The Department of Justice uncovered several examples of alleged unlawful and anti-competitive business practices by Learfield and IMG College, but their $2B merger will survive. The new Learfield IMG College settled an antitrust lawsuit brought by the DOJ yesterday by agreeing not to impede competition in the future. The lawsuit did not name specific executives who were involved in the anti-competitive behavior, nor did it name the schools, but the DOJ concluded that the unlawful restraint of trade restricted the amount of revenue they could have received for their multimedia rights. The DOJ spent 15 months investigating the multimedia rights practices at Learfield and IMG College as the companies were trying to merge.
Antitrust Division Assistant Attorney General Makan Delrahim: “The illegal agreements not to compete allowed Learfield IMG College to benefit at the expense of the nation’s universities, students, and fans. Public and private universities rely on competition among multimedia rights providers to provide critical resources to athletic programs, but these agreements lessened that competition and thereby harmed the universities and, ultimately, American students and taxpayers.” Learfield IMG College, a company of 2,300 employees, now owns the multimedia rights to 54 of the 65 schools in the Power Five, and more than 200 total. Its combined revenue in '17 was $808M, according to the lawsuit.
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Among the findings alleged in the suit:
- Learfield and IMG College secretly coordinated to limit competition with each other and with smaller competitors, often through the use of joint ventures. Learfield and IMG College entered into these JVs so they could work together and not compete. The DOJ cited one case where Learfield and IMG College at first prepared to bid separately, but used a joint bid to lower the price.
- In an effort to “co-opt” a smaller competitor, IMG College formed a JV and in exchange the smaller provider agreed not to bid on any of IMG’s schools for a year.
- When Learfield and IMG College decided to unwind a JV, they often crafted noncompete agreements that would continue to limit competition. The DOJ cited an example where IMG asked for permission to bid on a Learfield school and Learfield refused. The school ended up staying with Learfield.
- In another instance, Learfield bid on an IMG College school without getting IMG’s permission. Learfield withdrew its bid, and the school re-upped with IMG.
- The DOJ’s lawsuit summarized that Learfield and IMG College unreasonably restrained competition for multimedia rights, reduced the amount of rights fees that went to the schools and harmed the quality of multimedia management. A statement from Learfield IMG College disputed that conclusion: “The agreement includes no finding of wrongdoing by Learfield or IMG College, nor have any penalties been assessed. We are very confident in the integrity of our business practices, and categorically deny any allegations that either Learfield or IMG College has ever taken any action with the intent of hindering competition.”
Learfield IMG College settled the lawsuit essentially by agreeing not to engage in anti-competitive practices in the future. Specifically, the defendants may not share or benefit from bid information or agree with a competitor not to bid. The newly merged company cannot engage in a joint venture for multimedia rights or renew a JV. Learfield IMG College also must designate an antitrust compliance officer who will institute an antitrust program. The company released a statement yesterday: “We are satisfied with the amicable resolution of this matter and are confident that the combined company will continue to provide our partners with top quality services and invest to develop additional services and products to help them grow.” With regard to the JVs, Learfield IMG College said: “The primary focus of the DOJ’s review and the complaint is on the historical practice of joint venture bids. These joint ventures were created many years ago when the participants in the industry were very small and had limited resources and were always open and transparent to the universities. Given that the DOJ has now raised an issue with the idea of multimedia rights joint ventures, we have agreed to limit the practice going forward.”
