2020 NFL CBA
This past month the NFL membership approved the new CBA, which is likely to result in a decade of labor peace. Many of the changes are monumental (hello 17 game regular season!) however, might some of these changes lead to antitrust violations?
One of the most significant changes to the CBA is the increase in the players’ revenue split with owners. The revenue pot does in fact include revenue derived from “gambling on any aspect of an NFL game,” where NFL betting is the primary driver of sportsbook revenue throughout the U.S. Furthermore, the new CBA covers revenues from “the operation of gambling of any kind in an NFL stadium.” This is in addition to other stadium credits.
The term antitrust is used to describe any contract or conspiracy that illegally restrains trade and promotes anti-competitive behavior. Congress enacted antitrust laws to prevent anti-competitive behavior in business in order to promote competition and ultimately drive down prices for consumers.
What is the Sherman Anti-trust Act?
The Sherman Anti-trust Act prohibits monopolies and restraint of trade. Where several suppliers come together and agree to sell a product for a certain price (and no less), this hurts competition and therefore is prohibited by law. The Act prohibits: (1) a conspiracy by two or more persons to unreasonably restrain trade, (2) an unlawful monopoly or an attempt to monopolize an industry, (3) price fixing.
Section 1 of the Sherman Antitrust Act states, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”
American Needle, Inc. v. National Football League
In 2010, the Supreme Court heard the case of American Needle, Inc. v. National Football League, 560 U.S. 183 (2010). The ultimate question was whether the NFL and its members constituted a single entity for the purposes of antitrust laws. If the NFL and all 32 teams were viewed as a single entity, Section 1 of the Sherman Antitrust Act would not apply. However, if the Court held that the NFL’s 32 teams were separately owned businesses that are engaged in competition with one another, Section 1 would apply.
The Supreme Court held that the National Football League’s licensing of intellectual property in this case constituted concerted action that is not categorically beyond Section 1 of the Sherman Antitrust Act’s coverage. The Court noted that each NFL team is a substantial, independently owned, and independently managed business, whose objectives are not common. The Court reasoned that while the actions of NFL Properties (“NFLP”) are not as easily classified as concerted activity, the NFLP’s decisions about licensing are a concerted activity and, thus, are covered by Section 1.
How Does American Needle Foreshadow Potential Issues with the New CBA?
While American Needle held that each NFL team is a substantial, independently owned, and independently managed business, with objectives that are not common, what might this mean when we start considering the almost 1,700 NFL players who now have an interest in revenues from “the operation of gambling of any kind in an NFL stadium?”
First under Section 1, there may be a potential anti-trust violation because it prevents individual teams from selling their data to individual gaming companies on a free market. Further, in this context, it would prevent individual players from selling data as well. The centralization of game data for purposes of resale to sports gambling companies gives rise to issues very similar to the issues posed in American Needle.
With the League and its players looking to obtain huge profits from sports gambling, it is almost a certainty that anti-trust questions will arise. NFL betting is the primary driver of sports book revenue throughout the U.S. Of course, there will be plenty of complications surrounding collecting and selling data, organizing and running gambling in stadiums, and ensuring every party gets their “piece of the pie.”
While it will be interesting to see how this plays out as NFL players begin to profit from sports gambling in their stadiums, it leaves one to wonder how the rise of sports betting will cause challenges for other leagues. While MLB enjoys an anti-trust exemption, one must wonder whether the issues that will surround sports betting will once again bring this exemption into question.