PSA To Buy SGC – Should This Card Grading Monopoly Be Allowed?

I was shocked when I heard that Collectors Holdings (the parent company of PSA) had acquired SGC. I felt the same when Collectors acquired Goldin Auctions (the hobby’s most prominent sports card auction house).

”Our portfolio focuses on service providers that bring expertise, quality and value to hobbyists, and SGC has built a strong reputation on these three fronts. We recognize that every collector has their own preferred authentication and grading provider, and we look forward to providing expertise that will continue to enhance SGC’s customer offering.. 

– Collectors CEO Nat Turner

The big three third-party sports card grading companies (PSA, SGC, and Beckett) have held onto their competitive positions for years, weathering the somewhat unsuccessful challenges of other competitors (such as CSG). 

The pandemic led to many changes in the industry, strengthening the lead for PSA and improving processes to help streamline grading efficiencies.

And despite a run-up in pricing during the pandemic, weaker demand has led to corrective actions among all graders to lower pricing.

But now, Collectors Holdings (which also acquired Goldin Auctions) is making a bold and aggressive bet in consolidating the top two card grading companies.

First things first, PSA is the clear leader in the space. 

February Grading Stats from GemRate.com

​Based on data from Gem Rate, PSA has an 80% market share of the sports card grading market, and SGC is second at 14%.

Beckett and CSG are third and fourth but mostly inconsequential totals, with only a 6% market share between the two companies. 

How could a company (PSA) with an 80% market share in one industry be allowed to acquire the second-largest competitor (SGC)?

Think about Coke buying Pepsi, McDonald’s buying Burger King, or Apple buying Samsung.

If this PSA/SGC deal were happening between publicly traded companies, the FTC would be laughing in their face. 

Of note, the FTC (Federal Trade Commission), whose aim is to help protect consumers, recently squashed deals between Amazon and iRobot and JetBlue and Spirit Airlines.

In this context, the acquisition of SGC raises questions about market concentration and consumer choice.

For years, PSA has been the clear-cut leader in grading, and we’ve talked before about how PSA-graded cards typically sell for a significant premium over similar cards from other grading companies. It has, deservedly or undeservedly, earned the hobby’s trust and respect.

But, SGC has always been a respectful alternative and, of late, has been showing good progress in gaining market share. Compared to last year, SGC grading submissions have increased by 64%, compared to the 34% growth witnessed by PSA. 

Total Cards Graded Courtesy GemRate.com

There are many concerns with this acquisition. 

PSA (Collectors) can now outperform any remaining competitors by further strengthening their monopoly in the grading space. 

What Is A Monopoly?

“A monopoly is a market structure that consists of only one seller or producer. A monopoly limits available substitutes for its product and creates barriers for competitors to enter the marketplace. Monopolies can lead to unfair consumer practices.”  – Investopedia (source)

It could likely put the nail in the coffin for Beckett or CSG grading (at least in sports). Notably, Beckett’s grading submissions fell by 1% over the last year. 

PS: What’s going on at Beckett? It’s a shame that a well-respected name like Beckett has not been able to capitalize on the popularity of sports card grading.

A Beckett resurgence would be welcomed by many. The big question, however, remains: What’s motivating Beckett? At this point, what Beckett deems important is mostly a mystery. – GemRate Feb Blog

Not only will PSA and SGC have a dominant market share as one combined entity, but they will also control pricing. The two companies claim that SGC will remain a distinct operating entity, but at this point, it doesn’t matter. 

If PSA and SGC want to increase prices yearly, they can do so just because they can. 

Who will bother grading with CSG or Beckett when submissions keep dwindling, and hobby respect is ultimately lost?  I highly question the viability of either Beckett or CSG moving forward.

I doubt that regulators will be scrutinizing this deal, but they should, and we, as collectors, need to speak up. 

I have severe reservations about this deal and worry about the end impact on collectors.  

What are your thoughts? Should PSA be allowed to extend its monopoly in the card grading business by acquiring SGC?