Relaxing whilst doing Competition Law is not an Oxymoron

Competition Law and Sport (VI) The NFL Lockout

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Our “competition law and sport” series (see posts I, II, III, IV, and V) was born out of our belief that the application of competition law to the world of sports has a tremendous potential that still today remains to a great extent unexplored in the EU. As I´ve said before, not only are sports-related cases some of the most visible ones at the EU level (for the general public Bosman is very likely the best known ECJ Judgment of all times), but given the peculiar features of the activities and markets at stake they also raise particularly interesting issues that push competition law outside of its comfort area, some of which we´ve previously discussed here.

In the US they were much quicker than us to realize that. In fact, the application of the antitrust laws has shaped much of the current organization of professional sport.  A good and very hot illustration of this influence is the controversy surrounding the NFL lock out, which was recently challenged on antitrust grounds by several NFL players, including superstars Tom Brady, Peyton Manning and Drew Brees (Read their complaint here). The players also asked for an injunction to freeze the lock out that was finally granted last Monday.

Background and issues in a nutshell: the activities of all major leagues have enjoyed until now some degree of inmunity to the application of antitrust laws. The clearest example is baseball, which enjoys a controverted antitrust exemption that was ratified by the Supreme Court in Flood v Kuhn (1972) on the basis of a really absurd reasoning that put a curious interpretation of stare decisis before sound legal reasoning and common sense. Other sports have not been treated with so much deference, and so they have resorted to collective bargaining so as to escape the application of the Sherman Act. That was the case of the NFL, which, until now, had always negotiated all sorts of issues with the players union (NFLPA).

On March 11th, and in light of the unlikelihood of reaching a satisfactory deal on how to divvy up the $ 9.3 billion that the NFL makes, franchise owners  announced a lock out (which, amongst others, implies no salary, no hiring, and no access to training facilities) (btw, it seems that the NFL´s tactics are somehow similar, and coincidental in time, to those of the Republican party..) and players decided to decertify their union and cease the collective bargaining process in order to deactivate the non-statutory exemption and lodge an antitrust complaint (see the link above for the content of the complaint).

The complaint challenges the compatibility with Section 1 of the Sherman Act some of the NFL´s basic arrangements, namely those related to salary caps, drafting of new players and free agent restraints, as well as of the lock out itself.

On Monday, Judge Nelson (District Court for the District of Minnesota)  issued an order granting an injunction which freezes the lock out (finding that players/plaintiffs have a fair chance of prevailing and that absent the injuction they would suffer irreparable harm). The order, however, does not deal with the merits of most of the players´claims, and rather states that “[r]esolution of the issue of whether the exemption precludes relief on the NFL’s various Player restraints must await another day”.  (Click here to read the order).

If the litigation were to reach an outcome in the form of an Opinion on the merits (which is not so obvious in light of the White v NFL precedent and of the ongoing court-ordered mediation talks) that would mean that a court would undertake a competitive assessment of several practices that have never carefully scrutinized so far. This could most certainly have an impact on the debate surrounding the possible implementation of salary caps and other similar arrangements in European sports and particularly on their assessment under EU competition rules. We´ll deal with those in future posts.

Written by Alfonso Lamadrid

28 April 2011 at 10:29 pm

One Response

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  1. […] – Here´s one that I´m following with particular interest: NBA players hired the very well known antitrust lawyer David Boies to represent them in their battle against franchise owners that has led to the NBA lockout. The players have now filed two class action lawsuits (one in Minessota and one in California, which are considered to be favorable venues) asking for treble damages (that is, triple the amount of the more than $ 2 billion they would´ve made this season). The lawsuits argue that the lockout “constitutes an illegal group boycott, price-fixing agreement, and/or restraint of trade in violation of the Sherman Act” an hat the owners´ final offer for a new collective bargaining agreement would have “wiped out the competitive market for most NBA players”.  (For our comments on the very similar NFL precedent see here). […]

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