I have been thinking a lot about the upcoming NFL lockout. As more and more time passes it seems inevitable that it will happen. This isn’t the first time union and the teams have gotten into a fight. In 1987 the agreement got so bad that the players went on strike forcing the NFL to hire replacement players. The world does not need another “scab season” and certainly does not need another Keanu Reeves movie about a scab season.
The negotiations between the NFLPA and the NFL are so interesting. I plan on writing several pieces on it. Ironically, I have chosen to start my exploration of this topic on the somewhat dry area of antitrust implications. I realize that it is somewhat more boring than other topics, but it seemed to be a logical standing point because an antitrust lawsuit is the best weapon available to the players.
A few months back you may have heard that the several teams voted to decertify the players union. The implications of the players’ choice to decertify are somewhat complicated, but in a nutshell the players are positioning themselves to be able to bring antitrust law suit against the NFL. Labor law does not allow employees to sue their employers for antitrust violations if the employer and a union have agreed upon a collective bargaining agreement. Thus in order to sue the NFL, the players would have to decertify the union and wait for the current collective bargaining agreement to expire.
Even after decertification the players do not have a slam dunk case against the teams. Antitrust law only makes agreements between entities that unreasonably restrain trade illegal. Most of the agreements between the 32 teams are benign or necessary in order for the NFL to create a recognizable product. In order to succeed in an antitrust suit the players will have to show that the 32 NFL teams (1) are separate entities, (2) meant to restrain trade, (3) did in fact restrain trade, and (4) the pro-competitive affects of teams’ agreements do not outweigh the negative consequences of restraining trade. The Supreme Court has recently held that the 32 teams are separate entities. Accordingly, the real question is whether the agreements between the teams restrict trade and whether such a restriction is permissible.
There are a host of different agreements that the players could challenge. The best course of action is to challenge the current free agency system. Under the current system a team gets the exclusive rights to a player for the first 3 years, after which the players become restricted free agents for one year. Considering the average NFL lasts only 3.5 seasons most players never get to become unrestricted free agents. Thus the Houston Texans can continue paying Arian Foster league minimum for at least the first 3 years of his contract. That’s 24 million less than what Stephen Jackson will make over the same time period. Thus, the players argument that free agency restricts trade is pretty straight forward. Free agency restricts teams from competing for younger players services. The NFL’s only hope is to show that their restriction on trade is reasonable. Unfortunately for the teams, the existence of other restrictions such as the salary cap, weaken any argument that free agency is necessary.
The players could also challenge the college draft as being an antitrust violation. The players’ argument that the draft restricts trade is very strong. Once a player is drafted he is precluded from bargaining with any other team. Thus, the draft restrains trade. However, as discussed earlier, there is only an antitrust violation if the anti-competitive effects outweigh the pro-competitive effects. The NFL teams have a good argument that the draft is necessary in order to preserve parity in the NFL. Take the St. Louis Rams for example: last year they were the worst team in the NFL and accordingly got the first pick of the draft. This year the Rams are leading their division. It is likely that a court would reason that the draft is necessary but that it could be done in a manner which is less-restrictive of trade. For instance, limiting the draft to three rounds would allow more players to negotiate with multiple teams but would distribute the best players equally amongst the teams.
Finally the players could also challenge the hard salary cap as being a antitrust act violation. Again, it is easy to show that trade has been restricted. The salary cap reduces the amount of money that teams will spend competing on players and therefore reduces trade. Whether or not the pro-competitive effects justify this restraint on trade is an interesting question. The players would argue that 2010 was an uncapped year and there has been more parity than ever. Nonetheless, I think the NFL has the better argument. Other sports leagues that have soft caps (NBA) or no caps (MLB) do not enjoy the same competitive balance as the NFL. The NHL provides a clear example of the dangers of not having a salary cap. Prior to the lockout player salaries ballooned to a point where the 75% of league revenue was spent on salary, as a result 2/3rds of the teams operated at a loss. The NHLPA’s refusal to compromise on the salary cap issue is the key factor which led to the 2004-2005 lockout.
There are a whole host of other things that the players could assert are antitrust violations. Whether or not the NFL thinks that they could win such lawsuits will likely play a central role in the current negotiations.
