#antitrust

Competitive Cheer and Anticompetitive Practices: Varsity Spirit’s Antitrust Struggles

/ Washington Journal of Law, Technology & Arts / 1 Comment
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By: Hannah Gracedel

For decades, Varsity Spirit (“Varsity”) has been the undisputed champion of competitive cheerleading. They outfit teams, run camps, and, most importantly, control the biggest competitions in the industry. But while cheerleaders are trained to execute flawless routines, Varsity’s business decisions have drawn the attention of those who argue that its grip on the cheerleading world might be less about fair cheerleading competitions and more about unfairly dominating the competitive cheerleading market. Two recent class action suits, one in 2023 and another in 2024, claim that Varsity gained and maintained significant control of every aspect of the competitive genre, “All Star Cheer” through its anticompetitive practices. Both suits resulted in major settlements amounting to $126 million total.

What is All Star Cheerleading

Cheerleading has grown significantly since its inception in 1882, with an estimated 3.5 million athletes competing globally. While many Americans might be familiar with cheerleading, some might be surprised to learn about a subdivision called All Star Cheer. All Star Cheer focuses primarily on competition, whereas traditional school cheerleading involves crowd engagement, school spirit activities, as well as the option to compete. All Star teams are most often organized by private gyms, which form the teams based on skill and age level. At competitions, All Star Cheer teams perform a two and half minute routine composed of tumbling, stunting, pyramids, dance, and cheer segments. All Star Cheer is a notoriously expensive sport, where a full season can cost athletes around $8,000-$10,000 due to gym fees, uniform costs, travel expenses, competition fees, etc.

Who is Varsity Spirit

Varsity Spirit was founded in 1974 by Jeff Webb and started as a cheerleading camp company. The company later began manufacturing apparel for cheerleading teams, organizing competitions, and operating summer training camps. Today, Varsity runs the biggest and most prestigious cheerleading competitions and almost every single All Star Cheer competition as well. Varsity gained its dominant 90% share of the cheer competition market primarily by acquiring smaller competitors, including Jam Brands in 2015, Spirit Celebrations in 2016–2017, and Epic Brands in 2018. Essentially, if you are a competitive cheerleader, almost every competition you compete in is controlled by Varsity.

Antitrust Law

Varsity’s dominance in the competitive cheerleading industry has raised antitrust concerns. Antitrust law is about keeping the playing field fair by preventing businesses from using their power to stifle competition. Regulations like the Sherman Antitrust Act and the Clayton Act prohibit companies from monopolizing markets or using unfair practices, such as price-fixing, bid-rigging, or exclusive contracts, to restrict competition. The purpose of these laws is to safeguard consumers and other businesses from being coerced into bad agreements due to the excessive market power of a single company. However, not all monopolies are illegal. A company can gain dominance or a monopoly fairly by offering the best products or services at the best price, and that’s just healthy competition. But when a company reaches the top by stifling competition rather than fostering it, antitrust law will step in.

The Class Action Settlements

In March 2023, Varsity Brands agreed to pay $43.5 million to resolve allegations that it abused its market dominance to artificially inflate prices for private gyms and spectators. This action was brought by direct purchasers, which are those who paid registration and associated fees directly to Varsity to participate in Varsity competitions. Two markets were identified where Varsity exercised its monopoly power: the “competition” market and the “cheer apparel” market. The plaintiffs alleged that Varsity dominated 80% of the All Star cheerleading competition market and 90% of the All Star apparel market through a series of “exclusionary schemes.”

The alleged “exclusionary schemes” were the exclusionary contracts offered to All Star Gyms that were incentivized by the promise of rebates. A rebate is a partial refund given to a buyer after a purchase, which is different from a discount where the price reduction is applied at the time of purchase. The process to receive a rebate typically involves customers paying full price for an item and later submitting proof of purchase to the retailer, who then sends the customer the refund in the form of cash or future discounts on products. 

Varsity offered two rebate programs, the Network Agreement and the Family Plan. The Network Agreement, offered to large prestigious gyms widely known at their competitions, required a commitment to attending at least 5 of Varsity’s All Star Competitions and spending at least $30,000 per year on registration fees. Once gyms met this threshold, they earned increasing rebates for every dollar spent beyond it, creating a strong financial incentive to stay within the Varsity system. For smaller gyms that could not meet the spending threshold, Varsity offered a modified version called the Family Plan, which required attendance at 6 Varsity competitions in order to start receiving rebates. The rebates here were in the form of “Varsity Fashion Dollars,” which could only be used on varsity apparel purchases.

Because gyms and their teams can only attend a limited number of competitions each season, these agreements strongly incentivized All Star gyms to participate in Varsity events and purchase Varsity apparel exclusively. Attending a non-Varsity competition meant forfeiting the chance to earn higher rebates, which teams could not afford to do, when that money could then be used on Varsity competition uniforms. Once gyms were locked into Varsity’s exploitative ecosystem, Varsity was able to inflate its prices, thus possibly furthering demand for their rebate programs.

In May 2024, Varsity Spirit agreed to an $82.5 million settlement to resolve another class-action lawsuit. Unlike the 2023 case, this lawsuit was brought on behalf of indirect purchasers – those who paid competition registration fees, camp fees, or bought apparel through a gym or school. The lawsuit covered all the same issues as the previous, such as unlawful acquisitions of rivals, anticompetitive exclusive dealing agreements, and Varsity overcharging consumers.

In addition to the monetary settlements, Varsity agreed to end any rebate or discount program related to their cheer competitions.

Conclusion

What makes Varsity’s antitrust issues particularly interesting is how long these practices went unnoticed. Unlike tech monopolies or pharmaceutical price-fixing, competitive cheerleading is a relatively niche industry that does not draw much regulatory attention. But the consequence of Varsity’s practices going unchecked for so long has driven many working-class participants out of the sport simply because it is no longer affordable. Although both recent cases settled before reaching trial, they highlight how antitrust law can play a crucial role in curbing corporate abuses in power, ultimately safeguarding consumers and promoting fair competition for businesses.

Former Unpaid “Volunteer” College Coaches Seek Millions of Dollars From the NCAA Due to Alleged Price Fixing Cartel Between Division I Universities 

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By: Evan Stewart

Reform to college sports as a result of antitrust litigation is not limited to student-athletes. While Name, Image, and Likeness litigation changed the compensation opportunities for current and former student athletes, former unpaid college coaches are now also looking to be compensated for their work as volunteer coaches, a position the NCAA eliminated in 2023.

History of the NCAA and Antitrust Litigation among Athletes and Coaches

In recent years, current and former student-athletes have targeted the NCAA with antitrust lawsuits aimed at dismantling its anti-competitive practices. From the landmark decisions in O’Bannon and Alston, to the upcoming House and Hubbard settlements, the NCAA has faced constant challenges stemming from its previous rules prohibiting college athletes from receiving Name, Image, and Likeness compensation. However, until recently, there has only been one significant antitrust lawsuit against the NCAA regarding its limits on compensation for coaches.

Law v. NCAA

In Law v. NCAA, decided in 1998, a group of assistant college coaches, called “restricted earnings coaches,” (REC) challenged an NCAA cost-cutting rule that limited their potential salaries to $16,000. The REC were full-time, entry-level assistant coaches, but, unlike the head coaches and other assistant coaches, had capped salaries regardless of their experience or skills. The REC alleged that this cap was price-fixing, illegal under § 1 of the Sherman Antitrust Act, for which the NCAA could not provide pro-competitive justifications. The 10th Circuit granted a permanent injunction against the NCAA’s restricted earnings rule and awarded the coaches $54.5 million in damages, holding that the salary cap was a price-fixing agreement between competing employers, which was an illegal restraint of trade under the Sherman Act. 

Twenty-five years later, the NCAA’s compensation limit for coaches was challenged again by former “volunteer coaches. 

What is a Volunteer Coach

Until January 2023, the NCAA allowed certain sports to hire an additional “volunteer coach” under Bylaw 11.01.06. Volunteer coaches were unpaid members of a team’s coaching staff who usually performed the same duties as paid coaching staff members. Volunteer coaches often worked over forty hours per week, traveled with their teams, and helped with other coaching and supervision duties. Despite performing the same duties as paid coaching staff members, volunteer coaches “[c]ould not be paid by the institution’s athletic department or any organization funded by the athletic department.” The only compensation available to volunteer coaches was shares of revenue generated by events like camps or clinics. As a result, volunteer coaches at mid-sized or smaller schools rarely earned more than $15,000 a year and did not receive any medical or housing benefits. 

In January 2023, the NCAA Division I Council voted to eliminate the voluntary coach designation across Division I schools and transformed the volunteer position into an additional paid position. Interestingly, some coaches are wary of these NCAA changes. University of Nebraska head baseball coach Will Bolt, whose career started as a volunteer coach, believes that the new payment model may cause schools with fewer resources to avoid hiring more coaches, leading to fewer opportunities for coaches trying to begin their coaching careers.

Volunteer Coach Class Action Antitrust Lawsuits

Despite eliminating the volunteer coaching position, the NCAA still faces two class action lawsuits from former volunteer coaches who claim to have suffered antitrust injury due to the NCAA’s repealed rule.

Smart v. NCAA Class Action

The first of the two class-action lawsuits is Smart v. NCAA. In Smart, filed in November 2022, Taylor Smart (Arkansas) and Michael Hacker (UC Davis) represent a class of volunteer baseball coaches at Division I Institutions. Smart was an unpaid volunteer baseball coach at the University of Arkansas from 2018 to 2020, where the head baseball coach’s annual salary was more than $1 million.

Colon v. NCAA Class Action

The next volunteer coach lawsuit against the NCAA is Colon v. NCAA, filed in March 2023.. Joseph Colon (Fresno State wrestling), Shannon Ray (Arizona State track and field), and Kyle McKinley (University of Oklahoma track and field) represent more than 1,000 individuals who held volunteer coaching positions in sports other than baseball between March 17, 2019, to June 30, 2023.

Plaintiff’s Theory of Harm

The basis for Smart’s and Colon’s allegations is similar to the argument that the plaintiffs prevailed on in Law.

Both Smart and Colon sued the NCAA under § 1 of the Sherman Antitrust Act, which makes “every contract, combination, . . . or conspiracy in restraint of trade . . . illegal”. Colon and Smart allege that the NCAA and its member institutions created a price-fixing scheme that set the price for volunteer coaches at $0. Price-fixing is one of the most common violations of the Sherman Act and occurs when competitors in a market agree to set or tamper with their prices.

In Law, for example, the capped salary figure was price fixing because universities competing in the same labor market agreed not to pay more than $16,000 for restrictive earning coaches. Similarly, Smart and Colon allege that the NCAA and its Division I member institutions created a “buyer side cartel” agreeing to fix the price of labor for an assistant coach position at $0.

The former volunteer coaches also allege that they suffered multiple types of economic damage as a result of the NCAA’s price fix. The damages included lost salary, health insurance, housing, and other benefits that paid assistant coaches received.

NCAA’s Response and Failed Motion to Dismiss

The NCAA raised three main defenses against Smart and Colon’s theories. First, the NCAA claimed that the volunteer coaches’ allegation that they would have been hired as paid assistants but for the volunteer coach bylaw was conclusory and lacked factual backing. Second, the NCAA claimed it does not hold market power in the assistant coach labor market. Lastly, the NCAA claimed that there were other competitive coaching positions available in high school and professional sports.

These defenses, however, were not sufficient. In July 2023, both Smart and Colon survived the NCAA’s motion to dismiss. United States District Judge William Shubb rejected the NCAA’s motion and held that the allegation of horizontal price-fixing based on the creation of the volunteer coach position was sufficient to show possible antitrust injury. Specifically, Judge Shubb wrote that “it was not implausible that plaintiffs would have been paid a salary above $0 but for the NCAA’s adoption of [bylaw 11.01.6].”

This assumption that colleges would have paid for these assistant coaches has been supported by the fact that more than half of Division I schools began paying their former volunteer coaches within a year. This further disproves the NCAA’s claim that the plaintiff’s allegations that teams would not have hired volunteer coaches as paid assistants were conclusory.

Current Status of Litigation and Next Steps

Both Smart and Colon are seeking more than $5 million in damages from the NCAA. Originally, the jury trial for Smart was scheduled to begin in September 2025. However, on January 31, 2025, Smart reached a settlement in principle with the NCAA. While the terms of the settlement have not been finalized or released, this could still be an encouraging sign for the Colon. Because Colon raises many of the same arguments and theories of harm that Smart does, the NCAA may also look to settle with the Colon class as well, especially if the class is certified following the March 3, 2025 certification hearing.

Couldn’t Get Tickets to the Taylor Swift Concert? A Retroactive Look at the Live Events and Ticketing Monopoly in the US

/ Washington Journal of Law, Technology & Arts / Leave a comment
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By: Justine Kim

With soaring anticipation for the first live tour in five years, 3.5 million “registered” Taylor Swift fans around the country attempted to purchase presale tickets for the Eras Tour on Tuesday, November 15, 2022, ultimately resulting in website crashes and the cancellation of the scheduled public sale for non-registered fans. Although 2.4 million tickets were sold on that Tuesday, the incident became the catalyst for reignited scrutiny against Ticketmaster by concertgoers and artists alike, with renewed accusations of the company “abusing its market power at the expense of consumers.” As is the case for 80% of the ticketing market in the U.S., the Eras Tour tickets were sold by Live Nation Entertainment Inc. (LNE) through Ticketmaster. 

In 2010, Ticketmaster completed a $2.5 billion, tax-free merger with Live Nation to form LNE. This merger has been criticized (since its announcement) for “locking” competitors out of the industry and leaving consumers out of options. Consumers, lawmakers, and artists have continuously sought antitrust investigations into LNE for allowing the merged company to be the predominant servicer of tickets and live events in the U.S. with no meaningful competition.

Questions regarding the creation of a potential monopoly have persisted since the announcement of the merger, with notable criticism from Bruce Springsteen about Ticketmaster’s alleged “scalping” practices to a 2015 antitrust lawsuit by Songkick, LNE’s competitor. According to the Songkick suit, LNE had “threatened” artists to not work with Songkick and “abus[ed] [LNE’s] power as a concert promoter to influence how musicians sell their tickets.” In 2018, the two parties reached a $110 million settlement, including “an additional undisclosed sum [for LNE] to acquire some of Songkick’s remaining technology assets and patents.”

Analysis

Modern antitrust law in the U.S. is governed by three key federal statutes. First, the Sherman Antitrust Act of 1890 represents the federal government’s “commitment to a free market economy” by “outlaw[ing] all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade” or “monopoliz[ing] any part of interstate commerce.” According to the U.S. Department of Justice (DOJ), there is an unlawful monopoly under the Sherman Act if “only one firm controls that market for a product or service” and this market control was obtained “by suppressing competition with anticompetitive conduct” and not by the superiority of its product or service. Under this Act, unlawful monopolies are usually “punished as criminal felonies,” and the DOJ is the only entity with the power to bring such criminal prosecutions.

Second, the Federal Trade Commission Act, signed into law in 1914, established the Federal Trade Commission (FTC) and empowered the Commission to “prevent unfair methods of competition,” among other duties. The FTC Act, however, does not impose civil or criminal penalties, and provisions of this Act may only be enforced by and through the FTC.

Third, the Clayton Antitrust Act of 1914 empowered the FTC, in addition to other pro-competition duties, to prevent and eliminate unlawful corporate mergers and acquisitions (M&A). This Act mandates all entities considering M&A activity to consult the DOJ’s Antitrust Division and the FTC with violations of this Act resulting only in civil penalties. 1976 amendments to the Clayton Act allow “private parties to sue for triple damages when they have been harmed by conduct that violates either the Sherman or Clayton Act.”

Under this statutory framework, a merger of two or more entities may trigger FTC or DOJ investigations if either agency believes that there has been or may be a violation of antitrust law. In such cases, either agency “may attempt to obtain voluntary compliance” for the investigation “by entering into a consent order” with the merging entities. While a consent order is not an admission of violating antitrust laws, the order represents the signing entities’ agreement “to stop the disputed practices outlined in an accompanying complaint or [to] take certain steps to resolve the anticompetitive aspects of [their] proposed merger.” The entities’ refusal to sign a consent agreement with the DOJ or the FTC or their noncompliance with a consent agreement may cause the agencies to seek injunctive relief in a federal court.

In the LNE merger, the DOJ required the merging companies to divest some of their assets in order to obtain approval for the proposed merger. Specifically, Ticketmaster was required to “license its primary ticketing software to a competitor” (Anschutz Entertainment Group, “the second-largest concert promoter and operator of major venues”) and sell off its Paciolan Inc. ticketing unit. Live Nation, the concert-and-venue-hosting counterpart, “agree[d] to be barred from retaliating against venue owners who use a competitive ticket service” for a period of ten years.

However, as the ten-year deadline of the non-retaliation provision of the DOJ—Live Nation agreement drew near, the two organizations agreed to amend and extend this provision in 2019, based on Live Nation’s repeated violations of the provision. The DOJ had found that Live Nation, in violation of the original merger agreement, “had used its control over the concert touring business to pressure music venues into signing contracts with its Ticketmaster subsidiary.” This agreement, which will expire in 2025, would clarify the restriction that Live Nation “is not allowed to threaten venues in any way and may not retaliate against venues that decide to use a system other than Ticketmaster.”

LNE’s anti-competitive behavior has directly impacted consumers and the industry. According to a 2018 article, Ticketmaster, through LNE, ticketed eighty of the top one-hundred arenas in the U.S. Between 2009 to 2019, the average ticket price for the top 100 tours worldwide increased by 55% with the average ticket for the highest-grossing tour in North America (The Rolling Stones) costing $226.61. Using its unmatched power in the live music industry, Ticketmaster introduced a “dynamic pricing” system in 2011, which allows ticket prices to be dependent on the level of demand for the event and seat location. Bruce Springsteen has been a vocal critic of Ticketmaster’s dynamic pricing, particularly after prices for his concert ticket rose to $5,500—before the tickets were resold by a third party.

Conclusion

The Taylor Swift ticket sales reignited attention on the power of LNE in the ticketing and live event industry. Following the Eras Tour presale, the New York Times reported that the DOJ had opened an antitrust investigation into LNE, regarding their alleged abuse of “power over the multibillion-dollar live music industry.” Congress is also stepping in. The Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights announced that it would hold a hearing for “the lack of competition in the ticketing industry.” Industry competitors, consumers, and lawmakers are once again calling for greater scrutiny on the alleged anticompetitive power LNE has amassed since the 2009 Live Nation and Ticketmaster merger.