The long-running legal saga that can pose an existential threat to the UFC took a step forward when the presiding federal judge indicated that he may grant class certification in the antitrust lawsuit against the mixed martial arts organization. If the lawsuit is successful, the UFC can be on the hook for over $1 billion in damages. Class certification is a significant step for plaintiffs in a class action case. Here, it can be a major milestone in the lawsuit that may cause UFC to reevaluate its legal strategy going forward.

The lawsuit has been going on for six years already before it even reached this point. The plaintiffs kicked off their action in court by filing a legal case in 2014. The case alleged that UFC used illegal business practices both to depress its own fighters wages and to gain a competitive advantage over other competitors in the business.
 

UFC Allegedly Depresses Fighters' Wages with Anticompetitive Conduct

The plaintiffs have alleged a scheme in which UFC both keeps their wages down and prevents other mixed martial arts organizations from competing for their services. UFC allegedly has gone out of its way to crush other competitors in the mixed martial arts space to the point where it has become the dominant force in the industry. There is an allegation that UFC has forced sporting venues to only host its events and not work with other MMA groups. Accordingly, there are fewer competitors for fighters' services. This means that they must take what UFC offers them if they want to fight at all. UFC includes exclusivity clauses in its contracts with its fighters that keeps them from fighting for another organizer. In the event that the fighters try, they would lose their contract with UFC.

The end result is that UFC claims about 90% of the revenues from its MMA events. Even in sports that have salary caps, the players usually receive at least half of the revenue that the sport generates. UFC fighters end up with only a small fraction for their efforts. It is not unheard of for a fighter to make a few thousand dollars for an event in which they put their physical safety on the line. Even in an event like boxing, the fighters can take home purses of millions of dollars and some are guaranteed a percentage of the revenues.

Fighters can only fight for the UFC, and there are no comparable sports that they can turn to in order to increase their wages. They also cannot go overseas to fight because there are not comparable organizations overseas. In fact, foreign fighters end up coming to the United States in order to join the UFC. The lawsuit alleges that there is practically no other sport in the U.S. in which the league has such unadulterated dominance over its athletes.

Here, the federal judge held a status call among the parties to the case. In the call, he informed the parties that he was "likely" to grant class certification. He asked the parties if they had any additional arguments for him to consider on the matter. While this is not a binding ruling, it is a strong step of where the judge is heading.
 

The Lawsuit Is an Existential Threat for the UFC

Still, even six years into the litigation, it is far from a resolution. Class certification just means that the plaintiffs are allowed to proceed together with one lawsuit. It is not always an easy hurdle to overcome. If the plaintiffs do not receive class certification, it is almost always the end of the lawsuit. Once this ruling was issued, the trial would be free to proceed to the next steps.

Where this is a risk for UFC is that an antitrust lawsuit has very high damages. There is a provision in antitrust law that states that plaintiffs can get treble damages if the defendant has broken the law. Given the fact that the fighters claims that their wages were artificially depressed by hundreds of millions of dollars, you can get an idea of the stakes at play for UFC. If they lose the lawsuit, it could bankrupt the organization. Even if they end up settling, it will mean that the owners' profit take a major hit as they will need to share more of the pie with their fighters.