Why Antitrust Regulators Could Reasonably Block Fanatics From Acquiring Topps Trading Cards

Last night, it was announced that the e-commerce company Fanatics has reached an agreement to purchase the Topps trading cards company for roughly $500 million. However, before sports business reporters go too far down the rabbit hole of analyzing how this proposed deal could reshape the sports trading card market, it is important to first recognize that this proposed deal reasonably could be halted by antitrust regulators before progressing any further.

The Hart Scott Rodino Antitrust Improvements Act of 1976 allows for both the U.S. Department of Justice and the Federal Trade Commission to block mergers that serve to “substantially … lessen competition, or … tend to create a monopoly.” While there is some flexibility regarding whether either agency would challenge a given merger, a proposed merger of the No. 1 and No. 2 companies in any business category is at the highest risk of scrutiny—especially where these two companies combine to have an overwhelming share of the overall market. 

Antitrust regulators are especially concerned about mergers among market leaders if there are high barriers to entry for new competitors to enter the marketplace. Presumably, the sports trading card market has uniquely high barriers to entry based on the presumed legal requirement that sports trading card manufacturers license the rights to use players names and likenesses from sports players unions. Since most of these licensing agreements are exclusive in nature and apply over a multi-year term, and they require large, upfront payments that further limit the potential competitor set.

Although some sports and business commentators may believe that the proposed merger of Fanatics and Topps would be too small to get the agencies’ attention, that seems unlikely to be the case. The trading card market has been a rapidly growing market since the start of the Covid-19 pandemic, and a reasonable nexus between print cards and their emerging online counterparts figures to only further grow the market. 

Furthermore, an agency review and challenge to Fanatics’s proposed acquisition of Topps would be in many ways comparable to a review of the proposed DraftKings-FanDuel merger of 2017 — a proposed merger that the FTC properly had blocked due to the risk of consolidation within the daily fantasy sports category.

At this point, the next step for Fanatics and Topps would be to submit a required collection of documents to both the DOJ and FTC that would kickstart a review of the competitive effects of the proposed transaction by the agencies under Hart-Scott Rodino.  These initial documents, among other things, would include business plans where the companies define their competitive set in the marketplace.

So, while it is too early to reach any certain conclusion about the proposed Fanatics acquisition of Topps, there is reason for at least some skepticism as to whether the deal will ever make it to fruition.

Furthermore, even if regulators were to ultimately approve this acquisition, one could reasonably expect, at a minimum, the agencies would first request additional information and potentially the divestiture of certain assets to a third-party buyer.

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Marc Edelman ([email protected]) is a Professor of Law at Baruch College’s Zicklin School of Business, Sports Ethics Director of the Robert Zicklin Center on Corporate Integrity, and the founder of Edelman Law. He is the author of “A Short Treatise on Amateurism and Antitrust Law,” and is among the very few to predict from the beginning that the FTC would block the DraftKings-FanDuel merger. Nothing contained herein is intended as legal advice.