Part 2: The Return of Adrian the Canadian

Yesterday, Adrian reasserted himself on the blog with a clear proposal to reduce diving in soccer.  Today, he shows off his versatility with a response to my recent thoughts on fairness in U.S. and European professional sports leagues (written in relation to my brother Conor’s defense of talent concentration in European soccer). For a taste of the historical, economic, legal, and political, set aside 10 minutes and read on:

How long has it been? Too long, I think.  But Tyler’s recent post has compelled me to withdraw from my self-imposed hibernation and away from the stultifying process of studying for the Ontario bar exam. In short, I disagree with the capitalist/socialist, American Sports/European Sports dichotomy or, rather, I think it abstracts away from the real issue – that cartels make a heck of a lot more money than entities that exist in competition with one another. In short, the NFL and MLB are not staunch defenders of equality values; Dan Snyder and Hank Steinbrenner are not driving the train to the Finland Station.

The standard argument goes something like this: isn’t it ironic that America, land of unbridled capitalism, home of animal spirits on free and open fields, has “socialist” sports leagues that redistribute resources from winners to losers while red, socialist, pinko Europe has a free and open market for sports talent? It’s a cute argument and one that elicits a nice “hmmm…” from readers and there are certainly large elements of truth to it. American sports are, at least nominally, more redistributive, and there is a larger perception that American sports are organized more “fairly” than European sports from a competitive standpoint. Still, it’s far from clear that European sports are more aristocratic than American sports if we look at the highest levels and, more importantly, I think this distracts us from a deeper, more thorough comparison of why European sports and American sports are organized so differently.

Barcelona’s greatness is undeniable, but it’s not a greatness that has translated into a dynasty at the highest levels of competition. While Barca has been the dominant team in La Liga, it’s only won three of the last ten Champions League titles despite making each of the last ten tournaments. This means that the Champions League may not even be as “aristocratic” as the NBA:  eight different teams have won the Champions League while only six have won the NBA championship in the same span. And, unlike La Liga but like the NBA, the Champions League represents a competition between the best teams in Europe, not in a given geographic area.

While there is some turnover in the Champions League year to year, because of a lack of parity at the domestic level the composition of the Champions League is relatively static. Thus, Champions League sides benefit from the illusion of aristocracy. A team like Barca brings to the Champions League its wins over inferior domestic Spanish competition, even if they don’t exactly ransack the other elite European clubs. It’s worth noting that the elite Champions league teams, like elite teams in American pro-sports, follow different models of talent development. Barca uses mostly internal development, Chelsea buys more players. At this level, it’s not an economic horserace, but a competition between different player development models. I think it’s fair to posit that, so long as there’s sufficient talent in the area the league covers, any elite league of appropriate size will have relative parity. Certainly, any such league will not be as dynastic as the top European domestic club competitions. Still, Conor is right that aristocratic clubs, be they Barca, the Yankees, or the Heat, do have a power to elevate the game in a way the entirely “fair” leagues don’t. The arbitrary results of the last few year’s NHL playoffs certainly haven’t shown us better play than the epic Cup runs of the 1980s Edmonton Oilers.

The point of this brief, cursory analysis is not to say that European leagues aren’t aristocratic (Barca is still pretty dominant) or that American leagues are (sure, the Miami Heat or the Yankees are pretty aristocratic, but the L.A. Kings just won a Stanley Cup), but that redistributive policies like revenue sharing, the draft, and salary caps aren’t about parity or fairness, they’re about guaranteeing ownership money. By limiting player salaries and sharing revenue amongst the different league franchises, American professional sports leagues are able to ensure constant returns for ownership. Like the robber barons of the 1920s, American sports owners are old-style capitalists who use their monopoly position to transfer value from labor (that’s the players) to capital (the owners!). Indeed, much of the history of American professional sports involves ownership trying to find ways around anti-monopoly laws.

Monopolies are illegal for good reason. They restrict the supply of a product and result in higher prices for consumers, something that those of us who don’t own major companies don’t like. Yet, in the U.S., the antitrust regulations apply to sports leagues in a very limited way. For baseball this dates back to 1922 when the U.S. Supreme Court in Federal Baseball Club v. National League found that the Sherman Antitrust Act did not apply to the MLB.* Subsequent legal decisions would cast doubt on this conclusion finding that federal antitrust laws applied to both boxing and football. However, sports leagues would soon use their lobbying power to gain a major antitrust exemption, paving the way for our modern North American sports leagues. In 1961 Congress signed the Sports Broadcasting Act in response to a court decision rejecting the NFL’s attempt to pool broadcasting rights and sell them as a single entity.** The act permits the NFL and other professional sports leagues to band together, sell broadcasting rights, and share revenues, a major exemption to antitrust laws as we know them. This is what gives the NFL and other sports leagues multi-billion dollar national contracts, local television blackouts of certain home games, and the exclusive rights the NFL network has over some games.*** It also allows the NFL and other leagues to act as a bit of  a bully, using television contracts as a way to box out upstart leagues and maintain its position of prominence.  Another, perhaps surprising, place to find a major antitrust exemption granted to professional sports is in the collective bargaining arrangement.

Unionization is, I think rightly, regarded as a major accomplishment for professional athletes. Free agency is perhaps the single biggest triumph of unionization. Prior to free agency, using their antitrust exemption, baseball’s owners had used the “reserve clause” to limit player salaries. Although the MBPA lost when challenging the reserve clause at the Supreme Court, they won free agency through subsequent contractual negotiations as part of the collective bargaining process.****

Collective bargaining is the great benefit of unionization. Unionization allows employees to come together as a single entity and collectively bargain with management. In fact, collective bargaining is afforded another antitrust exemption under U.S. law – employees and owners who would otherwise be competing with one another can band together and negotiate as two parties. Thus, collective bargaining not only allows players to coordinate to demand higher salaries and owners to work together to distribute their collective pot (which, remember, they’ve made bigger with their antitrust exemption for their television rights).

Collective bargaining benefits the players in some ways – it guarantees them health care, protects veterans, distributes salaries, and prevents abusive practices from the owners. It also harms rookies by lowering salaries, forcing them into the draft, and, ultimately, brings down salaries for top players. It also doesn’t fully remedy the power imbalance between players and ownership. A single season means little to the owners and a tremendous fraction of lifetime income to the players, meaning that almost all labor disputes end in the owners favor. And, with collusive behavior made easy and legal through the Sports Broadcasting Act, players have few outside alternatives. Indeed, in the absence of collective bargaining, and in the absence of collusive behavior from the owners there is a very good chance that players would get a larger portion of the pot than they do now.

In short, the redistributive policies of modern American sports don’t arise out of a desire to improve fairness or parity; they’re the product of two antitrust exemptions (in baseball’s case, a blanket exemption) that allow league owners to legally engage in collusive business practices. Redistribution doesn’t come from socialist reasoning – that balancing competitiveness represents a fairer outcome – but from a capitalistic one – if we bind together, we can make more money. Now, the obvious question is: why haven’t European leagues done this?

Well, at the domestic league level this is a terrible idea. Spreading the wealth among all domestic teams would hurt the competitiveness of the top teams in the supra-national competitions. Barca and Real would be less able to compete for players and would perform to a lower standard in competitions like the Champions League (though even La Liga does split TV revenues among the teams, it’s just that Barca and Real get most of them). This would be bad for La Liga as a whole as their chief money makers, Barca and Real, would no longer be able to do what they need to make money, win games.

What is noteworthy is that, every few years, the top clubs in Europe agitate for a European Football Super League, an NFL of club soccer if you will. Why? Such a league would be more lucrative than the current arrangement. Elite club teams would play each other weekly and the revenues from such games would be entirely controlled by the elite cartel group of teams that runs the league. International broadcasting revenues would be massive. Of course, such a league would likely necessitate revenue sharing among the teams (especially the tv contracts) and, probably, a draft or some sort of exclusive rights system. If revenue was sufficiently large that players wouldn’t be able to garner higher salaries playing in other leagues, a salary cap wouldn’t be far behind. The logistics of such a league would be difficult and I have no idea if there would be European antitrust implications (I’m sure there would be), but it’s certain that such a league wouldn’t come from some sort of socialist impulse. No, it would come from the exact same place that American sports’ socialism comes from; the cold, capitalist desire to band together, restrict supply, and make a heck of a lot more money.

American sports leagues have reached their ultra-profitable ascendency through shrewd manipulation of antitrust laws while European teams have had far more difficulty organizing together in order to maximize their profits. This, I think, is the real insight. It’s not that American sports leagues are more socialistic, they’re not, they’re just much, much better at capitalism.

*Why? In order for the Feds to make a law, that law must be justified under the Constitution. Antitrust laws, like the current healthcare law, are justified under the Commerce Clause which permits the federal government to regulate anything pertaining to interstate commerce. In 1922, the Court lead by Justice Taft found that exhibitions of baseball were primarily local in character.

** Congress can write exemptions to the antitrust laws because, well, it’s Congress and it made the antitrust rules to begin with!

*** The flipside is that the NCAA, unlike the pro leagues, doesn’t get the benefit of this law. This is what gives us the Big Ten network and the Pac-12 network and the SEC’s game of the week on CBS. But don’t worry, the NCAA has found other ways to subvert the antitrust laws (see. The BCS)

**** The case is Flood v. Kuhn and it’s highly controversial.

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