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A look at Golden Boy’s Sherman Antitrust & Clayton Act lawsuit against Al Haymon
By Zach Arnold | May 7, 2015
On our site, we posted the letter that the Association of Boxing Commissions sent to US Attorney General Loretta Lynch alleging that Al Haymon is violating the Muhammad Ali Act.
On Tuesday, Golden Boy filed suit against Al Haymon and his business partners in Los Angeles federal court. The lawsuit alleges that Al Haymon is violating the Sherman Antitrust Act, the Clayton Act, and the Muhammad Ali Act.
Most of the initial text in the lawsuit filing mirrors the claims that ABC made in their letter to Loretta Lynch. So, we will focus on the various causes of action that Golden Boy, through attorney Bert Fields, has filed in their complaint against Haymon.
One item from the background claims in the complaint, however, is worth highlighting:
Plaintiffs are informed and believe and, on that ground, allege that defendants Waddell & Reed Financial, Inc. and Waddell & Reed, Inc. (collectively “Waddell”) are Delaware corporations in the business of supplying venture capital to businesses through controlled entities. Waddell financed and aided the Haymon Defendants through Ivy Asset Strategy Fund, WRA Asset Strategy and Ivy Funds VIP Asset Strategy (the “Waddell Funds”). These are investment funds established, owned and controlled by Waddell and their investors. Ryan Caldwell (“Caldwell”) is manager of the Waddell Funds (the Waddell Funds, Caldwell and Waddell are sometimes called the “Waddell Defendants” in this Complaint). The Waddell Defendants have provided more than four hundred million dollars to finance the unlawful activities of the Haymon Defendants alleged hereinbelow and have also advised, aided and abetted the Haymon Defendants in carrying out such activities and have conspired with them to do so.
Before the events on which this action is based, defendants sought to eliminate competition in the business of promoting Championship-Caliber Boxers by acquiring total ownership of Golden Boy and sidelining De La Hoya as a competitor. To that end, Waddell offered to purchase 100% of the equity interest in Golden Boy through another Waddell controlled fund, but conditioned its offer on obtaining an onerous and lengthy non-competition agreement from De La Hoya. Plaintiffs are informed and believe and, on that ground, allege that, in fact, the intended buyers of Golden Boy were the Haymon Defendants, that Waddell was to finance the acquisition of Golden Boy with the Waddell controlled fund as the nominal buyer, and that the involvement of the Haymon Defendants was to be concealed, since their acquisition of Golden Boy, a major promoter, would violate the law and perhaps expose defendants’ scheme to monopolize the promotion business. Defendants’ proposed acquisition of Golden Boy was not completed, because De La Hoya refused to accept the onerous, anti-competitive restrictions on his boxing related activities demanded by the proposed buyers.
With that noted from the Complaint, let’s take a look at the causes of actions listed in the court filing.
CLAIMS FOR RELIEF
FIRST CLAIM
(Unlawful “Tie Out” in Violation of 15 U.S.C. § 1 – Against the Haymon Defendants and DOES 1 through 10)
53. Plaintiffs incorporate each preceding and succeeding paragraph as though fully set forth herein.
54. Defendants have knowingly and intentionally engaged in an unlawful contract, combination, or conspiracy constituting a per se violation of Section 1 of the Sherman Act. 15 U.S.C. § 1.
55. With the advice, aid, financial backing and express agreement of the Waddell Defendants and CVC, the Haymon Defendants have entered into agreements to restrain trade in a substantial portion of the market for promotion of Championship-Caliber Boxers. As alleged hereinabove, while the Haymon Defendants insist that they are not promoters, their contracts to manage Championship-Caliber Boxers contain exclusionary provisions that condition their professional services on the boxers’ agreement not to contract with legitimate boxing promoters. These agreements constitute unlawful “tying” or “tie out” arrangements (sometimes known as “negative tying”), and as such, constitute per se violations of the Sherman Act.
56. The Haymon Defendants’ illegal agreements create a “tying” relationship between services sold in separately defined relevant markets: the market for management of Championship-Caliber Boxers (i.e., the “tying” market), and the market for promotion of Championship-Caliber Boxers (i.e., the “tied” market).
57. The Haymon Defendants exercise monopoly power in the market for management of Championship-Caliber Boxers (i.e., the “tying” market). Their dominance in the “tying” market is sufficient to substantially affect competition in the market for promotion of Championship-Caliber Boxers (i.e., the “tied” market). The Haymon Defendants’ ability to use their power in the “tying” market to foreclose competition in the “tied” market is enhanced by the susceptibility of Championship-Caliber Boxers to become “locked in.”
58. The Haymon Defendants’ imposition of unlawful “tying” or “tie out” provisions in their contracts with Championship-Caliber Boxers has in fact had a significant adverse effect on a substantial volume of commerce to the extent of many millions of dollars.
59. As a direct and proximate result of Defendants’ unlawful and anticompetitive conduct, Plaintiffs have been injured and damaged in its business and property.
SECOND CLAIM
(Conspiracy in Restraint of Trade in Violation of 15 U.S.C. § 1 – Against All Defendants)
60. Plaintiffs incorporate each preceding and succeeding paragraph as though fully set forth herein.
61. Defendants have knowingly and intentionally engaged in an unlawful contract, combination, or conspiracy that has unreasonably restrained trade in violation of Section 1 of the Sherman Act. 15 U.S.C. § 1. These unlawful agreements include, but are not limited to:
- A. agreements between the Waddell Defendants and the Haymon Defendants and between CVC and the Haymon Defendants, whereby the Waddell Defendants and CVC have financed, participated in, and gained a direct or indirect financial interest in the Haymon Defendants’ anticompetitive scheme;
- B. agreements between the Haymon Defendants and Championship-Caliber Boxers;
- C. agreements between the Haymon Defendants and boxing venues;
- D. agreements between the Haymon Defendants and television networks;
- E. agreements between the Haymon Defendants and advertisers;
- F. agreements between the Haymon Defendants and sponsors;
- G. agreements between the Haymon Defendants and “sham” promoters who act as “fronts” for the Haymon Defendants; and
- H. agreements between the Haymon Defendants and key employees “poached” from legitimate promoters.
62. As alleged hereinabove, Defendants have engaged in a multi-faceted and far-reaching scheme to unreasonably restrain trade in the primary and secondary relevant markets. This scheme includes, but is not limited to, the following actions:
- A. violating the prohibition, under state and federal law, against acting as both manager and promoter, so as to gain an unfair advantage over legitimate promoters;
- B. violating numerous state and federal laws and regulations governing promoters with which legitimate promoters must comply;
- C. entering into unlawful “tie out” agreements to prevent Championship-Caliber Boxers from contracting with legitimate promoters of their choice;
- D. surreptitiously operating in the promotion business through “sham” promoters;
- E. locking up boxing talent, venues, and television networks in exclusive dealing arrangements;
- F. paying broadcast companies for exclusive rights to television air time on most U.S. networks, so as to illegally present and promote televised boxing matches and to exclude legitimate promoters from promoting such matches on network television and to enhance the Haymon Defendants’ unlawful presence in the promotion business and ability to monopolize that business;
- G. misappropriating trade secrets from legitimate promoters; and
- H. other unlawful, anticompetitive, and tortious conduct.
63. As a direct and proximate result of this illegal, tortious, and anticompetitive conduct, Defendants have undermined and foreclosed competition in a substantial share of the affected commerce. Specifically, Defendants have maintained and expanded the Haymon Defendants’ monopoly in the primary relevant market for management of Championship-Caliber Boxers, and caused a significant adverse effect on a substantial volume of commerce in the secondary relevant market for promotion of such boxers.
64. The anticompetitive effect of the Defendants’ unlawful and anticompetitive conduct outweighs any ostensible procompetitive benefits.
65. As a direct and proximate result of Defendants’ unlawful and anticompetitive conduct, Plaintiffs have been injured and damaged in its business and property.
THIRD CLAIM
(Attempted Monopolization in Violation of 15 U.S.C. § 2 – Against All Defendants)
66. Plaintiffs incorporate each preceding and succeeding paragraph as though fully set forth herein.
67. Defendants have engaged in the predatory and anticompetitive conduct alleged hereinabove to leverage the Haymon Defendants’ monopoly power in the market for management of Championship-Caliber Boxers, in an attempt to obtain a monopoly in the market for promotion of Championship-Caliber Boxers, in violation of Section 2 of the Sherman Act. 15 U.S.C. § 2. This scheme includes, but is not limited to, the following actions:
- A. violating the prohibition, under state and federal law, against acting as both manager and promoter, so as to gain an unfair advantage over legitimate promoters;
- B. violating numerous federal and state laws and regulations governing promoters with which legitimate promoters must comply;
- C. entering into unlawful “tie out” agreements to prevent Championship-Caliber Boxers from contracting with legitimate promoters of their choice;
- D. surreptitiously operating in the promotion business through “sham” promoters;
- E. locking up boxing talent, venues, and television networks in exclusive dealing arrangements;
- F. paying broadcast companies for exclusive rights to television air time on most U.S. networks, so as to illegally produce and promote television boxing matches and to exclude legitimate promoters from promoting such matches on network television and to enhance the Haymon Defendants’ unlawful presence in the promotion business and ability to monopolize that business;
- G. misappropriating trade secrets from legitimate promoters and others; and
- H. other unlawful, anticompetitive, and tortious conduct.
68. The Haymon Defendants’ dominance in the primary relevant market of managing Championship-Caliber Boxers is sufficient to substantially affect competition in the secondary relevant market of promoting such boxers. Their ability to use this power in the primary relevant market to foreclose competition in the secondary relevant market is enhanced by the susceptibility of boxers to become “locked in.”
69. Defendants have engaged in predatory and anticompetitive conduct as alleged hereinabove with the specific intent to allow the Haymon Defendants to monopolize the market for promotion of Championship-Caliber Boxers. If left unchecked, the Haymon Defendants have a dangerous probability of obtaining monopoly in that market.
70. As a direct and proximate result of Defendants’ unlawful and anticompetitive conduct, Plaintiffs have been injured and damaged in its business and property.
FOURTH CLAIM
(Injunctive Relief Under 15 U.S.C. § 26 — Against All Defendants)
76. Plaintiffs incorporate by reference each preceding paragraph as though fully set forth herein.
77. California Business and Professions Code § 17,200 et seq. defines as “unfair competition” any unlawful business practice. As alleged hereinabove, the business practices of the Haymon Defendants violate numerous regulations and laws, are patently “unlawful” and thus “unfair competition.”
The Laws Violated
78. The laws violated by the Haymon Defendants include the following:
- A. The Muhammad Ali Boxing Reform Act 15 U.S.C. § 1631 et seq. (the “Ali Act”) explicitly creates a “Firewall between promoters and managers” and provides, inter alia, that it is unlawful for “a manager” to have “a direct or indirect financial interest in the promotion of a boxer” or “to receive compensation or other benefits from a promoter.” 15 U.S.C. § 6308(b)(1)(B). In addition, Sections 6307e(a) and (b) require promoters to make financial disclosures with respect to each bout to the applicable State Athletic Commissions and to the boxers they promote, and preclude a promoter from receiving the proceeds of a bout without having complied with these requirements. 15 U.S.C. § 6309 makes it a federal crime to violate these requirements.
- B. The California Code of Regulations, CCR Title 4 contains similar provisions. For example, CCR 396 provides it is unlawful for “any member, stockholder, director or officer [of a promoter]” to “act directly or indirectly as manager of a boxer.” The CCRs contain other provisions regulating the conduct of boxing promoters and managers, by requiring promoters to be licensed as such and requiring that their contracts be in writing on prescribed and approved forms and meet specified standards.
- C. Nevada law makes it illegal to act as a promoter without a license to so act. Nevada Revised Statute §§ 467.080, 467.104. The Nevada Administrative Code also prohibits a promoter from acting directly or indirectly as a manager or holding any financial interest in a boxer’s management or earnings from boxing matches.
- D. The Sherman Act, 15 U.S.C. §§ 1 and 2 make the conduct of the Haymon Defendants illegal, in the respects alleged hereinabove.
The Defendants’ Conduct Violates The Applicable Laws
79. The conduct of the Haymon Defendants alleged hereinabove violates the Ali Act, and particularly 15 U.S.C. § 6308(b)(1)(A) and (B) and § 6307(e)(a) and (b), in that the Haymon Defendants are managers and not only have “a direct or indirect financial interest in the promotion of a boxer,” but have actually functioned and are actually functioning as both managers and unlicensed promoters, have failed to provide the boxers they promote or state boxing commissions with the financial disclosures required by the Ali Act and have unlawfully received the proceeds of numerous bouts without such compliance.
80. The conduct of the Haymon Defendants alleged hereinabove also violates Title 4, Sections 211(3), 213, 220, 221, 222, 230, 243 263 and 396 of the California Code of Regulations, as well as Nevada Revised Statute Sections 467.080 and 467.104 as well as the Nevada Administrative Code, in that the Haymon Defendants regularly and repeatedly function as both managers and promoters, and do so without being licensed as promoters and without the promotional contracts required by law, and in that the Haymon Defendants prevent the boxers they manage from signing contracts with any legitimate promoters, as the law requires.
81. By reason of the facts alleged hereinabove, the Haymon Defendants have also violated Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2.
82. The unlawful conduct of the Haymon Defendants alleged hereinabove was devised in and is managed in and emanates from California and has a significant impact in and on California and California consumers.
83. The acts of the Haymon Defendants alleged hereinabove constitute unlawful business practices under federal and state law and are thus unfair competition as defined in California Business and Professions Code Section 17,200 et seq. If not enjoined, the Haymon Defendants will continue their unlawful acts of unfair competition.
The Need For Equitable Relief
84. As a direct and proximate result of the illegal conduct and unfair competition of the Haymon Defendants, plaintiffs are entitled to restitution from defendants in a substantial sum. The full amount of that sum is difficult, if not impossible to compute or measure accurately, so that, if the Haymon Defendants are allowed to continue their illegal acts of unfair competition, plaintiffs will suffer severe and irreparable harm for which they have no adequate remedy at law.
WHEREFORE, plaintiffs pray judgment against defendants jointly and severally as follows:
1. For an injunction, permanently and pending final judgment in this case, precluding defendants and each of them, and the agents, employees and representatives of each of them, from having any direct or indirect financial interest in the promotion of bouts featuring boxers they manage, from acting as both boxing managers and boxing promoters, from presenting, or participating in the presentation of, boxing matches on television featuring such boxers, or from arranging the arenas, sponsors and/or television broadcasts of boxing matches featuring boxers defendants manage, from directing or otherwise causing or inducing boxers not to sign contracts with Golden Boy or other promoters, from attempting, in any way, to prevent plaintiffs from obtaining venues or other essential facilities for the boxing matches plaintiffs promote, from raiding Golden Boy’s employees, from using Golden Boy’s trade secrets to lure business from it, and from attempting, in any other way, to monopolize the business of promoting Championship-Caliber Boxers in the United States, and from financing or otherwise aiding or abetting commission of any of the acts so enjoined;
2. For damages in the sum of $100 million or such other sum as shall be found;
3. That such damages be trebled pursuant to 15 U.S.C. § 15;
4. For restitution in such amount as shall be found;
5. For interest at the highest lawful; rate on all monetary awards;
6. For plaintiffs’ reasonable attorneys’ fees; and
7. For costs of suit and such other or further relief as the Court shall deem just.
DATED: May 5, 2015
GREENBERG GLUSKER FIELDS
CLAMAN & MACHTINGER LLP
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