Chapter 12: Competition Law and Labor Markets
Stephen F. Ross 1. INTRODUCTION Shortly after the ﬁrst professional sports league (Baseball’s National League) was created in 1876, and years before enactment of the Sherman Antitrust Act, baseball’s founders openly admitted that the principal justiﬁcation for agreements among clubs to restrain competition for players was the desire to hold down salaries and increase proﬁts. After the enactment of federal legislation subjecting antitrust violators to liability for treble damages, baseball ofﬁcials changed their tune, arguing that labor restraints were essential to promote competitive balance among the teams.1 Since then, there has been an ongoing debate about the proper application of competition law to labor market restraints.2 Competition law can constrain the ability of sports leagues to restrain trade in the market for player services. Many sports leagues have market power in both labor and output markets. Where such power exists, restraining competition inter sese is likely to yield monopsony proﬁts. Imposing contract terms that limit the ability of players to be employed elsewhere has the potential to exclude a sports league’s potential rivals. Even if these schemes harm the consumer attractiveness of their product, the lack of reasonable substitutes for sports fans means that ‘market retribution will [not] be swift.’3 At the same time, well-organized sports competitions may ﬁnd that imposing some fetters on a wholly competitive labor market improves the quality and public appeal of their product. Courts have accepted the potential need to restrain trade to promote competitive balance as one such justiﬁcation,...
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