Are sports monopolies necessary?

The news that a district court judge has allowed a lawsuit to proceed against MLS and U.S. Soccer is worrisome for the league and federation. The details of the ruling (see the PDF) are downright disturbing.

At issue: Is U.S. Soccer a legitimate overseer of professional soccer in the USA? Beyond that: Can any organizing body claim dominion over a sport?

In the legal world, monopoly power is a serious problem. In the sports world, we take it for granted. Men’s tennis = ATP. Women’s tennis = WTA. U.S. college sports = NCAA (NAIA exists but is far smaller). Baseball = antitrust-exempted Major League Baseball.

Sports that don’t have a monopoly in place, such as indoor soccer, are usually seen as weakened. Everyone thinks he has a better business plan than the other guy, and the result is often a mish-mash of leagues that test fans’ patience.

Monopolies and near-monopolies may limit competition on the business front. But on the competitive front, they establish objective criteria for determining who’s the best.

Think of boxing, with its alphabet soup of “world champions.” The world chess championship hasn’t really recovered from a split in the mid-90s in which Garry Kasparov walked away from governing body FIDE, though FIDE has its own issues that linger to this day. (Literally — this week, Anatoly Karpov’s bid for FIDE presidency has been squashed by incumbent Kirsan Ilyumzhinov, who seems more inclined to speak with aliens than listen to Karpov’s supporters.)

In mixed martial arts, fans endlessly debate whether to accept the UFC’s argument that it’s the “major league,” and everyone else is minor league. The UFC is getting closer — with Fedor Emelianenko’s loss in June, the UFC and lighter-weight affiliate WEC claimed the top spot in every weight class of the USA TODAY/SB Nation consensus rankings.

The court ruling — which, to be clear, is hardly the final word on the matter — would open the door for competition unless Congress has explicitly said otherwise. The judge rejected U.S. Soccer’s argument that the Ted Stevens Act, which establishes governing bodies for amateur and Olympic-preparatory sports, gives it dominion over the professional game as well. And in other sports, that’s true — USA Basketball and USA Hockey deal with national teams, not the NBA and NHL.

But the fearful question soccer fans must ask is this: Has the court limited U.S. Soccer’s ability to act for the greater good of the game? Specifically, can it protect the interests of a professional league (MLS) trying to take root where no other league has before?

If you remember ChampionsWorld, you may remember it as anything but benign as far as MLS was concerned. The message was driven home on the broadcasts by VP Giorgio Chinaglia, described by Grant Wahl as “the insufferable former New York Cosmos great” with a revisionist mindset toward NASL history and outright malice toward MLS.

Of course, the league survived, and ChampionsWorld didn’t. U.S. cities have shown they’ll support a few preseason exhibition tours by traveling Euro teams, but everyone has a limit.

From a practical point of view, the ruling might not open a can of worms but may merely provide the can opener. Just as other governing bodies provide the pathway to the Olympics, the pinnacle in most of those sports, U.S. Soccer provides the pathway to the World Cup. In the only part of the ruling that is clearly unsound, the judge seriously underestimates FIFA’s interest in meddling and its power to do so.

The ruling could pose a competitive challenge for SUM, the marketing affiliate for MLS that has figured out how to make money off promoting outsiders’ games in the USA. But some games already are outside SUM’s domain. The promoters in these cases are paying sanctioning fees to U.S. Soccer but not to SUM.

And so the optimists’ view of this case would be this: The suit is simply a deterrent to keep U.S. Soccer from setting its sanctioning fee too high. (And also repaying a few ChampionsWorld creditors.)

If MLS and U.S. Soccer were to lose this case, they might take heart from some U.S. precedent. The NFL once lost an antitrust suit. Even though the NFL paid a few million to the USFL in legal fees in addition to the famous $3 cash award, the NFL seems to have survived.

The NFL also has maintained its dominance as other upstart leagues have arisen. The XFL promised something different, and it turned out to be a little too different. The UFL, still in existence, is operating on a smaller scale.

MLS is already in a competitive environment. Fans can sit at home and watch games from around the world in HD (though it still doesn’t compare to the atmosphere of a good live game). Winning this case won’t make it go away. Losing won’t make it that much worse.

U.S. Soccer, like the UFC, has its critics who say it’s too arrogant in defending its share of the market. Ultimately, the threat of competition could keep it honest.

Congress isn’t going to hand U.S. Soccer, the UFC, the NFL or anyone else (other than baseball, which is another rant) carte blanche to do what it wants. It’s up to the managers and promoters to make sure competition on the business front doesn’t devolve into chaos on the competitive front, no matter what happens in court.

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5 thoughts on “Are sports monopolies necessary?

  1. In the end though, isn’t this a a whole nonstarter, no matter how the courts and Congress define the market?

    As long as FIFA, which exists outside US jurisdiction, decides who gets sanction and who doesn’t, and controls the world game in all the myriad legal and otherwise ways it does, then US Soccer doesn’t need to act to restrain trade as a monopoly. FIFA will do it for them and make it a de facto reality.

  2. The thing is, if the USSF does not have an antitrust exemption on the pro side, entities competing in professional soccer should be able to compete without preference. USSF’s interest in growing professional soccer in the U.S. is irrelevant as far as competition is concerned. If it turns out that MLS is getting preferential treatment, that’s a problem.

    It is also a legal problem if USSF and MLS are acting in concert in the professional soccer space, assuming the court rules that no antitrust exemption applies. If they are acting in concert, MLS will be seen as getting preferential treatment over other competing parties which likely violates antitrust laws (if CW’s allegations are proved true).

    But I think you are right. A ruling in favor of CW would result in monetary damages and perhaps a restructuring of the relationship between USSF and MLS, but it certainly won’t result in the decline of MLS. MLS, at this stage, has the ability in its own right to continue building a strong league. But let’s say that someone comes in and wants to pour tons of money into a competing league (which won’t happen), that competing league should be able to compete on equal terms with MLS. The quality of product should reflect the winner, not the closeness of the parties’ respective relationship with the Federation.

    If USSF wants control over professional soccer activities, that decision lies with Congress, not the Federation.

  3. Martek — I think there’s a difference between FIFA deciding that USSF gets to sanction games, and USSF and MLS jointly deciding the terms of the sanctioning process to the exclusion or detriment of potential competitors. I think part of CW’s claim is that the two are working in concert to foreclose competition without any explicit authority to do so. Even if FIFA gives USSF the power to sanction, it can’t override our domestic antitrust legislation without an explicit exemption from Congress.

  4. I think what Martek is saying is that FIFA might very will insist that non-U.S. based soccer entities deal with USSF when playing friendlies inside the U.S.

    The U.S. courts can’t control what FIFA tells Manchester United it can and can’t do. Additionally, as it stands now, the USSF is the assigning and certifying body for referees in the U.S. – which would complicate any attempt to hold games in the U.S. with professional club teams outside the purview of the USSF.

    Obviously the real risk is follow-on suits claiming collusion, or even under the RICO act. Sunil Gulati is just the tip of the iceberg when it comes to potential USSF/MLS (or even USSF/WPS) conflicts of interest.

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