Lebron James to Europe? NBA Labor Negotiators' Worst Nightmare

At 9 P.M. tonight, Lebron James is making his big announcement about where he will play next season.

Cleveland? Chicago? Miami? New York? New Jersey?

What about Europe?

Lebron once told ESPN he might play overseas for $50 Million per year. And NBA players should hope that Lebron chooses Europe for reasons far more important than just their chances of winning an MVP Award.

As most basketball fans know, the NBA collective bargaining agreement (pdf) is set to expire on July 1, 2011. Thus far, the NBA club-owners have taken a hard line stance, demanding that players accept a reduction in the current salary cap. According to NBA club-owners, they are losing money due to the down economy.

Irrespective of whether NBA owners are actually losing money, their demands right now are credible. If there is no other practicable place for top NBA players to work, the NBA players union will have no choice but to either accept the NBA’s proposed terms, strike, or seek to decertify the union and file an antitrust suit against the league (all undesirable options — each for different reasons).

If Lebron James makes the bold decision to sign in Europe, however, everything could change. The NBA club-owners would likely abandon their proposal for a lower salary cap because capped NBA clubs would struggle to compete for top players against uncapped EuroLeague clubs. Indeed, the very moment Lebron James puts on a EuroLeague basketball uniform, the threat of other players following him overseas becomes more credible.

While the thought of a star player leaving the NBA to help fight against the salary cap is unusual, it is not unprecedented. Back in August 1989, player discontent with the NBA’s salary cap (one that disparately impacted new players) led two young NBA players, Brian Shaw and Danny Ferry, to sign contracts with the EuroLeague club Il Messaggero (now known as Virtus Roma). Shortly thereafter, Il Messaggero began to court other top NBA players including Rick Mahorn (successfully) and Patrick Ewing (unsuccessfully). As a result, the NBA clubs simply agreed to increase their salary cap.

Despite the current down economy, there are probably a few EuroLeague clubs that could attempt to get into the action for one of the world’s best basketball players. For example, the Greek team Olympiacos Piraeus—winners of the 2006-07 EuroLeague championship—are owned by billionaire Greek brothers Panagiotis Angelopoulos and Giorgos Angelopoulos. The team plays in an approximately 15,000-seat arena, has already signed former Atlanta Hawks forward Josh Childress to a three-year, $20 million contract, and is seemingly not affected by the Greek debt crisis.

The Angelopoulos brothers probably could afford to sign Lebron James to a 1-year, $50 million deal—especially if they then streamed their games on the Internet to a worldwide audience (something NBA clubs likely cannot do due to the league’s New Media and territorial broadcast policies).

Likewise, Greece might make an interesting one-year “home” for Lebron. Unlike NBA players, EuroLeague players only compete in one or two games per week. This would leave King James a lot of time for personal travel.

Of course, this all presumes that Lebron is really willing to leave his friends and family to go overseas–a move that is rare among American-born NBA players. Indeed, just 9-15% of current NBA players have competed professionally overseas, and many of these players only did so when faced with no NBA alternative.

However, on balance, maybe the thought of Lebron going to Europe is really not so farfetched. We’ll see tonight.
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Marc Edelman, Above the Law’s sports columnist, is an Assistant Professor at Barry University’s Dwayne O. Andreas School of Law. He is teaching this summer at Fordham Law School, Seton Hall Law School, and Rutgers School of Law-Camden. His full collection of law review articles is available here.

This article appeared first on Above the Law.

American Needle v. NFL: The Aftermath Beyond Just Licensing

With more than a week having passed since the Supreme Court's ruling in American Needle v. Nat'l Football League, discussion about the case has begun to shift from what the ruling means for American Needle Inc. to what it means for other sports-related businesses.

Here are four sources that begin to address that issue:

• First, in an editorial published in this week's Sports Business Journal, I discuss the impact of the American Needle ruling on labor relations, ticket pricing, and the way that investors will likely structure new professional sports leagues (here).

• Second, in an interview with Ripten Magazine, I discuss the impact of the American Needle ruling on the football video game market and the NFL's exclusive licensing deal with EA Sports (here).

• Third, in traditional law review format, University of Iowa's esteemed Ben V. and Dorothy Willie Professor of Law Herbert J. Hovenkamp discusses the impact of American Needle on the credit card, hospital, and real estate industries (here).

• Finally, over on the Legal Talk Network, attorneys and co-hosts J. Craig Williams and Bob Ambrogi interview both Michael McCann and me about the effects of the American Needle case, via podcast (here).

(Cross-posted on Sports Law Blog)

Fordham Sports Law Symposium: This Friday @ 9:30 A.M.

This Friday, at 9:30 A.M., I (Marc Edelman) will be speaking at the 14th Annual Fordham Sports Law Symposium about the case American Needle v. Nat'l Football League.

The other speakers on my panel will be American Needle's general counsel Jeffrey Carey, Jones Day partner Meir Feder and Herrick Feinstein partner Irwin Kishner. The panel will be moderated by Tulane Law School professor Gabe Feldman.

Friday's sports law symposium is free and open to the public. New York lawyers who attend are eligible for six non-transitional, professional practice CLE credits.

For those interested in the full lineup of events (beginning with registration at 8:30 A.M.), see here.

For those interested in why I believe the Supreme Court should rule in favor of American Needle and remand this case back to the district court for a full antitrust review, please see here and here.

American Needle v. NFL: Discussing the Supreme Court Transcript

As many of you know, the Supreme Court heard oral arguments on Wednesday January 13 in the case American Needle v. NFL. A full discussion of the case is available here, and the full transcript is available here.

My main takeaway from the transcript is that the Supreme Court will reject the 7th Circuit's classification of the NFL as a single entity (a classification that I have described as being legally wrong in two law review articles--here and here).

However, some justices may be willing to outline a more narrow antitrust exemption for sports leagues.

Among the justices who seem most likely to reverse and remand is Hon. Antonin Scalia, who responded to Hon. Stephen Breyer's broad questioning about the competitive effects of joint licensing with the following inquiry (p. 18-19):

• JUSTICE SCALIA: Is this issue before us here? Or is it just the issue of whether the lower court was wrong to dismiss your suit on the basis that this is a unitary operation? I think that was the only issue.

• MR. NAGER: You're -- that is the only issue, Justice Scalia.

• JUSTICE SCALIA: Well, why am I worrying about this other stuff.

Another justice who seems likely to reverse is Hon. Sonia Sotomayor, who accused the NFL clubs of "seeking though this ruling what you haven't gotten from Congress: An absolute bar to an antitrust claim." (p. 47).

NFL Counsel Greg Levy gave a long answer to this question but never directly addressed the NFL's failed efforts in Congress.

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Marc Edelman is an Assistant Professor at Barry University’s Dwayne O. Andreas School of Law, where he teaches in the areas of contracts, property, antitrust and sports law. His full collection of law review articles is available here. Professor Edelman’s article, Why the ‘Single Entity’ Defense Can Never Apply to NFL Clubs: A Primer on Property Rights Theory in Professional Sports, has been cited in three Supreme Court briefs on this case.

American Needle v. NFL: Oral Arguments Begin Tomorrow

Tomorrow, the Supreme Court will begin hearing oral arguments in the case American Needle v. National Football League for the purposes of determining whether the NFL clubs’ collective licensing of individual club trademarks is exempt from Section 1 of the Sherman Act under antitrust law’s single entity defense.

American Needle, which is represented by the law firm Jones Day, will argue that the Supreme Court should uphold the ruling of at least seven lower courts, each of which has found that the business practices of the NFL clubs are subject to Section 1 of the Sherman Act (American Needle’s briefs are available here and here). By contrast, the NFL, which is represented by the law firm Covington & Burling, will argue that, despite these lower court rulings, the NFL is really more akin to a single company and should be treated as such for antitrust purposes (The NFL’s brief is available here).

For those who are less familiar with the American Needle case, the original plaintiff, American Needle Inc., had for more than twenty years maintained a non-exclusive license to design and manufacture headgear bearing the NFL clubs’ names and logos. Then, nine years ago, the NFL clubs decided to offer an exclusive license to American Needle’s main rival, Reebok.

Upon being foreclosed from the opportunity to sell NFL headgear, American Needle sued the NFL clubs in the Northern District of Illinois, contending that the new NFL licensing arrangement violated Section 1 of the Sherman Act by illegally restraining trade in the market for purchasing rights to NFL logos. The NFL clubs, in turn, responded by not only alleging that their licensing arrangement was pro-competitive under antitrust law’s Rule of Reason but also by arguing that the NFL clubs constituted a single entity under antitrust law.

American Needle’s surprising choice of where to bring suit played an important role in this case making its way to the Supreme Court. Although the First, Second, Third and Ninth Circuits have long since rejected the NFL’s single entity defense, American Needle instead decided to bring suit in the Seventh Circuit, which had never before addressed the issue. Upon reviewing the matter, the Seventh Circuit disagreed with these other circuits’ views of the single-entity exemption and instead held that the single-entity status of a sports league should be determined on a case-by-case basis, and that the NFL constituted a single-entity for the purposes of licensing intellectual property.

The Seventh Circuit’s ruling has since been challenged by both American Needle and the NFL clubs. American Needle, as expected, filed a petition for certiorari, urging the Supreme Court to reverse the Seventh Circuit’s ruling and adopt the position previously articulated by the First, Second, Third, and Ninth Circuits. Meanwhile, the NFL clubs have petitioned the Court to not only uphold the Seventh Circuit’s ruling with respect to licensing markets, but more broadly to rule that sports leagues are single entities for all purposes—thus shielding the NFL from future Section 1 antitrust challenges.

In arguing for a complete exemption from Section 1 of the Sherman Act, the NFL clubs rely on a broad reading of the 1984 Supreme Court case Copperweld Corp. v. Independence Tube Corp., in which the Court had held that a tubing company and its wholly-owned subsidiary comprised just one entity for antitrust purposes. Meanwhile, American Needle relies primarily on a different Supreme Court case from that same year, National Collegiate Athletic Association v. Board of Regents of the University of Oklahoma, in which the Court ruled that NCAA football teams are independent actors and not a single entity for purposes of antitrust law.

The only justice who remains on the Supreme Court from these earlier rulings is Hon. John Paul Stevens, who wrote the majority opinion in NCAA and dissented to Copperweld. Since that time, the Supreme Court has moved in a decidedly more conservative direction, having ruled in antitrust cases almost exclusively in favor of the defendants.

Nevertheless, even despite the recent conservative push of the Supreme Court, this case may perhaps represent an instance where even law-and economics minded conservatives would support the plaintiff’s position. Indeed, while there may be strong reasons why a court would ultimately uphold the NFL joint licensing program under the Rule of Reason (e.g., lack of market power in a broader market for sports logos and reduction of transaction costs), it makes little sense from a law-and-economics perspective for the Court to broaden antitrust law’s single-entity defense at the expense of allowing for full discovery and economic analysis.
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Marc Edelman is an Assistant Professor at Barry University’s Dwayne O. Andreas School of Law, where he teaches in the areas of contracts, property, antitrust and sports law. His full collection of law review articles is available here. Professor Edelman’s article, Why the ‘Single Entity’ Defense Can Never Apply to NFL Clubs: A Primer on Property Rights Theory in Professional Sports, has been cited in three Supreme Court briefs on this case.

Boise State's Antitrust Claim Against the BCS

[This article was written by Chris Stanley, a third year law student at The Ohio State University Moritz College of Law.]

The Boise State Broncos football team has proven that it can compete with the best football programs in the nation on several occasions. Perhaps the most noteworthy example was the victory in the 2007 Fiesta Bowl over the Oklahoma Sooners. Although the Broncos performance in recent years is turning heads, the current bowl system in the NCAA makes it difficult for Boise State to play in the top-tier BCS bowls.

The President of Boise State University has publicly voiced his frustration for the current BCS selection system, and the issue is heating up.[1] In an interview with 60 Minutes, President Obama even suggested a change to the system.[2] Additionally, one of the most vehement opponents of the current BCS system is Senator Orrin Hatch of Utah. He recently suggested that the current BCS system violates the Sherman Anti-trust Act.[3] If a suit is going to come about, I think Boise State would be a good Plaintiff to bring such a suit.

Many football programs are able to benefit from a common cycle that allows them to build their programs: (1) Perform well, (2) Get lots of money for the program from revenues that come from a big bowl game, (3) Use the money to hire the best staff and improve facilities, (4) This leads to better recruiting, (5) This leads to better performance, and we are back to the start of the cycle.

This cycle, however, only applies to certain teams under the current BCS system. Why is that? I don’t think the NCAA can really provide a reasonable answer to this question. Why, BCS committee members, does Boise State not have the same opportunities as, say, Ohio State or Oklahoma (whom they recently defeated in a BCS game) to reach the BCS bowl games and get the big bucks, allowing the program-building cycle to benefit the Broncos equally? One can argue that this restraint of trade is unreasonable, and that an antitrust suit is ripe. Below, I will take a second to lay out the basics of that suit, and then analyze Boise State’s case.

THE ANTITRUST SUIT

To win under Section 1 of the Sherman Act, Boise State must show that the restraint of trade is unreasonable. This can be difficult in the context of sports, but it is possible. As the Supreme Court held in NCAA v. Board of Regents of Oklahoma, restraints that ordinarily would be held "illegal per se" in other business contexts will get rule of reason analysis in the context of sports.[4] This is the case here because restraint of trade is essential if the NCAA football product is to be available at all. Given the unique nature of college football (and other sports) and the need to have competitive matchups, the NCAA will likely be given some leeway to evaluate the competitive character of bowl games as they see fit. Therefore, this case will undoubtedly be analyzed under the rule of reason.

Boise State should not have any difficulty demonstrating that the BCS method of selecting teams and distributing revenue is a sufficient restraint of trade to shift the burden to the NCAA to justify this restraint of trade. The NCAA will likely offer an affirmative defense in an attempt to justify this deviation from free market principles. The NCAA will probably argue that the BCS system is aimed at creating a competitive environment. However, there are several factors that might make Boise State a candidate to defeat this argument when raised by the NCAA. If they can defeat this argument and show that less-restrictive alternatives exist, they can win an antitrust suit against the current BCS system.

BOISE STATE’S CASE

In my opinion, the most competitive BCS Bowl game of the 2007 bowl season was the Boise State vs. Oklahoma matchup in the Fiesta Bowl. The Broncos got their shot at a BCS game, and they won. This epic game was the buzz of the offseason, and is still remembered as one of the best games in college football history. Everyone seems to remember the statue of liberty play or the hook and lateral from that game. What many people don’t remember is that Boise State finished as the only undefeated team that season. Although they were the only team not to lose a game they were not the national champions. That honor, and all the money that goes along with it, went to the 1-loss Florida Gators.[5]

During the selection process for the 2009 BCS bowls, Boise State was not chosen to compete in a prestigious BCS game. Despite being 12-0 and ranked higher than Ohio State in the BCS rankings, Ohio State got the at-large bid to play Texas in the Fiesta Bowl.[6] So what is really going on here? The current system in place for choosing teams to compete in BCS games selected a team that was ranked lower, but why? Is this restraint of trade really promoting competition?

Boise State has a strong argument that the system is not promoting competition, but is unfairly colluding to discriminate against schools that are not in the six major conferences.[7] The last time Boise played a Big 12 team in a BCS game, they won and it was one of the most competitive games all season. In 2009, they were ranked higher than Ohio State and should have played in the Fiesta Bowl against Texas, a Big 12 team.

This season Boise beat Oregon when Oregon was ranked 16th in the country. The Broncos are currently undefeated, and may or may not receive a BCS birth. Many commentators point out that the Broncos play a weak schedule and do not deserve a BCS birth because of this. They might have a point about the schedule, but Boise is barred under the current system from doing anything about who they play. They are destined for San Diego County Credit Union Poinsettia Bowl after Other Crappy Bowl because nobody will play them.

They sent out an open invite to any big time schools to play them at the home field of the big time school.[8] No takers. None of the schools from the big conferences want to play Boise State. The Broncos can’t change the conference they are in either, so they are just stuck playing a weak schedule unless the big schools will agree to play them. So far, when the big schools have played Boise, it hasn’t worked out too well for the big schools (Oregon and Oklahoma).

Boise might argue that this looks like an implicit agreement between the BCS conference contenders to keep BSU, and other schools like it, out. In fact, BSU’s president has hinted at such collusion along with Orrin Hatch and many others.[9]

If you look at all these factors together, Boise can argue that there is a presumption against allowing BSU to play in a BCS game. This presumption favors the 6 major conferences that get automatic bids to the BCS bowls as well as most at-large bids. They can argue that this is an unreasonable restraint of trade. It would be reasonable if based on accurate assumptions aimed at promoting competition, but BSU has proven that the assumptions are unreasonable by winning against the best. Furthermore, it is beginning to look more like the BCS is set up as it is to keep revenue distribution within the big six conferences, and less like an attempt to increase competition.

THE NUMBERS

To quote Senator Hatch, the current BCS system is “an agreement between the preferred conferences and the major bowl games as to how they will compete with one another and, more apparently, how they will compete against the non-preferred conferences. Worse still, under the current BCS regime, each of the six privileged conferences is guaranteed to receive a large share of the BCS revenue to distribute among their member schools. The remaining five conferences, which include nearly half of all the teams in Division I, all share a much smaller portion of the BCS revenue, even if one of their teams is fortunate enough to play their way into a BCS game. Over the lifetime of the BCS, the preferred conferences have received nearly 90 percent of the total revenues.”[10] That leaves only 10% for the remaining five conferences.

Another interesting fact is that the chairman of the ACC is the head of the BCS. Boise can argue that he has an interest in keeping the revenues where they are, not in diluting the revenue of the ACC teams for the sake of competition. The WAC chairman recently hired a PR firm to improve Boise’s bid at a BCS game this season.[11] I wonder what type of steps the head of the ACC (and BCS) takes to improve the prospects of schools in the ACC or other schools in the big conferences? This conflict of interest has really not been discussed that much, but when you look at the numbers, it is a glaring problem for the BCS if the system intends to at least appear impartial.

CONCLUSION

Boise State can argue that the BCS discriminates against football programs not housed in a major conference by creating a presumption against those programs getting a BCS birth and all of the benefits that come with BCS births. They can argue that this is an illegal restraint of trade, and there are several options that are less restrictive:

(1) Keep the automatic bids for the big 6 conferences, but give at-large bids to teams based on BCS computer rankings. This eliminates financial considerations that may result in 10th ranked Ohio State getting a Fiesta Bowl Bid over 9th ranked Boise.

(2) Take the top 10 ranked teams at the end of the season using the current formula rather than guaranteeing certain conferences automatic bids.

(3) Change the formula altogether so voters who don’t watch every team (such as Utah, BSU, and Hawaii) are not the ones determining outcomes that affect multi-million dollars at institutions (most state funded by taxpayer money) of higher learning.

(4) Allow BSU to play a tougher schedule so they have a chance to play in big games under the current formula. Maybe allow teams to join BCS eligible conferences if they perform well.

(5) A playoff system.

[1] See President Kustra’s comments at: http://news.boisestate.edu/blog/2009/10/antitrust-implications-of-the-bcs-system/
[2] Michael Wilbon, When the President-Elect Talks, The BCS Should Listen, available at: http://www.washingtonpost/ .com/wp-dyn/content/article/2008/11/18/AR2008111803615.html
[3] See his comments at: http://hatch.senate.gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id =56f346ed-1b78-be3e-e09d-5fcd7bca8fcd&IsTextOnly=0
[4] 468 U.S. 85 (1984).
[5] Similarly, last years Utah Utes went undefeated after winning their BCS game, only to finish 2nd in the final rankings.
[6] Instead of a BCS bowl, Boise got a bid to the San Diego County Credit Union Poinsettia Bowl.
[7] The SEC, Big 10, PAC 10, Big 12, ACC, and Big East all get automatic bids to the BCS games, and they are frequently chosen over schools from other conferences for at-large bids as well.
[8] Dan Wetzel, Boise BCS Blocked, available at: http://rivals.yahoo.com/ncaa/football/news?slug=dw-boise110709&prov=yhoo&type=lgns
[9] See President Kustra’s comments at: http://news.boisestate.edu/blog/2009/10/antitrust-implications-of-the-bcs-system/
[10] See his comments at: http://hatch.senate.gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id =56f346ed-1b78-be3e-e09d-5fcd7bca8fcd&IsTextOnly=0
[11] PR Firm Hired to Make Push for Boise State, available at: http://sports.espn.go.com/ncf/news/story?id=4623676.