Article by Gary R. Roberts
The locations of a professional sports league's franchises and the right of the league to control such locations are today matters of serious concern and great economic impact to many cities, fans, club owners, and players alike. The recent relocation of two National Football League (NFL) franchises without the league approval required by NFL rules (the Raiders from Oakland to Los Angeles in 1982, and the Colts from Baltimore to Indianapolis in 1984), the subsequent threats by the Philadelphia Eagles, the New Orleans Saints, and the St. Louis Cardinals to relocate their NFL franchises, and the now famous judicial decisions in the celebrated antitrust case Los Angeles Memorial Coliseum Commission v. NFL (Raiders), which prevented the NFL from enforcing its rules to prevent the Raiders' move, have focused much attention on the role that the Sherman Act should play in limiting the authority of professional sports leagues to control the locations of their member clubs.
In a recent law review article, Professor Daniel E. Lazaroff attempted to analyze the antitrust implications of league rules designed to control the home sites of member team franchises. Professor Lazaroff concluded that while league-imposed limitations on the freedom of league members unilaterally to move the site of their respective home games might appropriately be considered per se illegal under section 1 of the Sherman Act, it is more appropriate to judge such restrictions under the rule of reason, and furthermore, that under the rule of reason such league restrictions would almost certainly be found illegal. Because Professor Lazaroff's article closely reflects the arguments advanced by plaintiffs in several section 1 suits brought against various league internal governance rules, and is quite similar in its reasoning and conclusion to the Ninth Circuit's opinion in the Raiders case, it provides a useful vehicle for critical evaluation of the merits of such suits.
This Article takes the position that Professor Lazaroff's conclusions are fundamentally unsound, not necessarily because his rule of reason analysis is faulty if one accepts his basis premise, but because he starts from incorrect assumptions and observations about the fundamental nature of a sports league. The result is that his conclusions about the legality of "franchise relocation" rules are out of sync with the economic realities inherent in the business of producing a professional sports league entertainment product.
Professor Lazaroff's primary error is that he views the member clubs of a sports league as independent economic firms between whom the the antitrust laws require some degree of economic competition—that is, intraleague competition. Professor Lazaroff argues at length that member clubs are separate economic firms and acknowledges that his entire thesis rests on rejection of the so-called single entity defense.
The single entity defense posits that it is the league, not each individual league member, that is the relevant firm for antitrust purposes; therefore, a league cannot violate section 1 when it acts to manage and regulate internal league affairs. The erroneous view that each member club is a separate firm leads Professor Lazaroff to reject the single entity defense, and also flaws his rule of reason analysis. He tests franchise relocation restraints under the rule of reason as if there were a conspiracy of horizontal competitors acting in some nefarious way to distort natural market forces. Thus, if Professor Lazaroff's basic underlying assumption—that each team, not the league, should be regarded as the relevant firm for antitrust purposes—is incorrect, his entire analysis is flawed. Accordingly, this article focuses solely on this premise and endeavors to demonstrate that it is wrong.
Although the few courts to address the single entity issue in sports league cases have generally, although not unanimously, rejected the single entity defense, the growing weight of scholarly opinion is to the contrary. Three major articles published within the last two years have focused exclusively on the single entity issue, each from a very different analytical perspective. Each has concluded that it is the league, rather than each separate franchise, that in almost all cases should be treated as the relevant firm for purposes of section 1 analysis.
About the Author
Gary R. Roberts. Associate Professor of Law, Tulane Law School. B.A. 1970, Bradley University; J.D. 1975, Stanford University.
Citation
60 Tul. L. Rev. 562 (1986)