Sports Law Blog
All things legal relating
to the sports world...
Wednesday, July 23, 2008
Where's the Harm to the Consumer?

This week the ATP Tour is in court defending its recently-adopted scheduling format against Hamburg. A jury, who reportedly appears to possess very little knowledge of professional tennis, will soon determine whether the anticompetitive effects of the ATP's scheduling changes for 2009 outweigh its procompetitive effects. I have maintained the position that it is pretty much a given that the decisions of sport governing bodies, such as the ATP, PGA and LPGA, regarding scheduling of events, format of play and player ranking systems are necessarily going to impact third parties (e.g. tournaments like Hamburg that are not selected as one of the "elite tournaments"). Should these governing bodies be required to defend the reasonableness of their decisions in court each time some third party claims to be disadvantaged by one of their decisions? Even if the ATP wins this case, they had to spend gobs of time and resources proving that the scheduling change was reasonable and they will be subject to suit by the next disgruntled third party challenging a different rule or decision.

On the surface, the ATP-Hamburg case looks like a classic antitrust problem breaking every rule in the antitrust book -- Simply stated, you have producers of a product (tennis players) agreeing with certain distributors of the product (the tournament organizers) to place various geographic and supply restrictions on the production and distribution of that product. But when you go beyond the surface, the pertinent question for the jury in this case, as in any antitrust lawsuit, is not whether Hamburg has been harmed but whether the consumer has been harmed. Typically in other industries, these types of arrangements drive the price up and the quality down resulting in obvious harm to the consumer. But the ATP is not selling widgets. While I have no idea how the ATP's scheduling changes affect the price of tennis for the consumer, I can say fairly confidently that the quality of the tennis product is much better if the top players are playing against each other in a consolidated number of tournaments each year.

Bloomberg News editor John Helyar, the renowned author of The Lords of the Realm: The Real History of Baseball and co-author of Barbarians at the Gate, wrote an excellent column today discussing many of the problems currently confronting the sport of tennis (Tiger Woods's Knee Ends ATP's Federer-Nadal Dream). Helyar mentions the Hamburg suit and pinpoints what I believe to be a major hurdle for Hamburg, and that is demonstrating how the ATP's scheduling changes actually harm the consumer. Indeed, if anything they benefit the consumer:
The past two weeks make a good case study in the ATP's chronic problem: too many tournaments -- eight of them in seven countries in two weeks -- with too few stars. Casual fans can't make sense of it and can't sustain interest in it. Too much of a geographical challenge; too much of a "Where's Waldo'' aspect to it.
Moreover, all these scattered, simultaneous tournaments dilute the game's thin supply of stars and diffuse the sport's focus. Tennis needs more of its stars in the same tournaments -- hell, on the same continent would help.
The Rogers Cup gets the top players because it's one of nine ATP "Masters Series'' tournaments. These carry added weight in the ATP points system, which is used to determine which eight players make the rich ($4.45 million) season-ending Tennis Masters Cup. The ATP changes would build on that concept. The tour would mandate that top players compete in all the top-tier events, to be called the Masters 1000s. It would also create a more compelling second tier of tournaments, called Masters 500s and require that players compete in four of the 11 of them. So instead of players scattering to tournaments all over Europe following Wimbledon, more of them would be aggregated in one Masters 500 tournament in Hamburg. Suffice it to say, however, Hamburg is not honored.
If Hamburg is right in this case, it threatens the ATP's existence and could in fact ultimately destroy it. Is that good for tennis? And is that good for the consumer?


The consumer welfare issue can be tricky. While in one manner of speaking Rick is correct - e.g., consumers of tennis benefit from the highest quality product - in another sense the ATP restrictions can be said to harm consumer welfare. A fan in a city which would host a tournament in a totally free market may well be better off with the opportunity to attend a local tennis tournament, albeit it of possibly a lesser quality, than being forced to watch higher quality tennis on TV.

Thus, the legality of the arrangement should - under U.S. law, at least - be adjudged by the Rule of Reason. If the restriction in the number of tournaments is reasonably necessary to preserve the quality of the product, then so be it. If it represents an artificial reduction in quantity, however, with no direct quality benefits, then it is improper.

Anonymous Anonymous -- 7/23/2008 8:41 AM  


I can't disagree with what you are saying. But I disagree with you that the geographic market would be defined so narrowly to be a city that would host a tournament. It's clearly an international market, and the harm to consumers should be addressed on a global level (and I think your comment tends to suggest that maybe there is none).

Blogger Rick Karcher -- 7/23/2008 9:02 AM  

The market will regulate ATP organization, if they are that bad, tournaments will loose audience and ATP will change the tactics.

Anonymous noiblau -- 7/24/2008 3:50 AM  

good blog
I like!!

Anonymous événement poker -- 7/25/2008 5:14 AM  

Post a Comment