This story is part of a Prospect series called Rollups, looking at obscure markets that have been rolled up by under-the-radar monopolies. If you know of a rollup like this, contact us at rollups(at)prospect.org.

Though much has been made of social media innovation and data monetization, the fundamentals of monopolies haven’t really changed that much since the Gilded Age, when railroad barons, industrial titans, and meatpackers were the main antagonists. Concentrated economic power is often built around exclusive contracts that by their very nature crowd out competitors. When combined with market power, companies can use these contracts to muscle their way across other lines of business through tactics like tying arrangements and bundling, and crushing fair competition, worsening the quality of products and leading to higher prices. A century of antitrust court rulings and precedent back that up.

Old-school corporate behemoths like American Tobacco forced deals onto all their existing manufacturers. Telegraph powerhouse Western Union’s pacts with news outlets like the Associated Press earned it the title of “‘overlord’ of the news” in the 19th century, as legal analyst Daniel Hanley has written. These restrictive covenants are still in force today and can be found everywhere, from repairing John Deere tractors to fixing McDonald’s ice cream machines. Google’s default deal with Apple locked in its search engine as the gateway to the internet. Amazon’s coercive terms with sellers and delivery service providers fortify its control in e-commerce.

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The exclusivity curse is so widespread and pernicious that it’s even given rise to an elaborate rollup of the entire sports apparel and merchandising industry by one company.

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.

FANATICS HOLDS SEVERAL POWERFUL POSITIONS, but the business starts with securing all kinds of legal licensing and promotional rights across every major sports league, the individual teams, and the assorted player associations for intellectual property such as brand, trademark rights, and other emblems.

One of Fanatics’ biggest licenses involves designing and producing all in-game jerseys and gear worn by players in several sports leagues, most notably Major League Baseball.

Fanatics has won these deals despite the fact that the quality of their designs is often so lacking that they spur outcries from fans. In a recent debacle, the new uniforms Fanatics and Nike released before the start of the 2024 MLB season had a glaring design flaw: The pants were noticeably see-through. The league plans to fix the uniforms next year.

Amid the backlash, Rubin gave an interview complaining that his company was being unfairly blamed for the mishap. But in the end, market power outweighed the controversy; shortly after the MLB debacle, the National Hockey League inked a uniform deal with Fanatics.

Providing uniforms has made inroads for Fanatics with the leagues, which get to decide what companies they strike partnerships with.

The long-term deals are much more likely to lead to a worse quality of product and higher prices.

Fanatics now also holds significant market share across major segments of manufacturing, design, and distribution for the merchandising industry, one of the most lucrative product markets for sports entertainment. A few other companies have some presence in apparel, but Fanatics has increasingly nullified these rivals by buying them up. In 2012, it took over FansEdge, and then in 2017 it acquired Majestic, the iconic jersey brand that had deep ties to the MLB. Fanatics took a minority stake in the hat maker Lids as well.

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.

Fanatics also announced expansions into sports betting and even has aspirations to do ticketing for sporting events, going up against the likes of Ticketmaster.

This hasn’t been a smooth path for Fanatics. In 2022, a class action lawsuit accused the company of monopolizing NFL merchandise through an exclusive licensing arrangement. And fans have complained about junk fees on merchandise sales, poor quality, and errors in shipping.

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.

They have secured the exclusive contracts for trading cards that will go into full effect by 2026 with the National Football League (NFL), National Basketball Association (NBA), and Major League Baseball (MLB), along with their respective player associations. They also now carry deals with Major League Soccer and World Wrestling Entertainment for trading card expansions, along with other products.

In a major coup, Fanatics in 2022 also acquired Topps, the once-iconic sports trading card brand that pioneered the entire product market before it was worth anything by including sports cards in chewing gum packages in the early 1950s.

Topps actually faced major antitrust litigation starting in the 1960s that led to the breakup of its exclusive arrangements in the 1980s and a brief period of competitive alternatives. The breakup of Topps may have bearing on pending litigation against Fanatics today for its re-monopolization of the industry brought by trading card competitor Panini, which claims the leagues are conspiring with Fanatics and cutting them out of the market.

Summarizing the lawsuit, antitrust scholars Marc Edelman, Nathaniel Grow, and John Holden write in a forthcoming law review article: “The sports trading card market—driven by group licensing, long-term exclusive contracts, and industry mergers—has become uniquely consolidated, with one company, Fanatics, emerging as the industry’s dominant player.”

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.

Another aspect of the lawsuit is that Fanatics now essentially controls upstream suppliers for the market too, such as the main manufacturer for cards, GC Packaging.

Without league licensing rights, companies can still technically produce their own cards. But they won’t have any of the trademarks that actually make the cards valuable, and face other restrictions such as not being able to actually display a player in their official uniform. Essentially, they’re worthless paper at that point.

As the lawsuit argues, the long-term deals are much more likely to lead to a worse quality of product and higher prices, while being insulated from competition for long stretches of time.

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 “suggestions” 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. The vendor terms also impose extensive requirements for in-store operations such as certain resale/breaking restrictions, signage, hours of operation parameters, and even disclosure of quarterly sales reporting metrics.

However, Fanatics then qualifies all of this by ensuring that vendors will be independent: “The retailer shall, at all times and in its sole discretion, determine and control the price at which Topps products are sold by the retailer to its customers.”

These restrictive arrangements turn vendors into subordinate contractors of Fanatics. It’s part of the company’s long-term play, to roll up not just licensing and production of the cards but also the distribution channels. This is already an area where Fanatics has upended the traditional market for trading cards by owning its own online trading platforms and resale markets.

It’s a nearly identical strategy to what Amazon has done to e-commerce, many years before Fanatics’ rise.

Trading cards are a niche market, so maybe you don’t see what the big deal is. But as the American Economic Liberties Project’s Matt Stoller described recently on his Substack BIG, these forms of insidious “economic termites” make our lives just a little bit worse—not enough to trigger a large outcry but just enough to extract wealth. If you’re a sports fan in America, you can’t avoid Fanatics. That makes them worth paying attention to.