FanPost

Perhaps the MLS salary cap (or at least a low cap) is not long for this world



For my fun reading during this offseason, I read up on the case that MLS won against the players, Fraser v. MLS (http://law.justia.com/cases/federal/appellate-courts/F3/284/47/495459/). *I will give the following overview as my commentary and not legal opinion.* I was curious because last year, the Supreme Court decided American Needle v NFL (http://www.supremecourt.gov/opinions/09pdf/08-661.pdf) and held that the NFL could be liable for concerted action by the teams that was violative of the antitrust laws. In reading up about the Fraser case, there is much misconception about what that court held. In Fraser, among other claims, "the players claimed MLS and its operator/investors violated Sherman Act section 1 by agreeing not to compete for player services." Interestingly, the district court granted summary judgment on that issue, and the jury "found that players had failed to prove what they had alleged, namely, that the relevant geographic market is the United States and that the relevant product market is limited to Division I professional soccer players." The appellate court actually did not ultimately address the "single entity" issue: "In all events, we conclude that the single entity problem need not be answered definitively in this case." The appellate Fraser court basically could affirm the jury as "this case would have been lost at trial based on the jury's rejection of plaintiffs' own market definition." In general then, the players in Fraser could not show there was a relevant market so the antitrust analysis ended there.

By the way, one of the errors argued by the players was that the "players claim the court erred in permitting a defense witness, Neil Farnsworth, co-owner of a Seattle Division II professional soccer team, to testify that he was competing with MLS for two specific players, while refusing to identify the players by name on "confidentiality" grounds." Mmm...so Farnsworth testified on behalf of the MLS, and we now have our MLS Sounders.

That notwithstanding, many of the salient facts discussed in Fraser, e.g. no profits, the high likelihood of failure of MLS, etc., don't exist now. More importantly, the Fraser court itself found issues with the single entity structure: "[I]n this case the analogy to a single entity is weakened, and the resemblance to a collaborative venture strengthened, by the fact that the operator/investors are not mere servants of MLS; effectively, they control it, having the majority of votes on the managing board. The problem is especially serious where, as here, the stockholders are themselves potential competitors with MLS and with each other. Here, it is MLS that has two roles: one as an entrepreneur with its own assets and revenues; the other (arguably) as a nominally vertical device for producing horizontal coordination, i.e., limiting competition among operator/investors."

Note that the Fraser court expressly leaves the door open for further player attack. "In theory, there may be a broader market which plaintiffs might show (without contradicting the jury findings) in which unrestricted salary competition between the MLS operator/investors might result in somewhat higher player salaries. In that event, assuming that the single entity defense failed, a basis for liability might exist."

Sorry for the long writing above, and I won't go into American Needle, but let me just guess that that the Supreme Court's more expansive view of antitrust means the MLS is in trouble next go around. MLS does not have many of the arguments available they had in 1998-2000, and the "single entity" rule has not really been decided. Oh, and the MLS players did not have the benefit of the American Needle decision (which most did not think would go against the NFL) when they agreed to the new CBA in 2010. And just remember that many of the other sports league's salary caps are part of collective bargaining with the unions, and have not been ruled "legal" as such, especially in view of the more expansive antitrust rule from American Needle. They are part of the "settlement" of the collective bargain. Consequently, I think the MLS players can definitely bargain a much higher salary cap next go around (or possibly sooner) with MLS under duress of antitrust.

FanPosts only represent the opinions of the poster, not of Sounder at Heart.

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