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Ownership Restrictions

Ownership Restrictions. NFL Cross-Ownership Rule. Key factual findings: 1) Growing inter-sport competition between football and soccer concerning TV and local live gate 2) Limited availability of investors 3) No evidence of "confidential" information or of abuse of position by cross-owners

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Ownership Restrictions

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  1. Ownership Restrictions

  2. NFL Cross-Ownership Rule • Key factual findings: 1) Growing inter-sport competition between football and soccer concerning TV and local live gate 2) Limited availability of investors 3) No evidence of "confidential" information or of abuse of position by cross-owners 4) rule overly restrictive

  3. 2/ NASL v NFL • Restraint of trade • Do you agree with 2nd Circuit’s factual finding of a slim market for sports investors? • Why do other NFL owners have a legitimate interest in approving sale of teams to new owners?

  4. 3/ NASL v NFL • NFL response to MLS – allowing owners to own MLS teams in own city but not someone else’s – further illustrates the antitrust complexities of the issue • Why did the league create these exceptions? • Horizontal agreement to protect selves from competition • Vertical agreement to limit animosity and reprisals among ‘partners’ • ad hoc for Paul Allen

  5. Ban on Public Stock Offering • In what market does the NFL rule restrain trade? • What is the effect on the rule on the price/ value of NFL stock?

  6. /2 Sullivan • Would corporate owners behave differently than family owners? In what ways? • Are the NFL owners really concerned that co-owners are smart entrepreneurs committed to long-term success?

  7. /3 Sullivan • Parties agree that price for ownership interests is depressed, rather than artificially raised, by this rule • So why would owners adopt a rule that reduces the overall value of their franchise? • According to the plaintiffs’ theory, who is harmed by the NFL rule?

  8. Problems with 1st Circuit’s Reasoning • Court accepts NFL claim that its rule contributes to efficiency by precluding owners who will place short-term dividend interests of individual club s-holders instead of long-term interests of league [597] • but court still finds rule overbroad b/c NFL has a LRA: it could allow corporate minority ownership while protecting long-term interest by insisting on majority control by non-corporate owner • Do you agree with this reasoning? • In what market is trade restrained if league allows minority ownership? • Real problem: unwillingness of league to get rid of incompetent owner, the way a separate competition organizer would if not controlled by the owners

  9. Ironies in Sports Law • Benefits to Steelers of going public

  10. Who Should Own Sports Teams? • Member-owned teams • Capital investment or leveraged debt • Refuse highest bid unless owner is civic-minded • Member /private partnership

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