Regulating Professional Sports Leagues

Table of ContentsI. Introduction 575II. Antitrust Law Cannot Effectively Regulate Professional Sports Leagues 580A. Section 1 of the Sherman Act 582B. Section 2 of the Sherman Act 597III. Professional Sports Leagues Use Their Monopoly Power to Abuse the Public Interest with Little Legal Ramification 604A. League Expansion and Stadium Subsidies 604B. Television Broadcasting 6151. Collective Broadcasting Licensing Practices........6162. Blackout Restrictions 624IV. Proposed Free Market Solutions Are Impractical and Insufficient 629A. Divestiture 630B. Promotion and Relegation 636V. Government Regulation of the Monopoly Professional Sports Leagues Is Needed 640VI. Conclusion 652I. IntroductionFour monopoly sports leagues currently dominate the U.S. professional-team-sports industry.1 Because each of these leagues enjoys unchallenged control over its respective sport at the highest level of professional competition, each possesses significant market power in what is estimated to be a $67 billion industry.2 While federal antitrust law-the primary legal authority regulating professional sports leagues in the United States* * 3-would normally be expected to provide a significant check on anticompetitive, monopolistic behavior, it has failed to govern the industry effectively due to the leagues' well-entrenched monopoly status and the high degree of coordination necessary among their respective teams.4 Consequently, in many respects, each of the four major U.S. professional sports leagues today effectively enjoys unregulated monopoly status.5As one might expect, the leagues use this unchecked power to extract monopoly profits-or, in economics parlance, monopoly rents6-from the public with little legal consequence. For example, by restricting their rate of expansion, the leagues have created an artificial shortage of teams, forcing cities to compete against one another to attract and retain professional sports franchises.7 Despite the questionable economic benefits these franchises impart on their host communities,8 teams have nevertheless been able to extract enormous subsidies from local governments-typically in the form of new stadiums constructed at public expense- estimated to cost taxpayers as much as $1 billion per year for just the NFL alone.9 Meanwhile, the leagues have also extended their monopoly power to the television broadcast market, eliminating potential competition among their respective teams by collectively negotiating all national television broadcast agreements on a league-wide basis.10 As a result, the leagues are able to charge networks higher prices for the right to televise their games, costs that are eventually passed on to all television viewers-both sports fans and non-fans alike-in the form of higher cable television bills.11 Even then, fans may find themselves unable to watch their favorite teams play on television or over the Internet due to the imposition of various arcane and anticompetitive blackout rules imposed by the leagues.12This Article asserts that government regulation, ideally in the form of a federal sports regulatory body, represents the only practical means for curbing the anticompetitive behavior of the monopoly sports leagues.13 Because the U.S. professional sports industry has, throughout its nearly 150-year history, consistently gravitated towards monopoly control of each sport by a single "major" league,14 alternative proposals employing free-market mechanisms to curtail the leagues' monopoly power are impractical and unlikely to succeed. …