If the saying "You play with the bull, you get the horns" is at all accurate, Upper Deck now resembles a piece of Swiss cheese.


This hasn’t been a good year for staying off the radar for the company by any means. They have been involved in no less than three major lawsuits, lost three major licenses, had a player’s union order members not to return autographs to them and have had to let go approximately one third of its workforce. Why has the world come crashing down around the once mighty company? Well first off, one has to wonder if they ever were as mighty as they appeared as there appears to have been a lot of facade building going on from within the company. Be that as it may, why are things coming to a head now? It’s because of nothing but brazen greed or stupidity, depending on how you view what you’re about to read. Either-or, one thing is for certain: the ego involved in pulling this off was incredible and showed a blatant disregard for any consumer of their product.


Evidence, you say? Let’s start with the lawsuits, shall we? For those of you who haven't heard, this past February Upper Deck settled multi-million dollar lawsuits with Konami, owner of the Yu-Gi-Oh brand, and Major League Baseball. Let's take a brief look at the details on each.


Konami: In a nutshell, Upper Deck entered a licensing agreement in March 2002 with Konami to produce Yu-Gi-Oh cards. This partnership was extremely successful, resulting in over $17 million dollars in sales in the second quarter of that year alone and overtaking all Upper Deck's sports properties as its best selling product.


Fast forward to 2008 and we find Konami taking legal action against a company named Vintage Sports Cards, who repackage loose packages and cards into blister packs for re-sale in stores such as Wall-Mart and Toys R Us. Konami’s lawsuit alleged that the folks at Vintage were selling counterfeit copies of higher value Yu-Gi-Oh cards in these packages. Although Konami recognized that the packages contained in the blister packs were legit, the loose cards (often displayed at the front to grab the kid’s attention) were fraudulent knock-offs. Vintage were stunned, replying that they obtained ALL their cards, whether packs and loose, directly from Upper Deck. They HAD to be real, right?


Wrong. Upper Deck was added as a defendant in the lawsuit and Konami took over the operation of the Yu-Gi-Oh card game. At this point, Upper Deck made the sensible call and...countersued for $75 million? Yes, UD argued that these allegations HAD to be false! Why would the leader in trying to prevent counterfeiting, part of the appeal to UD over other companies when they first began developing cards with holograms on them, ever engage in the act themselves?


Makes sense until information from the lawsuit started coming out, including:


1) Revelations of a meeting in which Upper Deck’s chairman, Richard McWilliams, and at a minimum one other employee compared authentic Yu-Gi-Oh cards against the counterfeits.


2) A witness stating that following the meeting both authentic and counterfeit cards were shredded by Mr. McWilliams in his office.


3) Emails obtained in which an employee solicited information from other UD workers about how to "secretly" obtain Yu-Gi-Oh card security holograms.


4) Five Upper Deck executives, including McWilliams, pleading the Fifth Amendment (the right to not self-incriminate) on the stand.


Faced with these and other details, Upper Deck finally fesses up to having contracted out a company in China to print over 600,000 counterfeit cards for distribution to third party customers such as Vintage Sports Cards. An out of court settlement was reached which will see UD paying out millions in damages to Konami. How many millions? Hard to say exactly, but given that Konami were seeking between $50 to $150 million dollars plus punitive damage one can assume that it is at least in the tens of millions.!


This settlement alone has elicited reactions from many financial experts that the company could be on very shaky ground, possibly even headed for bankruptcy in the near future.


As if this financial hit and blow to the company’s reputation were not enough...


MLB: After 20 years of holding a license to produce MLB/MLBPA endorsed cards, Upper Deck found itself cut out. In a similar fashion to the deal Upper Deck and the NHL/NHLPA struck in 2005, Major League Baseball entered into a multi-year exclusive deal with Topps in August 2009, making it the sole company able to produce cards featuring MLB properties on them. Having just recently lost their basketball license to Italian card company Panini, UD were understandably concerned over losing another of the Big 4 sports in their product line. To prevent losing baseball completely Upper Deck sign a 1-year deal with the MLBPA, which would allow them to produce player cards, but without any team/MLB logos or names on them as these are property of MLB.


So the 2010 products are released AND.....there are cards showing MLB team logos/names. Major League Baseball's response was to slap Upper Deck with a $2.4 million dollar lawsuit for previous debts UD had with MLB and get a court order barring the company or its distributors from selling any of their 2010 products! Upper Deck settled by paying MLB a “substantial”, albeit undisclosed, amount for issuing three sets of cards since 2009 without a license, settled their debt, and were permitted to sell their 2010 product.


Then there was Topps! The main rival of Upper Deck in the Baseball market sued UD in 2009 for copyright infringement for stealing card designs. Specifically, Topps accused Upper Deck of using its designs from its 1970’s baseball cards and 1979 hockey releases for retro variations of their own releases in 2009. The lawsuit was settled by a mediator and details were not released.


Summary: UD paying off what one has to think is a minimum $15-$20 million dollar court settlement with Konami, a settlement to MLB likely in the $5 million range, $2.4 million of debt to MLB, had to sit on a few million dollars worth of merchandise for a month or two that they were barred from selling, an undisclosed settlement with Topps, and have had their reputation muddied even further than it was before.


Now, if one gets sued a lot, one better hope they’ve got the ability to pay! In UD’s case this means being able to bring in revenue which translates in a very basic sense to moving product. Here’s where the licensing comes in. Konami/Yu Gi Oh is obviously gone. As stated earlier in the article, both basketball and baseball have been lost as well. Then they lost their license with the NFL after 19 years. So what does that leave them with sports-wise? A collegiate license, a renewed NHL license, and a new Major League Soccer (MLS) deal.


Oh boys. First off, scratch the MLS product as a steady income flow! Too small, too specialized. The collegiate license? I’m not going to turn my nose up at that as we’ve seen what In The Game has been able to do with their International and Junior-ranks releases. If UD plays their hand right they could do alright with this. As for the NHL license, it’s solid but it’s not baseball and is driven disproportionately by sales in Canada. Factor this in with the fact that UD now share the license with Panini as opposed to having an exclusive production deal and what was a smaller, albeit steady, source of income relative to the other sports becomes less stable and profitable.


Look, questionable business decisions and allegations of underhanded practices have followed Upper Deck around for years, as far back as the company's inception. Were batches of Griffey Jr rookie cards being offered for purchase to dealers in 1989 as an underhanded way to drum up more cash for the company but also saturating the market for that card to the disadvantage of collectors who legitimately pulled them from packs? How backhanded was the undercutting of DeWayne Buice, the MLB pitcher who became a founding member of the company by managing to get them an audience with the MLBPA that set the wheels in motion for the company getting their license? Was the 12% stake in the company truly only worth the $2.8 million they gave him initially or closer to the $17 million the courts ordered them to pay when he sued them (an amount that took the company 9 years to pay off)? How shady is their practice of vague wording on their game-used cards (On the front of this is a piece of memorabilia that has been certified to us as having been USED in an NHL game)? Based on these statements we don't know HOW it has been used or WHAT it was (note that it does not say jersey!). Never mind the use of jerseys from photo shoots (where over 10 different jerseys might be used in a brief skate around session), old timers games for retired players (event-used), or even allegations as to whether they are merely using pieces of a jersey bought off a store rack that's never been in the vicinity of the player.


Point being is that these latest legal issues speak to shady dealings by a company that has been challenged on such behaviors before. Whether this spells the end of Upper Deck in the sports memorabilia world remains to be seen. It certainly adds another couple of stains to their reputation, however, and reveals certain arrogance about the approach they take with customers, business partners and licensees. The fallout from this will be interesting to say the least, and should their "worst case scenario" arise then we're all in for a major shift in the collectibles environment...

Shawn Gates
[email protected]
Twitter: ShawnHockeybuzz
Facebook: Shawn Gates
BBM: 311A4F7D
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