By Takao Ohashi, Attorney-at-law in Japan
In the United States, professional baseball players are protected by labor and antitrust laws.
In Japan, professional baseball players are recognized as employees and the Professional Baseball Players’ Association of Japan (“Players’ Association”). Organized by professional baseball players in Japan, the Players’ Association was recognized as a labor union under the Labor Union Act in September 1985. However, to date, the Players’ Association has not been able to conclude a collective bargaining agreement with the Nippon Professional Baseball League (“NPB”), which consists of all 12 professional baseball teams in Japan (“12 teams”). Moreover, the strike in 2004 by the Players’ Association led to the establishment of the Professional Baseball Structural Reform Council (“Council”) with the main intention of discussing issues between the Players’ Association and the NPB, leading to the implementation of various systemic reforms.
On the other hand, in relation to the antitrust law, the Fair Trade Commission, which enforces the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (name of the antitrust law in Japan), has long treated contracts between professional baseball players and baseball teams as not being subject to the antitrust law, based on the interpretation that contracts between professional baseball players and baseball teams are similar to employment contracts. Furthermore employment contracts do not constitute “transactions” under the antitrust law.
In the case of Junichi Tazawa, currently with the Wei Chuan Dragons (Chinese Taipei) and former player for the Boston Red Sox and other teams in the U.S., Tazawa raised an antitrust issue. Tazawa was eligible for the 2008 NPB draft, but he notified all of the Japanese teams not to draft him because of his intention to play in the MLB. He ultimately signed a contract with an MLB team instead of joining any of the Japanese teams. His action caused a stir in the NPB draft system. Immediately after this issue arose, the NPB established the following rule:
If a rookie player refuses to be selected by one of the 12 teams prior to the NPB draft or refuses to join a team, which has negotiating rights at the NPB draft, and signs a contract with a foreign team, the 12 teams will not select such a player at the draft for three years for high school graduates, two years for college graduates and adult players after the termination of the contract with the foreign team.
This rule is known as the “Tazawa Rule”. The purpose of this rule was to prevent the loss of talented Japanese players from the NPB.
The Players’ Association had been claiming that the “Tazawa Rule” violated the antitrust law ever since its establishment, but the NPB did not withdraw the rule and the Fair Trade Commission did not take any action.
In recent years, however, the attitude of the Fair Trade Commission has drastically changed. It was triggered by the following incident. In the Japanese entertainment industry, a number of top idols were transferred from one management office to another, and the former management office pressured the TV broadcasters to prevent such idols from appearing on TV. The Japan Fair Trade Commission investigated the case and issued a warning to such former management office on suspicion of violating the antitrust law. This case prompted the Fair Trade Commission to launch a “Study Group on Human Resources and Competition Policy” (“Study Group”) to investigate the actual situation of transfer restrictions in the Japanese entertainment and sports industries. Consequently, the Fair Trade Commission compiled and published the “Antitrust Law Perspective on Transfer Restriction Rules in the Sports Business Field” in 2019.
It indicates four points as follows:
- Teams compete with each other as businesses under the antitrust law because they are engaged in economic activities (business activities) through their sporting activities.
- In general, it is a violation of the antitrust law for two or more business operators in a competitive relationship to jointly agree to mutually restrict or limit the transfer or change of personnel. The same applies to cases where a business association establishes such arrangements.
- Two main purposes for establishing transfer restriction rules in the sports business field.
- to improve player development incentives by ensuring the collectability of player development costs.
- to maintain and improve the charm of the sport (sports leagues, competitions, etc.) by balancing the strength of the teams.
- A wide variety of rules restricting transfers in the sports business field, and whether or not they are going to be a problem under the antitrust law is to be determined on a case-by-case basis in accordance with the content of the specific rules and the actual situation.
The Fair Trade Commission investigated and examined the “Tazawa Rule” based on the above perspective, and in November 2020, it expressed to the NPB that the “Tazawa Rule” is suspected of violating the antitrust law because the “Tazawa Rule” may constitute the concerted refusal to trade by the 12 teams. However, the NPB had abolished the “Tazawa Rule” in September 2020.
The reason why the Fair Trade Commission, which had been reluctant to apply the antitrust law to the labor market, drastically changed its stance and became proactive was that the Study Group pointed out that against the backdrop of changes in lifetime employment and the ease with which companies and human resources can be matched on the internet, forms of employment such as freelancing and side jobs are diversifying, and forms of contracts other than employment contracts are increasing. There is room for the antitrust law to be applied to the labor market.
In particular, the Japanese sports industry has implemented a system that greatly restricts the transfer of players without any particular rational grounds. For example, in the NPB, there is the Free Agent system (“FA”) based on the reserve clause. But when a player of a certain level transfers through the FA, the team from which the player is transferred can demand a replacement player or money from the team to which the player is transferred on compensation for the FA’s transfer. This system discourages the FA transfers. In other sports in Japan, there is still an irrational rule that if a player transfers from one team to another without an agreement between both teams, the player who is transferred will be suspended for one year.
In the near future, such unreasonable transfer restrictions in sports in Japan will be able to be dealt with as a matter of the antitrust law. The Players’ Association will be able to use the antitrust law as a shield to pursue labor-management negotiations more aggressively than in the past. Similar to the U.S. professional sports leagues, there is also the possibility of concluding a legally binding collective bargaining agreement between the Players’ Association and the NPB.
In my opinion, if Japanese professional baseball takes the initiative in this area, its influence will spread to other professional sports in Japan.
