Antitrust and Hockey Flashcards
Lecture 6
What is a cartel?
A collective of firms who, by agreement, act as a single supplier to a market.
A combination of separate firms who collusively set prices and control output with the intent of maximizing mutual profits.
What defines a monopoly?
A market situation where one firm markets all the goods or services and can influence price.
The complete control of an economic good for which there is no substitute.
ie. Oilers game tickets. Gov will interfere if they feel there is an unfair advantage.
How does the NHL function as a cartel?
A collective of franchises who, by agreement, act as a single supplier of elite level hockey in North America.
Independent clubs who collectively negotiate TV rights, determine franchise allocation and reallocation, and set the conditions of the NHL season.
ie. Alberta hockey market controlled by Sportsnet, TSN and other channels don’t have rights to stream the games.
What is a monopsony?
A single buyer with monopoly buying power.
A market situation in which the product or service of several sellers is sought by only one buyer.
ie. NHL is a monopsony as they are the only market in North America for high level players. Players are seeking to sell their services.
Is cartel and monopoly behavior legal?
No. Laws in place in both Canada and the USA to regulate such behavior.
What is the Sherman Act?
Antitrust law designed to promote open competition and prevent monopolies that suppress competition.
Established in 1890.
United States antitrust law which prescribes the rule of free competition among those engaged in commerce and consequently prohibits unfair monopolies.
What does Section 1 of Antitrust Law address?
Restraint of Trade: 2 or more entities acting in combination or conspiracy.
Prohibits collusive behaviour between firms.
Trying to break up cartels.
What does Section 2 of Antitrust Law prohibit?
Illegal monopolies that affect interstate commerce and unreasonably restrain trade.
ie. NHL blackouts, salary restrictions/ salary cap, draft.
What is the Clayton Act?
A supplement to the Sherman Act that excludes labor from antitrust scrutiny.
Allows for unions to be created and for activities like picketing and striking.
Non statutory labour exemption: If you negotiate something “illegal” and ;abour agrees, it cannot be fought?
What are similar acts to the Sherman Act?
UK: Monopolies and Restrictive Practices Act (1948), legal sanctions for monopoly industries
Restrictive Trade Practices Act (1956), restricting practice such as sharing markets
Since 1997 in Europe, Treaty of Rome analogous to Sherman Act
What is Baseball’s Antitrust Exemption?
Historically exempt from antitrust law.
Exemplified by Federal Baseball, Toolson v. Yankees, and Curt Flood cases.
What was the first league to be exempt from antitrust law? Why?
MLB & Federal Baseball: Rival league formed against MLB. 81 players left MLB for this league
The monopoly/cartel that is the MLB decided to absorb the teams from the federal league and bought out the teams, getting rid of the league.
All except for the single Baltimore team, whose owner sued the MLB with antitrust laws and won (as leagues were “colluding”).
Amidst gambling scandals, it was eventually ruled that antitrust did not apply to the MLB.
Sued for: Conspiring to monopolize baseball by destroying the Federal League.
Explain Toolson v. Yankees (1952)
The first challenge to the reserve clause which prevented free agency.
Due to the reserve clause in his and every other player’s contract, under which teams reserved rights to a player for a year after the contract expired, he was effectively bound to the Yankees and could not negotiate a new contract with another team.
When his team was dissolved prior to the 1950 season, he was demoted to the minors. He refused to report and instead filed suit, arguing the reserve clause was a restraint of trade and that baseball should not be exempt from antitrust laws.
Explain the Curd Flood antitrust ruling.
Curt Flood, a player for the St. Louis Cardinals, was traded to the Philadelphia Phillies. He was unhappy with the trade, but the reserve clause required him to play for Philadelphia. He argued that the reserve clause was a collusive measure that reduced competition and thus an antitrust violation.
Federal Baseball ruling stood. Was said that the Federal Baseball ruling was wrong but higher levels of government needed to make a decision on this.
He was not happy to be “sold.” He challenged the MLB in their ability to allocate players.
What does the Sports Broadcasting Act of 1961 do?
Exempts MLB, NHL, NBA, and NFL from antitrust law regarding pooling of league broadcast rights.
The reason for blackouts?
Required permission from Congress for pooling broadcast rights.
What was the ruling in Radovich v. National Football League?
Sued the NFL on antitrust law and won, but never played again.
Established that the NFL did not have antitrust immunity like the MLB did.
The plaintiff played in AAFC and was blacklisted from returning to the NFL.
What was the outcome of Denver Rockets v. All-Pro Management, Inc.?
Players were allowed to play without completing all 4 years of NCAA eligibility.
This established that the NBA was exempt from antitrust immunity.
What did the Mackey v. National Football League case address?
The punitive nature of the ‘Rozelle rule’ that affected player movement in that the team which signs a player (who has become a free agent) must compensate the former team. Players rarely moved teams as it it was punitive enough that teams wouldn’t trade players.
Resulted in fewer player trades due to the rule’s penalties.
What did the Oakland Raiders v. National Football League (1984) address?
NFL Raiders moving from Oakland to LA, saying that they had a right to do so. Sued the NFL as the NFL was saying that they had no right. Accused the NFL of being a cartel.
What was the significance of Philadelphia World Hockey Club, Inc. v. Philadelphia Hockey Club, Inc.?
Broke the reserve clause in hockey, allowing players to leave.
World Hockey Association formed. NHL said that their contracts and reserve clause protected their players, WHC said no they should be able to leave.
Said that players were monopolized and it was anticompetitive. This broke the reserve clause in hockey. As it was impossible for rival teams to operate. NHL said that they were protected by the non statutory labour protection but they weren’t.
What was the ruling in San Francisco Seals v. NHL?
The NHL was ruled a single entity despite arguments of joint ventures.
Seals weren’t doing well, so relocation to Vancouver or Buffalo was being considered, but NHL didn’t want Seals to move as they would rather expand not relocate.
Single entity defence- “NHL is a single business entity and we make decisions about where we put our clubs together” yet Seals argued that it was a joint venture and they should have an opinion too. Ruled that NHL was a single entity.
What was the outcome of McCourt v. California Sports, Inc.?
Similar rule to Rozelle rule- awarding compensation to team that loses a player in free agency.
Red Wings signed a new player and NHL said that a specific player (Dale?) needed to go to LA, Dale was good at hockey (third overall pick?) and didn’t want to.
Red Wings and LA agreed to alternate compensation and traded players that were ok with the move. Case was never solved.
What was the NFL’s argument in the Raiders’ relocation case?
Raiders wanted to move to LA.
Used the single entity defense to block the relocation.
Raiders won as the court ruled that teams were distinct business entities.
Section 1 of the Sherman Act.
In a hypothetical case, what would be the NHL’s grounds for blocking a Coyotes’ relocation to the greater toronto area?
Undermines interest in the game in Phoenix and reduces the value of TV contracts in the US.
(Or: NHL wants the move to occur… Leafs attempt to block, claiming violation of territorial rights)
The Coyotes argue for the right to seek a more lucrative market.
