Sports Leagues

Overview

It is tempting to analyze sports leagues and associations as collaborations among horizontal competitors. However, the potentially anticompetitive consequences of such collaboration—monopolization of input markets such as “the market for player services” or monopolization of output markets like “the market for teams”—may be more apparent than real.

Barnstorming teams can exist without leagues, but individual barnstorming teams’ output, such as that of the Harlem Globetrotters, differs from league output, such as that of the Chicago Bulls. The member clubs of the major United States sports leagues exist for the primary, if not sole, purpose of participating in their respective leagues, not to barnstorm. Sports leagues and other coordinating bodies have successfully argued, in courts and elsewhere, that they are more accurately analyzed as joint ventures, if not single entities, rather than unrelated, independent economic agents.

The league, the very instrument that purportedly threatens competition among teams, is necessary for teams’ existence. Rules potentially affecting the division of economic benefits—for example, rules regarding competition for players or rules regarding team movement—may have pro-competitive justification. Indeed, industry observers tend to acknowledge that rules limiting the number of players per team or club membership in a league are necessary for league survival. Focusing on collaboration among and between league co-owners and input suppliers over the division of rents while acceding that collaboration on quantity and quality are fundamental to team and league existence, turns conventional antitrust analysis on its head. Such a focus on division of rents rather than on quantity and quality of league output underlies much sports litigation.

Experience

EI economists have worked in various sports industries examining league conduct to determine whether league rules are likely to diminish competition in any way, and, if so, whether there are pro-competitive justifications.

EI economists have consulted for several sports leagues and associations, including:

  • National Football League
  • National Basketball Association
  • National Hockey League
  • National Collegiate Athletic Association
  • Indy Racing League
  • NASCAR

Notwithstanding the import and complexity of the liability questions in sports litigation, analysis of damages may also warrant special attention. For example, in the United States Football League v. National Football League, EI economists demonstrated that there was no reasonable basis for concluding that the NFL had caused any harm to the USFL, regardless of any harm the NFL may have caused to competition. Similarly, in McNeil v. National Football League, EI economists demonstrated that even if the player reservation rules at issue in that litigation were unduly restrictive, those rules also may have benefited certain players by protecting them from competition from other players.