been able to exercise monopsony power
over its Fighters over time. Moreover, the relevant question is not whether Fighter compensation
has grown in the absolute sense, but rather whether Fighter compensation would have been higher
273. My own regression does not suffer from these two flaws. First, my regression
revenue. Second, my regression controls for a host of other factors that may also influence Fighter
compensation, unlike Dr. Dick’s analysis, which allows me to identify (and isolate) the effect of
the Challenged Conduct on Fighter compensation: My regression measures the effect of Zuffa’s
606. According to Zuffa’s financial documents, Zuffa’s Event Revenue per Fighter per event increased from
$55,806 in 2001 to $599,207 in 2010.
607. Dr. Dick’s data show that Zuffa Fighter compensation at the 25th percentile increased from just over
$4,000 in 2001 to just under $12,000 in 2010. Zuffa Fighter compensation at the 50th percentile increased from
approximately $10,000 in 2001 to approximately $22,500 in 2010. Zuffa Fighter compensation at the 75th percentile
increased from approximately $20,000 in 2001 to approximately $60,500 in 2010. See ZFL-1212452 at 568-570.
608. Scott Coker, former CEO of Strikeforce, testified that Fighters received significantly lower offers after
Strikeforce was acquired. Coker testified that, after the Strikeforce acquisition “[a] lot of people were disappointed ...
[b]ecause you know, I had managers call me and say: Now our purses are going to go down. Now there’s only one
buyer and it’s not going to be good for MMA as an industry.” Coker Dep. 135:10-25. One year after the acquisition,
mangers were telling Coker that “offers are about 20 percent less than when you guys [Strikeforce] were here.” Id.
137:14-21.
foreclosure on Fighter compensation, all other things held constant, as opposed to simply tracking
changes in compensation over time. 609 This distinction is important because the relevant
comparison is not between Fighter compensation at arbitrary points in time, but rather between
what Fighters earned in the actual world and what they would have earned in the absence of the
274. Dr. Dick compares compensation paid to Fighters for WEC, Pride, and Strikeforce
before and after Zuffa acquired these promoters, and finds that the level of compensation increased
for most Fighters. 610 Dr. Dick claims that this is evidence that Challenged Conduct was
275. Dr. Dick’s analysis fails to control for the fact that (due in part to the Challenged
Conduct) non-Zuffa promoters earned revenues far below Zuffa’s. As explained in Part III.D.1, the
correct comparison is between the share of revenue that would-be rivals paid to their Fighters and
the share of revenue received by Zuffa Fighters. The data show plainly that other MMA promoters
paid a much higher share of their revenue to Fighters than did Zuffa, and my regression analysis
yields the same result—after controlling for a host factors that may also influence Fighter
609. See Part III.D.1, supra. Dr. Dick does present alternative analyses controlling for a small fraction of the
control variables used in my own regression analysis. See Dick Report, supra, at 571-573 (showing compensation
adjusted for the fighter’s result in the current fight and his previous three fights, event type, indicators for knockout of
the night, submission of the night, letter of agreement bonuses, and fighter fixed effects). In addition, none of Dr.
Dick’s analysis accounts for Zuffa’s increasing revenue over time.
610. Id. at 495-500.
611. Id. at 501.
economics (and common sense), which teaches that firms seek to maximize dollar profit, not profit
as a share of revenue. 621 A firm that earns $1 million of profit on $10 million in revenue has a
profit margin of just 10 percent, yet that firm is obviously worth more than a firm that earns
Zuffa’s financials, from 2006 to 2010, Zuffa’s revenues increased from $181.5 million to $445.8
million, while its profit as a percentage of revenue remained roughly constant, resulting in a large
280. More generally, the notion of a purported lack of profitability is flatly contradicted
by the facts. As explained above, UFC was purchased for $2 million in 2001 and sold for about $4
billion in 2016. 622 By any reasonable metric, this represents an extremely high return on
investment. Contemporaneous financial analysis confirms that third parties considered Zuffa to be
highly profitable: In 2010, Moody’s increased Zuffa’s rating outlook to “Positive” from “Stable,”
citing “Zuffa’s continued strong revenue and EBITDA growth trends worldwide.” 623
” 626
621. See, e.g., MICHAEL KATZ & HARVEY ROSEN, MICROECONOMICS 207-217 (Irwin McGraw-Hill 3rd ed.
1998).
622. See Part I.A, supra.
623. Moody’s Investors Service, “Announcement: Moody’s Changed Zuffa LLC's (d/b/a Ultimate Fighting
Championship or UFC) Rating Outlook to Positive from Stable,” (December 1, 2010), available at
https://www.moodys.com/research/Moodys-Changed-Zuffa-LLCs-dba-Ultimate-Fighting-Championship-or-UFC--
PR 210184 (“‘The rating outlook change is prompted by Zuffa’s continued strong revenue and EBITDA growth
trends worldwide’”).
624. WME-ZUFFA-00001150 at *5.
625. Id.
626. Id.
281. As explained in Part III above, the Challenged Conduct suppressed competition,
and allowed Zuffa to exercise monopsony power. As economists and antitrust authorities
recognize, competition creates incentives for firms to invest, while the absence of competition can
harm investment incentives. 627 In addition, as explained in Part VII.D below, evidence from
professional sports leagues rejects the hypothesis that employers must wield monopsony power
over athletes in order to incentivize investment decisions that ultimately benefit the industry as a
whole. In contrast, Zuffa (parroting past arguments made by owners in other professional sports
leagues) has claimed that elimination of the Challenged Conduct would remove incentives for
282.
627. For example, when analyzing the potential for anticompetitive effects of a proposed merger, the antitrust
agencies’ Horizontal Merger Guidelines recognize that anticompetitive mergers may induce firms to reduce
investment in capacity, or even to disinvest in pre-existing production capabilities. Merger Guidelines, supra, §6.3.
The Guidelines also state that “[e]xplicit or implicit evidence that the merging parties intend to raise prices, reduce
output or capacity, reduce product quality or variety, withdraw products or delay their introduction, or curtail research
and development efforts after the merger, or explicit or implicit evidence that the ability to engage in such conduct
motivated the merger, can be highly informative in evaluating the likely effects of a merger.” Id. §2.2.1. See also
Jonathan Baker, Beyond Schumpeter vs. Arrow: How Antitrust Fosters Innovation, 74 ANTITRUST L.J. 575-602, 577
(2007).
628. Gaglio Letter, supra, at 071.
283. More fundamentally, in a competitive market for Fighter services, Zuffa (or any
other MMA promoter) would secure the services of Fighters not by binding them to exclusive
multi-bout contracts, but by offering competitive compensation, giving the Fighters clear economic
incentives to commit to participating in future bouts, regardless of contract duration. 630 Even if a
contract were to expire before the event, so long as the Fighter’s pay was contingent on
participating in the event, and so long as the compensation was competitive, the Fighter would
have every incentive to show up for and compete vigorously at the event. Thus, in the but-for
world, Zuffa’s “Go To Market” event planning could be disrupted only if Zuffa offered below-
market compensation, giving other MMA promoters an opportunity to offer Fighters alternative
bouts with compensation more commensurate with their human capital. This is precisely how the
competitive process is supposed to work. Moreover, if Zuffa offered to co-promote, it would not
have had a similar claimed need to have a ready stable of available Fighters.
284.
” 631 This is pure conjecture, without any basis in evidence or economic theory.
Television distributors are interested in Zuffa producing high-quality events that will attract
viewers. The precise identities of Zuffa’s roster of Fighters in (say) seven years (or whatever the
629. Id.
630. See Part III.D, infra.
631. Gaglio Letter, supra at 073.
length of the typical television contract) cannot be known, and in any event, is less critical than
Zuffa’s offering generic, top-ranked Fighters who are competitive matched and effectively
promoted. Again, in a competitive equilibrium, Zuffa could secure the services of top-ranked
Fighters provided that it offers competitive compensation, and also through co-promotion.
285. The duration of a television contract can easily exceed the average length of a Zuffa
Fighter contract or a Fighter’s career. For example, Zuffa’s 2011 broadcast agreement with Fox
spans seven years. 632 That Zuffa was able to negotiate such an agreement confirms that multi-year
television distribution agreements do not require that Zuffa specify the identities of the Fighters to
be featured in all future broadcasts over the life of the contract. Indeed, the Fox agreement calls for
“high caliber” events without specifying the identities of all participants. 633
D. The Experience of Other Professional Sports Leagues and the Sports Economics
Literature Suggests That Elimination of the Challenged Conduct Would Benefit
Fighters, Consumers, and the MMA Industry As a Whole
286. Although there is little question that the demand for professional Live MMA Events
has expanded significantly in recent years, I have seen no persuasive evidence that the Challenged
Conduct was necessary to facilitate this expansion, or that eliminating the Challenged Conduct
would somehow impair the development of the industry. To the contrary, the experience of other
professional sports leagues suggests that cessation of the Challenged Conduct would enhance
287. Before free agency was introduced in other professional sports leagues, it was
sometimes argued by sports leagues that it was necessary to exercise monopsony power over
632. ZFL-1387999 (2011 Fox Agreement spanning January 1, 2012 through December 31, 2018).
633. Id. (“At a minimum, the quality of (i) the Fight Card for UFC Live on FBC fights shall be of a high caliber
that is commensurate with broadcast television sporting events, and (ii) the Fight Card for all other Live Fight Events
(as defined below) shall be equal to or better than the average quality of the Fight Cards for UFC fights telecast on
SpikeTV and Versus in 2011.”).
athletes in order to ensure “competitive balance” (a commonly used measure of fan welfare). 634
The claim was that free agency would be harmful to fans and the industry overall, with talent
flowing disproportionately to a small number of dominant teams. Yet the introduction of free
agency to one professional sport after another has not had this effect. 635 As Stanford sports
The [Leagues’] argument amounts to the claim that collusion by teams in sports leagues is
justified because it is efficient and improves the welfare of consumers. This line of
argument is rejected by virtually all economic studies of professional sports.…[T]he
assignment of ownership of an asset (here, a player’s human capital) will not affect the
ultimate allocation of that asset in a competitive market… Thus, there is no basis for the
636
claim that anticompetitive restrictions in the player market enhance efficiency....
288. Given that MMA is not a team sport, it unsurprising that Zuffa has not claimed that
its conduct can be justified by concerns of competitive balance. Nevertheless, Zuffa’s efficiency
justifications, like those of professional sports leagues in the past, are premised on the notion that
incentives to invest appropriately in Fighter services, and in promoting the bouts valued most
highly by fans, are contingent on imposing restraints on athletes. Zuffa is wrong today for similar
reasons that other sports leagues were wrong in the past: The reason that anticompetitive restraints
on the market for athletes services cannot be justified in terms of economic efficiency is that, in a
competitive market for athlete services, each athlete’s “human capital” will flow to its highest-
valued use. 637 In a competitive market, MMA promoters would compete for talent by assembling
634. See, e.g., Brad R. Humphreys, Alternative Measures of Competitive Balance in Sports Leagues, J. SPORTS
ECON. 133-148 (2002).
635. Roger Noll, Buyer Power and Economic Policy, 72 ANTITRUST L.J. 615-616 (2005).
636. Id. Professor Fort himself reaches a similar conclusion in his sports economics textbook. RODNEY D. FORT,
SPORTS ECONOMICS 267 (Prentice Hall 3rd ed. 2011). See also JAMES QUIRK & RODNEY D. FORT, PAY DIRT: THE
BUSINESS OF PROFESSIONAL TEAM SPORTS 240 (Princeton University Press 1992).
637. See Noll, supra, at 616; see also Simon Rottenberg, The Baseball Players’ Labor Market, 64(3) J. POL.
ECON. 242-258 (1956); Quirk & Fort, supra; Mohamed El-Hodiri & James Quirk, An Economic Model of a
Professional Sports League, 79 J. POL. ECON. 1302 (1971); Roger G. Noll, Professional Basketball: Economic and
Business Perspectives, in THE BUSINESS OF PROFESSIONAL SPORTS 18 (Paul D. Staudohar & James A. Mangan eds.,
the highest compensation and benefits and the highest-valued matchups (including a willingness to
co-promote). Fighters would offer their services to the MMA promoter that offers the most
favorable compensation commensurate with their productivity (their marginal revenue product).
This would derive from MMA promoters’ deploying Fighters’ human capital to its highest-valued
289. Far from harming the sport, the increased competition that would prevail in the but-
for world would be expected to benefit the industry. Sports economists—including Professor
Fort—recognize that fans are harmed when sports leagues exercise market power through
coordinated behavior; “fans pay more for less in the presence of market power.” 638 As Professor
Almost all economists see the ultimate culprit [for rising ticket prices and other trends
harmful to fans] as market power, which derives from the special legal treatment of
leagues. The outcomes are exclusive franchise rights for teams, management of sports
leagues as cartels, and a complete stifling of any competing leagues, precisely those
639
indicated by the basic economic theory of market power.
290. Through the Challenged Conduct, Zuffa has achieved results analogous to
cartelization of the MMA industry, without even the mitigating factor of having various teams
within the UFC competitively bidding on athlete services as other sports leagues have. Another
important distinction between Zuffa and certain other sports leagues is that Zuffa does not enjoy
special immunity from antitrust enforcement. Fighters, fans, and the industry as a whole would be
1991); Daniel Sutter & Stephen Winkler, NCAA Scholarship Limits and Competitive Balance in College Football, 3 J.
SPORTS ECON. 16 (2003).
638. Fort, supra, at 409 (“From the fans’ perspective, market power has the general tendency to reduce output
and increase price…fans pay more for less in the presence of market power.”). See also ZFL-1212308 at 11-12; see
also MICHAEL LEEDS, & PETER VON ALLMEN, THE ECONOMICS OF SPORTS 111 (Boston Addison Wesley 2002); see
also Roger Noll, The Economics of Baseball Contraction 4 J. SPORTS ECON. 383 (2003); see also JAMES QUIRK &
RODNEY D. FORT, HARD BALL: THE ABUSE OF POWER IN PRO TEAM SPORTS 9 (Princeton University Press 1999).
639. Rodney D. Fort, Market Power in Pro Sports: Problems and Solutions, in THE ECONOMICS OF SPORTS 8
(ed. WILLIAM S. KERN, W. E. Upjohn Institute for Employment Research 2000).
expected to benefit from removal of the Challenged Conduct and the introduction of increased
CONCLUSION
291. Since at least the beginning of the Class Period, Zuffa has possessed significant
monopoly and monopsony power and, through the Challenged Conduct, has substantially
foreclosed competition and generated significant anticompetitive effects. As a result, Zuffa has
been able to compensate members of each Class below levels that would have prevailed in the
absence of the Challenged Conduct, and this injury was widespread across the members of each
Class.
The potential procompetitive justifications for the Challenged Conduct that Zuffa or
economists acting on its behalf have asserted in prior proceedings are unavailing. The evidence
from other professional sports, and the sports economics literature, as well as my own analysis,
indicates that elimination of the Challenged Conduct would likely benefit Fighters, consumers, and
the MMA industry generally. Finally, each prong of my analysis involves methods data, and
evidence common to all Class Members. If I were asked to perform the same analysis for any
single member of either Class, the evidence and analysis would be the same.
* * *
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Why the iPhone Won’t Last Forever and What the Government
Should Do to Promote its Successor, 8 JOURNAL ON
TELECOMMUNICATIONS AND HIGH TECHNOLOGY LAW
313 (2010), co-authored with Robert W. Hahn.
The Ohio State University v. New Par D/B/A Verizon Wireless, Case
No. 2:15-cv-2866 (S.D. Oh.).
Philip R. Loy and Sharon Loy v. Womble Carlyle Sandridge & Rice,
et al., Case No. 2014-cv-254012 (Ga. Super.).
Omni Healthcare, et al. v. Health First Inc., et al., Case No. 6:13-
CV-01509-RBD-DAB (M.D. Fla.).
In re New York City Bus Tour Antitrust Litigation, Master Case File
No. 13-CV-07I1 (S.D. N.Y.).
White Papers
Good Intentions Gone Wrong: The Yet‐ To‐ Be‐ Recognized Costs
of the Department Of Labor’s Proposed Fiduciary Rule (prepared for
Capital Group), co-authored with Robert Litan (July 2015).
Why the iPhone Won’t Last Forever and What the Government
Should Do to Promote Its Successor (prepared for Mobile Future),
co-authored with Robert Hahn (Sept. 21, 2009).
Speaking Engagements
How the FCC Will Wreck the Internet, WALL STREET JOURNAL,
May 28, 2015
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authored with Robert Hahn.
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Should (or Shouldn’t) Do to Promote Its Successor, MILKEN
INSTITUTE REVIEW (First Quarter 2010), co-authored with
Robert W. Hahn.
Memberships
Reviewer
Telecommunications Policy
292. I relied on eight datasets to estimate the bout and identity class damages. Five of
these datasets: (1) Zuffa bout compensation data; (2) Zuffa identity compensation data; (3) Zuffa
contract data; (4) profit and loss data for Zuffa events; and (5) pre-acquisition Strikeforce event
and compensation data—were derived from discovery documents. The other three datasets came
from public sources: (6) the Fighter performance FightMetric data was purchased from the vendor
directly; (7) Fighter rankings and the universe of Fighter-event matchups came from FightMatrix,
and (8) the Sherdog website.
A. Datasets
294. Zuffa produced ZFL-2679053 and ZFL-2764813 at Plaintiffs’ request, which are
line-item accounting databases used by Zuffa to track payments, including payments to fighters; it
is internally referred to as the “JD Edwards Database.” I analyzed the payment data and flagged all
payments relating to the identity class (sponsorship payments, video-game payments, merchandise
royalties, and athlete outfitting policy payments). I supplement this data with ZFL-0000650, a
“Merchandise Royalty Accrual database,” which tracks royalty revenues accrued to specific
Fighters for the sale of merchandise. If total royalty accruals are greater than merchandise
payments in the JD Edwards Database during the Class Period, I use royalty revenues accrued
from the Merchandise Royalty Accrual database instead for that Fighter’s Merchandise payments
during the Class Period.
name, promoter name, whether or not the document was signed by both parties, and various terms
of the agreement. In addition to recording the term of the agreement in months and bouts, we also
noted (where applicable) the terms of the Right to Match Period, the Exclusive Negotiation Period,
the Champion’s Clause, tolling periods, and any Option Periods. The researchers recorded how the
language of the ancillary rights clauses, promotion clauses, exclusion clauses, Champion’s clause,
tolling clauses, right to match clauses, commercial identification clauses, and breach of suspension
clauses changed over time. From this exercise, my team and I ultimately created a dataset
containing the terms of all valid and complete PAR agreements signed by both Zuffa and the
Fighter. This dataset contained 2,136 valid contracts in total, from May 2001 to November
2015. 640
296. I match this contract data to the Fighter-event observations from the Zuffa
compensation data by the Fighter’s name and the date of the observation. I assign an active PAR to
a Fighter-event observation if the observation occurs during the active contract period of the PAR.
This active contract period is determined by taking the PAR signing date as the beginning date,
and assigning it an end date determined by (1) the contract’s term length in months (including the
lead-up time from signing to a Fighter’s first bout, as determined by empirical observation); and
(2) the option period (if any) specified in the contract.
297. I make further allowances for early contract renewals and contract tolling. First, if a
Fighter signs a new PAR while an old PAR is active, the new PAR takes precedence over the old.
Second, as tolling data on contracts was not comprehensively available, I and my team take steps
to match Fighter-event pairings that occur outside of any active contract. This happens in 123
observations before November 2015, the cut-off date for the contract data. If Fighter-event pairings
occur with no matching PAR, and if that fight does not exceed the maximum number of bouts
specified in the most recent contract, it is assumed that the PAR was extended via one of the PARs
many tolling provisions. For 177 observations that occur after November 2015, we apply the
Fighter’s most recent contract to the observation.
298. Overall, I and my team are able to match 78 percent of Zuffa’s Fighter-event pairs
from the compensation data to a PAR from 2001-2015, when the contract data ends, and 71
percent overall. (Contracts signed in 2015 may still be active in 2017, but no new contracts are
observed, leading to a lower share of matched pairs.) I have no reason to believe the sample of
contracts provided were biased in any material way with regards to their terms relative to the true
contract population.
640. I exclude two contracts from non-Zuffa promoters, one from Invicta and one from EliteXC, that Zuffa
included in the document production.
299. Zuffa provided two event-level profit-and-loss documents from which I gather
event-specific revenues, costs, and compensation paid to Fighters. ZFL-2764797 details the event-
level revenues and costs for all numbered (Pay-Per-View) UFC event from 2006 to 2016. ZFL-
2764798 details the same revenues and costs for all events from 2010 to 2016. This second
document includes Strikeforce, WEC, and non-PPV events (such as the shows on FOX, FX, and
FUEL). This means that there is a data gap from 2006 to 2010 of non-PPV Zuffa events. To
address this gap, I supplement this data with event-specific profit and loss documents produced in
discovery. 641 Each of these profit-and-loss statements reports the total direct and indirect costs and
revenues generated from the event. The revenues are sorted into various categories, broadly
classified as Ticket Sales or Site Fees; PPV, Broadcast Sales, and Fees (including “Web Buys” and
“Other”); event-specific Merchandise; and event-specific Sponsorships.
300. Within the discovery documents, I identified a number of files that contained data
on Strikeforce’s operations before its acquisition by Zuffa. These assorted datasets, once cleaned
and combined, provide a partially complete picture of Strikeforce’s event revenues and Fighter
compensation before its acquisition. These documents are SJS00084771, ZFL-2458186, and ZFL-
1472338. These sources add complete 400 Fighter-event level observations to the regression
dataset. I omit “Young Guns” Strikeforce events from my analysis, as these were amateur events
with purses less than $1,000.
301. To control for a Fighter’s characteristics at the time of a fight, I procured detailed
statistics on a Fighter’s bout performance from FightMetric. This sports statistics firm, the “official
statistics provider of the UFC,” 642 generates Fighter-bout level information such as the number of
strikes attempted or landed, where they hit and the degree of power, the time spent in the various
MMA positions (stalking, clinch, ground control), and other relevant metrics. These data are
matched onto the bout compensation data by Fighter name and event.
302. The FightMetric data contains fight data for a select number of MMA firms. These
include Affliction, Bellator, EliteXC, Pride Fighting Championships, Strikeforce, World Extreme
Cagefighting, and the UFC. FightMetric founder and director Rami Genauer explained over email
FightMetric’s selection criteria for promoters:
It was basically an attempt to cover the…most prominent organizations in the world. That
was UFC and PRIDE, then WEC, then Strikeforce. In recent years, it’s become whoever
the market is willing to pay for. That’s meant covering Bellator at times, but not currently.
There are also instances in the database of following a fighter’s career, regardless of
organization. That was more important in the early days of the company when the stars
were what mattered. Now it’s the UFC brand that matters the most. 643
7. FightMatrix Data
8. Sherdog Data
304. Sherdog.com is a major MMA news and fan site, cited by industry analysts as “the
most popular source of MMA news and information.” 647 In addition to its news services, Sherdog
642. See http://www fightmetric.com/company. Note that UFC displays the FightMetric statistics on their
website, and a branded “Statistics Provided by FightMetric” logo appears on pages such as
http://www.ufc.com/fighter/Ronda-Rousey
643. E-mail from Remi Genauer, Director, FightMetric, to Augustus Urschel, Analyst, Economists Incorporated
(November 19, 2016, 19:48 ET).
644. See http://www.fightmatrix.com/faq/
645. Deposition of Javier Vasquez, Feb. 14, 2017 at 67, Exhibits 42-44.
646. See http://www.fightmatrix.com/historical-mma-rankings/generated-historical-
rankings/?Issue=109&Division=4 and http://www.fightmatrix.com/historical-mma-rankings/generated-historical-
rankings/?Issue=109&Division=1
647. ZFL-2463304 at 14.
maintains a nearly complete record of every MMA fight from around the world, from UFC mega
events in Las Vegas to eight-man untelevised garage fights in Bosnia and Herzegovina. 648 These
records give the dates and locations of the fights, who fought in them, and the outcome of the
individual bouts. I obtained the entire catalog of fights and events from Sherdog’s public website
and assembled a dataset of every MMA fight from around the world. The dataset contains 280,471
worldwide bouts of two Fighters from 36,864 unique Live MMA Events spanning from December
1991 to June 2017.
305. In addition to event and bout data, the website assigns a unique Fighter ID to each
MMA combatant in the known MMA universe. For example, the number “2383” in the URL
www.sherdog.com/fighter/Nate-Quarry-2383 corresponds to Nate Quarry and no other Fighter,
which can be tested by typing in http://www.sherdog.com/fighter/2383. Because names can vary
across different datasets (and, in the case of some Zuffa data, within a dataset), I use this unique
Fighter ID to link Fighters across the various datasets described here.
306. Zuffa’s foreclosure share of the market is defined as the percentage of foreclosed
Zuffa Fighters over the total population pool of the Relevant Input Market in a given month at time
t, illustrated below. I calculate one measure of foreclosure under which all Fighters are considered
foreclosed; in the alternative, I classify a Fighter as foreclosed only if the duration of exclusivity
for their contract is 30 months or more. The foreclosure statistic can be written:
307. Due to missing contracts for some Zuffa Fighters, I construct this statistic by
multiplying Zuffa’s internal foreclosure share by Zuffa’s market share of the Relevant Input
Market Fighter Pool at time t. For example, Zuffa may have 150 Fighters in a pool of 200 total
Fighters in the Relevant Input Market at time t, but contract data is only available for 120 of those
150 Zuffa Fighters. In this case, I would take the internal foreclosure share of the Zuffa Fighters
for which we have contract data. If 96 of those 120 Fighters were foreclosed, Zuffa would have an
internal foreclosure share of 80 percent. I would then multiply that 80 percent by Zuffa’s market
share at time t, in this case 75 percent (equal to 150 Zuffa Fighters divided by 200 total Fighters in
the Relevant Input Market Fighter Pool) for a total foreclosure share of 60 percent.
308. The Relevant Input Market Fighter Pool consists of all Fighters in the Relevant
Input Market at a Live MMA Event occurring at time t. I consider a Fighter to be in the Relevant
Input Market Fighter Pool if he or she participated in a Live MMA Event within nine or twelve
months before or after the Live MMA Event in question. This allows me to capture the pool of
Fighters that were active around the time of a Live MMA Event, and thus potentially could have
participated in it (even if they actually participated in some other Live MMA Event within the
window). I consider a nine-month window as my baseline specification. By definition, Fighters not
fighting in events during this window were inactive (did not fight in any Live MMA Event) for a
period of 18 months surrounding the event in question. (My analysis of data from Sherdog reveals
that the median career length for an MMA Fighter is brief—approximately five bouts, spread over
just 41 months, which means that the typical length of time between bouts for a Fighter is about 8
months).
309. In some specifications, Fighters are weighted by the average gate and PPV revenues
per Fighter for their respective promoters. Using the MMA news source http://mmapayout.com, I
construct a database of 254 Live MMA Events and their total revenues. 649 This includes event
revenues for the promoters Affliction, Bellator, EliteXC, Pride, Strikeforce, UFC, WEC, and
WSOF. I match these event revenues into the Sherdog data of all of the Fighter bouts that took
place in that event. I then take the average revenue generated by each Fighter by dividing the total
revenue by the number of Fighters. One average is calculated for Zuffa, and another for non-Zuffa
promoters. Zuffa Fighters are then weighted by Zuffa’s average revenue per Fighter, while non-
Zuffa Fighters receive the average revenue per Fighter for non-Zuffa promoters. This approach is
conservative because revenue data are available only for (relatively) large non-Zuffa MMA
promotions such as Bellator and Strikeforce, so that Fighters from smaller promotions (which lack
such data) receive the same weight as if they were affiliated with a larger promotion. In the case of
ONE Championship, I conservatively assigned Fighters a weight equal to 25 percent of Zuffa
Fighters’ weight, in light of evidence that ONE’s valuation was reportedly “approaching” a
valuation of $1B at approximately the same point in time that Zuffa sold for $4B. 650
310. Given the various datasets described above, I create a combined regression dataset
at the Fighter-event observation level. Each observation is a Zuffa (or Strikeforce pre-acquisition)
Fighter in a given event matchup. Each observation contains the Fighter’s name, their opponent,
the event and its details, the Fighter’s compensation and bonuses (from the Compensation Data),
the events revenues and costs (from Zuffa’s Event Profit and Loss Data), the Fighter’s
performance in that event (from the FightMetric data), the market foreclosure shares in that month
(see section B above), the PAR agreement terms a Fighter was subject to at the time of the event
(from the Contract Data). Combined, these datasets provide the independent and dependent
variables necessary to estimate the regression.
311. With the exception of the contract, FightMatrix, and foreclosure share data, all of
these datasets were merged in by Fighter IDs, a generated event ID, and the event date. Because
the PAR agreements span multiple fights over time, I generate a timeframe over which each PAR
agreement is active. This is the signing date plus the combined effective term. Because this is a
theoretical date range, in the case of any overlapping agreements, I take the most recently signed
contract. The foreclosure share data and FightMatrix ranking data were merged in on matching
months.
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ZFL-1381761
ZFL-1382453
ZFL-1387999
ZFL-1392468
ZFL-1393175
ZFL-1394078
ZFL-1394508
ZFL-1402629
ZFL-1402631
ZFL-1402822
ZFL-1404974
ZFL-1421024
ZFL-1421551
ZFL-1470673
ZFL-1472063-76
ZFL-1472077
ZFL-1472224
ZFL-1472337
ZFL-1472338
ZFL-1484035
ZFL-1484036
ZFL-1484037
ZFL-1487968
ZFL-1499215
ZFL-1500311
ZFL-1501599
ZFL-1514712
ZFL-1514713
ZFL-1514769
ZFL-1514770
ZFL-1514804
ZFL-1514836
ZFL-1514837
ZFL-1514870
ZFL-1514900
ZFL-1514901
ZFL-1514933
ZFL-1514944
ZFL-1514966
ZFL-1544038
ZFL-1674096
ZFL-1676293
ZFL-1677482
ZFL-1690436-444
ZFL-1702118
ZFL-1702162
ZFL-1704928
ZFL-1825387
ZFL-1833347
ZFL-1835118
ZFL-1838367
ZFL-1872579
ZFL-1873428
ZFL-1886668
ZFL-1892287
ZFL-1892294
ZFL-1892308
ZFL-1892315
ZFl-1897060
ZFL-1897652
ZFL-1901788
ZFL-1908119
ZFL-1941439
ZFL-1974115
ZFL-1977394
ZFL-1978914
ZFL-2005388
ZFL-2005616
ZFL-2020850
ZFL-2022954
ZFL-2135552
ZFL-2149052
ZFL-2152714
ZFL-2176645
ZFL-2177960
ZFL-2177961
ZFL-2188190
ZFL-2193553
ZFL-2193737
ZFL-2203067
ZFL-2205733
ZFL-2206472
ZFL-2206527
ZFL-2206534
ZFL-2235745
ZFL-2244834
ZFL-2244949
ZFL-2251021
ZFL-2251267
ZFL-2251268
ZFL-2279086
ZFL-2444687
ZFL-2461790
ZFL-2463304
ZFL-2472830
ZFL-2477398
ZFL-2479576
ZFL-2480590
ZFL-2482323
ZFL-2483111
ZFL-2483345
ZFL-2483396
ZFL-2483439
ZFL-2486240
ZFL-2489547
ZFL-2491662
ZFL-2494934
ZFL-2494948
ZFL-2496215
ZFL-2496264
ZFL-2497585
ZFL-2499718
ZFL-2502942
ZFL-2508355
ZFL-2508548
ZFL-2520643
ZFL-2528642
ZFL-2528842
ZFL-2529699
ZFL-2530042
ZFL-2530953
ZFL-2531156
ZFL-2532557
ZFL-2534622
ZFL-2535654
ZFL-2536288
ZFL-2536392
ZFL-2536695
ZFL-2540458
ZFL-2544560
ZFL-2547712
ZFL-2552141
ZFL-2554757
ZFL-2554758
ZFL-2559292
ZFL-2582134
ZFL-2586870
ZFL-2587231
ZFL-2595178
ZFL-2602496
ZFL-2603701
ZFL-2603702
ZFL-2603704
ZFL-2613931
ZFL-2613939
ZFL-2613946
ZFL-2614046
ZFL-2614687
ZFL-2615437
ZFL-2618630
ZFL-2632955
ZFL-2642993
ZFL-2643298
ZFL-2647127
ZFL-2649918
ZFL-2685237
ZFL-2689504
ZFL-2699674
ZFL-2699678
ZFL-2699683
ZFL-2699687
ZFL-2699696
ZFL-2764799
ZFL-2764805
ZUF-00017896
ZUF-00031544
ZUF-00031995
ZUF-00034210
ZUF-00085896
ZUF-00086103
ZUF-00088096
ZUF-00088100
ZUF-00090606
ZUF-00096950
ZUF-00106610
ZUF-00106849
ZUF-00106854
ZUF-00106856
ZUF-00109551
ZUF-00122280
ZUF-00401766
ZUF-00140642
ZUF-00140700
ZUF-00153787
ZUF-00153903
ZUF-00157199
ZUF-00157206
ZUF-00162329
ZUF-00169647
ZUF-00284193
ZUF-00296703
ZUF-00325418
ZUF-00335242
ZUF-00339684
ZUF-00374356
ZUF-00377706
ZUF-00395941
ZUF-00401766-779
ZUF-00418378
ZUF-00421380-97
ZUF00447547
ZUF-00447778
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1. 6 ¶ 3 n. 6 If, however, the class definition were interpreted to be limited only to If, however, the class definition were interpreted to be limited only to Increase Validity
those class members who fought in a bout that physically took place those class members who fought in a bout that physically took place
within the United States during the Class Period (regardless of within the United States during the Class Period (regardless of whether
whether or not it was broadcast live into the United States), 12.7 or not it was broadcast live into the United States), 13.8 percent of the
percent of the Bout Class members would be excluded (154 out of Bout Class members would be excluded (167 out of 1,214 Fighters).
1,214 Fighters). These 154 Fighters account for 1.5 percent of the These 167 Fighters account for 3.0 percent of the aggregate Bout Class
aggregate Bout Class damages. Additionally, 33.1 percent of all Bout compensation. Under the damage models presented in Table 9 (Part
Class damages are associated with bouts fought outside the United IV. A), this corresponds to 3.0 percent of aggregate Bout Class
States (but which were broadcast live into the United States). Damages. Additionally, 33.1 percent of Bout Class compensation is
associated with bouts fought outside the United States (but which were
broadcast live into the United States).
2. 6 ¶ 3 n. 10 I estimate that, as of June 30, 2017, there are 1,214 Fighters in the I estimate that, as of June 30, 2017, there are 1,214 Fighters in the Inaccurate Numerical
Bout Class and at least as many Fighters in the Identity Class. Bout Class and 1,085 in the Identity Class. Figure
3. 16 ¶ 20 n. 29 Id. See also WME_ZUFFA_00031950-60 (“History tells us that for a WME_ZUFFA_00031950-60 (“History tells us that for a pay-per-view Unclear Citation
pay-per-view to do big numbers, it needs marquee names… sales to do big numbers, it needs marquee names… sales estimates from the
estimates from the last nine years make it clear that it’s the name at last nine years make it clear that it’s the name at the top of the card
the top of the card that sells pay-per-views.”). that sells pay-per-views.”).
4. 26 ¶ 35 n. 84 Id. See Mossholder Dep. Exhibit 36-A. Unclear Citation
5. 29 ¶ 42 n. 102 Id. Epstein 30(b)(6) Tr. 24:12-13 (stating Zuffa’s testimony that it Unclear Citation
acquired the WEC); Ken Pishna & Ivan Trembow, UFC Buying World
Extreme Cagefighting, MMA Weekly, Dec. 11, 2006, available at
https://web.archive.org/web/20070929111019/http://www mmaweekly
.com/absolutenm/templates/dailynews.asp?articleid=3053&zoneid=13
6. 31 ¶ 45 n. 117 Id. See ZFL-0506593, ZFL-0175016, ZFL-0132594, ZFL-0469456, ZFL- Unclear Citation
0086231. See also ZFL-1544038 at 58 (2012 Information
Memorandum prepared by The Raine Group stating that “[a]ll fighters
are signed exclusively to the UFC”). Prior to its acquisition by Zuffa,
at least some Strikeforce contracts were “not exclusive and allow[ed]
the fighters to have bouts elsewhere.” See ZFL-1393175. See also
30(b)(6) Deposition of Kirk Hendrick, November 29, 2016, Exhibit 2,
at 21-25 [hereafter Zuffa Contract Summary], at 3. The PAR did
permit Fighters to compete in certain bouts, provided that the bout was
not televised and that the Fighter obtained Zuffa’s express written
permission. Ex. 2 to Hendrick Dep. at Tabs 29-50 (demonstrating in
Section 3.6 the lone exception to the contractual bout exclusivity
provision). Because Zuffa could deny its permission, Zuffa could
ensure a Fighter never defected to a rival that Zuffa perceived to
threaten its market dominance.
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