J. Fine – Sports Law – Fall 2013
1) Antitrust Rules Overview
a) Sherman Act
i) Purposes
(1) Protection of consumer welfare
(2) Preservation of fair and competitive marketplace
ii) Section 1
(1) Prohibition on agreements and collective action which unreasonably restrain trade
iii) Section 2
(1) Prohibition on unfair monopolization of a market/industry
b) Four Types of Parties can raise claims under the Sherman Act
i) Teams
ii) Players
iii) Owners
iv) Media, merchandising.
2) Unreasonable Restraints and the Burden-Shifting ‘Rule of Reason’ Test
a) Heavy restraint under the Sherman Act on sports leagues would be counterproductive since the product is competition. If teams competed too aggressively, they would run the competition out of business.
b) Types of Tests
i) Per se Test
(1) Any type of interference with no pro-competitive justification, then it is anti-competitive
(2) Without some measure of restrictive activity, the league would be imbalanced and damage consumer welfare and reduce the product’s value.
ii) Rule of Reason
(1) Plaintiff must show that the alleged restraint resulted in anticompetitive harm in a relevant market
(a) Relevant Market- The relevant market has 2 components: the product market and the geographic market. Product market definition involves the process of describing those groups of producers which, because of the similarity of their products have the ability- actual or potential- to take significant amounts of business away from each other. A market definition must look at all relevant sources of supply, either actual rivals or eager potential entrants to the market…
(2) Burden shifts to D to show pro-competitive justifications for the alleged restraint
(3) Burden shifts back to P to show ‘less restrictive means’ of achieving the precompetitive goals
(4) Court then balances the anticompetitive effects against the precompetitive benefits and thus the net competitive consequences to consumer welfare
3) Sherman Act §2
a) Proving Monopolization requires showing that:
i) The defendant possesses monopoly power in the relevant marker and;
ii) The defendant has willfully acquired or maintained that power rather than having grown or developed power as a consequence of a superior product, business acumen, or historical accident.
b) Proving Attempted Monopolization requires that
i) The defendant has engaged in predatory or anticompetitive conduct with
ii) A specific intent to monopolize and
iii) A dangerous probability of achieving monopoly power.
4) Requirements for a Pro Sports League
a) Access to capital and management expertise
b) Geographically diverse economic base
c) Access to adequate playing facilities
d) Major league quality player
e) National television broadcasting contracts
5) Antitrust Law
a) Best Interests Power
i) Possessed by League Commissioner to investigate any act, transaction, or practice not in the best interests of baseball to determine what preventative, remedial, or punitive action is appropriate to take that action.
ii) Given in ambiguous language
iii) Charles O. Finley & Co. Inc v. Kuhn
(1) Players challenged commission
preserve a competitive marketplace and protect consumer welfare
iii) Because of the nature of sports, it is difficult for courts to apply antitrust laws in a consistent fashion since sports teams do not have an economic interest in driving each other out of business
(1) Not only would the weaker teams fail, but eventually the entire league as a result of lacking weaker teams
d) MLB Antitrust Law Immunity and Other Exceptions
i) To be subject to scrutiny under the Federal antitrust laws, the defendant’s business activities or the allegedly anticompetitive conduct must have the requisite nexus to interstate commerce
ii) In Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs (1922)
(1) Court ruled that professional baseball is a business but that it isn’t interstate in nature as required for the Sherman Act to regulate it
iii) Flood v. Kuhn
(1) Ruled professional baseball is a business and interstate but refused to overturn the Federal Baseball ruling
(2) Decided that such a decision should come from the legislature
(3) Narrowly exempted only player-management labor relations from antitrust law, not all business of baseball.
iv) Curt Flood Act of 1998- Congress modified Sherman Act to provide MLB players with the same antitrust remedies as players in other leagues
