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Welcome to Sports Law

Last Time. Piazza v. Major League Baseball, p 160;?Rule" and ?result" stare decisis, p 163;Court opts for ?result?" baseball's reserve system is not covered by the antitrust laws; ?Markets" also important; ?giving exhibitions;"?sellers of services;"?ownership of teams;"Other courts agreed and

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Welcome to Sports Law

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    1. Welcome to Sports Law

    2. Last Time Piazza v. Major League Baseball, p 160; “Rule” and “result” stare decisis, p 163; Court opts for “result—” baseball’s reserve system is not covered by the antitrust laws; “Markets” also important; “giving exhibitions;” “sellers of services;” “ownership of teams;” Other courts agreed and disagreed;

    3. Last Time, Curt Flood Act applies to “players” only; And MLB players only—not Minor Leagues; After Flood Act, reserve rule subject to antitrust, by statute; Balance of baseball MAY be subject to antitrust under Piazza/Tirendi

    4. Last Time, Chapter Three--Antitrust to Labor Law Sherman Act §1 covers groups/conspiracy; Sherman Act §2 covers single actors; Both require “direct” and “antitrust” injury; Brown v. Pro Football, Inc., p 179; boycotts of player services do constitute direct injury for antitrust purposes;

    5. Brown v. Pro Football, p 179 Sports cases differ from most antitrust; Antitrust usually filed by buyers trying to purchase goods at competitive prices; because of lack of sellers (generally §2) or because of a conspiracy by sellers (§1); Sports cases--monopolists are the buyers--the owners who are purchasing services;

    6. Brown v. Pro Football, p 179 P 180--wage-fixing schemes are price-fixing within antitrust laws P 180 “a service provider is injured ... when buyers of those services artificially deflate the price of services through cooperative anticompetitive conduct.”

    7. Per Se Rule of Reason Per Se Facts are so obviously more anticompetitive than procompetitive that showing facts is all that is needed; Per Se analysis is simply an evidentiary substitute Rule of Reason (Most Cases) A Balancing Test Does Anticompetitive impact of the practice outweigh the Procompetitive effect of the same practice We will fill more out more of this analysis later

    8. What’s the Point While there is a great deal of discussion in cases about Per Se and Rule of Reason, both tests are trying to get to the exact same result. When in doubt, court—and YOU—should use Rule of Reason Let’s Look at some cases

    9. Smith v. Pro Football, p 186—The Rookie Draft (James McCoy Smith) Yazoo Smith drafted by Washington Paid $22,000 plus $18,000 bonus Career-ending injury; Per Se or Rule of Reason Why?

    10. Smith v. Pro Football, p 186 Draft enforced through “no tampering”rule –bottom p 186; P’s here allege group boycott; Where group of competitors agree to boycott another competitor—tends to destroy competition usually per se; If per se, no further evidence;

    11. Smith v. Pro Football, p 186 PP 187-188; Just because not per se does not end inquiry; Rule of Reason is fact-intensive inquiry; In fact, it makes the inquiry more fact intensive;

    12. Antitrust Under Rule of Reason Plaintiff Must Prove: Adverse Impact on Competition in Relevant Market What is “Relevant Market” in Smith’s case? What does the NFL say is the “Relevant Market?” What difference does it make which one we use? Why?

    13. What’s the Point Look at the Balancing Test, p. 188 Anticompetitive “evils” Procompetitive virtues Does this court allow the NFL’s “Procompetitive virtues” to offset the Player’s “Anticompetitive evils?” Why or why not?

    14. “Relevant Markets” "Relevant market”--the "smallest market for which elasticity of demand and supply are sufficiently low that a firm with 100% of that market could profitably reduce output and increase its price substantially."

    15. Relevant Markets, II P 189: Draft requires seller of service to deal with ONLY one buyer; Market is the one for seller's of football services; Does Player Draft substantially impede competition in selling football services market?

    16. Relevant Markets, III Anticompetitive aspects? Seller of services has no meaningful competitive market; League agrees that the practice is anticompetitive; Pro-competitive effect is "competitive balance" on the playing field;

    17. Relevant Markets, III P 189--League says market is purchasers of the entertainment product of professional football; How does this touch Smith? Nat. Soc. Professional Engineers, p 189

    18. Nat. Soc. Professional Engineers, p 189 Society banned price in competitive bids; Ban discriminates v. underbidding; Favors "clubiness" of the profession; Procompetitive allegation--public interest; Court says, p. 183 frontal assault on Act;

    19. Professional Engineers, II Court says, p 189-190--to balance under Rule of Reason--anticompetitive and pro-competitive aspects of the restraint must touch on the same aspect of the case--or the same relevant market;

    20. The Dissent If Football is a Natural Monopoly, then …. Dissent then is looking at the procompetitive nature of the competition generally

    21. Questions, p 197 et seq. NO Not entirely—just irrelevant here; Isn’t any player restraint anticompetitive?

    22. Maurice Clarett Case, p 200 et seq. Apply the prior rules and answers to the facts of Maurice Clarett’s case; NFL Rules bar drafting until 3 years out of high school; Is this an antitrust violation? Why or why not?

    23. Clarett, II—S.J. for Clarett; Per Se--p 202, “quick look” shows rule excluding players is anticompetitive; League Argues; If players come in too early, could get injured and ruin career; Less than 3 years out of H.S.—not emotionally ready;

    24. Clarett, III If players come in too early, could get injured and ruin career Wrong “market;” This works if market is NFL team ownership; Less than 3 years out of H.S.—not emotionally ready; Lesser restrictive alternative—can test players;

    25. What’s the Point If a “Draft” is virtually ALWAYS viewed as being anti-competitive, How do you account for the now-STAGGERING amounts of money some draft picks regularly receive?

    26. What’s the Point, II What other options does the Player have? OR What will Michael Crabtree be doing at this time next year?

    27. Context: Rookie Salary Caps Cap is absolute limit on the amount a team can spend on rookies; Clearly anti-competitive; Market: Persons eligible to sell their services to the League for the first time; O.k. because negotiated; Look only at Antitrust aspects

    28. Rookie Salary Caps, II Cap good for Rookie free agents--more of whom are likely to get signed because they will play for less; This is actually pro-competitive Cap bad for second round draft choices—won’t get as much;

    29. Brown v. Pro Football II, p 204 This is the same case as earlier; Does a “developmental squad” promote “competitive equality?” For whom? What does court do with this argument; What “markets” are at work? Do NOT pay attention to notes yet—on Ultimate Result of this case.

    30. Mackey v. NFL (I), p 207 Rozelle Rule Bound for two years at 10% DECREASE Then became free agent 1963-1974: How many players played out option? 176 How many players were able to sign with new teams? 24

    31. Mackey v. NFL II Per Se: Does court review the case under Per Se Illegality Rules? Why or why not?

    32. Mackey v. NFL III Under Rule of Reason what questions need be asked? Is the restraint anticompetitive? Not asked by court, but implicit; Without this Q, won’t get to next; Is the restraint justified by legitimate business interests? Is the restraint more restrictive than necessary?

    33. Mackey v. NFL IV What Legitimate Business Interests are offered? How does court respond to each of them? Why?

    34. Mackey v. NFL, V Business Interests I: Without Rule, star players would flock to cities having certain factors; Court found as a fact that this did not take place

    35. Mackey v. NFL, VI Business Interests II: Rozelle Rule protects player development costs; Court found this does not differ from any other business; You can leave your firm after 3 years as associate;

    36. Mackey v. NFL, VII Business Interests, III: Teams need to work together: Variation on “competition” argument; Player movement hurts; Court does not Decide; Even if true, the Rozelle Rule is more intrusive than necessary; First Time court does not completely reject competitive balance;

    37. Notes Following Mackey Even after, draft remained virtually the same; Union/league negotiated it that way; WHY? Players understood competitive balance issue; Without balance, no economic stability/no fan appeal/no television;

    38. McNeil v. NFL, p 211 Plan B—p 211; Teams can protect 37 players Protected players whose contract expires can go to new team—but old team gets to match new offer; If player leaves, old team gets compensation; What does this offer players?

    39. McNeil v. NFL, II Jury Findings; Plan B anticompetitive; Plan B made league more competitive; But restrictions more restrictive than necessary to reach competitive balance;

    40. McNeil v. NFL, III Before Appeal, case settled; How would it have been resolved?

    41. Notes P. 212—players win; 1993 Settlement; Most players unrestricted after 5 years; Team can designate one “franchise” player; Allows team to match offers or pay player 120% of the prior year’s salary;

    42. Notes, II 1993 Settlement, Rookie draft limited to 7 rounds; Salary cap—see economics pp 185-86; Why do players do this?

    43. What’s the Point All the football cases are Section 1 cases—”Combinations” in restraint of trade; The league is its teams; Would owners have any better luck if they were a single entity under Section 2?

    44. Iain Fraser P. 214 By whom are players employed? What is the reason for doing this? What “market” did the owners claim? What “market” did players want? What lesson? Could NFL, MLB, or NBA, at this stage of their development, ever become a “single entity?”

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