Fanatics, Inc., is nearing its final form as a fully armed and operational battle station within the sports card hobby. It took the sports merchandising giant only two years to go from zero involvement to complete domination of the Hobby in areas of licensing, manufacturing, distribution, and, most recently, resale:

Aug. 19, 2021: Fanatics strikes a deal with MLB and MLBPA to replace Topps as the league's official trading card partner in a deal set to begin in 2023.

Aug. 23-25, 2021: Fanatics replaces Panini, the company’s main competitor, as the official trading card partner of NBA, NBAPA, and NFLPA in a deal set to start in 2026.

Sept. 29, 2021: Fanatics Trading Cards are valued at $10.4 billion, over half of the company's overall valuation of $18 billion following a $350 million funding round from Silver Lake, Insight Partners, and Endeavor, the owner of the UFC. (Panini maintains licensing rights to the UFC)

Jan. 3, 2022: Fanatics, not content with waiting for its MLB and MLBPA deals to go into effect, agrees to purchase historic trading card manufacturer Topps in an acquisition worth approximately $500 million.

Feb. 2, 2023: Fanatics announces its plans to create a live streaming platform for shopping trading cards and collectibles to rival platforms like Whatnot, TikTok, and Instagram Live.

June 21, 2023: Fanatics sends local card shop (LCS) owners a contract with terms and conditions outlining requirements and restrictions regarding the resale of Topps products.

Over that same two-year period, Fanatics' memorabilia arm, Fanatics Authentic, penned exclusive licensing agreements with superstars across professional sports including Tom Brady, Jayson Tatum, Auston Matthews, Shohei Ohtani, and several others.

Under the Sherman Antitrust Act, “an unlawful monopoly exists when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct." [1] Recent lawsuits citing Sherman Act violations have been leveled against large corporations involving mergers and acquisitions in both the airline industry and social media space. [2] The allegations center around anti-competitive behaviors including price-fixing, artificial price inflation, and lopsided exclusivity agreements. In the case concerning domestic airline travel, the court focused on the roughly 80% controlling interest that the defendants would have over the entirety of the $513.5 billion airline industry should proposed mergers be allowed. [3] Make no mistake, the sports collectibles business (valued around $35 billion in 2023) is several tiers below the airline industry, but the principles combatting anticompetitive behavior in both should be recognized and acted upon by the Department of Justice and/or corporations in the space.

Surprisingly, the Hobby’s reaction to Fanatics slowly gobbling up competitors has been generally positive. The sentiment is that Fanatics brings more investment and marketing dollars into the business, drawing more eyeballs and interest to the space, and in turn, growing the Hobby to the benefit of both dealers and collectors alike. However, that continued growth now comes with demands and stipulations for sellers of Fanatics products that, by 2026, will include exclusive rights to three of the four major U.S. sports.

In the terms and conditions contract sent to LCS owners earlier this week, Fanatics included its ability to issue “suggested” minimum price policies for certain products sold in the future. Should a dealer fail to comply with the “suggested” price policies, Fanatics reserved the right to suspend individual accounts, likely halting all distribution to the offending dealer. In the same subsection, Fanatics qualifies the demand by claiming that the “retailer shall, at all times and in its sole discretion, determine and control the price at which Topps products are sold by the retailer to its customers.” Despite the qualification, these “suggestions” feel a lot like Fanatics strong arming LCS owners into submission for fear of losing access to football, baseball, and basketball product which likely makes up nearly 95% of total in-store sales. The merchandising mogul also requires certain signage posted in-store, resale/breaking restrictions, hours of operation parameters, and quarterly sales reporting metrics. If Fanatics cannot currently be considered a monopoly, by 2026 there will be no doubt.

Other rising concerns amongst Hobbyists include several what-if’s. Specifically, concerns that further demands made by Fanatics could require live streaming sales done exclusively on their coming Fanatics Live platform. Where an LCS owner may not have the deep pockets to combat Fanatics regarding the above contract conditions or future harms, platforms like Whatnot and Twitch are better positioned to challenge Fanatics on Sherman Act antitrust grounds—citing an illegal restraint on trade—should this additional step towards the suppression of competition come to pass. There should also be forthcoming discussions about whether the above terms bring Fanatics into an agency relationship with LCS owners and/or whether resale restrictions are barred by something akin to patent exhaustion for sports card products.

Nate Otto is a rising 3L at the University of Florida Levin College of Law and the Executive Articles Editor for the Florida Entertainment and Sports Law Review. Find his store on eBay @BlueWhippetSportsCards.

Sources:

[1]Antitrust Laws and You, The United States Department of Justice (visited June 23, 2023) https://www.justice.gov/atr/antitrust-laws-and-you#:~:text=The%20Sherman%20Antitrust%20Act,-This%20Act%20outlaws&text=An%20unlawful%20monopoly%20exists%20when,suppressing%20competition%20with%20anticompetitive%20conduct. [2]See Mulvey v. American Airlines Inc., 2019 U.S. Dist. LEXIS 35824 (D.D.C. 2019), In re Domestic Airline Travel Antitrust Litigation, 221 F. Supp. 3d 46 (D.D.C. 2016); See also FTC v. Meta Platforms, 2022 U.S. Dist. LEXIS 199854 (N.D. Cal. 2022). [3]Airline Industry Market to be Worth $635.8 Billion by 2030, Yahoo Finance (visited June 25, 2023) https://finance.yahoo.com/news/airline-industry-market-worth-635-143000729.html#:~:text=Through% 20primary%20research%2C%20it%20was,passenger%20aircraft%20and%20freight%20aircraft.