Thursday, October 01, 2020

(Cheerleading) Monopoly Power And Sexual Abuse

mattstoller.substack  |  When I started writing this newsletter on monopoly power, I would not have predicted that one of the more interesting and popular themes would be on how market power plays out in the world of cheerleading. And yet, the story of monopolization in cheer is a great example of the problem of concentrated corporate power, because it reveals so much about how our economy actually works.

As a quick recap, the company involved is called Varsity Brands, which has monopolized the sport of cheerleading by buying up most major competitions. Varsity is owned by private equity giant Bain Capital. What makes this story so useful is that there are no fancy high tech gadgets in cheer, no possible excuses from economists; it’s just the use of raw power to extract money from teenagers and their families through a business conspiracy.

The story also speaks to the power of advocates to make change. Over the past six months, competitors and customers have filed multiple class action antitrust lawsuits against Varsity, all essentially alleging the same anti-competitive practices from different angles. These cases hit one after another, building on each other and adding more details to the overall story of recklessness that occurs under a monopoly.

And now another shoe just dropped.

Last week, Marisa Kwiatkowski and Tricia L. Nadolny at USA Today detailed a massive scandal of rampant sexual abuse in cheerleading. There’s a high-profile aspect of this scandal; Netflix’s Cheer celebrity Jerry Harris was arrested for producing child pornography involving young cheerleaders, with complaints about him seemingly ignored by the main cheer governing body. But the scandal is more far-reaching than just Harris. What Kwiatkowski and Nadolny found was that over a 100 convicted sex offenders who had raped or assaulted children or otherwise engaged in sexual misconduct were allowed to work in the cheerleading world, and the two governing nonprofits of the sport - USA Cheer and the U.S. All Star Federation (USASF) - did not put these sex offenders on their list of people banned from the sport.

This kind of abusive behavior happens in every sphere of human activity, so one might think that abuse is not intrinsic to any particular business model. Further, these offenders by and large did not work at Varsity, but at independent gyms and associated companies doing business in the cheerleading ecosystem, so it’s even easier to see this as an isolated scandal. And yet, while it may not at first seem like it, this scandal about predators is part of the same monopoly story that I happened to hit on in January. This is a story of a theme I’ve hit on in other industries, or what is known as absentee ownership.