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Wednesday, May 30, 2007
 
Proposed UFL and Antitrust

From my FIU colleague and occasional guest blogger Andre Smith (who is the real sports law guru on our faculty):


Dallas Mavericks owner Mark Cuban is involved in creating another challenger to the NFL, dubbed for now the UFL. I’m not sure what the “U” stands for, but I am guessing United, with Universal being a slighter possibility.

According to NBCsports.com, “Each owner will put up $30 million, giving him an initial half-interest in the team; the league will own the other half. Eventually each team is going to sell shares to the public... Then the owner, the league and the fans will each own a third of every franchise.”

This ownership structure is novel in professional sports and begs a question relating to anti-trust: Which section of the Sherman Anti-Trust Act applies to a league constituted this way?

The major professional sports leagues and organizations in the United States (NFL, MLB, NBA, NHL, NASCAR) consist of individual team owners who establish league rules through a non-profit entity, i.e., the League Office. These teams can be sued under section 1 of the Sherman Act for combining or conspiring to restrain trade.

Teams in Major League Soccer, on the other hand, are owned by the league. They are managed by franchise operators, rather than team owners. Being a single entity, then, there can be no “combination” or “conspiracy” to restrain trade. Still, MLS can be sued under section 2 of the Sherman Act, which prohibits attempts to monopolize.

So the question becomes, can the UFL be sued under section 1, if the league owns 51% of all the franchises, 50% of all of them, 33% of them, or 51% of more than half of the teams and minority stakes in the rest? Often in federal taxation, a subsidiary is owned and controlled by its parent when the parent owns at least 80%; should there be a similar supermajority standard?





7 Comments:

The New York Times has an article about the UFL in today's paper (online only I think). It is available at:
http://www.nytimes.com/2007/06/03/sports/playmagazine/0603play-business.html?ex=1338264000&en=a5dada57d1753d5d&ei=5124&partner=permalink&exprod=permalink

Anonymous David -- 5/30/2007 12:18 PM  


As Judge Easterbrook's opinion in the Chicago Bulls case demonstrates, the applicability of Section 1 to sports leagues is still an open issue. See also the former Chief Justice's dissent from denial of certiorari in a 1982 sports antitrust case.

In any event, assuming that the current view of most courts is correct and Section 1 does apply to leagues organized in the normal fashion, I would think Section 1 would apply to the UFL unless the league owned at least 51% of every team. The precedents decided under Copperweld should shed some light on when a parent cannot conspire with a partially-owned subsidiary.

Anonymous PK -- 5/30/2007 1:48 PM  


I don't think that your characterization that "MLS teams owned by the league." Many are, but some have independent ownership. That is why MLS is not a pure "single entity" league and not necessarily immune from antitrust liability. Check out the 1st Circuit's opinion in Fraser v. MLS. The court sided with the league on other grounds, but did not buy the argument that it was a pure single entity. That means, that, conceptually, there may be some antitrust liability in its decisionmaking structure (albeit unlikely).

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Blogger psychic17 -- 5/31/2007 6:00 AM  


Mark-
Perhaps your understanding of MLS is different than mine. I believe there are no "owners" in MLS, rather there are operator/investors who are paid a mangement fee by the league office....thus the league does own the teams. Currently the league's 13 teams are operated by 10 operator/investors. Could you expand on your idea that the league is not a single entity and how that opens them up to antitrust liability? I read through the First District's Fraser opinion, and I am not sure where they said MLS was not a single entity.

Anonymous Anonymous -- 5/31/2007 10:30 AM  


OK looking at the Nielsen markets it would appear the targets would be.

LA
Orlando
Sacramento
Portland
Hartford
Raliegh, NC
Columbus
Milwaukee
Salt Lake City
Greenville, SC
San Antonio
West Palm, FL
Grand Rapids
Birmingham
Harrisburg, PA
Norfolk, VA
Las Vegas
Memphis
Albuquerque
Oklahoma City
Greensboro, NC
Louisville

Few of those cities have a decent sized stadium that is civic owned. LA, Orlando, San Antonio, Birmingham, Memphis are about it.

The rest either have smaller facilities or would have to go hat in hand to the local university who may not want competition for ticket and sponsor dollars.

In other cases, especially San Antonio playing on Friday night in competition with high schools would heresy and a major hit in potential ticket dollars.

Anonymous Anonymous -- 5/31/2007 5:20 PM  


The UFL is also looking at Mexico City which has a very large stadium.

Blogger sgtrick -- 6/05/2007 1:46 AM  


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