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Boxing Promoter Faces Tough Fight In Antitrust Suit

Law360
By Helen Maher

Law360, New York (July 21, 2015, 9:51 AM ET) -- In what may be the only rematch between Floyd Mayweather Jr. and Manny Pacquiao, Pacquiao’s promoter, Top Rank Inc., has — after an almost 60-year hiatus — put the issue of whether championship boxing constitutes a relevant market for antitrust purposes back in the spotlight by suing Mayweather’s manager.

Top Rank sued Al Haymon, several Haymon-run businesses, financial planner Waddell & Reed Financial Inc. and its affiliate Media Group Holdings LLC (“MGH”), for more than $300 million alleging that the defendants violated federal antitrust laws in the markets of promoting and managing championship-caliber boxers. Top Rank also seeks injunctive relief precluding the defendants from: having any direct or indirect financial interest in the promotion of bouts featuring boxers that the defendants manage; presenting television broadcasts featuring such boxers; causing boxers not to sign with Top Rank; and preventing Top Rank from obtaining venues for the boxing matches which Top Rank promotes.[1]

Las Vegas-based Top Rank is a licensed promoter in several states including California and Nevada,[2] and promotes several boxers, including Manny Pacquiao. Top Rank’s founder and CEO, Bob Arum, promoted his first fight for Muhammad Ali in 1966, and formed Top Rank in 1970.[3] Haymon, a former music promoter and television producer, first entered the boxing world in the early 2000s. Plaintiff contends that Haymon “has approximately 200 boxers in his stable” including Floyd Mayweather Jr., and that Haymon effectively acts as both the promoter and the manager of various boxers in violation of the Muhammad Ali Boxing Reform Act.[4],[5]

Background to Top Rank’s Claims

Top Rank claims that: (1) Haymon violated Section 1 of the Sherman Antitrust Act and that (2) Haymon, Waddell & Reed and MGH conspired and thereby violated Section 2 of the Sherman Act.

Section 1 Claims

Top Rank claims Haymon violated Section 1 based on exclusivity provisions in Haymon’s adviser agreements with boxers that restrict them from independently contracting with other boxing promoters:[6] “By expressly conditioning his managerial services on boxers’ agreement to not freely contract with legitimate promoters, Haymon effectively excludes legitimate promoters from accessing and promoting many of the industry’s top boxers — which in turn allows Haymon to act illegally as both manager and promoter to his clients.”[7] Top Rank alleges that Haymon is creating an illegal tying relationship between the market for the management of championship-caliber boxers and the market for the promotion of championship-caliber boxers.[8] The complaint alleges that but for the tying agreements, championship-caliber boxers would contract with legitimate promoters.[9]

Top Rank also alleges that agreements among Waddell & Reed, MGH and Haymon, as well as agreements among Haymon and champion-caliber boxers, venues, broadcasters, advertisers, sponsors, and “sham” promoters are part of a conspiracy that violates Section 1 by improperly maintaining and expanding Haymon’s market power in both the markets for managing and promoting champion-caliber boxers.[10] Top Rank further alleges that Haymon is violating the Muhammad Ali Boxing Reform Act by acting as both promoter and manager to boxers. Haymon allegedly conceals his role as promoter by employing “sham” frontmen/promoters who effectively rent out their promoters’ licenses to Haymon.[11] Top Rank contends that by violating the act and extinguishing the firewall between managers and promoters, Haymon is reaping an unfair advantage over legitimate promoters, including the ability to block boxers from contracting with legitimate promoters.[12]

Attempted Monopolization

Top Rank claims Haymon and his companies have engaged in a predatory scheme to leverage Haymon’s monopoly power in the market for management of championship-caliber boxers to attempt to obtain a monopoly in the market for promotion of championship-caliber boxers. Top Rank claims that if “left unchecked” the defendants have a dangerous probability of obtaining a monopoly in the market for promotion of championship-caliber boxers in violation of Section 2 of the Sherman Act.[13]

While the complaint focuses largely on the conduct of Haymon and his businesses, the predatory “payola” practices include Waddell & Reed. Waddell & Reed purportedly committed more than $400 million to fund the broadcast of Premier Boxing Champions (“PBC”) on over half a dozen major broadcasters securing over 100 show dates.[14] According to the complaint, the purchase of this air time will force defendants to suffer large losses, but will intentionally aid in the conspiracy to block other promoters from broadcast and promotion opportunities. Ryan Caldwell, no longer with Waddell & Reed, allegedly participated in meetings to effectuate what the plaintiff coins “Haymon’s payola scheme.” After leaving Waddell & Reed in April 2014, Caldwell became an adviser with Haymon Boxing Management, and eventually chief operating officer of PBC.[15]

Analysis

Notwithstanding Top Rank’s assertion that in 1959 the U.S. Supreme Court “established conclusively” that championship boxing is a distinct and cognizable relevant market, Top Rank faces an uphill battle in establishing that market in today’s world. Indeed, it is unlikely that fact-finding that supported the creation of a distinct championship boxing market nearly 60 years ago would be relevant today. The boxing business of the 1950s is much different than the boxing business of today, particularly given the advent of pay-per-view TV and its impact on boxing.

Proper antitrust market definition is a threshold question to the survival of Top Rank’s antitrust claims. To state a valid antitrust claim, Top Rank must allege that the defendants have market power within a properly defined relevant antitrust market.[16] Although generally warranting a factual inquiry, a facially unsustainable market definition may warrant dismissal under Fed. Rule 12 (b)(6).[17] The Supreme Court has held that the market will “vary with the part of commerce under consideration … That market is composed of products that have reasonable interchangeability for the purposes for which they are produced—price, use and qualities considered.”[18] Even if Top Rank can survive a motion to dismiss, it is likely going to be difficult for Top Rank to factually prove the relevant antitrust markets.

Top Rank defines the two relevant markets as: (1) the market for managing championship-caliber boxers; and (2) the market for promoting championship-caliber boxers. Championship-caliber boxers are defined in the complaint as “professional boxers who, within the past three years, have demonstrated through such quantitative factors as purse size, television rights, viewership, ticket revenue, and other objective criteria, that they belong to ‘the cream’ of the boxing business.”[19]

Top Rank heavily relies on the Supreme Court’s analysis in U.S. v. Int’l Boxing Club of N.Y., 358 U.S. 242 (1959) for the market definitions. However, the Supreme Court’s analysis in that case was limited to determining whether the lower court’s decision was “clearly erroneous” in identifying a market consisting solely of championship boxing contests for the purposes of evaluating the antitrust claims. The court affirmed the lower court’s decision, stating that “championship boxing is the ‘cream’ of the boxing business, and, as has been shown above, is a sufficiently separate part of the trade or commerce to constitute the relevant market for Sherman Act purposes.”[20] Important to Top Rank’s case is whether it can also show that managing and promoting champion-caliber boxers constitute separate markets.

The Int’l Boxing lower court’s decision recognizing a market consisting solely of championship boxing contests followed a trial, including testimony of 15 witnesses and the presentation of almost 300 exhibits. Defendants were accused of committing antitrust violations by: (1) purchasing promotional control of certain boxing championships; (2) acquiring assets of their competitors; (3) acquiring exclusive control of stadiums and arenas; and (4) requiring specific contenders for a title to enter into an agreement by which the contender, if he won the contest and became champion, would engage in title bouts only under the promotion of defendants for a period of three to five years, and if the contender refused to enter such agreement he would not be permitted to fight in the championship bout.[21] The defendants claimed that the market should consist of the entire entertainment field, or if that definition were rejected, then all levels of boxing contests. The court rejected defendants’ reasoning, instead opting for a narrow market definition consisting of only championship boxing.

At the time the lower court reviewed the evidence, there were eight recognized weight classes in boxing.[22] Today there are at least 17 different weight classes. In finding that championship boxing was a distinct market, the court stated, “It is reasonable to say that, at any one time, there are at most only six or so professional boxers who can defend a world championship title.”[23] Today, there are at least 17 professional boxers who defend their world championship titles. It is clear that even if the 1955 court’s reasoning were relied on today, the market would consist of many more competitors, given the increased number of professional boxing organizations, and even more world champions who compete in the United States.

The lower court examined the revenue from the championship bouts versus the nonchampionship bouts finding that “the average gross revenue of a championship fight promoted by defendants was almost four times that of an ordinary fight. Breaking down these overall figures, it appears that a championship contest generates three times the television, radio, and movie revenues, and five times the box office receipts of non-championship fights.”[24] The court found that “[i]n matters of public appeal as well as financial return, championship contests are on a plane which clearly distinguishes them from non-championship fights. The great public interest in a championship match was shown to generate a separate and distinct public demand which attracts many spectators who do not patronize non-championship fights.”[25]

Notwithstanding its reliance on Int’l Boxing’s championship boxing market, Top Rank’s market definition is much different and likely more difficult to prove. Unlike 60 years ago, boxing fans have a multitude of media forums to watch boxing events, and no longer only watch champion-level bouts. Thus, the interchangeability between the various boxing levels, never mind other sporting events, will be an obstacle for Top Rank to factually demonstrate.

Further, it will be incumbent upon Top Rank to show that financial aspects of a champion-caliber boxer separate him from other types of boxers. This may be difficult to demonstrate given that boxing over the last three years has generally been broadcast via paid programming where multiple bouts are compiled on one card. Moreover, it may well be that all of the qualifications which Top Rank has used to define championship-caliber boxers — purse size, television rights, viewership, ticket revenue and other objective criteria — are all reflective of a broader market in which boxers compete against many other forms of entertainment. In today’s world, sports leagues are keenly aware that they compete against every form of entertainment for the consumer’s dollar. This case will certainly be a main event for other leagues to watch given its impact on market definition in the sports context.

—By Helen M. Maher, Boies Schiller & Flexner LLP

Helen Maher is a partner in Boies Schiller's Armonk, New York, office. She has been counsel to NASCAR for over a decade.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Complaint, Top Rank v. Haymon et. al., No. 15-CV-04961 (JFW) (MRW) (C.D. Cal. July 1, 2015) (“Compl.”) at 47-48.

[2] Compl. at ¶ 9.

[3] Top Rank, Inc. About Us, www.toprank.com/about (last visited on July 15, 2015).

[4] Compl. at ¶ 54.

[5] The Muhammad Ali Boxing Reform Act specifically provides that “it is unlawful for (A) a promoter to have a direct or indirect financial interest in the management of a boxer or (B) a manager (i) to have a direct or indirect financial interest in the promotion of a boxer; or (ii) to be employed by or receive compensation or other benefits from a promoter, except for amounts received as consideration under the manager’s contract with the boxer.” 15 U.S.C.A. § 6308 (b) (1) (WestLaw 2015).

[6] Compl. at ¶ 119.

[7] Compl. at ¶ 54.

[8] Compl. at ¶ 121.

[9] Compl. at ¶55.

[10] Compl. ¶¶ 125-130.

[11] Compl. at ¶ 57.

[12] Compl. ¶¶ 65-66.

[13] Compl. at ¶ 134.

[14] Compl. at ¶ 71.

[15] LinkedIn Profile of Ryan Caldwell, https://www.linkedin.com/pub/ryan-caldwell/11/a5/878. (last visited on July 15, 2015).

[16] Newcal Indus. Inc. v. Ikon Office Solution, 513 F.3d 1038, 1044 (9th Cir. 2008).

[17] Dang v. San Francisco Forty Niners, 964 F. Supp. 2d 1097, 1104 (N.D. Cal 2013).

[18] U.S. v. E.I. du Pont De Nemours & Co., 351 U.S. 377, 404 (1956).

[19] Compl. at ¶ 87.

[20] U.S. v. Int’l Boxing Club of N.Y., 358 U.S. 242, 252 (1959).

[21] U.S. v. Int’l Boxing Club of N.Y., 150 F. Supp. 397, 400 (1957).

[22] Id. at 403.

[23] Id.

[24] Id. at 420.

[25] Id.

Related Practice: Antitrust

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