“The Amazon of Sports” has already conquered the baseball apparel market – and is now on the verge of taking up baseball cards too

During spring training, Major League Baseball's official supplier, Fanatics, became the main target for all of the incorrect reasons.

After arriving in Florida and Arizona, players began complaining concerning the quality of their recent uniforms, manufactured by Fanatics.

A player for the Baltimore Orioles complained that the brand new uniforms looked like this “Like a copycat TJ Maxx jersey.” Others were dismayed to learn that the white pants were see-through and had seams produced from tucked-in jerseys – and sometimes greater than just seams – visible for everyone.

The spring training uniform fiasco has brought more attention to Fanatics, an organization that until recently was widely considered an American success story. CEO Michael Rubin, a school dropout, transformed Fanatics from a ski and snowboard company into what some now call “the Amazon of sports.”

Thanks to its ties to major U.S. sports leagues, Fanatics has quickly develop into the dominant player in nearly every facet of the sports licensing industry. It produces and sells the whole lot from team caps and t-shirts to logo-adorned t-shirts License plate frame And Birdhouses.

But uniforms aren't the one aspect of Fanatics' licensing strategy that has sparked controversy. In recent years, Fanatics ran an aggressive campaign to amass the exclusive rights to supply the officially licensed sports trading cards not just for the MLB, but in addition for the NFL and NBA. In some cases, these contracts are designed to last as long as 20 years.

As we explain in an upcoming article In the University of Illinois Law Review, Fanatics' consolidation of the sports card industry threatens to cut back the corporate's incentive to innovate or put money into trading cards, risking a stagnant future for the hobby.

Professional sports have gotten exclusive

To produce apparel or memorabilia with official team logos, manufacturers must secure the legal right to make use of the teams' trademarks, the mental property that legally protects the teams' names and symbols.

Companies typically acquire these legal rights by concluding contracts, so-called License Agreementswith a selected sports league, giving the manufacturer the appropriate to make use of all league and team logos on its products.

In the past, U.S. sports leagues have granted these rights to several corporations.

In recent years, nevertheless, leagues and manufacturers have tended to favor it exclusive licenses – Agreements that be sure that only a single company has the appropriate to make use of the league's trademarks for a selected variety of product. EA Sports, for instance, has exclusive rights to supply NFL video games through its Madden franchise. for nearly 20 yearsgiving it a virtual monopoly over this product line.

After deciding to enter the sports trading card market, Fanatics took advantage of exclusive brand licenses to secure sole rights to supply MLB, NFL and NBA cards in 2021.

While some people view baseball cards as mere child's play, the US sports card industry disagrees is estimated to be a $12 billion market. Since the COVID-19 pandemic Interest has increased significantly.

In the longer term, Fanatics could have near-monopoly control over a big portion of this market.

The trading card competition drives innovation

This won't be the primary time the US sports card hobby has come under the control of a single manufacturer.

During the Sixties and Nineteen Seventies, considered one of Fanatics' recently ousted corporations—the Topps Chewing Gum company—held largely unchallenged power over the industry.

Topps then acquired its monopoly within the mid-Nineteen Fifties buys out its former competitor, Bowman, after a protracted legal battle. It then maintained the monopoly for many years by signing exclusive contracts with nearly every MLB player. These contracts gave Topps the only real right to make use of the players' images on trading cards.

This lack of competition led to an era of little innovation – and, within the eyes of many collectors, uninspired offerings. In fact, not only did Topps often depend on relatively unattractive card designs during this era, but the corporate also occasionally did so Reuse the identical player photos several years in a row.

The Topps monopoly was eventually overturned by a federal court in a lawsuit brought by potential competitor Fleer under the Sherman Antitrust Act, and this decision resulted in a number of latest brands entering the market.

In addition to Fleer, quite a few recent card corporations were founded within the Nineteen Eighties, including Donruss, rating and upper deck. The resulting competition drove these corporations to with Upper Deck leading the way in whichto significantly improve their product offering and improve not only their card designs and photos, but in addition their printing technology and card stock.

As time went on, nevertheless, many card collectors became overwhelmed by the vast number of products available within the Nineties and early 2000s. Realizing that overproduction was dampening consumer interest, sports leagues began granting exclusive licenses to individual card manufacturers to limit the variety of cards in the marketplace. Topps for instance, regained his status because the exclusive card manufacturer for MLB in 2009.

However, until recently, various corporations held the exclusive rights to supply trading cards for major U.S. sports leagues, creating some ongoing competition within the industry.

Is Fanatics violating antitrust law?

Fanatics' consolidation of the industry raises the specter that the hobby could once more witness the evils of monopolization within the years to return.

Perhaps unsurprisingly, Fanatics has taken over the sports card hobby is currently being challenged in court by Paninione other company that replaced Fanatics.

The lawsuit alleges that Fanatics violated the Sherman Antitrust Act by engaging in anticompetitive practices that drove Panini and other competitors out of the industry.

In this sense, Fanatics' renewed monopolization of the U.S. sports trading card business has additional parallels to the previous Topps monopoly of the Sixties and Nineteen Seventies.

Ultimately, Panini's case merely underlies what may very well raise larger questions on Fanatics' business practices on the whole.

Fanatics has used exclusive licensing agreements – just like those it has entered into for sports cards – to expand its dominance within the broader sports licensing market.

Whether these exclusive license agreements are legal or not stays unclear; The admissibility of comparable exclusive trademark licenses under federal antitrust law was most recently raised in a 2010 case before the Supreme Court American Needle, Inc. v. National Football League.

In that case, a former NFL cap manufacturer sued the NFL after the league decided to grant Reebok exclusive rights to fabricate its team-logoed caps starting in 2002. American Needle claimed that the choice by 32 individually owned NFL franchises resulted in a collective decision to license their trademarks to a single manufacturer with which they were in conflict the Sherman Antitrust Act.

While the Supreme Court found that the NFL-Reebok deal was subject to antitrust scrutiny, the parties ultimately settled the case before the courts issued a final ruling on the legality of the NFL's exclusive license.

While sports trading cards represent a multibillion-dollar industry, they represent only a portion of the larger, US sports licensing market price $33 billion.

See-through, cheap-looking baseball pants may or might not be a results of an absence of competition on this market.

However, we consider it is just a matter of time before the decline in competition for licensed sportswear results in higher prices and fewer alternative for fans. The same applies to trading cards.