It’s tennis Jim, but not as we know it.
The Australian Open was the first to crack - will the other Grand Slams follow?
James W. “Jim” Quinn is the U.S. trial lawyer named on the tin of the filing before the Southern District Court of New York – a case that seeks to blow up professional men’s and women’s tennis as we know it.
One of the interesting claims stated in the filing is that in 2004 “the U.S. Open generated more revenue from the sale of one specialty cocktail ($12.8 million) than it paid to the men’s and women’s champions combined (approximately $9 million).” We’re not sure why that cocktail couldn’t be named because everyone who’s been to the US Open knows it’s the “honey deuce” cocktail made with Grey Goose vodka, drunk in copious amounts around the grounds, fuelling the more raucous crowd behaviour at Flushing Meadows than Pimm’s at Wimbledon seems to inspire. For aspiring entrepreneurs or free lancers out there, including struggling tennis professionals, Sidney Frank started Grey Goose in his late 70’s and seven years later sold it to Bacardi Limited for a reported $2bn.
Granted, tennis professionals try to make money as extra skilled athletes in the tennis tournaments market, rather than starting beverage brands. And that’s where this case begins.
The racket
The crux of the filing in New York is that the alphabet soup gang which controls professional tennis - the ATP, WTA, ITF, ITIA, and the Grand Slams owners themselves – is allegedly engaged in a racket (pun intended) through draconian contractual structures, onerous scheduling and a barrier-to-entry ranking system, all of which combine to suppress tennis professionals’ earnings and restrict competition.
It may be that Tennis Australia took account of James Quinn’s pedigree for winning anti-trust sports cases when it reportedly settled (made public this month) with the clients of Mr. Quinn, although we couldn’t find any substantial details of what such “settlement” entails, apart from Tennis Australia agreeing to share financial information in exchange for being released from liability in the case. It’s the same Mr. Quinn putting the tennis governing bodies to task for anti-competitive practices who was lead trial counsel for NFL players in McNeil v. NFL (1990), which paved the way for the modern form of free agency for American football (NFL), reshaping how players and teams negotiate contracts and creating greater player wealth and mobility across the league.
So, who are these clients and what accusations are being made? The plaintiff on the filing is the Professional Tennis Players Association (or PTPA), together with a smattering of former and current ATP and WTA players (including Nick Kygrios), mostly outside the top 100 rankings. The claim is that the only market where professional tennis players can effectively work and sell their expertise, is fundamentally rigged. The case seeks to be a massive class action on behalf of former, current and future professional tennis players.
The players behind the players
Who is the PTPA? Why do they care? What are the allegations and what will happen next?
The PTPA is a non-profit organisation set up by Novak Djokovic and Vasek Pospisil (a former Canadian pro player) in 2019 as a force for good – to provide a stronger, more unified front for players when dealing with the incumbent governing bodies and to get better deals on earnings and playing conditions. Djokovic has since disassociated himself from the group citing concerns about transparency, governance, and the way his voice and image have been represented. The PTPA however, push on with their litigation against the powers that be. Does engagement of one grand slam owner, the Australian Open, with the PTPA signal that others will follow or will the ATP, WTA and the rest more tightly circle the wagons?
Although not-for-profit, the PTPA does have a for-profit arm, the commercial and venture-backed company called “Winners Alliance”. Winner’s Alliance isn’t mentioned in the filing and is not a party to the case. However, with shareholders like Prysm Capital and the super investor (and tennis fan), Bill Ackman, as chairman, it is reasonable to infer that profits for shareholders of Winners Alliance as well as players might flow from a breakup of the current professional tennis circuit.
The case for the PTPA runs for 163 pages and lists what it sees as obvious breaches of anti-trust laws. These include claims of anti-competitive arrangements between all the major governing bodies and the organisers of tournaments capping prize money, restricting geographies and colluding on event scheduling, preventing players from pocketing more revenue, whilst enabling those organisations to enjoy unfair purses. According to the PTPA, comparable professional sports bodies such as baseball, basketball and American football pay out around 50% of event revenues to players, whilst tennis manages less than 20%. These contractual and licensing arrangements, the filing claims, effectively amount to the bodies which own and operate professional tennis events running a cartel. One example given in the document is that the ATP and WTA 1000 event at Indian Wells, owned by Larry Ellison, (another billionaire avid tennis fan), tried to increase player prize money to grand slam levels but was rebuffed on the basis that the ATP and WTA rule books prevented it. The market was willing to pay more for the labour, notes the filing, and disallowing it amounts to price-fixing as well as restricting competition between tournaments.
The PTPA buttresses its prize-fixing arguments with details around player arrangements the governing bodies and tournament organisers demand to take part in the tour. For example, the filing quotes sections of the ATP and WTA rule books requiring players to assign their Name, Image and Likeness (“NIL”) rights to the governing bodies and tournament organisers for use in media, advertisements, and promotion for … $0. Restricting players’ ability to monetise their own NIL rights, the PTPA argues, is further evidence of anti-competitive conduct. The filing claims that there is no pro-competitive justification for assigning those rights at zero value as the tournaments are quite capable of profitability without that requirement. And if players did want to sue? The PTPA points to clauses in certain rulebooks requiring Swiss arbitration which it considers an unfair restriction of the players ability to seek damages in more damage-friendly awarding environments such as the United States, and further evidence of player coercion.
Perhaps one claim in particular has caught the imagination of the main competitor in tennis ranking systems, Universal Tennis, with its UTR scoring system, mostly used by US college tennis but applied more and more by satellite event operators who use it to run the UTR Pro Tennis Tour (PTT) offering smaller prize money, but generating match data which can be sold to sports betting companies. Many professional players avoid these events because they generate no ATP or WTA ranking points.
The PTPA put to the court that the main bodies of professional tennis lock up the market by agreeing to only recognise the ranking points from each others’ tournaments. This, plus a heavy schedule of events lasting 11-months of the year, limits the events at which professional tennis players can earn ranking points to tournaments. The PTPA’s argument is that it compels players to attend only sanctioned events at the exclusion of alternative events, further enabling the tour bodies to restrict player compensation, knowing that players will have no incentive, no time, and little flexibility to play at unsanctioned tournaments or on a different circuit.
What happens next?
The lawsuit is ongoing in the federal court of the Southern District of New York, (and similar filings exist in the UK and the EU). It is not cheap to litigate in New York. But with the Winners Alliance having raised in excess of $20m, the PTPA knows people with cash and a heavy interest in tennis. Legal standing (the requisite authority to bring a case) is a big deal in anti-trust cases, as well as ones involving a potential huge class action. The PTPA must show the judge that they have it, as the ATP, WTA, ITA and the other accused bodies have filed a motion that it has none. No final judgment has been reached on standing and without an organised, well-funded body to run a case like this, it is difficult to see how players, especially the ones so far named in the case, would have the finances and organisation skills to bring a class action.
Tennis Australia has, in the eyes of the PTPA, begun to shift its position, opening its books to cooperate and presumably start talks on running professional tennis differently. Further support of the PTPA’s position can be inferred from the court’s decision that the defendants may not retaliate against players for joining the lawsuit.
Cracks in the current regime of how tennis is organised seem to be appearing and widening like those down at your sun-baked local hard court. Will the Grand Slam owners stick with the ATP and WTA bodies or split off and join forces, governing themselves? Will larger prize-money events appear – such as Saudi Arabia’s “Six Kings” tournament which guarantees the top six players a $1.5m appearance fee and $6m to the winner - even without the lure of ATP or WTA points on offer? If so, how does that really help lower ranked players?
Alternately, the case could run its course with the courts concluding that the sport’s coordination, however uncomfortable, is a necessary precondition for it to function at all at the professional level.
Or will everyone do a deal before then – one that not only makes investors money, but looks after the lower-rung professional tennis players as well?
If its down to the PTPA, the answer is to drop what it sees as anti-competitive practices and let the market decide.
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This article discusses allegations and arguments made in ongoing legal proceedings and reflects the author’s analysis of publicly available court filings and reporting. Allegations described have not been adjudicated.