Tim’s Take: Fanatics Strikes Back

If you recall in my article where we first discussed the Panini vs. Fanatics lawsuit, we asked if Fanatics was a monopoly, as Panini accused them of being. In that article, we said the short answer was no, and the long answer was also probably no.

But let’s flip the script and turn the attention to the accuser, Panini. Is Panini a monopoly in the hobby space?

I think the conclusion ultimately ends up being the same. But fortunately for all of us captivated by this drama, if both parties have their way, we may now eventually find out. Let’s break down a simple timeline of what has transpired to get us here, shall we?

April 17, 2023 

Panini sues Fanatics as a result of the poaching of about 36 employees from their company. They claim it was a tactic by Fanatics to obtain “trade secrets” from the both current and former employees. In addition to Fanatics, Panini also named seven of it’s former employees in the lawsuit.

For now, both sides agreed to a mutual restraining order and trial is set for April 2024. Fanatics can continue to hire former Panini employees, but former Panini employees that now work for Fanatics cannot actively court current Panini employees. 

There has been a lot of guessing as to how this will play out in the end but absent any non-compete agreements, it sure doesn’t look good for Panini as their employment is of an “at-will” nature. It did come out that all the employees left with company-supplied thumb drives. Were there “trade secrets” on any of these? Fanatics claim is that there weren’t. We’ll probably never know the truth. 

May 30, 2023

Panini’s offices in Irving, TX were broken into, leading many to believe that it was some kind of corporate espionage rather than your typical, run-of-the-mill breaking & entering.

The reason? Somehow the would-be robbers broke in without triggering alarms, supposedly caused thousands in damage, but the break-in was mostly targeting a certain office area, breaking through walls to access computer equipment. What were they looking for? Those “trade secrets” again? I doubt it. But customer data could prove pretty valuable.

August 3, 2023

Panini sues Fanatics, accusing them of a variety of malfeasance, and wraps it all up nicely in an anti-trust package.

They claim many things including Fanatics willingness to “steal” Panini employees, cutting off memorabilia supply, and taking over the print shop Panini primarily uses. We hit on these in my previous article.  And here is the link to the lawsuit (PDF), if you want it straight from the horses’ mouth. 

August 7, 2023

Fanatics countersues Panini, with their own 101-page document (PDF), as a direct result of the anti-trust case against them. It, too, is an anti-trust case but lays out a ton of information, none of which paints a pretty picture of what’s been going on over at Panini.

The lawsuit is an entertaining read. At the very least, skip to page 68, where Fanatics shares Panini’s statement on social media, followed by 30-plus pages of Panini getting roasted by card collectors on Twitter, with comments like “Panini better hope nobody on that jury has redemptions,” and “It’s hard for me to support a company that is terrible with their customers.”

That’s right. We now have dueling lawsuits – cue the banjos – both claiming antitrust issues, both claiming anti-competitive conduct, both claiming the other side hasn’t dealt in good faith. Only this time, Fanatics claims that all the leagues are giving their licensing to them because they would rather work with the new, up and coming innovators that Fanatics is.

Fanatics points to Panini’s antiquated but still-practiced business of long redemption wait times, lackluster customer service, and dealings with distributors that are clearly unfriendly to collectors.

To use a hockey analogy, coaches (leagues) are bringing in the backup rookie goalie (Fanatics) to put in net because the grizzled veteran netminder (Panini) couldn’t stop a beach ball right now. Low blow? Maybe, depending on where your loyalties lie when it comes to Panini’s products over the years, but I’m sure a case can/will be made that there could be some semblance of truth.

One thing we have found out is that for the last couple years, the hobby rumblings of a deal going down for Fanatics to acquire Panini were apparently sort of TRUE! It has come out in the documents Fanatics filed that negotiations had been on going for Fanatics to at least get early access to the NFL and NBA licenses, potentially as early as July of this year.

It’s also now clear that Panini had been shopping their own sale, unsuccessfully, for quite awhile. Obviously the deal ship has sailed at this point, but with Fanatics seemingly having more money than Fort Knox to spend in hobby spaces, why couldn’t this deal get done before? Fanatics claims that the entire time, Panini was dealing in bad faith because during the negotiations they repeatedly went after former employees, threatened others, and probably worst of all, “falsified earnings projections to bait Fanatics…” forcing them to overpay.

This is probably, most likely, possibly, absolutely, definitely important. Fanatics claim here is that during the negotiation process, Panini gave them profit projections that were inflated as much as 30%, thus capping the profitability statements at a higher rate, leading to a much larger valuation.

Fanatics goes on to claim that even Panini’s own CEO, Mark Warsop, admitted to them during their meetings that this was the case. Yes, the same Mark Warsop that was apparently being recruited by Fanatics to “jump ship.” Fanatics claims that Panini’s legal team has created a “protracted, unlawful, and deceitful campaign of unfair trade practices, strong-arm tactics, and tortious misconduct to hamper Fanatics Collectibles’ nascent business, in the hopes that it could force Fanatics Collectibles to pay an extortionate amount for Panini to terminate its licenses early.”

Isn’t that fraud? I’m not an attorney but, kind of.

Think of it this way: you attempt to sell a card for way more than the precious “comps” you all love so much. It sits, and it sits, and no one wants to buy it. You then go on to advertise, touting it’s virtues and how great it is, highlighting how much it’s sold for in the past. Finally a collector with tons of cash that really wants the card and seems willing to give you your ask, comes along. You think it’s going to be a done deal. But the collector is no dummy. They start to do their own research and happen look at recent sales and says, “Hey, wait a second here, man. I thought you said this thing sold for like $100-120? All these sales in the last 3 months are $40-50. What gives?”

Well your past pricing was what it was worth a year ago, two years ago, maybe longer. Those numbers, although they once may have existed, don’t mean a thing for value right now, or what the future might bring. Is it fraud at this level? I suppose not really, because it’s your card and you can try to sell it for whatever you want. The market will ultimately dictate the price. But in a business negotiation with fleets of legal counsel including corporate attorney’s and due diligence experts, fake valuations that get uncovered aren’t just going to get you a negative feedback score.

In all this mess and confusion, we can’t forget that for the longest time, Panini themselves had “multiple, overlapping exclusive licenses with players’ associations and leagues,” a direct quote from Fanatics attorney’s.

Since at least the 1990s, negotiating licensing with both players associations and leagues has been an extremely lucrative, but necessary objective, for card manufacturers. If we look back on NHL licensing in the 1996, for example, we had officially licensed hockey cards from Donruss, Fleer, Pinnacle, Topps, and Upper Deck. Those are just the major releases and don’t include food-related, team issued, or other oddball licensing that was given out at the time. As the calendars flipped, we saw less and less of that into the 2000s.

What we did see was more and more athletes signing on with manufacturers to be exclusive autograph signers for products featuring their names, likeness, and autographs.

We also saw manufacturers consolidating, gobbling up one another, their brands, and other IPs for sometimes pennies on the dollar. By the 2010s, it was clear that if you wanted any licensed card product, your only options were to go to Topps, Panini or Upper Deck. While some athletes could still occasionally be lured away to other manufacturers, any product that contained team names, logos, players, or other major professionally licensed themes could really only be obtained from one of those “Big 3.” So, by now, pointing a finger at Fanatics, Panini sure seems to be creating a Cervantes-esque pot vs. kettle situation that they’ve been long complacent in.

Panini’s attorney’s seem to think the countersuit by Fanatics is just a publicity stunt to deflect from the accusations that were thrown at them. According to their statement, Fanatics just wants to attempt to play the victim role rather than deal with any response to their own impropriety, which includes all the things we pointed out in the last article. Is Panini a monopoly because of exclusives? If it’s commonplace in the market, probably not. Is Fanatics a monopoly because they are buying up all aspects of the business? I still don’t know the answer to that.

But regardless of what side you take in either anti-trust claim, I think it’s clear that the next couple years in the hobby are going to be anti-boring.

Tim Parish is a writer-at-large for Puck Junk. Follow him on Twitter @therealdfg.

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Author: Tim Parish

Tim is a hockey nut and music aficionado who, despite a busy life, somehow still finds time for collecting. He's been a sports card collector for over three decades and his collecting habits have evolved many times over the years. Tim has collected all the major sports, but has always come back to hockey and hockey card collecting. It’s a lifelong hobby, so he’s in no hurry and not going anywhere anytime soon. Highly opinionated and never wrong, Tim’s world view of hockey is as keen as any talking head or insider on a major sports network; the only thing missing are the “unnamed sources.” Sarcasm is also his strong suit. You can find Tim and his warped ramblings on Twitter @TheRealDFG.

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