Chapter 10
College Sports: Goals of the NCAA
Preserve the amateur nature of intercollegiate athletics as a part of the educational process in university and to ensure that its member schools compete on a level playing field. NCAA has created extensive rules restricting the nature of participation in intercollegiate athletics (e.g., limits on recruiting, academic eligibility requirements, financial aid standards, agent regulations, amateurism rules, and a myriad of other topics).
Individual Performer Sports
Professional boxing, tennis, golf, bowling, and automobile racing have all been found to be businesses engaged in interstate commerce. There is a focus of antitrust scrutiny of these sports. Eligibility restraints have not been found to violate the antitrust laws if the restrictions promote the quality of the competition, ensure uniformity of the rules, and assist in the orderly scheduling of tournaments and other events.
Clayton Antitrust Act
Provides that when a plaintiff proves that there has been a breach of the Sherman Act, the damages that the plaintiff can recover are tripled. In 1984, when Los Angeles Raiders owner Al Davis won his antitrust lawsuit against the NFL, the tripled damages amounted to more than $35 million.
Antitrust Review of the NCAA
Rules that affect commercial activity have been found to violate the antitrust laws. 1. NCAA football television plan that set limits on number of games that could be televised was found to violate antitrust laws (NCAA v. Board of Regents, 1984). 2. Rule restricting coaches salaries was found to violate antitrust laws (Law v. NCAA, 1998). Rules that are not commercial in nature have been found to not violate the antitrust laws. 1. NCAA argues that eligibility rules and academic standards are needed to preserve amateurism of NCAA athletics. 2. NCAA no-draft, no-agent rules barring athletes who are drafted by a professional sports league or sign with an agent do not violate antitrust laws (Banks v. NCAA, 1992).
Curt Flood Act
-Modifies baseball's antitrust exemption. -Allows baseball players to sue MLB if they believe that some condition of their employment may violate the antitrust laws. Other aspects of the business of baseball itself (ownership, management, relocation) are still protected by the antitrust exemption.
League Structure
A crucial question for antitrust analysis is whether a sports league is one entity or an entity composed of different, separate owners. -If it is a single entity, then its decisions do not constitute section 1 violations (since it applies to two or more entities) -If a group of owners or employers, then section 1 applies -Courts had to deal with this question with frequency in the 1980s and 1990s
Single- Entity Structure: Defense
A defense to an antitrust claim; a party using this defense must demonstrate that instead of being an organization made up of separate business entities, it is one business entity itself and so it cannot be a combination or conspiracy in restraint of trade as required to violate the antitrust laws.
Monopoly
An organization that possesses exclusive control over the means of selling and producing a product.
Player Restraints
Assuming leagues are not single entities, then the following labor issues have antitrust implications: 1. Player drafts 2. Restrictions on free agency 3. Salary caps
Clarett Case
District court found for Clarett, but ultimately circuit court reversed and remanded decision. Circuit court found that draft rule was collectively bargained for and that it was a mandatory bargaining subject which is protected by NLRB labor exemptions and thus was not subject to antitrust rules.
Player Drafts
Each of the major sports leagues uses an annual draft to select and allocate players to its member teams. Each league also sets out specific requirements related to the age of those who can be drafted, their completion or progress in high school or university, and their eligibility to be drafted by a member team. Past courts have called aspects of the draft into question and have found draft rules to be in violation of antitrust laws. Recently the key to passing antitrust scrutiny has been to make sure that they are collectively bargained for
AntiTRUSt Exemptions
Findings by a court or provisions of statutes that exempt a party from review under a particular regulation or statute. Exemptions allow the party to avoid a lawsuit as a result of its actions that otherwise could be found to have violated the regulation or statute. Baseball's antitrust exemption -Judicial exemption granted to Major League Baseball in 1922 that immunizes the league from being sued for violations of the antitrust laws. -Baseball did not act in interstate commerce. -Exemption upheld in Flood v. Kuhn (1972). Nonstatutory labor exemption -Judicial exemption that provides that when employers and employees have bargained in good faith, one party cannot be sued by the other party claiming violations of the antitrust laws -Remains in effect even after collective bargaining agreement ends (so long as negotiations still could take place) -Court found union would have to dissolve in order for exemption to go away There is a three-part test applied for non-statutory labor exemption: 1. Restraint of trade affects only the parties to the CBA; 2. Restraint is a mandatory subject of collective bargaining; and 3. CBA is product of arms-length bargaining
Purpose of Antitrust Law
Promote competition and efficiency in the marketplace. Protect consumers from the growing monopoly power of big business Maintain a high level of competition among producers so that consumers are able to get products at affordable and reasonable prices.
Salary Caps
Set a limit on the amount of money a team can spend on player salaries Set either as per-player limits or as a total limit that a team can pay for its players Court found this did not violate antitrust because it was collectively bargained for
Federal Antitrust Laws
Sherman Act Clayton Act Sports Broadcasting Ace Curt Flood Act
Curt Flood Act
1. Modifies baseball's antitrust exemption. 2. Allows baseball players to sue MLB if they believe that some condition of their employment may violate the antitrust laws. - Other aspects of the business of baseball itself (ownership, management, relocation) are still protected by the antitrust exemption
Violations of Sherman Act: Section 1
1. Per Se Rule: Conduct that is inherently anticompetitive, such as price fixing and group boycotts, and so automatically violates the Sherman Antitrust Act 2. Rule of Reason: -Rule used by courts in antitrust cases that applies when the conduct is not inherently anticompetitive; under this rule, a court focuses on whether the challenged conduct unreasonably restrains trade -A balancing test of pro-competitive and anti-competitive effects of the action
Franchise Relocation
1. Professional sports leagues restrict franchise relocations to other cities. Approval by 75% of owners is required. 2. Teams have sued the leagues claiming that these rules violate the antitrust laws. 3. Los Angeles Memorial Coliseum Commission v. NFL, 1984 - NFL owners voted against move of the Oakland Raiders to Los Angeles. - Raiders' owner Al Davis and the Los Angeles Coliseum sued. - Federal appeals court found the NFL franchise relocation restrictions violated the antitrust laws. - Team was awarded $11.5 million and Coliseum was awarded $4.6 million, both amounts then tripled under the Clayton Act. This case ruled that the NFL is not a single entity.
NCAA v Board of Regents
Case revolved around NCAA's restrictive tv rights contract with ABC Contract limited the number of games that schools could appear on TV along with the amount of money that they could make College Football Association, made up of major football-playing schools, was able to secure TV deal with NBC, but NCAA threatened action against any school that took part in this deal. Court finds actions of NCAA to be restraint on trade-limits ability of schools to negotiate on TV contracts-horizontal price fixing By limiting number of games each school can appear on, this creates limit on output-this is typically held to be unreasonable restraint of trade
Restrictions on Free Agency
Curt Flood originally challenged free agency in 1972 but was unsuccessful-Court found MLB's antitrust exemption allowed for baseball to restrict players NFL's Rozelle rule -NFL rule required a team signing a veteran free agent to provide compensation to the team that was losing the player. -Struck down as an antitrust violation in Mackey v. NFL. Collective bargaining agreements between the leagues and their players' associations What happened with Baseball's rule? Arbitration ruled against them after two players went for the extra year without a contract.
Fraser v. MLS 2000
Major League Soccer attempted to be set up as a single entity. League office owned all player contracts, controlled all player salaries under a salary cap, and mandated transfer fees for player transactions among teams. Players sued, claiming that the restrictive player restraints embodied in the salary cap and transfer system violated the antitrust laws. MLS admitted that it had created this structure in an attempt to keep salaries and other costs down so that the league could develop a strong base of financial viability in its early years of operation. The federal appeals court agreed with MLS, finding that it was a single corporate entity, and therefore it could not violate section 1 of the Sherman Act. The crux of the ruling was based on the conclusion that the players could not show that MLS was the relevant market for soccer.
Law v. NCAA
NCAA had restricted the salaries of entry-level assistant coaches in the sport of basketball to $16,000 NCAA's arguments were that the rule was put into place to retain entry level jobs, reduce costs, and maintain competitive equity Court found that this salary fixing did not accomplish those goals-no evidence that entry-level jobs were in jeopardy due to salary Court also did not find any evidence that restricting salaries would promote competitive equity NCAA tried to argue that all plaintiffs must show injury, but Court found that unless it is clear no plaintiff were injured, the fact that some defendants were not would not defeat the inference of antitrust injury
Sherman Antirust Act
Section 1: "Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several states or foreign nations is declared to be illegal" (15 U.S.C. § 1, 2008). Section 2: "Every person who shall monopolize, or attempt to monopolize or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several states, or with foreign nations, shall be deemed guilty of a felony" (15 U.S.C. § 2, 2008). To prove a violation 1. Must show that there is an agreement between two separate parties 2. Must show that the parties' conduct taken under the agreement unreasonably restrains trade because they are anticompetitive 3. Activity must affect interstate commerce (i.e., commerce that takes place between two or more states)
Broadcasting Exemption
Sports Broadcasting Act 1. Enables clubs to put their separate rights together into one package so that the league can sell the package to one purchaser, such as a TV network, in an effort to protect their home game ticket sales and to allow clubs to share television revenues. 2. Allows professional hockey, football, baseball, and basketball to pool and sell their rights in sponsored telecasts of games without the fear of being sued for creating an agreement in restraint of trade. NCAA is not a party.
Free Agency
The period of time when a professional athlete is not under contract to any particular team and so is able to freely negotiate with any team Baseball's reserve clause - A clause used to be in every professional baseball player's contract stating that if the player did not automatically sign a new contract with the team for the next season, all of the provisions of his present contract would be automatically renewed. Andy Messersmith and Dave McNalley were able to gain free agency since they went a year without a contract The player remained the property of his team. Messersmith arbitration hearing ended reserve clause
Brown v. Pro Football INC
This case came about due to unilateral decision by owners to implement salary restriction on practice squad players NFL and players had been negotiating new CBA-in 1987 the agreement expired In March 1989, owners brought up proposal for developmental squad, which was rejected by players In June negotiations came to impasse NFL owners then implemented proposal Plaintiff won at District level, and appeals court reversed Court found that this case fit under nonstatutory labor exemption This exemption was put into place to give deference to labor laws and not have antitrust courts get into the middle of labor disputes Through collective bargaining some restraints on trade are agreed upon-so long as done through collective bargaining, labor law says this is ok Question becomes does exemption apply after an impasse is reached if a party unilaterally takes action Exemption does apply after impasse, so long as: the change was reasonably comprehended within employer's pre-impasse proposals, must bargain in good faith, must still be bargaining (arms-length)
