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The Antitrust Implications of Professional Sports Leagues Revisited: Emerging Trends in the Modern Era

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The Antitrust Implications of Professional Sports Leagues Revisited: Emerging Trends in the Modern Era University of Miami Law Review Volume 41 Number 4 Article 2 3-1-1987 The Antitrust Implications of Professional Sports Leagues Revisited: Emerging Trends in the Modern Era Thane N. Rosenbaum Follow this and additional works at: https://repository.law.miami.edu/umlr Part of the Antitrust and Trade Regulation Commons, and the Entertainment, Arts, and Sports Law Commons Recommended Citation Thane N. Rosenbaum, The Antitrust Implications of Professional Sports Leagues Revisited: Emerging Trends in the Modern Era, 41 U. Miami L. Rev. 729 (1987) Available at: https://repository.law.miami.edu/umlr/vol41/iss4/2 This Article is brought to you for free and open access by the Journals at University of Miami School of Law Institutional Repository. It has been accepted for inclusion in University of Miami Law Review by an authorized editor of University of Miami School of Law Institutional Repository. For more information, please contact [email protected]. University of Miami Law Review VOLUME 41 MARCH 1987 NUMBER 4 The Antitrust Implications of Professional Sports Leagues Revisited: Emerging Trends in the Modern Era* THANE N. ROSENBAUM** 1. INTRODUCTION ... ....................................................... 730 A. The Antitrust Implications of Professional Sports Leagues in General ...... 734 1. SECTION 1 AND THE FEAR OF CONCERTED ACTIVITY ................. 734 a. Per Se Invalidity or a Rule of Reason Approach ................ 735 b. The Single Entity Defense .................................... 740 2. SECTION 2 MONOPOLY POWER AND ITS THREATENED MISUSE ........ 749 B. United States Football League v. National Football League ............... 757 II. ANTITRUST HISTORY OF PROFESSIONAL SPORTS LEAGUES .................. 760 A. Types of Questionable Practices ...................................... 761 1. PLAYER RESTRAINTS .............................................. 761 2. FRANCHISE RELOCATIONS ......................................... 763 3. LEAGUE EXPANSION: THE PROBLEM WITH RIVAL LEAGUES ......... 764 B. Baseball's Antitrust Immunity ....................................... 767 C. Attempts by Other Leagues to Gain Immunity ......................... 769 1. POOLING TELEVISION RIGHTS: THE SPORTS BROADCASTING ACT ..... 769 2. NFL/AFL MERGER: THE FOOTBALL MERGER ACT ................... 770 . 3. IS FOOTBALL A NATURAL MONOPOLY? 772 4. COLLECTIVE BARGAINING ......................................... 774 D. The Early Assumptions About Sports League Conduct ................... 778 1. PROFESSIONAL SPORTS AS A UNIQUE PRODUCT ..................... 778 a. Rule of Reason Versus Per Se Treatment ....................... 779 b. N o Single Entity Status ...................................... 781 c. There Are No Interchangeable Substitutes for Sports Entertainm ent ........................................ 783 . 2. DO THESE ASSUMPTIONS MAKE FOR GOOD PRECEDENT? 786 * The author wishes to acknowledge the assistance of his friends and colleagues, Janie Anderson, Andrew Berman, Sylvia Penneys, and Karen Stetson, who read and commented on the ideas expressed in this work. Moreover, the author wishes to thank the members of the University of Miami Law Review for their researching assistance; and special gratitude to Ben Smith, for his insight and devotion to this article. ** B.A., 1981, University of Florida; M.P.A., 1983, Columbia University; J.D., 1986, University of Miami School of Law. The author is a former Editor-in-Chief of the University of Miami Law Review. This article is dedicated in memory of the author's parents, and to the life he shares with his wife, Jackie. UNIVERSITY OF MIAMI LAW REVIEW (Vol. 41:729 III. THAT WAS THEN, THIS Is Now: THE CHANGING COMPLEXION OF PROFESSIONAL SPORTS LEAGUE ENTERTAINMENT ......................... 788 A. Features of the M odern Era ......................................... 788 1. INCREASED NUMBER OF SCHEDULED GAMES ....................... 788 2. ADVENT OF TELEVISION REVENUES AND EXPANDED GATE RECEIPTS ................................................... 791 3. COLLECTIVE BARGAINING REVISITED ............................. 794 B. New Assumptions to Match the Modern Era ........................... 797 1. NATURAL MONOPOLIES ............................................ 797 2. INPUT/OUTPUT SUBMARKETS ...................................... 801 a. O utput M arket ............................................. 803 b. Input M arket ............................................... 806 i. P layers ................................................. 808 ii. Stadia as "Essential Facilities" . ........................... 809 iii. Game Officials and Coaches .............................. 811 iv. Preemptive Expansion and Available Franchise Sites ......... 812 IV. A REVIVED LOOK AT RIVAL LEAGUE COMPETITION ....................... 814 V . CONCLUSION ............................................................ 820 I. INTRODUCTION In a nation where sports entertainment is such a vital part of the American experience, it is somewhat surprising that the precise law governing the relationship between professional sports leagues and the Sherman Act is so noticeably confused and unsettled. Those who have sought uniformity in this area of law and scholarship had hoped to achieve some level of consistency between the highly developed principles embodied in traditional antitrust law, and that which seems to have evolved in the sports entertainment industry. What has remained from this academic if not athletic exercise is certainly not coherence, but rather a series of vague assumptions about the nature of sports league economic organization. Without offering meaningful guidance as to the potential liability of various trade practices, these assumptions only serve to highlight the inability of courts to apply the antitrust laws in a reasoned and consistent way that recognizes the considerable consumer welfare implications that sports league entertainment provides. For years, courts and commentators alike have struggled over the antitrust implications of professional sports leagues. The decision whether to apply the Sherman Act to the operation and business of professional sports is one that courts have made in virtually all areas of league conduct, ranging from restraints upon franchise relocation,' 1. See, e.g., Los Angeles Memorial Coliseum Comm'n v. National Football League, 726 F.2d 1381 (9th Cir.), cert. denied, 469 U.S. 999 (1984); San Francisco Seals, Ltd. v. National Hockey League, 379 F. Supp. 966 (C.D. Cal. 1974). For a historical breakdown of some of the restraints that sports leagues have imposed on franchise owners, see Weistart, League 1987] ANTITRUST IMPLICATIONS OF SPORTS LEAGUES 731 league expansion or denied transfers of ownership,2 player mobility,3 league rule enforcement,4 and the prevention of rival league competi- tion.5 The challenge has taken many forms, and the players in these controversies are not always the same as those appearing on the field. Indeed, courts have provided the backdrop for some of the more interesting contests in sports history, involving all the drama and romance of a game-ending touchdown or game-saving catch. Through it all, however, courts, commentators, the leagues them- selves, and those who have challenged league practices have all in some way attempted to give content to the proper scope and applica- Controls of Market Opportunities:A Perspective on Competition and Cooperation in the Sports Industry, 1984 DUKE L.J. 1013, 1024-25 & nn.35-37. 2. See, e.g., Mid-South Grizzlies v. National Football League, 550 F. Supp. 558 (E.D. Pa. 1982), aff'd, 720 F.2d 772 (3d Cir. 1983), cert. denied, 467 U.S. 1215 (1984); Levin v. National Basketball Ass'n, 385 F. Supp. 149 (S.D.N.Y. 1974); see also Comment, The Super Bowl and the Sherman Act: Professional Team Sports and the Antitrust Laws, 81 HARV. L. REV. 418, 426-30 (1967) (discussing the various potential restraints that sports leagues place on owners). 3. See, e.g., Radovich v. National Football League, 352 U.S. 445 (1957); Wood v. National Basketball Ass'n, 809 F.2d 954 (2d Cir. 1987), aff'g 602 F. Supp. 525 (S.D.N.Y. 1984); Smith v. Pro Football, Inc., 593 F.2d 1173 (D.C. Cir. 1978); Kapp v. National Football League, 586 F.2d 644 (9th Cir. 1978), cert. denied, 441 U.S. 907 (1979); Mackey v. National Football League, 543 F.2d 606 (8th Cir. 1976), cert. dismissed, 434 U.S. 801 (1977); Robertson v. National Basketball Ass'n, 389 F. Supp. 867 (S.D.N.Y. 1975); Philadelphia World Hockey Club, Inc. v. Philadelphia Hockey Club, Inc., 351 F. Supp. 462 (E.D. Pa. 1972). 4. Self-regulatory rule enforcement applies to both professional sports leagues as well as to sports associations that govern and supervise the operation of nonleague affiliated professional sports activities. Compare, e.g., Linseman v. World Hockey Ass'n, 439 F. Supp. 1315 (D. Conn. 1977) (enjoining a rule that prohibited players under the age of twenty from playing in the league) and Bowman v. National Football League, 402 F. Supp. 754 (D. Minn. 1975) (striking down a roster limitation rule that prevented franchises from signing former players of the defunct World Football League) and Denver Rockets v. All-Pro Management, Inc., 325 F. Supp. 1049 (C.D. Cal. 1971) (finding that the NBA's "four year rule," which prevented a college player from entering the league until four years had passed since his high school graduation, was an unlawful group boycott) with Gunter Harz Sports, Inc. v. United States Tennis Ass'n, 511 F. Supp. 1103 (D. Neb.), aff'd per curiam, 665 F.2d 222 (8th Cir. 1981) (upholding
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