By Spencer Kahn, 3L at George Washington Law School
Would Major League Soccer (MLS) win in Fraser v. Major League Soccer (2002) if the same trial occurred today?
When the MLS was first formed in 1995, it had the goal of becoming the first soccer league to take hold in the US market while competing with other professional sports leagues such as the National Football League (NFL), and the National Basketball Association (NBA). To maintain its financial viability, it decided to structure itself as a single entity rather than the joint venture structure of the NFL and NBA.
As a single entity, MLS believed that this structure would help jumpstart the league and increase its odds of succeeding. Looking back, this structure has appeared to provide MLS increased its financial flexibility through player control which has allowed the league to grow. Rather than making contracts with the individual teams, players make their contracts with the league and the league then assigns the players to various teams. Instead of having multiple teams bidding against each other, the negotiation is solely between the player and MLS which leads to lower salaries and a greater chance of MLS surviving financially. In addition, the league also takes on collective matters such as all broadcasting rights and paying referees’ salaries.
Conversely, the joint venture structure of the NFL and NBA permits teams to be owned independently from the league as well as select players through a draft and free agency. Despite collaborating for the development of the common product of professional sports, these teams have individual incentives. This leads to the teams competing with one another for more desirable players which often ends in a salary bidding war resulting in greater wages for the players. Due to a joint venture structure leading to increased wages, this was not the preferred structure for MLS.
MLS’s status as a single entity was put to the test when it first faced antitrust litigation in Fraser. The main issue in this case was if the MLS should fall under Section I or Section II of the Sherman Act. This hinged on if the MLS was actually a single entity or if it was just calling itself such in order to fall under Section II. Upon evaluation of the MLS, the court found that it was in fact a single entity and that the operator-investors were to be treated as shareholders of the single entity. As a result, the MLS was not to be viewed under the scope of Section I of the Sherman Act which deals with multiple actors using coordination to fix prices, but rather Section II. This section deals with a single actor attempting to exclude competitors from the market.
Since this ruling, there have been significant changes to the structure of player contracts in MLS. The first change came in 2007 when David Beckham, a star in European soccer, entered the league. His salary alone would have taken up a team’s entire salary cap, but adding a player of this level to the league would increase the profitability of the league as a whole. To solve this issue, MLS instituted the “Designated Player Rule” to allow teams to exceed their salary cap (budget) in order to sign a marquee player. However, the individual club is responsible for the player’s salary above the “Designated Player Salary Budget Charge” set by the league. This results in the club paying some of the player’s salary rather than the league.
Further change occurred as a result of the 2015 MLS Collective Bargaining Agreement (CBA) in which the players achieved the right to free agency. Under this CBA, any player with 8 years of service who was at least 28 years of age was eligible to sign with and play for any team of their choosing. This allowed 12% of the players in the player pool to be free agents when their contract expired. In the newest CBA, which was agreed to in 2020, the requirements for free agency were loosened even further allowing players who are 24 years old with only 5 years of service in the league to become a free agent. This more than doubles the number of players who are eligible for free agency.
Given the new developments in MLS of the Designated Player Rule as well as free agency, MLS’s two pivotal arguments from Frasier that took it out of Section I of the Sherman Act are now gone. Originally, MLS was taken out of Section I due to being a single entity. It was established as a single entity because all contracts were made with and paid for by the league as well as the fact that teams could not compete or bid against one another for players. However, all contracts are no longer completely paid for by the league as part of a designated player’s contract is paid for by the individual operator-investor. Additionally, teams now must compete with one another for certain players who are permitted to be free agents under the new CBA.
Due to the evolution of the Designated Player Rule as well as free agency in MLS, there are questions as to whether MLS would still be found to fall outside of Section I of the Sherman Act and what the result of potential antitrust litigation would be if they do fall within Section I. Frasier II anyone?
Citations
Fraser v. Major League Soccer 284 F.3d 47 (2002)
Collective bargaining agreement. MLS Players Association. (n.d.). Retrieved October 17, 2021, from https://mlsplayers.org/resources/cba.
Progress. MLS Players Association. (n.d.). Retrieved October 17, 2021, from https://mlsplayers.org/progress. Roster rules and regulations. mlssoccer. (n.d.). Retrieved October 17, 2021, from https://www.mlssoccer.com/about/roster-rules-and-regulatio
