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Unanimous Jury Upholds ATP's Tournament Restructuring Plan

By Rick Karcher, Michael McCann, Geoffrey Rapp, Greg Skidmore, and Howard Wasserman

Yesterday, it was reported that jurors unanimously decided "the ATP did not enter into any contract or conspiracy that might have harmed competition, and that there is no market that it monopolized or attempted to monopolize," when it reorganized its tournament structure whereby top-ranked ATP players would be required to play in each of eight top-tier tournaments, known as the Master Series 1000, and four of 11 tournaments in the second-tier Master Series 500. Earlier this week, Sports Business Journal's Daniel Kaplan reported on the testimony of ATP's expert economic witness, Jonathan Walker, who testified on the stand last Friday that what the ATP stands accused of are the normal functions of a governing body and that the ATP is allowed to make rules regarding where players compete. Walker further said:

?We are talking about rules that are necessary for the ATP Tour to exist. So before we even get to the stage of measuring market shares, we know that we are concerned with conduct that's fundamentally necessary for the product to exist. The end goal of antitrust is what's the impact on consumers, not, say, what is the result on a particular tournament.?

I posted on this case numerous times (questioning the harm to the consumer and advocating for an antitrust exemption) and, needless to say, I think the jury and Walker are right. But my question is whether this case should have even gotten to a jury. While the outcome of this case is obviously a beneficial result for the ATP, as well as the other professional sport governing bodies, third parties should not be permitted to challenge decisions of sport governing bodies that relate to rules that are necessary for their existence. The cost of these lawsuits threatens their existence and it is a waste of judicial resources. But most importantly, the players, through their elected representatives, have input and a vote, which serves as a sufficient check on the authority of these governing bodies to enact rules that serve the interest of the players and the sport as a whole.

In this case, the ATP was essentially required to prove that its new scheduling format was adopted in good faith. There needs to be a legal standard that allows judges to dismiss antitrust challenges to rules that relate to the governing body's core functions and purposes. Examples of such rules include rules regarding tournament/event format, scheduling and location, playoff structure, player rankings and playing conditions. When a third party challenges such a rule, it should be deemed to have been adopted in good faith unless the third party presents "clear and convincing evidence" to a judge that the rule was not made in good faith.

In antitrust law, there is the doctrine of "per se illegal" restraints on trade (like price fixing), in which agreements are deemed to be unreasonable as a matter of law. Recognizing that sports is unique and that restraints on competition are necessary in order for the sport to exist, courts have consistently rejected this doctrine, subjecting the rule to a reasonableness test that weighs the anticompetitive and procompetitive effects. The ATP-Hamburg case demonstrates that perhaps certain rules should not be subject to a rule of reason analysis. My suggestion essentially allows judges to decide that a particular restraint in sports is "per se legal" and therefore reasonable as a matter of law.

Full post as published by Sports Law Blog on August 06, 2008 (boomark / email).