Sports and Anti-Trust Term Paper 15 pages
Sports and Anti-Trust
Is the National Football League’s Requirements to Enter the Draft a Violation of Antitrust Law?
If so why? Why does the NFL think it is not a violation?
Defining the AntiTrusts Legislation
Sherman AntiTrust Legislation
Clayton Antitrust amendment
The Maurice Clarett Case
The NFL’s position,
The effect is could have on the game.
Judge Scheinin’s decision
Sherman Antitrust Act
Basis of Judge Shira Scheinin’s Decision
Other cases from other Professional sports leagues, like the NBA, that are Similar to Maurice Clarett’s Case
Haywood v. National Basketball Association, 401 U.S. 1204 (1971)
Impact that this case has had on the league
Players straight out of High School who have been successful
Players who have not been successful.
Is it worth the risk and is it fair to the kids who leave early
Will an 18-year-old out of High School not be physically tough enough to play in the NFL?
Summary and Conclusion
Antitrust Law and the National Football League
Bid rigging, price fixing, and other antitrust violations have a devastating effect on the American public economy. This illegal activity contributes to inflation, shakes public confidence in the country’s economy, and undermines our system of free enterprise. These crimes can increase the costs of government, boost taxes, and erode the citizens’ trust in their government and business community.
The federal antitrust laws were enacted to preserve our system of a free market based on free competition. They serve as our primary defense, a governor of the engine of business, against unlawful attempts to limit competition. When a business has the ability to limit competition, it has the ability to raise profits exorbitantly, ignore the customer’s needs, or ignore to the traditional market forces. In an anti-competitive marketplace, organizations can raise the purchase prices of products and services, and extort their customers.
It is hard to conceive how these laws apply to the ability, or inability of a person who wants to enter a professional football career, but the recent court case brought by Maurice Clarett against the NFL charged that their rules regarding eligibility to enter the league are conspiratorial against his ability to earn a living. The NFL has placed age requirements on individuals. The want to make sure that a person who applies to for the job of a football player in the NFL will have developed the talent, as well as physical and emotional maturity to be qualified for the game. None the less this recent court action by Judge Shira Scheindin has declared that the NFL is in violation of antitrust legislation because of the qualifications it required of players to enter the game.
According to district Court Judge Shira Scheindin, the National Football League is acting in violation of the antitrust legislation by setting boundaries and limitations as to a person’s age who wishes to enter the NFL. The judge declared that the NFL’s age requirement for a person who wants to enter the NFL draft is a violation of antitrust law. While the case will undoubtedly be appealed, the effects of this decision on the game,
What is being challenged, according to the youth Maurice Clarett, is that the NFL is prohibiting him from earning a living be not allowing him to compete on an equal playing field (no pun intended) with players who are 3 or 10 years his senior. For the NFL, the question of antitrust has not been challenged successfully before this challenge. The age limitations and requirement to for new recruits to enter the draft exist for the purpose of the league to ensure physical and emotional maturity in its players. The game of football is not like basketball, which since 1971 has allowed players to come directly out of high school onto the court. The football game is a physical game which will pound a new play into submission before allowing him to rise to a level of success. Allowing a person on the field who is significantly less mature creates the real and measurable threat to life, liberty, and the pursuit of happiness for that individual.
Earning a living is not the only measure of a person’s success, and some of the veteran football players have a much different definition than does Maurice. Some players on the field would consider the opportunity to level an 18 or 19-year-old with a punishing open field, full contact tackle a measure of their own success. The younger player, if allowed to enter the game, could be at risk long-term disability, not only because of his own lack of preparedness, but also because of other players’ aggressive play.
According to the Columbia Electronic Encyclopedia, (2003) the Sherman Antitrust Act of 1890 was the first measure passed by the U.S. Congress to prohibit trusts, or the collective agreement between businesses entered into for the purpose of limiting competition. Prior to its enactment, various states had passed similar laws, but they were limited to intrastate businesses and could not enforce the legislation on a national scale. The industrial revolution brought about a significant change in the amount of power an individual company or group of companies could amass for themselves. When opposition to the concentration of economic power in large corporations and in combinations of business was brought to the attention of the Congress, the Sherman Act was the result. The act, based on the constitutional power of Congress to regulate interstate commerce, declared as illegal every contract, combination of contracts, (in the form of trust or otherwise), or conspiracy that was organized in order to create restraint of interstate and foreign trade.
The Sherman Act authorized the federal government to institute proceedings against monopolies (trusts) in order to dissolve them, but subsequent challenges in the Supreme Court prevented federal authorities from using the act for a few years. President Theodore Roosevelt’s finally put power behind the act by insisting on enforcing the statute, and as a result, the Sherman Act began to be invoked with some success, in 1904 the Supreme Court upheld the government’s position in its suit for dissolution of the Northern Securities Company. The act was again employed by President Taft in 1911 against the Standard Oil trust and the American Tobacco Company.
The Clayton Antitrust Act, 1914, passed by the U.S. Congress as an amendment to clarify and supplement the Sherman Antitrust Act. Drafted by Henry De Lamar Clayton, the act further prohibited exclusive sales contracts, local price cutting to freeze out competitors, rebates, and interlocking directorates in corporations capitalized at $1 million or more in the same field of business. Labor unions and agricultural cooperatives were excluded from the forbidden combinations in the restraint of trade because the unions were also seen as agents of restraint against monopolistic business tendencies. The act restricted the use of the injunctions against labor to insist on their return to work, and it legalized peaceful strikes, picketing, and boycotts. The Clayton Antitrust Act was the basis for a great many important and much-publicized suits against large corporations, as the government sought to allow free competition to regulate the marketplace rather than individual businesses.
During the next few decades, antitrust legislation was further refined, as businesses evolved more creative ways to create unfair business advantages. The legislation has been used recently to challenge the success of Microsoft in a case which may have been pushing the legislation past the boundaries of what it was designed to prevent, and preserve in the marketplace. Essentially, the legislation has been designed to control monopolistic businesses from limiting competition in the marketplace, and preventing other businesses from competing. The question at issue in the case of the NFL is whether or not the player union’s regulations that new players enter the draft, and that they cannot enter the draft until a certain age is in fact a violation of this legislation.
According the legal statute, and the case work which has been developed over the last half century, a civil plaintiff must establish three elements to prove a violation of the Act.
An agreement to concerted action, such as a combination or conspiracy formed by two or more entities.
That the agreement unreasonably restrained trade or commerce
The restrained trade or commerce is interstate or international.
Under [section] 1 of the Act, a conspiracy “must comprise an agreement, understanding or meeting of the minds between at least two competitors, for the purpose of, or with the effect of, unreasonably restraining trade.” (Krauze and Mulcahy, 2003) The illegal agreement itself constitutes the offense; thus, neither completion of the conspiracy nor any overt acts furthering the conspiracy need be pleaded or proven in a case brought under the Act. Regarding the restraint of trade definition, the agreement or conspiracy must “unreasonably” restrain trade. The Supreme Court has referred to the phrase “restraint of trade” as “a particular economic consequence, which may be produced by quite different sorts of agreements in varying times and circumstances.” (Krauze and Mulcahy, 2003)
Typically, a restraint of trade, or a decrease in competition, occurs as a result of the creation of a monopoly, artificial maintenance of prices, restriction of output, or other interference with the free play of market forces.
The Maurice Clarett Case
Regarding the NFL’s position, they do not believe they are unreasonably restraining trade by insisting on monitoring and controlling the entry of players into the game. They are simply setting guidelines by which all players can have equal access to the game, and all teams within the league can have a fair and equal access to the annual crop of new players. According to NFL’s executive vice president Jeff Pash, “We will move promptly for a stay in the Court of Appeals. We continue to believe that last week’s ruling is legally erroneous and not in the best interests of the NFL, college football, or professional and college players. We are a long way from a final decision.” (nfl.com, online) Pash continued: “We believe today’s ruling is inconsistent in numerous respects with well-established labor and antitrust law… No other player has challenged the eligibility rule. It was supported by the league’s coaches and executives, who say younger players aren’t physically ready for the NFL…. Although the 6-foot, 230-pound Clarett could be an exception… I don’t know that the floodgates are opening,” Pash said. “While the ruling is broad in its language, I think we have to wait and see what the effect is.” (cbssportsline.com, online)
Jeff Reynolds, a writer at Pro-Football Weekly, said the ruling probably would not have an immediate effect on young players around the country. He continued that the game could change considerably if NFL teams started sending scouts to high school games. It was more likely that a greater number of players will leave college early to enter the draft. (cbssportsline.com, online) But these repercussions could be grave for many young athletes as well as the game of football itself. Both high school play and college football programs could forever change as the schools feel the squeeze of NFL recruitment from both sides.
There are currently 1,200 agents registered with the NFLPA, and more than half of them don’t even have a signed player. (utahdailychronicle.com, online) These unemployed agents, and others who are looking to break into the lucrative business of player representation, will have twice as many players to coax into leaving college for the pros. The character and ethics of the players and their agents will be the only restraining force keeping the game from becoming an extended version of college ball. As the nation has seen lately, the character and ethics of the players may also need more time to mature before they are ready for the opportunity of professional ball.
Regarding Maurice Clarett, ethics are a valuable point to discuss when considering his case. Although the court will not weigh these issues as it works toward a final decision, Clarett is entering the draft early because he has been declared ineligible for college play. His own violation of school and league rules created the situation in which he was ineligible during the 2003 season, and Ohio State is hesitating as to the value of fighting to reinstall his eligibility for the 2004 season. So, rather than accept the consequence for his actions, Clarett is making trouble for another group of athletes, for the entire national football league, and possibly for unprepared collegians who will follow him.
Under the current rules, the purpose for three years of college football is to weed out the pretenders and those who will not make the cut into the NFL. If this ruling stands, the task will fall the NFL to sort through the unprepared players, and find the professional quality players. This can be bad for the college game, the pro-game and the players themselves.
College football, much like college basketball, will likely lose young talent before they can display their talent for their college team. The game will no longer have as many world-class juniors and seniors as it enjoys today.
As a result, the quality of play will also slowly deteriorate, and the game will be less exciting. The same thing could happen to the pro-game because the talents of the experienced players will have to take bench time in order for the team to ‘get the most out of its investment’ in the new, younger players. The NFL will be charged with the difficult task of refining talent that has not had the benefit of a number of years playing college ball.
In addition, the pro-game is much faster and more detailed than the college game. Taking the step from high school ball to the professional level will be like asking a person who builds model airplanes to fly a 747. The task is simply out of the preparedness of the applicant. If this ruling stands, rookies could land in the NFL after playing one year of relatively simple college schemes, playing as freshmen. Is this in the best interest of the athlete?
Washington Redskins linebacker LaVar Arrington said Clarett could be in for a rough time when he joins the league. “Because of the way he’s done all these things, some people here see it as disrespectful,” Arrington said. “I’m sure guys are going to break his tail, try to break him in. ” (cbssportsline.com, online)
Definition of Terms:
Sherman Antitrust Act: 1890, first measure passed by the U.S. Congress to prohibit trusts, contracts or agreements which limited competition, or constructed barriers to other companies to enter a business pursuit. It was named for Senator John Sherman. Prior to its enactment, various states had passed similar laws, but they were limited to intrastate businesses. (Columbia Electronic Encyclopedia, 2003)
Clayton Antitrust Act: 1914, passed by the U.S. Congress as an amendment to clarify and supplement the Sherman Antitrust Act of 1890. Drafted by Henry De Lamar Clayton, the act prohibited exclusive sales contracts, local price cutting to freeze out competitors, rebates, interlocking directorates in corporations capitalized at $1 million or more in the same field of business. (Columbia Electronic Encyclopedia, 2003)
Review of the Legal basis of Scheindin decision.
The Judge was quoted as supporting her decision based on some of the following reasons. Scheinin ruled that the NFL rule barring eligibility to Clarett and other young players from the NFL draft violates antitrust law. “Contrary to the NFL’s argument, most of the rules governing this case were established decades ago… Indeed, the legal framework for that decision was laid in a long line of Supreme Court precedent,” she added. (nfl.com, online) The judge said that the NFL’s concern younger players might over-train or resort to steroid use to better qualify for the draft “makes no sense… At worst, the NFL will be forced to tolerate the handful of younger players who are selected in the 2004 draft,” she said. “What would amount to a one-year suspension of the league’s eligibility rule scarcely imposes any great hardship on the NFL or its teams.” (nfl.com, online) “One can scarcely think of a more blatantly anti-competitive policy than one that excludes certain competitors from the market altogether,” Scheinin continued. (dailyutahchronicle.com, online)
According to a review of the case at law.com, the judge distinguished this case from other prominent rulings in sports law which upheld the distinction between antitrust legislation and professional exemptions from the same, including Wood v. National Basketball Ass’n, 809 F.2d 954 (1987).
In that case, the 2nd Circuit ruled that a basketball player, after being drafted by the National Basketball Association could not challenge the league’s collective bargaining agreement on antitrust grounds. The court held that the non-statutory labor exemption barred the player’s claim. The player was arguing that his contract was in violation of the antitrust agreement.
However, in the case of Clarett, Scheinin said that the rule is not covered by the nonstatutory labor exemption. She insisted that the exemption applies to only players “who are complete strangers to the bargaining relationship.” Exactly what she meant by this is unclear, but she went on to say that the NFL’s purported justifications for the rule, that a player must be 3 years out of high school before they would be allowed to enter the NFL, needed to be pro-competitive, rather than an arbitrary rule which was anti-competitive.
The NFL’s concern for the health of younger players is laudable, but it has nothing to do with promoting competition,” she wrote. “Age is obviously a poor proxy for NFL readiness, as is a restriction based solely on height or weight.” (law.com, online)
The judge noted that Maurice Clarett stands 6 feet tall and 230 pounds, and is bigger than all-time football greats Walter Payton, Barry Sanders and Emmett Smith. She ruled that rather than being automatically excluded, players of his size and caliber could submit to medical tests to determine maturity and preparedness for the league.
According to Northwestern University athletic director Mark Murphy, who holds a law degree from Georgetown, and played in two Super Bowls in his nine-year career as a safety for the Washington Redskins “the NFL will have a difficult time winning the Clarett case. Spencer Haywood vs. The NBA 30 years ago, in which the court ruled the NBA could not stop someone from earning a living playing his sport, in my view, set a precedent. If it came to that, it would be terrible. We’ve got a rule that works for kids, colleges and the NFL.” Murphy has worked as an assistant executive director of the NFL Players Association, a lawyer in the Justice Department and athletic director at Colgate. He continued “I think it would be difficult of the NFL to win, but I don’t want to see the NFL become the NBA, or Major League Baseball, with kids going from high school to the pros.” (Washington post, 2003)
Professional sports long and difficult waltz with Antitrust Legislation
For many years of recent professional sport history, the players, clubs, players unions and potential players who are entering into the professional arena have been trying to apply the antitrust legislation in order to gain a competitive edge. Baseball has been challenged, but the challenges have not taken down the protection which the league enjoys. Possibly because the baseball clubs have developed a farm system which grows their talent they cannot be said to be restricting competition. They have a place for the Maurice Clarett’s of the world to learn to play, and earn their way into the big show. More recently the National Basketball Association has allowed talented players to enter the sport directly out of high school.
Both the NFL and the NBA had similar guidelines which are applied to players entering their draft. The NBA’s rules, before the Haywood case, were that a player needed to wait 4 years out of high school before entering the draft. The NFL’s guidelines were the same, with the length of time being 3 years.
One of the first landmark cases which began to turn the tide against the time and age requirements of national professional sports clubs was Haywood vs. The National Basketball Association. When the final gavel sounded, the U.S. Supreme Court ruled that the NBA does not enjoy the exemption from antitrust laws. Prior to losing this case in 1971, the NBA required graduating high school players to wait four years before they were considered eligible to play in its league. The rule did not require a player to attend college, nor did it place an age restriction on players entering the league, which may have been one of its weaknesses.
The case was brought by Spencer Haywood, who did not go to college and than was drafted by the Seattle SuperSonics after less than four years from his high school graduation. Haywood contended the rule violated the Sherman Antitrust Act, and won, forever changing the eligibility requirement for NBA players. (sportsbusinessjournal.com, online)
Recently, players such as Kobe Bryant, Lebron James, and Shawn Kemp skipped the collegiate stage in their career, and went into the professional league early. While they have been able to rise to the level of play in the professional court, one must wonder if they were emotionally ready for the challenge. Kobe Bryant is embroiled in a rape case, and Kemp is paralyzed after a motorcycle accident. Unfortunately, however, the legal system is not concerned with the character of a player, or how their character may, or may not hold up under the pressure, and increased opportunity to earn huge sums of money in the professional sports leagues.
Regarding the Haywood example, Haywood was a gifted athlete. But, says Spencer Haywood, “and I squandered everything.” (Ostler, 1988) and he had a great deal to squander, in money and talent. After Haywood led the 1968 U.S. basketball team to an Olympic gold medal, and he went on to star in the NBA, he contributed to four all-star years as a Seattle SuperSonic. While his maturity on the court was ready to play basketball, his maturity off the court was not ready for the world of money, success, and the opportunities which came his way. He was eventually consumed by his descent into a cocaine hell. After his tour of duty with the SuperSonic, he was traded to the Los Angeles Lakers in 1979, and soon thereafter became a drug casualty. As his bottle rocket career approached its apes, things came to a head after the third game of the 1980 play-off finals. Haywood got into a locker-room shouting match with teammates Brad Holland and Jim Chones, and he was suspended indefinitely by coach Paul Westhead. He never played for the Lakers again. (Ostler, 1988)
Haywood subsequently retired from pro-ball in 1983. Intent on kicking his cocaine habit, he entered rehabilitation the next year, and then returned to Detroit to rebuild his life. Haywood, 39, is now the president of a company that renovates inner-city housing for rental to low-income families. He has become a respected community leader, devoting much of his time to lecturing on the perils of drugs.
While the NBA has allowed players to enter the draft earlier and earlier if their talent level has been demonstrated in high school, or early college, the NFL has been allowed to continue to use its 3-year rule. The league has been able to hold onto its antitrust exemption through a specific argument, and broadly interpreted case law.
For example, in Brown v. Pro-Football, Inc. The Court held that employers could conspire and agree to take actions to impose controls on a labor market, if those actions “grew out of” and were “directly related to” a multiemployer bargaining process, and which did not offend the federal labor laws that sanction and regulate the process. As long as their practices did not affect terms of employment subject to compulsory bargaining, and concerned only parties to the collective bargaining relationship, the antitrust legislation exemption could be applied to the NFL – player relationships. Because all major professional teams have joined with other league clubs to bargain in multiemployer units with unions representing the athletes that they employ, as long as a multiemployer bargaining relationship exists, league-imposed restraints on player labor markets easily met the Court’s other conditions. The Brown holding, therefore, effectively enabled leagues in every sport to be as free of antitrust constraints in order to control player mobility and salaries as Major League Baseball has been under its special, long standing antitrust exemption. (Harper, 1997)
Cases can be made for the rights of the individual to be able to apply for what every position he chooses, without legal barriers to cross. However, in any other career path, the employer has the right to reject unqualified applicants, or insist that the applicant receive additional training or skills before being considered for hire. The purpose of college is to prepare young minds with the skills and abilities for professional careers, in business, arts, and sports. We do not consider it a violation of antitrust that an engineering firm won’t hire a first year science student, or a hospital won’t consider hiring a pre-med collegian.
It seems that of those who have challenged the eligibility requirements for professional sports, many would have been better served if they had waited, and matured before entering the big show. As this case makes its way through the courts, one can hope that the legal arguments make room for the reasonable, rather than allowing the demand of unprepared individuals to hurt the sport.
Antitrust. (2003) The Columbia Electronic Encyclopedia, Sixth Edition, Columbia University Press.
Brown, N, and Burns, J. (2000) Antitrust Violations.; American Criminal Law Review, Vol. 37,
Connolly, R. (1998, January). Detect and Prevent Antitrust Violations
Public Management, Vol. 80.
Do Not Pity This ‘Victim’ 2003, September 8) The Washington Times.
Freedman, W. (1987) Professional Sports and Antitrust New York: Quorum Books.
Harper, M. (1997) Multiemployer Bargaining, Antitrust Law, and Team Sports: The Contingent Choice of a Broad Exemption
William and Mary Law Review, Vol. 38.
Judge denies NFL’s requiest in the Clarett Case.(2004) NFL Wire Reports. Nfl.com Accessed 5 March 2003. Available at http://www.nfl.com/news/story/7081207.
Judge: NFL Draft rule violates antitrust laws; Clarett eligible (2004, Feb 5) CBS Sportsline Wire Reports. Sportsline.com Accessed 5 March 2004. Available from: http://cbs.sportsline.com/nfl/story/7065027
Krauze, R. And Mulcahy, J. (2003) Antitrust Violations. American Criminal Law Review, Vol. 40,
Ouelette, M. (2004, Feb 10) Nice call, Judge: Way to ruin football. The daily utah chronicle Accessed 5 March 2004. Available at http://www.dailyutahchronicle.com/news/2004/02/10/Sports/Nice-Call.Judge.Way.To.Ruin.Football-602815.shtml.
Ostler, Scott. (1988, June 13) Seduced and betrayed by cocaine, a basketball star rebuilds his life and earns the ring of a champion. (Spencer Haywood) People Weekly;
Perrotta, T. (2004, Feb 6) NFL Draft Rule Is Found to Violate Antitrust Laws http://www.nylj.com” New York Law Journal Law.com. Accessed 5 March 2004. Available at http://www.law.com/jsp/article.jsp?id=1075219902839
Q&A (2003, Sept 28) The Washington Post
Sports Law (2004) Sports-related laws and legal cases through the years. accessed 5 March 2004. Available at http://www.sportsbusinessjournal.com/index.cfm?fuseaction=page.feature&featureId=247
See In re Baby Food Antitrust Litig., 166 F.3d 112, 117 (3d Cir. 1999) (describing the existence of an agreement as the “hallmark” of a [section] 1 claim and finding no violation where there was insufficient evidence of a conspiracy)
Arizona v. Maricopa County Med. Soc’y, 457 U.S. 332, 342-43 (1982) (explaining that under the literal language of the Act, all agreements in restraint of trade would be unlawful and concluding that Congress intended to analyze and rule as unlawful only those agreements that are unreasonable.
UNITED STATES DEPARTMENT OF JUSTICE, DEPARTMENT OF JUSTICE ANTITRUST MANUAL [section] 7-6.100 (Supp. 2000-1)
See Nynex Corp. v. Discon, Inc., 525 U.S. 128, 133 (1998) (noting that only agreements that unreasonably restrain trade are prohibited by the Act).
Brown v. Pro-Football, Inc., 116 S. Ct. 2116, 2127 (1996)
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