Mint Condition - August 14, 2023
Fanatics and Panini butt heads...again
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Leading Off
Coming out of The National, the hobby has not been short of headlines as some bombshell news hit the tape over the last few weeks with Fanatics and Panini both filing lawsuits against one another. First, Panini launched an antitrust suit against Fanatics, claiming they engage in anticompetitive activities and behave like a monopoly. In response, Fanatics countersued, stating Panini interfered with business relations and failed to negotiate in good faith when, as was finally brought out publicly, Fanatics was evaluating an acquisition of Panini.
While the legal journey is in its early stages and there will be many months, if not years, of these cases winding through the court system, unless a settlement is reached or the lawsuits are dropped, this type of event has already caused shockwaves across the hobby.
Let’s get into the various ramifications…
Mint Condition’s Take:
(1) Does Panini’s lawsuit have merit?
Panini alleges that Fanatics is engaging in “calculated, intentional, anticompetitive conduct” to establish a monopoly in the trading card industry. To be clear, a monopoly is defined as “a business that is characterized by a lack of competition within a market and unavailable substitutes for its product” and antitrust legislation is the framework in place in the U.S. to prevent monopolies from existing. It is obvious the talk of Fanatics as a monopoly has popped up on more than one hobby forum over the last few years, so I am sure there is a portion of the hobby that is collectively saying, “I’ve been trying to tell you for a while.”
While I am no legal expert, here are a few thoughts on the topic. First, Upper Deck controlling NHL’s trading card licenses will help Fanatics’ case that they are not a monopoly, as it does not hold one of the four major sport licenses in the U.S. Second, if Fanatics has not been accused of or sued for anticompetitive practices in its apparel / merchandising business, in which it has licenses with all four major sports, then why would they be a monopoly when executing a similar strategy in the trading card market? Third, Fanatics has all the momentum as a well-capitalized, multi-billion dollar company whereas Panini is at risk of becoming a fraction of itself once the NBA and NFL licenses are lost. Typically the larger company that has more ammo can play more effective hardball in the legal system and outmaneuver the smaller guy.
Frankly, I would think Panini has additional beef with the NBA and NFL for not including them in contract negotiations, but I do wonder whether or not Panini had any language in those partnership agreements that would prevent the leagues from negotiating with Fanatics in this kind of way. I assume not, which is surprising, given we have not heard of any lawsuits by Panini against the leagues.
(2) Is this what the hobby is really about?
Lawsuits aren’t new for the hobby, but this is probably the most publicity that one has gotten given the multi-billion dollar company (Fanatics) and high-profile founder (Michael Rubin) involved. Major moves made by Fanatics in the collectibles space will continue to be covered in all of the large business and news outlets, as compared to the past when hobby-related lawsuits could just be found in collectibles-focused news sites and social media. Given the size and growth of the collectibles market and the larger-scaled players entering the space over the last few years, inherently more eyeballs are on the industry and the headlines will be bigger.
But at its core, is this type of litigious activity good for the hobby? It depends from what perspective you look at it. For example…
For long-time collectors, all they truly care about is doing the thing they love — collecting, buying, selling, and trading cards. The evolution of the hobby over the last few years has been looked at with a skeptical eye (between new entrants, new startups, and new ways of collecting), so this is just another occurrence that is taking away from the purity of collecting. It’s not as fun being a traditionalist in an industry where lawsuits are flying around.
For casual hobby followers or business enthusiasts, I think this is an exciting, suspenseful time to be involved in the industry. The dust will eventually settle and this litigious behavior will not go on forever, so being able to witness first-hand the growing pains of an historically old-school, slow-to-evolve industry is interesting. New entrants trying to unseat incumbents and the ensuing business battles are common and widely covered across various industries. It is unfolding real-time in trading cards.
(3) Where do Fanatics and Panini go from here?
While there is more to come here, one plausible reason for Panini’s lawsuit is that it is a last-ditch effort to save itself as (1) each day that goes by is one day closer to Fanatics taking over the NBA and NFL trading card licenses and (2) to cover itself up if they did indeed negotiate in bad faith when considering a sale to Fanatics. If that is true and the lawsuits are both dropped or settled, don’t be surprised if Fanatics is finally able to successfully acquire Panini, given Panini’s outlook with lost licenses on the horizon. However, given that this is not the first round of lawsuits between the two companies, there is clearly bad blood. Maybe Panini moves past any possible sale and goes all-in on its lawsuit efforts.
No matter which way events unfold, it won’t be a quiet ending and I am sure we will be reading soon enough about the next move in the Wall Street Journal and CNBC.
As always, I would love to hear your thoughts. You can reach me at jbmintcondition@gmail.com or on Twitter @jbmintcondition
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