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: The Sports Law Professor

Our Little Baby's All Growns Up

By Jeffrey Standen

Of course we're talking today about Major League Soccer, the little baby in the American professional sports world. Like the growing pains experienced by its more mature siblings, MLS is facing the expiration of its collective bargaining agreement, on January 31, and the distinct possibility of a labor interruption. Is MLS doomed to repeat the labor strife experienced in baseball and football? Or can "the beautiful game" follow a different path?

[I had the opportunity to participate in a podcast discussion of the status of MLS labor issues today on a website called "MLS Talk" Here's the link.]

1. From its inception, MLS has tried to follow a different path. Well aware of the trouble antitrust law has caused for owners in other professional sports, MLS was organized in a very specific way in order to avoid antitrust liability. Antitrust law, in relevant part, prohibits an agreement that restrains trade. One way to avoid antitrust problems is not to restrain trade. The other is not to enter any agreements. MLS chose the latter. It avoids entering any agreements, in effect. Under the MLS ownership structure, the MLS constitutes a "single entity." As a result, the kind of arrangements or agreements among teams that have gotten other leagues in trouble (such as salary scales, salary caps, player drafts, limitations on free agency, and so forth) are not, in the view of the MLS, "agreements" under the antitrust law at all. They are merely internal business decisions, no different than any coordinating activities among divisions of a single manufacturer. Thus, MLS is incapable of violating the antitrust laws, no matter how much it restrains trade.

2. The union fought this "single entity" characterization in the 2003 litigation styled Fraser v. MLS. The league won, sort of. The appellate court in that case (the U.S. Court of Appeals for the First Circuit) found that the league lacked sufficient "market power," given the ample competition for players from the various international soccer teams, to give rise to a cognizable antitrust claim. So the best reading of that decision (and this reading is debatable; the court's opinion is less than clear on the point) is that the First Circuit gave no ruling on the single entity argument. In any event, in the wake of the decision, the union in its next collective bargaining agreement promised not to contest MLS's single entity status, at least for now. It remains contestable, however, at least in my view.

3. Of course none of this should matter, and courts will say as much. Whether or not a sports league is a single entity for antitrust purposes should have nothing to do with what form of business model a league adopts. League structures should be based on the most efficient forms to enhance fan interest. Most leagues have a more decentralized structure, featuring independent team ownership, on the view that teams owned locally will promote local rooting interests to a greater degree than would a centrally managed league in which teams were mere divisions of the same company. Structure shouldn't matter for legal purposes, but it does. MLS, which has "investors" instead of owners, and has player contracts entered into by the league, not the team, simply looks more like a single entity than does Major League Baseball, for instance, and thus is more likely to sustain that conclusion in court.

4. It is this "single entity" status that is at the heart of MLS current labor issues. The players' union is not asking for more money or better benefits. It wants free agency: the right of players whose contracts have expired to shop their services among competitor teams. The union understands that it has been free agency that, along with salary arbitration, has been instrumental in bringing about the enormous salaries that are common in other pro sports. The union wants the MLS to treat itself, essentially, as not a single entity, and to allow their "divisions" to bid against each other for assets. This is a serious divide. The entire league is set up to promote single entity status, yet it is exactly that status (or more exactly, the benefit from that status) that the union wants to negate. Soccer fans, this could get ugly.

5. The MLS collective bargain agreement expires in a few days. I have no idea what the parties will do. I know what I would advise the owners to do: offer a better financial deal, and if it's refused, lock the players out. This is a huge year for MLS. The league's public prominence has crested during times of significant USA success in international competitions, such as the 2002 World Cup, where the US made the quarterfinals, or last year's Confederations Cup. 2010 is of course a World Cup year, and the attention of the US on its national team will be intense. This is exactly the wrong time for a labor stoppage. Yet the union by requesting free agency is threatening the very heart of the MLS cost-control measures. The union is picking a big fight.

6. MLS is currently enjoying some profitability. It has a few very successful franchises (Toronto, Seattle) and (finally) a profitable television contract. It has some money to spread around and adjust some of the very low player salaries. But the union doesn't (at this time) appear to want money; it's arguing for a principle that the league will be very loathe to adopt. By not locking the players out at the inception of the season, the league risks making major investments in the season (in salaries and in staging contests) only to see the players threaten a strike toward the late summer, when World Cup interest reaches its peak and the MLS season heads towards the playoffs. A failure by the owners to lock the players out only transfers the leverage to the players, who would now get the pick the date of a work stoppage to exert maximum leverage. By locking the players out early, the owners retain the upper hand and will be able to exert maximum leverage to sustain the season.

7. I like MLS. I don't want to see the season interrupted. I think the best way to avoid an interruption is for the league to put out its best financial offer presently and then plan on a lockout. The prospect of improved wages will be very attractive to the union's rank and file, many of whom earn less than $50,000 per season, and who may care less about free agency than does the higher-paid players. Also, the huge divide in player compensation (David Beckham earns over six million for his limited work) will render a strike very hard for the union to sustain. Players will cross the lines, or go back to Europe. The union has to know this, and know also that the owners could withstand a lockout much more easily than could the players. Let's hope a reasonable salary compromise can be reached.

Full post as published by The Sports Law Professor on February 05, 2010 (boomark / email).