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Al Haymon argues he’s not liable for predatory pricing because he spent 9-figures & can’t make the money back
By Zach Arnold | November 7, 2016
Attorneys representing both Al Haymon personally and the various Haymon Entities are trying to kill off Golden Boy’s anti-trust & unfair competition lawsuit. In our first article on Haymon’s motion for summary judgment, we analyze Haymon’s attempt to defend the actions of Premier Boxing Champions and the hundreds of millions of dollars he has spent.
In carefully reading the motion for summary judgment Federal court briefings filed on behalf of Al Haymon against Golden Boy, Haymon made a major concession that will impact his future business dealings in order to win the legal war with Oscar De La Hoya. We’ll focus on that concession and its legal impact in a separate article.
This article is about Haymon’s narrative of playing the role as outsider challenging the “oligopolists.”
Lead by attorney Michael E. Williams, Team Haymon’s bigger-picture argument about why Premier Boxing Champions did nothing wrong can be summed up in the following: I got the cash, I paid for TV time on networks you weren’t doing business with, so how can you say that I interfered with boxing’s business model which is reliant on HBO, Showtime, and PPV?
Al Haymon continues to argue that he’s not a promoter. He calls himself a “packager.” In the same way that he has avoided calling himself a manager by calling himself an “advisor,” Haymon has managed to build a multi-million dollar empire and huge roster of fighters. Managers and promoters are required to be licensed to do business. Athletic commissions must approve of contracts on official state documentation. But what if nobody goes after you for being an advisor or a packager?
Haymon argues that he’s made fighters wealthier because he has directed them into situations where they don’t sign long-term deals with promoters like Golden Boy with odious contracts featuring clauses such as fighters not being able to talk to a manager, consultant, or advisor to help them out without GBP’s permission or else face a substantial fine.
Haymon claims that the PBC business model was built on the concept of paying for TV time on networks like NBC, drawing a “substantial” audience, and then convincing those same networks to pay him rights fees. That plan hasn’t exactly panned out.
The legal defenses
Sherman anti-trust argument
In order for Golden Boy to prove that Haymon’s liable of violating anti-trust, Golden Boy has to show: 1) specific intent to control prices or destroy competition; 2) predatory or anti-competitive conduct directed at accomplishing that purpose; 3) a dangerous probability of achieving ‘monopoly power’; and 4) causal antitrust injury.
Haymon’s attorneys cite the case of Rebel Oil Company vs. Arco regarding a determination of a market. Haymon argues that PBC buying time on networks like NBC and CBS isn’t restricting competition because none of the other major boxing players were on those platforms. The Arco case dealt with the gasoline company offering self-serve gasoline at a lower price and Rebel claiming that Arco drove out competitors by discounting their product at a cut-rate in order to turn around, gain substantial market share, and then jack up the prices after taking over the market. The issue of predatory pricing.
Arco won the case based on the ruling that Rebel failed to show that barriers to entry prevented others from entering into that retail market and that Arco “lacked the power to charge supracompetitive prices to recoup any losses from predatory pricing.”
This is the Haymon argument in a nutshell. PBC did business on networks others weren’t. He took the risk with the hedge fund cash. Golden Boy and Top Rank could continue to do business on their traditional platforms and they could also do business with him. PBC expanded the number of TV platforms airing boxing programming.
Anti-competitive policy involving PBC having “exclusivity” with NBC
Team Haymon cites Omega Environmental Inc. vs. Gilbarco Inc case law to argue that deals involving exclusivity with distributors are not anti-competitive. In this case, PBC’s exclusivity with NBC & CBS isn’t anti-competitive because Golden Boy can still do business with HBO and on PPV. Plus, Haymon argues the TV contracts were of “short duration” with “easy terminability” options.
Team Haymon also argues that Haymon Entities has waived the exclusivity provisions in the TV agreements after Golden Boy sued, therefore resulting in no foreclosure or attempted monopolization. Arguing mootness after Golden Boy sued is a curious play here.
Haymon argues that his boxers are not obligated to sign long-term promotional agreements with Golden Boy and cites a recent Aerotec vs. Honeywell court decision regarding Aerotec failing to prove antitrust violations because Honeywell had a parts shortage which caused Aerotec’s repair business to tank. Aerotec alleged that Honeywell’s part shortage was done on purpose to kill their company. The 9th District Court of Appeals said there was no evidence to prove this assertion. Haymon’s arguing that his fighters refusing to sign contracts with Golden Boy isn’t evidence of intent of anti-competitive or unfair business practices.
Haymon’s attorneys argue that Golden Boy has unclean hands because a judge ruled that contractual extensions for Golden Boy going beyond five years in length were illegal under California law and that Golden Boy then changed its promotional contracts to be governed under Nevada law.
Offering PBC for free is not anti-competitive, it’s the opposite
Haymon cited Matsushita Electric Industrial vs. Zenith Radio Corporation, a 1986 Supreme Court decision regarding Zenith claiming that Matsushita artificially kept prices high in the Japanese market but undercut them in the United States with cut-rate pricing to obtain market share by driving out the competition. The Supreme Court ruled that offering competitive pricing is not an automatic sign of predatory pricing. Predatory pricing involves 1) below cost pricing and 2) “a reasonable expectation of recovering, in the form of later monopoly profits, more than the losses suffered.”
The argument here is that Haymon offered PBC fights for free on network television. He spent hundreds of millions of dollars in hedge fund cash by “packaging” fighters he advises to TV networks and promoters in order to make them more money than they would have by signing with Golden Boy. His attorneys argue that “without the probability of recoupment,” his product on network TV increased the welfare of consumers by giving away a product and increasing exposure for boxing and therefore it isn’t an issue of predatory pricing. Intriguing legal argument but still amazing to read, nevertheless.
The 1993 Supreme Court case involving cigarette manufacturers Liggett and Brown & Williamson is cited. Liggett made generic cigarettes and Brown & Williamson countered by making their own generic cigarettes at below-cost pricing with volume rebates. A rebate war broke out between the two companies before a generic cigarette was even sold. Liggett claimed the price rebates from Brown & Williamson were discriminatory in order to manipulate the margins on both the generic and retail branded smokes. On appeal, Brown & Williamson won because a judge said Liggett couldn’t prove a causal link for damages between the price rebates and Liggett’s alleged economic injury.
Given Team Haymon’s classification of Golden Boy as part of a boxing oligopoly, their arguments about losing money not equaling predatory pricing makes for a very interesting court argument and a likely scenario that Haymon will be able to strike some portions of Golden Boy’s anti-trust & unfair competition court complaint.