Zuffa’s economic expert dismisses Plaintiffs’ opinion on damages in Antitrust lawsuit

February 23, 2018

In the latest round of filings in the UFC Antitrust Lawsuit, the UFC provided an expert report from Roger D. Blair.  Dr. Blair’s report was meant to rebut the assertions made by Plaintiffs’ expert Andrew Zimbalist.

Dr. Blair’s report argues Dr. Zimbalist’s “yardstick” method of assessing plaintiffs’ damages in the lawsuit was inappropriate and flawed.

Dr. Zimbalist does not conduct a yardstick analysis. He does not search for a
business that is comparable to Zuffa in all important respects. Instead, he uses the sports leagues that he has available to him (NFL, MLB, NBA, and NHL) and some limited data from boxing. He then calculates an average PTRR across these five sports. Even if the PTRR were relevant, which it is not, this average across five different sports cannot serve as a yardstick for Zuffa’s but-for PTRR.

Dr. Blair does not identify a relevant market as he claims that Dr. Zimbalist “never identified a relevant market, nor assessed concentration in any market.”  He does suggest that if you were to define the relevant market it would consist of “all promoters that promoted an MMA athlete who previously competed for the UFC, then the shares of the qualifying promoters within that market and HHI could be calculated.”

Notably, Dr. Blair reviews contracts of the Big 4 leagues in comparing with the UFC contract terms in showing that exclusionary practices through contract extensions are procompetitive.  Dr. Blair gives examples of contracts such as Andrew Luck, Von Miller and Mike Trout.

Despite the claim that the UFC contract’s are exclusionary because they impose exclusivity on athletes, he notes contractual language in other sports that limits athletes:


 

Dr. Blair notes that there are two ways to estimate damages:

Further in the report, Dr. Blair claims that Dr. Zimbalist’s method of calculating Zuffa’s pay-to-revenue ration (PTRR) is not valid:

Dr. Zimbalist calculates Zuffa’s pay-to-revenue ratio (PTRR) as the ratio of UFC athletes’ compensation to Zuffa’s total revenue. Similarly, he calculates PTRR for each of the sports in his yardstick. Dr. Zimbalist’s measure of damages is the difference between the UFC athletes’ compensation as a fraction of Zuffa’s total revenue (Zuffa PTRR) and the average of the fraction of total revenue going to athletes in boxing and the four major league sports in North America (proposed yardstick PTRR) multiplied by Zuffa’s revenues. This measure of damages is fatally flawed.

Here, Dr. Blair claims that labor share of total revenue can vary widely.

Dr. Blair also claims that the comparison with the four major leagues are incorrect because each has a union and bargained collectively with management.

…the athletes in the four major leagues are unionized and bargain collectively with management, while MMA athletes are independent contractors and are not unionized. Collective bargaining likely impacts compensation in the four comparator sports leagues in myriad ways, but at minimum, one would expect that unionized athletes would have increased leverage to demand higher pay, which would impact the percentage of revenue they receive. As a result, one likely cannot compare compensation between unionized and non-unionized athletes in a yardstick analysis because the compensation outcomes would differ regardless of the differences in competition between the yardstick and target firm.

Here, readers may view this as a concession that a union would be better for athletes since unions have “increased leverage to demand higher pay.”  While this may have been an indirect concession on the part of Dr. Blair and the UFC that unions are successful vehicles for better wages, the argument was that the yardstick method claimed by Dr. Zimbalist was not correct.

Further, in his report, Dr. Blair makes this assertion about Dr. Zimbalist’s opinion on multi-year contracts:

Dr. Zimbalist appears to assume all multi-year contracts will be found to be anticompetitive, despite their presence across the comparator sports used in his proposed yardstick. To the extent the court or jury does not find all multi-year contracts to be anticompetitive, they will be left with no valid estimate of damages from Dr. Zimbalist.

He also asserts that Zuffa’s bout compensation various tremendously by Athlete.  However, this section of Dr. Blair’s report is redacted in its entirety.

Payout Perspective:

Dr. Blair’s report is as expected from the UFC.  It was clear that it would oppose the damages claim from Dr. Zimbalist and would criticize the method in which he came up with his damages estimate.  Dr. Blair outlines the differences between the big 4 leagues as well as the small amount of data he used in boxing.  The argument is that Dr. Zimbalist method is not sound when contemplating damages in this case is because it is different from the 4 pro leagues and there is just not enough data from boxing to make the comparison.  The question would be what would have satisfied the UFC’s economic expert?  As we see in Dr. Zimbalist’s rebuttal report, he takes issue with Dr. Blair’s critiques.  With the UFC filing a motion to exclude Dr. Zimbalist, the battle of the experts is a key issue in this lawsuit if it goes to trial.

Got something to say?

You must be logged in to post a comment.