This story is part of a Prospect series called Rollups, looking at obscure markets that have been rolled up by under-the-radar monopolies.

Fanatics has been dubbed the Amazon of sports because of its CEO Michael Rubin's ambitions to become the central e-commerce platform for all corners of the sports entertainment market. Its success can be seen not only in its aspirations for a $100 billion market capitalization, but in the fact that Fanatics' main competitor for control of apparel sales is now indeed Amazon. It has secured the financial interests of large institutional investors like SoftBank and celebrities like Jay-Z.

But it's through a network of exclusive arrangements that Fanatics has asserted its dominance across the sports industry.

By 2022, Fanatics managed to get exclusive licensing arrangements with the NFL, NHL, NBA, MLB, and college sports programs, guaranteeing control over the official merchandise of professional sports.

Memorabilia arm Fanatics Authentic has locked up superstar player rights to autographs and other items by striking deals with Tom Brady, Jayson Tatum, Auston Matthews, Shohei Ohtani, and many others.

But what's really gotten sports fans and collectors enraged recently is Fanatics' tactics to acquire exclusive rights to a monopoly over most major sports leagues' trading cards.

TRADING CARDS, AN ICONIC CULTURAL ARTIFACT of the 20th century with a large subculture of collectors, hold a particular sentimental value for many Americans. Many sports fans share the uncanny, near-universal experience of their mothers at one point throwing out their valuable stash and something close to a mortgage down payment along with it, or at least so they claim.

Leagues are incentivized to partner with outside firms on trading card memorabilia because they get a sizable cut of the profits. But the relevant question is how they structure the licensing agreements, and whether they're giving too much power to one company ultimately at the expense of fans.

The trading card arm of the Fanatics empire is the defining example.

Trading cards underwent a resurgence during the pandemic and saw a boom in value that drew speculators and investment from non-fungible token (NFT) startups and other online trading platforms. Trading cards became the perfect vector for this niche endeavor of financialization.

During this period, Fanatics invested heavily in capturing the new value of this burgeoning growth market. They now not only produce the cards, but also control the resale market and the platforms where most of the action takes place, for new cards as well as old rare collectibles.

Summarizing the lawsuit, antitrust scholars Marc Edelman, Nathaniel Grow, and John Holden write in a forthcoming law review article:

Leagues have the legal right to sign to certain forms of exclusive licensing without anti-competitive effects, but the lawsuit focuses specifically on the longevity of these deals that Fanatics has locked in, spanning well over a decade. The deals ensure Fanatics will benefit from an extended period of monopoly profits without competition.

One key indication of higher prices for collectors are the terms and conditions that Fanatics is forcing third-party card vendors to sign in order to sell any of their products. With the acquisition of Topps, these terms can apply to old collectibles too, where third-party vendors and brick-and-mortar retailers play the largest role.

To sell Fanatics cards, sellers have to agree to a provision ensuring Fanatics' ability to make for minimum prices for future card sales, according to a review by Nathaniel Otto, an associate attorney at Burr & Forman LLP. The contract also threatens that Fanatics can potentially punish any seller that does not comply with the terms by revoking their access to all Fanatics-affiliated products.

To read the complete article, see:
Big Business Has Come for Your Baseball Cards(https://prospect.org/power/2024-06-20-rollups-big-business-baseball-cards-fanatics/)

To read the earlier E-Sylum article, see:
FANATICS SHAKES THE SPORTS CARD INDUSTRY(https://www.coinbooks.org/v24/esylum_v24n40a26.html)