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Sports Law
University of North Carolina School of Law
Osborne, Barbara


· Baseball has antitrust exception—but courts have given players right to challenge if labor or employment issue

· To be subject to scrutiny under antitrust laws, defendant’s business activities must have requisite nexus to interstate commerce

· Rule of reason analysis requires procompetitive analysis—P has to show this does not exist in antitrust cases

o Generally given over quick look or per se violation of antitrust law

o If D can show procompetitive balance, they will likely win under rule of reason framework

o Always going through rule of reason analysis for antitrust questions—go through the steps

· Reason for why rule of reason applies in sport: When restraints on competition are essential if the product is to be available at all, per se rules of illegality are inapplicable, and instead the restraint must be judged according to the flexible Rule of Reason

· Labor law trumps antitrust law in general

o If a term is not mandatory, it does not need to be negotiated between the union and the league

o Expired CBA remains in effect until the parties reach a new agreement—look for impasse

· All professional athletes meet uniqueness requirement under contract law—leads to negative injunctions

· Courts do not want to get involved in overturning an arbitrator’s decision…generally

· As long as the parties negotiated in good faith, the league can implement what was discussed if the CBA has expired

· Student athletes do not have a right to play the sport—only to the scholarship

· Actual malice standard for student-athletes in speech cases

· Playing collegiate sports is a privilege—give up a lot of your rights when you choose to play

· NCAA is NOT a state actor—not bound by those federal laws

o NCAA does not have to consider its past precedent when making decisions/rulings

· Remember, for antitrust recovery, have to demonstrate act was anticompetitive and economic loss was caused by this creation

o Has to be anticompetitive as whole—not just bad for your business; all about competition in market

· Even if excluded under Title IX, look to EPC for protection for discrimination in athletics

· If a labor question—are what is being discussed mandatory bargaining subjects?

· Saints bounty scandal on pg 584

· Labor law protection over antitrust does not stop when an impasse is reached


· Professional leagues are private entities

o Thus, they operate under the private law of association—no worries about US Constitution

§ League governs authority from the league bylaws or other rules that they have created

· In essence, those documents become binding contractual rights between those parties

· Courts give tremendous deference to leagues

o Contractual rights of the parties—they agreed to these terms and the court will not intervene to make their judgment where experts have already decided how to deal with it

§ If the party does not like the rules, they have the option to leave or work to try to change them

o Courts will review the actions of professional sports’ leagues only when:

§ 1) Where the rules, regulations or judgments of the association are in contravention to the laws of the land or in disregard of the charter or bylaws of the association and

§ 2) Where the association has failed to follow the basic rudiments of due process law

§ 3) If association’s decision-making process is arbitrary or capricious or tainted by malice/bad faith

· Courts as a general rule will not settle disputes between members of the organization

o Courts will generally not engage in de novo review

§ Not going to substitute judgment for governing body

§ Really only going to decide if the rules were complied with

· Not whether it is a good rule or a bad rule or if they should have the rule at all

· In general, the league, its commissioner, and the teams are aligned on one side; the players, their union, and player-agents are on the other

· League Commissioners

o Hired and fired by the team owners

§ But he can also discipline the owners and the teams

o Job is to make sure the league as a whole thrives—does not place one team over another

o Responsibilities (bottom of page 389)

§ Create a fair and impartial authority

§ Take action against owners exercising too much power

§ Serve as a centralized administrative authority to facilitate efficient decision making

§ Mediate disputes

§ Lead negotiator in league wide-contracts

§ Broad authority to act on best interests of the league

· Commissioner’s duty is just to look out for the best interest of the league as a whole

o If it hurts one team, so be it (think about trades)

· Commissioner as a disciplinarian has to provide due process—why?

o Goes to basic notions of fairness—ability to be heard; we want this to be upheld; want to give the player or team the chance to defend themselves

o Always has to be a notice and a fair opportunity to be heard

· Expected to follow own rules and bylaws

o If you don’t have rules specifically established, in those instances, as long as minimum due process is satisfied, then the sanctions have to be fair relative to the violation

§ Courts will not say if it is too unfair unless arbitrary or capricious

o League Commissioner “Best Interests” Power

§ Best interest clause in baseball (and other sports)—gives commissioner virtually autonomous power to govern a great extent of league affairs without direct supervision

· Used sparingly but to dramatic effect

§ Commissioner of Baseball has the authority to determine whether any act, transaction, or practice is not in the best interests of baseball, and upon such determination, to take whatever preventive or remedial action he deems appropriate, whether or not the act, transaction, or practice complies with the Major League Rules or involves moral turpitude.


· Federal antitrust rules are one of the primary bodies of public law used to regulate professional sports

o These laws prohibit agreements and collective action that unreasonably restrain trade under the Sherman Act, and monopolization and attempted monopolization

o Purpose of the antitrust laws is to preserve a competitive place and protect consumer welfare

· Sport is unique under antitrust laws

o Consumer interest in the sport product is dependent essentially on competitive balance

o Competitive balance is different from competition in the marketplace

§ Competition on the field is not the same as in the marketplace

· Have to be conscious what the relevant market is

o So much of the regulation can actually be considered procompetitive in nature

§ Rules of the game create this environment

o Although teams are independent, in most of the major leagues, there is also economic interdependence—if any of the franchises fails, that effects the entire league as a whole

§ The success of the league positively impacts all the franchises

§ Thus, don’t have independent teams completely competing because they have an interest in the success for everyone for the betterment of the league

· Antitrust issues in sport tend to come up when a new league challenges the dominance of one of the major leagues

Antitrust and Baseball

· Federal Baseball Club of Baltimore (landmark case for baseball and antitrust)

o Court of Appeals held baseball was not subject to the Sherman Act

§ SC said baseball gets an antitrust exception—determined baseball was not interstate commerce—holding remains valid today (not the not interstate commerce part but the exception)

o Appears baseball got grandfathered in—no other league is given an exception under the antitrust laws

o Court has remained firm that it will not overturn this decision (recently)

§ Could and have threatened to do it—sort of gives them power over MLB because of this exception

· Flood v Kuhn: Although baseball was a big business engaged in interstate commerce, precedent dictated that the reserve system was exempt from federal antitrust laws. In this regard, baseball was anomalous among professional sports, but Congress had the power to change the nature of the sport through legislation

o In the case, Flood was traded without consulting him and wanted to be able to strike his own bargain—argued that baseball was inhibiting his ability to operate in the market and an antitrust violation

§ Specifically challenged baseball’s reserve clause which had prevented him from negotiating a contract with the MLB team of his choice

· Congress response to Flood

o Decided that legislation for these circumstances might be warranted

§ Enacted the Curt Flood Act in 1998

· Players can sue MLB under antitrust laws

· Only the business of baseball gets exception, NOT for labor and employment issues

o Can be sued under antitrust for labor and employment issues

o Sports Broadcasting Act: In order to market baseball as a league, need Congress to provide exception


o Genuinely have less worry about antitrust provided it does not come from a player’s employment

Antitrust analysis: Types of approaches

· 1. Under rule of reason, court looks to see if restraint is no more restrictive on market place than necessary

§ Rule of reason analysis is applied where economic impact of certain practices is not immediately obvious. Under this analysis, conduct will be deemed illegal only if it unreasonably restrains comp

o 1) Is this something that protects the league

o 2) Is rule reasonable means of achieving a proper goal

o 3) What are the anticompetitive effects on the market place and what are the procompetitive effects?

o Is there a less restrictive way to accomplish goal

§ Rule of reason analysis is the most common and likely analysis for antitrust involving sport

o What P must first show to win

§ 1) P has to show there is an agreement

§ 2) P has burden to prove what relevant market is

§ 3) P then has to show there is an anticompetitive effect

· Can show this with actual evidence of effect on market or inference from expected effect

o If P meets the entire burden, the burden shifts to the defendant who has the opportunity to show that the rule is either not anticompetitive or is procompetitive (competitive balance)

§ If P meets that burden–which can’t be met merely by a showing that P has been harmed as an individual competitor—burden shifts to D to show evidence of procompetitive effect of agreement

· If the defendant offers such evidence, the burden then shifts back to the plaintiff to prove that any legitimate competitive benefits provided by the defendant could


o When a team is relocating, if an antitrust suit were to arise, consider factors such as population of the new community, economic projections, facilities, regional balance, fan loyalty (pro-competitive)

§ When one team moves onto the territory of another team in the league

· To withstand antitrust scrutiny, restrictions on team movement should be more closely tailored to serve the needs inherent in producing the NFL product and competing with other forms of entertainment

o Rule of reason applies in league efforts to restrict franchise movement

Revenue Sharing

· Most leagues have significant revenue sharing provisions to ensure competitive balance

o Otherwise large market teams would garner higher support nationally and earn more revenue which would affect the product that particular teams could put on the field and destroy competitive balance

· Primary purpose of revenue sharing is to maintain competitive balance in the league

o By-product of competitive balance—combining everyone’s individual rights has maximized revenue value

§ Economic incentive to pool all of the assets of the sport

· All major leagues equally share in revenue from national broadcasts

o Aside from MLS—single entity structure and can distribute the money however they want

o Every league does collective licensing of its trademarks (most have equal splitting of Internet rights)

· MLB Properties v Salvino (trademarking MLB items case)

o MLB Properties holds worldwide licensing for trademarks

o Salvino has licenses for some products but put trademarks on toys that did not have approval by MLBP

o When considering licensing requirements in this case, a licensor could bid on the licenses that it wants

§ Only have to buy one license—could be for everybody or one team

· Paying a fixed percentage on royalties of its sales

§ Revenue sharing equally is the reason why this works—licensing rights and everyone gets royalties; No need to have license for all teams

o As long as the MLBP does not limit number of licenses in particular category and licensees can pick and choose what they manufacture, it seems the leagues right to centralize licensing is per se legal

§ All comes back to American Needle where granted exclusive licensing rights—found to be illegal

§ Consider video game example and how this one licensing requirement makes everything flow

Antitrust: Sherman Act §2 (Prevention of monopolization)

· This section considers antitrust issues arising out of the formation of a new league that challenges an established league’s dominance of a major professional league sport

o Restraints on interbrand competition

§ Defined by the courts as: in the minds of consumers, if different brands are reasonable substitutes, then you would have reasonable competition

· In a §2 claim, the P has to prove

o 1) D possesses monopoly power in readily identifiable market

§ a) Identify relevant product and geographic market

§ b) Also have to prove monopoly power by showing willful control of market (like 70%) (D’s market share is significant enough to influence entire market)

· Needs to be at least more than majority

o 2) 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

§ Continue to expand in market, could take control of market

· Philadelphia World Hockey Club v Philadelphia Hockey Club

o NHL has put a lot of money into farm system—want the best talent in the world

§ There are some contract between those farm teams and the NHL parent company

§ Reserve clause going to enforce rights of players against them if they had gone to the WHA

o Relevant market is defined as professional hockey at the time of trial

§ Relevant geographic market is US and Canada (would likely be world now)

o Reserve clause essentially continues a contract with a player automatically—keeps them under contract—this contract was unfair because it prevented any other league having access to any talented individual

o The mere possession of monopoly power in the relevant market does not alone constitute a violation of § 2 of the Sherman Act. There must also be willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident