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From Antitrust Law Daily, January 27, 2017

Boxing management company KOs boxing promoters’ antitrust suit

By John W. Scanlan, J.D.

A boxing promotion company could not maintain antitrust claims against a boxing management group of entities because the boxing management group’s contracts with its boxers and its television agreements did not harm competition, the federal district court in Los Angeles held in granting summary judgment on all claims to the management group (Golden Boy Promotions LLC v. Haymon), January 26, 2017, Walter, J.).

In 2013, boxing promoter Alan Haymon founded Haymon Sports LLC to provide boxing management services. Haymon Sports currently represents over 200 boxers. In addition, Haymon Sports has created the "Premiere Boxing Champions" (PBC), a series of boxing matches aired on various television networks, as part of which it entered into exclusive agreements with several networks (and some non-exclusive agreements with others), for most of which Haymon pays fees to the networks to air the series. Although the agreements originally were for two or three years, the exclusivity provisions had all been waived by May 2016.

Golden Boy Promotions Golden Boy Promotions, Inc. and Golden Boy Promotions, LLC (Golden Boy) are licensed boxing promoters owned by boxers Oscar De La Hoya and Bernard Hopkins. Golden Boy brought suit against Haymon Sports and other Haymon organizations (the Haymon entities), alleging that since January 2015 the Haymon entities violated the Sherman and Clayton Acts, as well as California unfair competition and unfair practices acts, by attempting to monopolize the market for the promotion of "Championship Caliber Boxers" through the use of illegal tying arrangements, exclusive television contracts, and predatory pricing. It asserted that Haymon used fake or sham promoters for the PBC fights, while functioning as the actual promoter of these fights in violation of the Muhammad Ali Boxing Reform Act, which requires a "firewall" between boxing promoters and managers. As a result of these arrangements, Golden Boy asserted, the number of Golden Boy fights broadcast on English-language television networks dropped from 37 in 2014 to 2 in 2016, and no Golden-Boy promoted boxer has appeared in a PBC fight.

Sherman Act tying arrangements. The Haymon entities had not engaged in illegal tying arrangements pursuant to Section 1 of the Sherman Act because they had not tied their management services to the rejection of competitors’ promoting services, the court found. Although Golden Boy alleged that Haymon’s exclusive multi-year management contracts prohibited Haymon’s boxers from entering into contracts with promoters without its consent and prevented them from being promoted by Golden Boy and other promoters, no boxer testified that Haymon had pressured or prevented him from working with a promoter, and six boxers testified that Haymon had not. In addition, Haymon Sports allowed its boxers to be promoted by Golden Boy and other promoters during the relevant time period, including fights that were very lucrative for Golden Boy. Even though there were fewer fights involving a boxer managed by Haymon and a boxer promoted by Golden Boy as suggested by Golden Boy’s overall percentage of the promotional market, the court observed that Golden Boy generally offers long-term promotional contracts. However, Haymon generally advises boxers to avoid long-term promotional contracts as being primarily advantageous for the promoter, and only one Haymon-managed boxer entered into any sort of long-term contract with a promoter during that time period. Finally, Golden Boy did not submit any proposal during that period to any Haymon entity to promote any Haymon boxer. The primary evidence provided by Golden Boy to support the existence of a tie was vague and hearsay conversations with boxers, none of whom were deposed, the court noted.

Furthermore, there was no evidence that the Haymon entities possessed economic power in the tying product. Market power can be shown through direct evidence of restricted output or supracompetitive prices, but the evidence showed that there were more televised boxing matches, with boxers taking home larger purses and paying lower management fees than the prevailing rates in the industry. According to the court, Golden Boy also could not demonstrate market power circumstantially because its definitions of the relevant product and geographic markets were flawed. Golden Boy’s expert determined that Haymon had 47.5 percent of the market for "Championship Caliber Boxers," defined as those boxers who had been ranked in the top 10 by any of the four major sanctioning bodies during 2016 or classified as a champion since January 2015, and who had appeared on U.S. television since January 2015, excluding those with managers residing outside the United States. However, because the expert assumed that the only alternatives available to Championship Caliber Boxers were managers of other Championship Caliber Boxers, he did not analyze the qualifications and backgrounds of these managers to determine whether there were any viable substitutes among managers of other boxers. His assertion that a manager residing outside the United States was not part of the relevant market for managers of Championship Caliber Boxers was conclusory and unsupported by empirical data, when the facts showed that 61 to 71 of these boxers already have managers from outside the United States. The court calculated that 35 percent of boxers managed by Haymon were themselves from outside the United States.

Even if the Haymon entities had a substantial market share, the court explained, they lacked market power because there were no significant barriers to entry. A person can become a manager by filing out an application, paying a fee generally ranging from $30 to $100, and in some states pass a background check. Many boxers, including Champion Caliber Boxers, are managed by friends, family members, trainers, and others. Experience, knowledge of boxing and the regulations governing it, and knowledge of economic factors affecting negotiations are not "barriers to entry" because they are not additional long-run costs incurred by new entrants but not incumbents or factors that allow incumbents to earn monopoly returns while deterring new entrants. Golden Boy argued that "network effects" served as a barrier to entry because Haymon was attracting boxers by promising them television air time on its PBC network and fights against other Haymon boxers. The court found that more than a third of the boxers appearing on PBC were not managed by Haymon, and there were many other television networks available to broadcast non-Haymon fights involving Champion Caliber Boxers.

Sherman Act monopolization. Haymon’s exclusive television agreements were not anti-competitive under Section 2 of the Sherman Act because there were many existing and potential alternative distribution channels available to Golden Boy, including English-language, Spanish-language, and basic cable networks. Haymon never had any exclusive arrangements with HBO, Showtime, or the pay-per-view networks that were the most profitable distribution channels for boxing programming. Haymon reached deals with networks like SpikeTV and BounceTV, which had not previously broadcast boxing, as did Golden Boy with Estrella TV. Although Golden Boy argued that the availability of Spanish-language alternatives did not make up for a lack of English-language alternatives, there was no evidence that it had attempted to develop any relationship with any English-language network during the relevant period.

In addition, there was no evidence that Haymon had engaged in predatory pricing when it bought time on various networks to air boxing matches in hopes of expanding the boxing audience. Golden Boy’s expert did not perform any analysis showing that Haymon had a reasonable expectation of recovering more than the losses it had suffered, instead testifying that Haymon’s television strategy had caused it to lose much more than the hundreds of millions it had originally anticipated. Although Haymon eventually planned to "flip the model" and charge networks to air the boxing matches, predatory intent alone cannot substitute for a reasonable possibility of recoupment.

Golden Boy could not show that it had sustained economic damage as a result of Haymon’s alleged violations of the Muhammad Ali Boxing Reform Act. The "Ali Act" is designed to prevent boxers from being harmed by their managers’ and promoters’ conflicts of interests, and only boxers or the government have standing to bring actions for its violation. The conflict of interest provision that Golden Boy accused Haymon of violating was not intended to compensate promoters for lost profits. The injury claimed by Golden Boy was caused by conduct that was beneficial to competition in the promotion market, the court found.

Because the court had granted summary judgment to Haymon on the other claims and there is no independent cause of action in Section 16 of the Clayton Act, summary judgment was granted to Haymon on Golden Boy’s claim for injunctive relief.

The case is No. CV 15-3378-JFW (MRWx).

Attorneys: Ricardo P. Cestero (Greenberg Glusker Fields Claman & Machtinger LLP) for Golden Boy Promotions LLC. Howard Weitzman (Kinsella Weitzman Iser Kump & Aldisert LLP) for Alan Haymon, Alan Haymon Development, Inc. and Haymon Sports, LLC.

Companies: Golden Boy Promotions LLC; Alan Haymon Development, Inc.; Haymon Sports, LLC

MainStory: TopStory Antitrust CaliforniaNews

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