Judge Deals Cheerleading Monopolist Varsity Brands a Brutal Setback

Ouch. This one's gonna be fun.

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Regular BIG readers know of the cheerleading monopolist Varsity Brands, a Bain Capital owned firm that controls the sport of cheer. I’ve reported on it a number of times, and now there’s a class action antitrust suit against the firm in Tennessee. Late last month, the judge issued a ruling which is quite promising for the plaintiffs who brought the case.

Antitrust is messed up for a lot of reasons, but a very basic one is that judges don’t like to handle complex business litigation. So they often just dismiss antitrust suits before they get to trial, or even before the plaintiffs can ask for internal documents from the monopolist to see what happened (this is called ‘discovery’). It’s easy for judges to do this because the Supreme Court has made it much easier to toss out antitrust cases, even when there’s a good claim. So monopolists almost always file a motion to dismiss, and often win.

That’s what Varsity did this time, hoping that they would be able to avoid both discovery of sensitive documents, and an embarrassing trial. However, in this case, Judge Sheryl Lipman brutally smacked down the motion to dismiss. On every single count, Lipman ruled that the plaintiffs should get their trial.

The plaintiffs made the case that Varsity controls the sport through a number of mechanisms. They noted it owns 90% of All-Star cheer competitions and sells 80% of All-Star apparel. Varsity controls gyms, which is where cheerleading happens, by enticing gym owners with rebates to sign exclusive supply contracts. Varsity also bought up competitors, and schemed with the nonprofit governing the sport - the United States All Star Federation - to block rivals from getting access to various championship tournaments.

Varsity disputed all of these claims. They claimed the plaintiffs didn’t show there was a monopoly, pointing to the fact that there are still competitors in the market. Lipman responded with, ‘nah, Varsity has 90% market share, and if that’s the case, it’s a monopoly.’ They made technical objections to bringing suit against Varsity’s various exclusive contracts with gyms and rebate schemes, to which the judge ruled, ‘nah, that looks suspicious.’ Varsity said it’s too late to contest its ten plus mergers that facilitated its monopoly, the judge rejected that claim as well. And Judge Lipman concluded by noting that the possibility of a conspiracy between Varsity and USASF is also viable.

All in all, it’s a pretty devastating loss for Varsity. Now there’s discovery, which means that the plaintiffs get to ask for internal documents from Bain and Varsity. And perhaps a trial, presided by a judge who takes the antitrust claims seriously.