Michael Sykuta headshot

Associate Professor, Division of Applied Sciences
University of Missouri

Michael Sykuta is an economist and Associate Professor in the Division of Applied Social Sciences at the University of Missouri. He is Executive Director of the Financial Research Institute (FRI), whose programs focus on public utilities regulation and utility industry issues. He is also Co-founder and Director of the Contracting and Organizations Research Institute (CORI), an interdisciplinary research program focused on the economics and law of contracting, organization, and corporate governance.

Antitrust

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The NFL As A Single Firm?

When I first read Josh’s post of antitrust links below, I thought “Drew Brees? Surely not THAT Drew Brees.”  Turns out, it IS that Drew Brees. I was very interested to read the QB’s take on American Needle and his plead for the Supreme Court to reject the NFL’s petition to be deemed “a single entity.”  However, of even more interest to me was Brees’ comment that the NFL is petitioning for a “single entity” designation that would, according to Brees, apply “for pretty much everything the league does.”

I wrote a paper (here) with Ken Lehn several years ago examining the issue of antitrust and franchise relocation in the NFL in the wake of L.A. Memorial Colisuem Commission v. National Football League, et al. (1984), more commonly referred to as the Oakland Raiders case.  This antitrust case resulted from the NFL’s refusal to permit the Oakland Raiders franchise to move from Oakland to LA. The key finding in the Court’s decision against the NFL was that the NFL was not a single entity.  The NFL had argued that it was a single entity and therefore incapable of “conspiracy;” the same logic used by the courts to reject an antitrust claim against the National Hockey League in one of its own franchise relocation disputes (San Francisco Seals, 1974).

Ken and I took issue with both the Raiders finding concerning the single entity argument and the court’s understanding (or misunderstanding) of the consumer welfare effects of the NFL’s territorial restrictions.  Drawing on the organizational economics literature concerning incentives and franchises, we made several arguments concerning the important incentives such territorial restrictions provide when revenues are shared but (local) costs are not. We then provided empirical evidence to demonstrate that both the Raiders and the LA Rams did in fact seem to underinvest in quality of their respective franchises after the Raiders moved to LA, ultimately resulting in no NFL team in one of the largest media markets in the US.

So I would have to suggest that, at least for franchise relocation decisions, the NFL should in fact be considered a single entity and some of its other restraining practices are actually pro-competitive (or certainly welfare enhancing). As for American Needle, I haven’t yet read all the facts, but I suspect there are compelling economic reasons for a single-entity decision there as well, particularly given the revenue sharing rules that govern the NFL.

Regardless, I would suggest Mr. Brees use a little more caution in his arguments. Something about pots calling kettles black, and all that. Having reviewed at least one (publicly available) licensing agreement in the CORI K-Base between the National Football League Players Association and one of the popular sports memorabilia companies, a good case could be made using Mr. Brees’ reasoning that the NFLPA is violating antitrust law both in its Group Licensing Rights program and its restrictions against licensees negotiating contracts with any NFL players, or even potential NFL players, who are not (yet) part of the NFLPA’s group license.  I don’t know how far the NFLPA’s antitrust immunity as a labor union may extend beyond the labor market for football players.

Posted in antitrust, contracts, markets, sports, Sykuta