Marvel superheroes could pose antitrust risk for Disney, Universal

The Incredible Hulk roller coaster is one of several Marvel-themed attractions in Universal Orlando's Islands of Adventure theme park. (Photo courtesy of Universal Orlando)

Spider-Man has Walt Disney World and Universal Orlando in a web that legal experts say could put the rival resorts at risk of antitrust complaints.

The issue stems from the Walt Disney Co.’s recently completed, $4 billion purchase of Marvel Entertainment, the comic-book company that has for years licensed its superheroes for use in Universal theme parks. And it underscores the awkward marriage that has been forced upon Disney World and Universal Orlando, two resorts that have long been intense, sometimes bitter, competitors.

Through a 15-year-old licensing contract between Marvel and an arm of NBC Universal — a contract Disney inherited when it bought Marvel — Universal Orlando is the only theme park on the U.S. East Coast that can use some of Marvel’s best-known characters, including Spider-Man, the Incredible Hulk and the X-Men.

But the contract also gives Disney a number of rights over Universal, including the ability to audit Universal Orlando’s books, to ensure it is paying the appropriate amount of royalties, and the power to review Universal’s promotional materials when they feature Marvel characters.

That, antitrust lawyers say, creates a problematic scenario for both Disney World and Universal Orlando, which together command about 90 percent of Central Florida’s theme-park market. Because Disney, through Marvel, now has access to proprietary information about Universal, the companies could become vulnerable to charges of price-fixing or other anticompetitive behavior.

While Disney World and Universal Orlando often appear to raise ticket prices nearly in lockstep, sharing confidential information could conceivably allow them to actually plan in concert everything from stroller-rental rates to future discounts.

“What an antitrust regulator would be concerned about very clearly is the notion that Disney and Universal would be able to coordinate their activities in the theme-park business,” said Randal Picker, a commercial-law professor at the University of Chicago. “You’d really want to be careful with this.”

In what experts say is likely a bid to pre-empt any such complaints, Disney and Universal recently signed an agreement in which corporate Disney promised not to share with its theme-park division any of the confidential details it might learn about Universal Orlando through the Marvel license.

The agreement specifically precludes the Disney Co. from providing Walt Disney World or Walt Disney Parks and Resorts with any confidential information about Universal Orlando that could be used “for anticompetitive purposes.” Universal disclosed the agreement in a recent filing with the U.S. Securities and Exchange Commission.

Experts say it appears Disney and Universal are attempting to establish a kind of information firewall to prevent even the appearance of illegal collusion. The federal government sometimes imposes similar “hold separate” restrictions on companies as a condition of approving a merger, though such orders are typically temporary — until, for instance, the newly combined company can shed its antitrust conflict.

“This looks like a ‘fix-it-first’ attempt to avoid any appearance that there’s price collusion going on. That’s what the concern would be if I were an antitrust enforcer,” said William Page, a senior associate dean at the University of Florida’s Levin College of Law and a former attorney in the U.S. Department of Justice’s antitrust division.

The Marvel licensing contract, Page noted, creates “a direct avenue of potential communication between competitors in the theme-park market.”

Experts also say it’s possible Disney’s agreement with Universal was needed to appease the Justice Department as part of an antitrust review conducted last fall of Disney’s acquisition of Marvel. Regulators did examine the transaction, though they ultimately signed off without public comment.

“It might be that Disney offered this to the Justice Department as a way of calming some concerns,” said Herbert Hovenkamp, a professor and antitrust expert at the University of Iowa law school.

Some say they think Disney could have been forced into the non-disclosure pact. Universal, for example, could have threatened to challenge the Marvel deal with regulators unless such a concession was made, said Keith Rounsaville, an antitrust lawyer at Littchford & Christopher, a commercial-litigation firm in Orlando.

“That’s probably something that Universal demanded not to challenge the transaction,” Rounsaville said. “If I were Universal, it would obviously be of grave concern to me to have my primary competitor have the ability to use my current financial information.”

A spokesman for Universal declined to discuss the agreement. A spokesman for Disney called the arrangement “standard practice among media companies” but would not comment further.

Whatever the motivation, the agreement is another example of the strange bedfellows that have been made by the Disney-Marvel merger. Marvel has a number of other character licenses that Disney must honor, including pacts with rival movie studios such as Paramount Pictures, Sony Pictures and Twentieth Century Fox.

Universal, which doesn’t want to abandon its Marvel rights after having invested heavily to build Marvel Super Island in its Islands of Adventure theme park, now must pay millions of dollars a year in royalties to the corporate parent of its archrival. Disney, meanwhile, finds itself unable to use the most popular characters from its pricey new studio in Orlando, at the company’s biggest, most visited theme-park resort. (Universal Parks & Resorts also holds exclusive theme-park rights to Spider-Man in Japan, where Disney operates the two-park Tokyo Disney Resort.)

The non-disclosure agreement is not absolute: Either Disney or Universal can cancel the confidentiality pact after two years.

Picker, the University of Chicago law professor, said that provision likely reflects that both Disney and University realize they are on unfamiliar terrain with each other.

“I take it they’re trying to get a feel for how this pretty complicated relationship is going to work,” Picker said. “Situations like this are incredibly tricky.”

Jason Garcia can be reached at jrgarcia@orlandosentinel.com or 407-420-5414.