Monday, November 21, 2011

Money, Basketball, and the Law

I wrote this article last week for the Stanley & Associates Newsletter, "Off the Record." I wanted to write something that would be relevant to anyone who reads it, and I wanted to explain what the NBA players would have to prove to win an antitrust case. The article is basically an explanation of antitrust in as simple of terms as I could make it. I hope you find it informative. You can read the original newsletter here if you'd like.

If you have any questions regarding antitrust, please feel free to email me at Enjoy:

"This one is for all the sports fans out there. You may know that the NBA Players Union has recently elected to disband and file suit against the NBA. You may have also heard that the specific type of lawsuit filed by the players (in multiple jurisdictions) is an “Antitrust” lawsuit. But what does all of this actually mean for the league, the players, and your favorite NBA team?

An antitrust claim means essentially this: The parties being sued are accused of participating in an agreement that unreasonably restrained trade in the market. In this case, the parties being sued make up the NBA; which is a collection of the teams and owners.

The first element of the claim the plaintiffs (the NBA players) have to prove is the existence of a “market.” There are two types of markets involved in this case: output and input markets. Output markets have to do with things that generate revenue, such as the games, TV deals, and merchandise. Input markets have to do with the products themselves, which, in this case are the players and coaches.

The second part of an antitrust claim that must be proven is the anticompetitive effect that the defendant (NBA’s) actions have on the market. An example of this (taken from a Major League Baseball antitrust case) would be if all the owners got together and agreed that they would not pay any player (free agent) over a certain dollar figure. Proving the anticompetitive effect on the market can be difficult. In the case of the NBA, the players are claiming that the owners conspired to “boycott players” attempting to force them to take massive reductions in compensation.

The final piece of the antitrust suit puzzle for the NBA players is establishing that the teams who make up NBA have available to them less restrictive (less anticompetitive) alternatives.

The NBA will have the opportunity to defend these claims with procompetitive justifications. They will give an economic justification for each of the actions that the players claim to be anticompetitive. Some of these defenses will be very persuasive.

It is worth remembering that the NBA has lost antitrust suits in the past. Back in the mid 80’s, when the San Diego Clippers’s moved to Los Angeles, a court upheld a jury’s finding that requiring approval of every NBA team regarding the move of another team was an unreasonable restraint on trade.

The bottom line is that while antitrust claims are very hard to prove, the cases will often settle out of court because the stakes are very high for defendants. In this case, if the NBA looses, owners will feel the pain as damages awarded in antitrust suits are automatically tripled.

Keep an eye on our firm’s twitter feed for more updates on the NBA antitrust case."

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