Digging deeper into the Golden Boy-PBC Haymon lawsuit

For those that want additional information on the PBC lawsuit discussed in Show Money Episode 5, we provide it here.  On May 5, long-time Golden Boy Boxing attorney Bertram Fields filed a Complaint in the U.S. District Court for the Central District of California (Los Angeles to be specific) against Al Haymon and a variety of Haymon’s associated companies as well as Waddell & Reed Financial Inc.

The complaint seeks an injunction against Haymon’s business practices as well as a sum of $100 million plus the statutory damages which would be three times the amount in its claim.  Thus, $300 million.

The lawsuit argues that Haymon, et al. violates sections 1 and 2 of the Sherman Antitrust Act, the Clayton Act, the Muhammad Ali Act and California state unfair practices law.  Golden Boy breaks down the pro boxing industry into two different parts which comprise two distinct markets: boxing managers and boxing promoters.

The alleged scheme mapped out by Golden Boy indicates that Haymon, et al. have market power in one business (i.e., management of boxers) to “monopolize another business” (i.e., promoting fights).

Golden Boy claims that the market deals “primarily with ‘Championship-Caliber Boxers’ – that is professional boxers who, during the last three years, have demonstrated through such factors as purse size, television rights, viewership, ticket revenue and other objective factors to be ‘the cream of the boxing business.’”

Specifically, the Muhammad Ali Boxing Reform Act creates a “[f]irewall between promoters and managers.”  The Ali Act prohibits “a direct or indirect financial interest in the promotion of a boxer” and from being “employed by or receiv[ing] compensation or other benefits from a promoter.”

Golden Boy argues that Haymon, et al. violate this law by managing fighters without a license in most instances.  It also claims that Haymon, et al. violate the law as it acts as promoter as well.  In this capacity, promoters are to make “extensive financial disclosures to state boxing commissions and to boxers, and imposes an obligation on promoters to notify the state boxing commission before any professional boxing match is held.”

From the Senate Report which discussed the Ali Act: “It is not plausible for a boxer to receive proper representation and counsel from a manager if the manager is also on the payroll of a promoter.  This is an obvious conflict of interest which works to the detriment of the boxer and the advantage of the promoter.”

In paragraph 22 of the Complaint, Waddell (the Haymon investment fund) offers to purchase 100% of the equity interest in Golden Boy but the transaction was predicated on a “lengthy non-competition agreement from De La Hoya (Golden Boy founder).”

This allegation suggests that Waddell, a fund with different assets, was mainly funded by Haymon, et al. in order to purchase Golden Boy.  The transaction was structured this way in order to “conceal” the identity of Haymon so as not to alert Golden Boy or anyone else of the potential monopoly.

Golden Boy attacks the Haymon “time buys” on the network by arguing that it is “patently an act of promotion by a boxing manager…”  It also claims that it has entered into “coercive contracts” with Haymon fighters as fighters must sign “multi-year” contracts with the Haymon Defendants.

The scheme claimed by Golden Boy indicates that Haymon, et al is willing to take on losses in the “hundreds of millions of dollars” initially for future gain to control the “promotion of boxing on American network television.”  Golden Boy suggests that once they have secured its market dominance, it will “reverse the financial arrangements, recoup their losses, pay less to boxers and reap massive profits, far in excess of their temporary losses, by charging supracompetitve prices to networks, sponsors and consumers.”

The argument by Golden Boy is that the time buys “lock out” other promoters from attempting to secure television deals. The issue with the scheme laid out by Golden Boy is that while it may be true that the business strategy by Haymon, et al. may one day seek to switch its current time buys to network deals in which the networks would pay Haymon, it does not means it is not against antitrust laws.

One of the issues Golden Boy points out is that boxing managers negotiate with boxing promoters on behalf of their boxers.  Golden Boy claims Haymon, et. al circumvents this practice in violation of the laws cited in its Complaint.

With the alleged scheme, Golden Boy claims that Haymon contracts create an illegal “tying relationship between relationships between services sold in separately defined markets (management and promotion of boxing).

Payout Perspective:

It will be interesting to see how this lawsuit will proceed.  One hurdle that Golden Boy may have to overcome is the allegations related to the “time buy” on networks as it is hard to argue the future business dealings for Haymon.  This is discussed in Show Money Episode 5.  There might be an allegation of anticompetitive behavior in the future if Haymon were to secure deals with all of the television networks PBC currently airs on.  But, networks such as FS1, TruTV, HBO and Showtime have non-PBC boxing on its networks.

An interesting part of the litigation will be the information that might surface considering Haymon’s alleged attempt to purchase Golden Boy from Oscar De La Hoya.

We will keep you posted.