All-Star Gym Class Action Alleges Unfair Cheerleading Monopoly

A California gym filed a class action lawsuit against Varsity Brands and the U.S. All Star Federation, saying the two conspired to control cheer all-star competitions.

Fusion Elite All Stars claims the two defendants have violated the Sherman Antitrust Act in that they worked together to increase prices for all-star competitions and all-star apparel.

Fusion Elite alleges that the defendants impaired and then bought up any actual or potential rivals that could have threatened Varsity’s dominance in the cheerleading competition network.

In addition, the plaintiff accuses the defendant of monopolizing its power by imposing exclusionary agreements on all-star gyms, such as Fusion Elite.

The agreements state that the largest, high sale volume all-star gyms would have to purchase their apparel exclusively through Varsity and to fill the limited number of events comprising their seasons to Varsity all-star competitions, the plaintiff maintains.

In addition, Fusion Elite states that Varsity continued a series of acquisitions that allowed it to dominate the all-star competition market.

“Varsity’s systematic and continuing acquisition of All-Star Competition rivals, combined with one or more of the other anticompetitive conduct alleged herein, has allowed it to acquire, maintain, and enhance control over all three national championships of consequence in competitive cheer —the Cheerleading World Championships (‘Worlds’), The Summit, and the U.S. Finals (collectively, ‘All-Star Championships’),” the Varsity Brands class action lawsuit goes on to say.

Fusion Elite alleges that all-cheer competitions are market-dominant trade shows and Varsity forbids or severely restricts its all-star rivals from displaying wares in the “showrooms.”

The plaintiff states that Varsity’s conduct blocks rivals from a key marketing channel which comprises the main reason why all-star gyms buy all-star apparel in the first place, which is for use in all-star competitions.

The lawsuit maintains that Varsity employs two types of exclusionary contracts with all-star gyms, called the “network agreement” and “family plan.”

Fusion Elite says that Varsity focuses these contracts on all-star gyms because these gyms recruit, train, and organize all-star teams. All-star gyms are thus a key input for producing a successful all-star competition and the primary distribution channel for Varsity Brand cheer uniforms.

In addition, Fusion Elite claims that Varsity imposes its most exclusionary contracts, which are called network agreements on the most prestigious all-star gyms whose attendance is critical to putting on successful all-star events, as well as a key distribution channel for Varsity Brand cheer uniforms.

Fusion Elite says that, with these network agreements, all-star gyms are required to commit to near exclusive attendance at all-star competitions and exclusive patronage by the gyms and their team members for all-star apparel.

The Varsity Brands class action lawsuit states that Varsity has controlled approximately 90 percent of the all-star competition market and 80 percent of the all-star apparel market.

“Varsity has used its dominant market power in the Relevant Markets to substantially foreclose competition in both markets and thereby maintain and enhance its dominance in both markets,” the Varsity Brands class action lawsuit says.

Fusion Elite states that Varsity’s exclusionary scheme has led to reduced output, supracompetitive prices and reduced choice in the relevant marketplaces.

The Varsity Brand cheer uniforms class action lawsuit maintains that the number and variety of the all-star competitions have fallen, the number of rivals have dropped and the prices in the marketplace have risen.

As a result of Varsity’s unlawful and anticompetitive scheme, the plaintiff and the putative Class have paid higher prices for all-star competitions, all-star apparel, as well as other services bought directly from Varsity Brands than they would have paid in a competitive marketplace.

Common questions of law and fact in this class action lawsuit include: 1) whether the defendant maintains monopoly power in the relevant markets; 2) whether Varsity willfully obtained, maintained, or enhanced monopoly power in the relevant markets; 3) whether Varsity and USASF conspired to assist Varsity in maintaining dominance in the relevant markets; and 4) whether the defendants engaged in unlawful exclusionary conduct to impair the opportunities of rivals in the relevant markets.

Prospective Class Members in the Varsity Brands class action lawsuit include: “All natural persons or entities in the United States that directly paid Varsity or any wholly or partially owned Varsity subsidiary from May 26, 2016 until the continuing Exclusionary Scheme alleged herein ends (the ‘Class Period’) for: (a) registration, entrance, or other fees and expenses associated with participation by an All-Star Team or Cheerleader in one or more All-Star Competitions; and/or (b) All-Star Apparel.”

Are you part of an all-star gym and think that Varsity Brands has a monopoly? Leave a message in the comments section below.

The plaintiff is represented by Benjamin Galdston, H. Laddie Montague Jr., Eric L. Cramer and Mark Suter of Berger Montague PC; Jonathan W. Cuneo, Katherine Van Dyck and Victoria Sims of Cuneo Gilbert & LaDuca LLP; and Benjamin D. Elga, Brian Shearer, and Craig L. Briskin of Justice Catalyst Law Inc.

The Varsity Brands Class Action Lawsuit is Fusion Elite All Stars v. Varsity Brands LLC, et al., Case No. 5:20-cv-03521, in the U.S. District Court for the Northern District of California.

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