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Monday, July 07, 2008
 
What impact will the ATP antitrust lawsuit have on non-team sports governing bodies?

Two months ago, I argued that sound policy reasons exist to support the application of an antitrust exemption for professional tennis and golf relating to rules and decisions of the governing bodies with respect to playing conditions and other issues that primarily affect the players, such as format of play, the number and location of tournaments, how they are going to be ranked, etc., etc.. As the ATP prepares for trial in 14 days to defend its decision to downgrade the Hamburg, Germany tournament sanction, SportsBusiness Journal's Daniel Kaplan probes the question what impact an ATP loss at trial would have on the governance of all non-team sports governing bodies (ATP Suit Could Remake Non-Team Sports, 7/7/08, subscription required).

Kaplan makes an interesting observation:
At its core, the Hamburg case is about whether the ATP functions as a league. If it is seen as such, then it likely will be afforded antitrust protections held by other sports leagues....If, however, the ATP is viewed as less than that — say, for example, a disparate set of global tennis events unrelated to one another, no different than non-sports businesses that are not allowed to collude — then the court could tear apart the fabric of men’s tennis.
I would add a third possibility. And that is if the ATP is viewed as an association of players who should have the right to determine playing conditions and other issues that primarily affect them. The ATP was formed as a players association, and it has elected player representatives serving on its board. To me, the player representative component has to be factored into the antitrust analysis, and is what distinguishes the ATP, PGA and LPGA from other sports governing bodies that do not have player membership (for example, NASCAR and the NCAA). As Kaplan notes, this case "could determine just how far a rules-making body can go in setting tournament schedules, compelling players to compete in certain events, establishing a ranking system and awarding sanctions." If any third party can successfully challenge rules that the players have agreed to be in their collective best interest, then these governing bodies are at risk, it's as simple as that, because third parties are going to be adversely affected in one way or another. Where do you draw the line? [The ATP settled an antitrust lawsuit with the Monte Carlo event regarding the same issue.]

If the NFL and the players decided that playing in China (or Hamburg for that matter) was not in their best interest, a court simply would not hesitate to dismiss an antitrust challenge by the event organizers in China and Hamburg, either on the basis of the non-statutory labor exemption or because the event organizers would be viewed as "jilted distributors". So is there a compelling justification for treating the non-team sports different from the team sports in applying antitrust law?





14 Comments:

The ATP is not an association of players. It is a joint venture between the players and the tournaments. Also, the players are independent contractors, not employees, and are not represented by a union. Should the ATP be permitted to ban non-favored tournaments from competing for player services? And compel the players to compete in the ATP's favored tournaments? That's the question for the Delaware court.

Anonymous John -- 7/07/2008 5:23 PM  


John,

I didn't say that it was; I suggested maybe it should be "viewed" as one. You've stated the obvious - that they are not a certified union. But you're not answering the question as to WHY they should be treated differently from the team sports under the antitrust laws.

Blogger Rick Karcher -- 7/07/2008 5:45 PM  


Rich -- My primary purpose for posting was to correct your mistaken belief that the ATP is simply the represetnative body of the players. It is not, and it is not in a way that is significant in an antitrust matter. Given your lack of knowledge of the make-up of the ATP, I thought you might be under the mistaken impression that the ATP is a certified union.

As for whether tennis should be treated differently thn team sports, I do think there are significant differences. Some collective action is necessary in team sports -- for example, teams needs to create a schedule to play against one another to have a sport at all. In tennis, it's not necessary. Anyone can hold a tournament and invite the world to compete, and assuming the tournament and what it's offering are attractive enough, players will or won't show up. I'm not sure there's a competitive need for the tournaments and players to get together and say "these tournaments players are allowed to play, those tournaments, they are not allowed to play." That beign said, it's not as if all team sports are immune from liability for all forms of anti-trust behavior.

As for whether there's a justification for treatign actions by unions and non-unions differently -- of course there is. Unions are subject to rules and laws that non-unions aren't in an attempt to ensure that unions adequately represent their constituents. Obviously, the ATP players feel that they were not being adequately represented by their representatives in major decisions made by the ATP, because they have since removed all of their representatives.

Hope that all wasn't too obvious.

Anonymous John -- 7/08/2008 12:37 PM  


John,

I'm not sure how you know what knowledge I possess about the make-up of the ATP, but that's neither here nor there. I didn't say the board is exclusively made up of player reps, and I've made it very clear in my previous post that the ATP's board is made up of both player reps. and tournament reps.

But in response to your point, regardless of whether they're called "games," "tournaments," or "events," the way I see it is that there are only a certain number that players can feasibly play in. I'm not sure I understand the distinction you're making, other than that the team sports have decided that they are going to divide up the players into separate groupings who then play each other pursuant to a set schedule. I'm not sure why that distinction is relevant for antitrust purposes. If some event organizer in Germany invited the Yankees and Mets to play a series there, and the players and the league decided not to play there, why is that different?

You raise a good point about certified unions being subject to labor law, which the ATP isn't. But I'll leave you with this quote from the U.S. Supreme Court in Brown regarding the policy behind recognizing an antitrust exemption for agreements between unions and multi-employer units that restrain competition:

"As a matter of logic, it would be difficult, if not impossible, to require groups of employers and employees to bargain together, but at the same time to forbid them to make among themselves or with each other any of the competition-restricting agreements potentially necessary to make the process work or its results mutually acceptable. Thus, the implicit exemption recognizes that...some restraints on competition imposed through the bargaining process must be shielded from antitrust sanctions."

You may not see it, but I see an analogy to collective bargaining when the ATP player representatives and tournament representatives collectively enact rules that govern their sport. At a minimum, it is a factor to consider in the antitrust analysis even if it doesn't warrant a full exemption. And if the players feel they are not being adequately represented (as you mentioned), then they have the ability to remove and appoint whomever they please just like in the professional sports unions -- so to me that's just one more example as to how the ATP has similar characteristics of a union.

Blogger Rick Karcher -- 7/08/2008 2:47 PM  


Well, I guess I don't see that the pro-competitive benefits outweigh the anti-competitive effects were the ATP be permitted to (as they are trying to do) require players to play in all eight of their favored tournaments, and forbid them to play in their non-favored (non-cartel) tournaments. So, if I had a non-favored, non-cartel tournament and offered $100 million to the winner, no ATP players would be permitted to participate. And conversly, from the consumers' standpoint, the ATP has now monopolized the market for player services, so if I want to see one of the top 500 players in the world, I have to go to an ATP tournament. This lack of competition will result in increased prices to the consumer. And from the player perspective, now that the top eight tournaments don't need to compete for players, they have little incentive to increase their purses to attract the players. I don;t see why that type of activity should be protected by some sort of anti-trust exemption. Why should tennis be any different than computer or software sales? Tennis tournaments should have to compete for customers like any other business.

Anonymous john -- 7/09/2008 9:27 AM  


John, your argument might hold water if your facts were correct, however, they are not.

ATP players are not forbidden to play in other non-ATP events. As a matter of fact, they play in a multitude of non-ATP events every year such as, Wimbledon, the US Open, the French Open, the Australian Open, Davis Cup, World Team Tennis, Bundesliga (in Germany), the Hopman Cup and multiple exhibitions (Federer v. Sampras and Nedal v. Federer on a half-grass/half-clay court, to name some recent exhibitions) just to name a few. Yes, there are non-compete provisions in the ATP Rulebook, however, those provisions are narrow in both their time scope and their geographic scope. The players joined the ATP as members and freely joined knowing of these rules. They have representation on the ATP Board and the ability to attempt to change these rules if they do not agree with them. Clearly, with all the non-ATP events that are out there and are successful you cannot say that ATP rules are making it impossible to compete for player services (which I don't believe should even be classified as an anti-trust market).

This case is about a tournament that thinks it should be protected from market forces and have a perpetual right to hold an event on a certain date in a certain tier on the ATP circuit. I'm quite certain that the anti-trust laws were not intended to allow that type of protectionism. To the contrary, they are there to promote moving a product into a market where consumers are clamoring for that product (ie, the tennis market in China and Spain). This is precisely what ATP is attempting to do by moving away from a market where tennis is slumping (Germany), and placing Madrid in that slot along with a new tournament in Shanghai. There is absolutely no way that the anti-trust laws were designed to do anything but promote what the ATP is trying to do.

Anonymous Anonymous -- 7/09/2008 3:18 PM  


There are rules that prevent players from participating in any tournaments or exhibitions that compete with ATP-favored tournaments. For example, if you wanted to hold an exhibition in South Florida in March, no ATP players would be permitted to play. Also, with the Brave New World plan, players will be required to play 8 of the 8 Masters 100 events and 4 of the 11 500 events. Add the Gland Slams and the Davis Cup, and you've basically taken up the players' calendar (very few players can play more than 17 or 18 events a year -- better players play fewer).

As for market forces in this case, this case is about the ATP wanting to take the Hamburg week and sell it. It has nothing to do with market forces. Hamburg is one of the most popular events on tour. The ATP saw a way to make money, and to do it all they had to do was strip Hamburg of its asset. The ATP could then give Madrid Hamburg's week and sell a new event to China. This case is about the ATP's appropriate rights that have historically been owned by the tournaments.

And if you think consumers in China are clamoring for tennis, you've never been to an event there. The arenas are empty. The players don't want to go there. This is all about the ATP trying to appropriate tournaments rights and control player services. And that is exactly what antitrust laws were designed to prevent. It is a textbook case of anti-competitive activity (and corruption). I guess we'll just have to see what the jury decides after seeing all of the evidence.

Anonymous john -- 7/10/2008 8:46 AM  


John,

You do realize that virtually every rule adopted by the ATP is necessarily going to have an anti-competitive affect on some third party -- That's a given because it's a natural byproduct when multiple producers (the players) enter agreements with multiple distributors (tournaments or teams) that govern their product (the sport). That's what happens in collective bargaining with the team sports and that's what's going on here. I take it that your position is that every rule or decision should be subject to antitrust law, such that the ATP should be required to defend any third party challenge and prove that the procompetitive affects outweigh the anticompetitive affects? The way you analyze the ATP's rule in this particular case, the answer is that the ATP would lose every time, because one could always simply say that the consumers living in some geographic location are harmed by not being able to watch the top players at a tennis match. This is sports, not computer or software sales, and courts and juries have long recognized the distinction from an antitrust standpoint.

Blogger Rick Karcher -- 7/10/2008 11:44 AM  


I disagree that virtually every ATP rule has anticompetitive effects, but yes, that is my position. No rule should be immune from antitrust inquiry. There should be a balancing test just as there is for any other industry. For example, giving ranking points only for finishes in ATP-affiliated events has some anti-competitive effects, but its procompetitive purposes outweigh (in my mind) its anticompetitive effects. Banning players from competing in competing events, or requiring them (at the risk of fines and suspensions) to play certain favored tournaments probably doesn't survive the balancing test. And being able to take sanctions away from tournaments and then subjecting them to non-competes, probably doesn't survive either.

As for whether sports have historically been treated differently by courts, I'm not sure I agree with that as a blanket statement. Courts have repeatedly found leagues and governing bodies guilty of anti-trust violations.

Ultimately, I think this case settles because the stakes are too high for both parties. The ATP will give Hamburg its date and status back, or it will pay them a lot of money and give them the same status they gave Monte Carlo in that settlement.

Anonymous john -- 7/10/2008 12:25 PM  


John,

You say that courts have repeatedly found leagues and governing bodies liable for antitrust violations. I'm curious which of these cases you think is/are analogous to this situation.

Blogger Rick Karcher -- 7/10/2008 2:02 PM  


Rick --

You can start with Volvo v. Men's International Professional Tennis Council, 857 F.2d 55.

Anonymous john -- 7/10/2008 4:50 PM  


When you read through all of the restrictive agreements entered by the defendants in the Volvo case, it essentially amounted to Volvo not only being denied ANY access to players, but also being prevented from hosting ANY tournament. There was also price fixing involved. And there were allegations that the association's director embarked on a campaign to “dissuade and intimidate” tournament owners and producers from associating with Volvo or permitting Volvo to participate in the ownership, production, and sponsorship of events. Volvo also alleged that the director sent letters to NBC Sports, Public Broadcasting Service, ESPN (a cable television sports network), and USA Network claiming that Volvo was attempting to mislead the public into believing that it was still the overall sponsor of the Grand Prix, and requested that the networks not permit Volvo to use its logo during their telecasts of any Grand Prix events.

Isn't this case really just about Hamburg being demoted to a different tier? So is Hamburg really in the same situation as Volvo was? What was the end result in the Volvo case? Did it go to trial or settle?

Blogger Rick Karcher -- 7/10/2008 10:04 PM  


Well, the Hamburg case is about being downgraded, but also about the implications of being a lower-tier event and the lack of an option to operate outside of the ATP monopoly and compete in the market for the services of professional tennis players. It also involves Qatar and the process by which the ATP awarded a 500 sanction to Dubai in what was supposed to be an open bid process.

As for the Volvo case, it settled, which is why many of the same rules that the court questioned in that case are still around (and being challenged in the Hamburg case. Things like the Special Events Rule, pooling of media rights, player commitment rules, etc. I think the findings are broader than you describe. The Court rules that mechanisms such as pooled media rights, player commitment rules, "satisfy the element[s] of antitrust injury." The Court also rules that the MIPTC (the forerunner to the ATP) was not a single entity for anti-trust purposes. The Court also allowed the plaintiffs' charges of "price fixing" in connection with the MIPTC setting prize money maximums and minimums (a claim that has been raised by Hamburg as well). The Coyrt also found that player commitment rules amounted to a group boycott or refusal to deal. The court also let stand the Section 2 claims of monopolization of the relevant market (which was defined as men's professional tennis).

There are significant similarties between the Hamburg case and the Volvo case. Many of the rules challenged in the Volvo case (and viewed as potentially anti-competitive by the Second Circuit) remain in almost the identical form today. And the fact that the judge in the Hamburg case wouldn't even permit the ATP to file a summary judgment motion indicates to me that he has analyzed the issues the same way the Volvo court did and this does not bode well for the ATP.

Anonymous john -- 7/11/2008 10:13 AM  


I would imagine that Hamburg is seeking injunctive relief and want to have things stay at the status quo? So, basically, they're arguing that the ATP system is illegal only if they're not allowed to be a part of it. If the ATP's right to decide on calendar dates and classifications is held to be invalid then what does that do to the tennis calendar? All tournaments may be in any classification they want in any week they want? So, all European clay court events will want the date 2 weeks before the French Open and will call themselves 1000s?? Thus, we’d have a calendar with some weeks having 8 tournaments (and diluted player fields) and bunches of others with zero tournaments. Obviously the avoidance of such a chaotic situation is why we have sports leagues. If a sport league cannot decide upon those types of things the entire sport is in disarray and it is the consumers (fans, sponsors, TV) that suffer. Was the anti-trust law really designed to give us such a result?

Anonymous Anonymous -- 7/14/2008 3:30 PM  


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