Welcome to Sports Law

1. Welcome to Sports Law

2. Last Time Contract rights/Unclean Hands: Giants v. Chargers, p 120; Giants do not file contract and can�t then fault Chargers for signing. Oilers v. Neely, p 121; Not unclean hands when player signs yet still college eligible (State statute may change today); Bengals v. Bergey, p. 121�can sign to start after current contract;

3. Last Time, Reserve system-- Flood v. Kuhn, p. 146; baseball not subject to the antitrust laws��reserve rule� thus o.k.; Affirms Federal Baseball; BUTconcludes baseball/business/interstate commerce; Baseball exemption comes from Congress�silently; Partee�Baseball not subject to state antitrust laws because a �federal� issue;

4. Last Time, Following Kuhn, the exemption from the antitrust laws became less meaningful; because, in 1968, the Major League Baseball Players Association and the owners agreed to be bound by federal labor laws;

5. What�s the Point Under holding in Flood, federal antitrust law does not apply to baseball; Under holding in Partee, state antitrust law does not apply to baseball; Baseball is thus totally exempt from Regulatory control; To what, then, does this exemption apply?

6. P 153, �2 "With its reserve system enjoying exemption from the federal antitrust laws ...� Does this mean that baseball's exemption, however it is created, extends only to the "reserve system?�

7. Piazza & Tirendi MLB, p 160 Piazza an investor attempting to put MLB in St. Petersburg; with Bob Laurie, owner of the Giants--Laurie would negotiate only with Piazza group and attempt to move Giants to St. Pete; MLB rules require investigation�no specifics but both plaintiffs linked to Organized Crime;

8. Piazza & Tirendi MLB, II League committee/NL Pres. directed Laurie to consider other offers; SF group claims agreement with MLB to let SF keep the Giants in SF; Plaintiffs claim antitrust violation when owners refuse to allow move;

9. Piazza & Tirendi MLB, III According to this court: To what did Flood apply? If �Rule� stare decisis were applied in Flood, what? If �Result� stare decisis is applied, what? What is the point of talking about �Markets?�

10. Piazza & Tirendi MLB, III �Rule� stare decisis�courts bound by the notion that baseball is not interstate commerce within antitrust laws; �Result� stare decisis�courts bound only by the result�baseball�s reserve system not covered by the antitrust laws; Court says Flood opts for �result� stare decisis only;

11. Piazza & Tirendi MLB, IV Piazza�"markets" for baseball antitrust; First�Flood/Federal Baseball--market of "giving exhibitions of baseball;" Second "moving players and their paraphernalia from place to place;� Here, market--"ownership of existing major league baseball teams;� Antitrust measured by extent of activity on relevant market;

12. Piazza & Tirendi, the aftermath Courts agreed and disagreed; Did not resolve the �political issue� of status of MLB; Came up again following 1994 strike; Led to Curt Flood Act;

13. Curt Flood Act What does Congress think of the result in Piazza? What is baseball�s antitrust exemption following Curt Flood Act?

14. Curt Flood Act, II Legislative History: Only those specified in subsection 27(a). This made clear by subsection 27(b); To Whom, then, does Act apply?

15. Chapter Antitrust to Labor P 175��Whatever �.� Flood Act is law (2004); P 176: Does antitrust cover �labor� as opposed to consumer issues? Curt Flood Act assumes labor relationship of players/owners, if no labor agreement, activates antitrust laws;

16. From Antitrust to Labor Law An Antitrust Primer, http://www.ftc.gov/bc/compguide/antitrst.htm The antitrust laws describe unlawful practices in general terms, leaving it to the courts to decide what specific practices are illegal based on the facts and circumstances of each case. Section 1 of the Sherman Act outlaws "every contract, combination . . . , or conspiracy, in restraint of trade," but long ago, the Supreme Court decided that the Sherman Act prohibits only those contracts or agreements that restrain trade unreasonably. What kinds of agreements are unreasonable is up to the courts. [Section 1: Conspiracy to restrain trade�requires multiple actors]

17. From Antitrust to Labor Law An Antitrust Primer, http://www.ftc.gov/bc/compguide/antitrst.htm Section 2 of the Sherman Act makes it unlawful for a company to "monopolize, or attempt to monopolize," trade or commerce. As that law has been interpreted, it is not necessarily illegal for a company to have a monopoly or to try to achieve a monopoly position. The law is violated only if the company tries to maintain or acquire a monopoly position through unreasonable methods. For the courts, a key factor in determining what is unreasonable is whether the practice has a legitimate business justification. [Section 2 is individual Monopolists]

18. From Antitrust to Labor Law An Antitrust Primer, http://www.ftc.gov/bc/compguide/antitrst.htm Section 7 of the Clayton Act prohibits mergers and acquisitions where the effect "may be substantially to lessen competition, or to tend to create a monopoly." Determining whether a merger will have that effect requires a thorough economic evaluation or market study. For Professional Sports, if the league is a single employer, it cannot be liable under Section 1�it could, however, be liable under Section 2. For Professional Sports, if the league is a single employer, it probably cannot be liable under Clayton Act, Section 7�because no merger in a single employer situation;

19. Nature of Injury Direct Injury Only No double recovery Indirect Injury Rule �Antitrust Injury,� Brunswick Corp. v. Pueblo Bowl-O-Mat, 97 S.Ct. 690 (1970) �Pro-competitive� actions may not support antitrust claim�even when they cause injury. T.R.�the Trust Buster

20. Brunswick Corp. v. Pueblo Bowl-O-Mat, discussion, p 176 Plaintiff ran a bowling alley ? sold bowling equipt. Number of P�s competitor alleys failed, Brunswick came in and ran�creating a horizontal monopoly; P sues�without this monopoly, P would do better;

21. Brunswick Corp., II Court says NOT an antitrust injury: ?�s actions pro-competitive; Provided consumers with more bowling alleys to use, not less, even though the plaintiff lost money; Thus, to be antitrust injury, must be damage to plaintiff; AND, must be injury to consumers as a result of that injury to the plaintiff;

22. Kartell v. Blue Shield of Mass.,P. 177 Doctors forced to accept low returns from Blue Shield. Why? So that Blue Shield subscribers would benefit from lower premiums; Did Blue Shield have a monopoly? Of course. Is there an antitrust violation? No. How is Professional Sports similar to this case? Look at questions, p. 178

23. Sports Similar to Doctors Players sell services; They want to earn maximum, like the doctors, When they do, games may cost more for consumers; Thereby defeating some of the purposes of the antitrust law;

24. Brown v. Pro Football, p 179 From United States Supreme Court Case, http://www.sportslawnews.com/archive/Court%20Rulings/Brown.htm In 1987, a collective-bargaining agreement between the National Football League (NFL) �and the NFL Players Association �expired�. In March 1989, during [negotiations towards a new contract], the NFL adopted Resolution G-2, a plan that would permit each club to establish a "developmental squad" of up to six rookie or "first-year" players who, as free agents, had failed to secure a position on a regular player roster�. [Development] Squad members would play in practice games and sometimes in regular games as substitutes for injured players. Resolution G-2 provided that the club owners would pay all squad members the same weekly salary�.

25. Brown v. Pro Football, p 179 From United States Supreme Court Case, http://www.sportslawnews.com/archive/Court%20Rulings/Brown.htm The NFL proposed a squad player salary of $1,000 per week. The Players Association disagreed. It insisted that the club owners give developmental squad players benefits and protections similar to those provided regular players, and that they leave individual squad members free to negotiate their own salaries. [Ultimately, the league imposed the substance of Resolution G-2 on the clubs.]

26. Brown v. Pro Football, p 179 Sports cases differ from most antitrust; Antitrust usually filed by buyers trying to purchase goods at competitive prices; because of lack of sellers (generally �2) or because of a conspiracy by sellers (�1); Sports cases--monopolists are the buyers--the owners who are purchasing services;

27. Brown v. Pro Football, p 179 Sports cases into the normal antitrust posture would have the players agreeing to a salary scale; Would dictate ticket prices/injure consumer; In our cases, monopolists aligned with consumer--because; If owners keep price paid for players down, ticket prices down;

28. Brown v. Pro Football, p 179 Thus, initial question of whether these cases covered by antitrust law at all?? P 180--wage-fixing schemes are price-fixing within antitrust laws P 180 �a service provider is injured ... when buyers of those services artificially deflate the price of services through cooperative anticompetitive conduct.�

29. Per Se Rule of Reason Per Se Facts are so obviously more anticompetitive than procompetitive that showing facts is all that is needed; Per Se analysis is simply an evidentiary substitute Rule of Reason (Most Cases) A Balancing Test Does Anticompetitive impact of the practice outweigh the Procompetitive effect of the same practice We will fill more out more of this analysis later

30. What�s the Point While there is a great deal of discussion in cases about Per Se and Rule of Reason, both tests are trying to get to the exact same result. When in doubt, court�and YOU�should use Rule of Reason Let�s Look at some cases

31. Smith v. Pro Football, p 186�The Rookie Draft (James McCoy Smith) Yazoo Smith drafted by Washington Paid $22,000 plus $18,000 bonus Career-ending injury; Per Se or Rule of Reason Why?

32. Smith v. Pro Football, p 186 Draft enforced through �no tampering�rule �bottom p 186; P�s here allege group boycott; Where group of competitors agree to boycott another competitor�tends to destroy competition usually per se; If per se, no further evidence;

33. Smith v. Pro Football, p 186 PP 187-188; Just because not per se does not end inquiry; Rule of Reason is fact-intensive inquiry; . In fact, it makes the inquiry more fact intensive;

34. Antitrust Under Rule of Reason Plaintiff Must Prove: Adverse Impact on Competition in Relevant Market What is �Relevant Market� in Smith�s case? What does the NFL say is the �Relevant Market?� What difference does it make which one we use? Why?

35. What�s the Point Look at the Balancing Test, p. 188 Anticompetitive �evils� Procompetitive virtues Does this court allow the NFL�s �Procompetitive virtues� to offset the Player�s �Anticompetitive evils?� Why or why not?

36. �Relevant Markets� "Relevant market�--the "smallest market for which elasticity of demand and supply are sufficiently low that a firm with 100% of that market could profitably reduce output and increase its price substantially."

37. Relevant Markets, II P 189: Draft requires seller of service to deal with ONLY one buyer; Market is the one for seller's of football services; Does Player Draft substantially impede competition in selling football services market?

38. Relevant Markets, III Anticompetitive aspects? Seller of services has no meaningful competitive market; League agrees that the practice is anticompetitive; Pro-competitive effect is "competitive balance" on the playing field;

39. Relevant Markets, III P 189--League says market is purchasers of the entertainment product of professional football; How does this touch Smith? Nat. Soc. Professional Engineers, p 189

40. Nat. Soc. Professional Engineers, p 189 Society banned price in competitive bids; Ban discriminates v. underbidding; Favors "clubiness" of the profession; Procompetitive allegation--public interest; Court says, p. 183 frontal assault on Act;

41. Professional Engineers, II Court says, p 189-190--to balance under Rule of Reason--anticompetitive and pro-competitive aspects of the restraint must touch on the same aspect of the case--or the same relevant market;

42. The Dissent If Football is a Natural Monopoly, then �. Dissent then is looking at the procompetitive nature of the competition generally

43. Questions, p 197 et seq. NO Not entirely�just irrelevant here; Isn�t any player restraint anticompetitive?

44. Maurice Clarett Case, p 200 et seq. Apply the prior rules and answers to the facts of Maurice Clarett�s case; NFL Rules bar drafting until 3 years out of high school; Is this an antitrust violation? Why or why not?

45. Brown v. Pro Football II, p This is the same case as earlier; Does a �developmental squad� promote �competitive equality?� For whom? What does court do with this argument; What �markets� are at work? Do NOT pay attention to notes yet�on Ultimate Result of this case.

46. Mackey v. NFL (I), p 207 Rozelle Rule Bound for two years at 10% DECREASE Then became free agent 1963-1974: How many players played out option? 176 How many players were able to sign with new teams? 24

47. Mackey v. NFL II Per Se: Does court review the case under Per Se Illegality Rules? Why or why not?

48. Mackey v. NFL III Under Rule of Reason what questions need be asked? Is the restraint anticompetitive? Is the restraint justified by legitimate business interests? Is the restraint more restrictive than necessary?

49. Mackey v. NFL IV What Legitimate Business Interests are offered? How does court respond to each of them? Why?

50. McNeil v. NFL, p 211 Plan B�What did it offer players? In lawsuit, what questions was jury asked and what were the jury�s answers? What about the �competitive balance� issue?

51. What�s the Point All the football cases are Section 1 cases��Combinations� in restraint of trade; The league is its teams; Would owners have any better luck if they were a single entity under Section 2?