Topic: Law and Order
American Needle vs. NFL: Antitrust and The Unnoticed Price of Incorporation Law An antitrust case to be heard by the Supreme Court underlines the dangers inherent in having laws which allow the creation of fictional entities.by Walt Thiessen
(libertarian)
Tuesday, July 21, 2009
It has received little attention in the major media (TV news), at least so far, but the U.S. Supreme Court has agreed to hear an antitrust case that clearly illustrates the insanity involved in having a policy of treating incorporated companies as if they were super-individuals.
ESPN, among others, has taken notice of the case and are warning readers that, depending on how the Supremes rule on this case, it could mean the end of free agency for all four major sports in America. The idea is not nearly as far-fetched as it sounds.
The Court will hear the case of American Needle vs. NFL on the question of whether the NFL is a single entity or a group of 32 separate businesses (the 32 teams who comprise the NFL). The ESPN article suggests that if the court decides to side with the big business NFL on this legal point, the likely outcome is that the NFL (and other major sports leagues) could not be treated as monopolies under the Sherman Antitrust Act, because there are no competing leagues for them to "price fix" with. The article suggests that lacking the legal formula for a monopoly under the law, the NFL could effectively and drastically reduce the impact of free agency, suggesting the idea that the teams in a league are in competition with each other, and therefore restricting free agency violates the Sherman Antitrust Act. Take away the notion that the teams are independent entities and combine them under one entity (the NFL) and Sherman becomes moot and inapplicable.
Is this interpretation correct? Probably not. Major League Baseball is already exempted by prior Supreme Court decisions against antitrust allegations, based first on a 1922 case Federal Baseball Club v. National League in which the Court held that baseball was not covered by the commerce clause of the Constitution and therefore could not be regulated under the Sherman Antitrust Act. This decision was affirmed by the Court in Toolson v. New York Yankees in 1952 and Flood v. Kuhn in 1972. This explains why MLB is the lone major sports league which has refused to file an amicus brief in the case. The NBA and NHL have filed such briefs, presumably because they want the same exemption baseball has. Moreover, free agency in baseball came about because of the Seitz Decision in 1975. Arbitrator Peter Seitz ruled that because pitchers Andy Messersmith and Dave McNally pitched for a year without a contract, they were effectively free agents, a decision later upheld by the Federal courts. So even if the NFL gets its way on this issue, free agency will likely remain.
Nevertheless, major sports unions, according to the ESPN article, are treating this case very, very seriously, giving credence to the belief that the threat to free agency is real. The article quotes Rutgers law professor, Marc Edelman, as saying, "If the court adopts the NFL's single-entity concept, it would change everything." The same article quotes Randal Picker, a professor at the University of Chicago Law School, as saying, "I am sure that the league and the lawyers have gone through a justice-by-justice analysis and have concluded that they have a chance to solve many problems in a single decision."
And what exactly is this list of problems the NFL hopes to address? According to the ESPN article, it includes the end of the high price (to teams) of free agency, competition that keeps down sports souvenir pricing (which makes less money for the teams), the lowering of the high cost of coaches and managers (which now become salaried employees of the teams instead), and possibly the end of widespread broadcast scheduling of games. Such a decision would almost certainly lead to a dramatic increase in strikes and lockouts in all major sports as the various union contracts expire.
Surely such a pro-NFL decision isn't likely, is it? ESPN's legal experts count five likely votes out of nine among the Supremes: John Roberts, Samuel Alito, Clarence Thomas, Antonin Scalia. and Stephen Breyer.
Will free agency be eliminated by a pro-NFL decision? Probably not. But what neither ESPN nor any of the other news outlets reporting the story have noted is that this case is a direct, although unintended, consequence of recognizing fictitious entities as being legally recognized individuals. I'm talking about corporations, which governments have long held have the same rights as people. This fact will not likely gain any traction as the story becomes more famous. None of this, however, reduces the glaringly obvious fact that the whole plate of nonsense exists soley because of the crazy notion that corporations are people.
Corporations are not people. They are associations of people, but that doesn't mean they should be treated as separate, individual people that never die unless they get bought by someone else (usually another fictional person, although the whole thing sounds uncomfortably like slavery to me) or go bankrupt. Of course, I don't expect that the governments at the Federal and State levels are going to start removing incorporation laws anytime soon. Should they? Yes, they should, but they won't, which means that the unintended consequences of the insane corporation laws promote and perpetually enhance superpowerful cartels, in this case known as the NFL, the NBA, the NHL, and Major League Baseball.
Isn't it fun to be a pro sports fan?
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The views expressed in this
article are those of Walt Thiessen only and do not represent
the views of Nolan Chart, LLC or its affiliates. Walt Thiessen is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
Excellent point, the issue is non existant without the concept of incorporation and I agree the premise of incorporation, although crucial to the case and many others situations, including our current "bailout", is not likely to even come up in the reporting, it is so engrained in our thinking.
If free agency can be removed, the subsidized funds that are channelled into sports teams from local municipalities and sometimes states will now stay in the owner's pockets. We would then have the feds thru the court system instructing the states not whether or not it is constitutional to subsidize a sports team, which is a valid supreme court question, but who in the corporate structure the subsidy should go to!
Nice job Walt......But I'm curious if this would affect law suites against the "fictional entities"......Meaning that if the NFL is considered a person, who would go to jail or pay the price in a lawsuite, say a wrongful death or criminal neglagence case, about a player who dies in the manner of Kory Stringer.
Posted By: Donna Maskell
Date: 2009-08-19 14:53:07
Walt --
If corporations are not individuals, how will the government tax them to support health care? That might be an interesting situation, if the Supremes decide that way.
I own a store in downtown Cleveland selling sports apparel.
I notice that Google is filled with Chinese counterfeit websites selling NFL jerseys.
This problem seems to grow rather than shrink. Instead of tackling this problem the NFL is trying to restrict online sales of NFL jerseys by legitimate Reebok accounts.
Reebok distributed letters to retailers this week that to continue selling NFL jerseys online you must apply to the NFL for permission. The basic requirement for brick and mortar stores with a website is that they bought over $2,000,000 wholesale of NFL product in 2009.
For web only stores it is $3,000,000 and then the NFL wants a 13.75% cut of NFL sales next season.
It is obvious this program is to protect the huge salaries and stock options of the executives running nflshop.com and other huge online merchants. Most are controlled by GSIC. Look up what these executives earn at Yahoo Finance.
The hardworking individual store owners that service the local communities and maybe sell a few jerseys online will be screwed.
Picture my small store in Cleveland or similar stores in Detroit selling Browns or Lions jerseys. They have to struggle with losing records, traded and injured players, and changing designs. If they sell a few jerseys online they now risk closure of their Reebok account.
Also will you even have a Reebok salesperson left to service your account or will they all be let go if the NFL succeeds in closing individual accounts that choose to continue selling online.
If the NFL instituted this policy in 1999 so be it. But now 10 years later there are 1,000's of legitimate local Reebok dealers that have had websites for years. They service the customer while NFLshop.com just wants the money. The local shop owner talks sports with their customers and maybe knocks a few dollars off a jersey for the laid off factory worker. nflshop.com talks how much can we get you to spend with us and our corporate partners.
The greed of the NFL is astounding that in these trying economic times they only care about their huge online partners instead of the small local store that has supported the NFL for years.
If this policy affects you tell the NFL, tell your Reebok rep, and tell your congressman and senators but most of all tell your customers.
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