Thursday, September 16, 2010

NFL Primer: What’s Decertification, Antitrust Law & How Can Decertification Prevent a Lockout

You may have heard that the New Orleans Saints have voted unanimously in favour of decertifying the NFL Union to try and prevent a lockout. You’ve probably also heard the term “antitrust laws” thrown around as part of this decertification discussion as it relates to the NFL labor situation.

What is decertification and how can it be used to try and prevent a lockout? How do antitrust laws apply here?

In this column, I connect the dots from decertification to the lockout. My intention is not to provide a detailed review of antitrust law, but to explain the fundamental principles at play.

Antitrust Laws: What Is It & How Does It Apply

So long as the Union is in place, the collective bargaining agreement (CBA) governs the relationship between the Players and the NFL teams. The CBA sets out the rules that both sides need to follow.

Why is this important? Well, there are a bunch of provisions in the CBA that are in violation of U.S. antitrust law.

Think of antitrust as anti-competition. Where competitors get together and implement rules that limit competition, they open themselves up to an antitrust or anti-competition claim. Back in the 1880s, the U.S. Federal Government wanted to ensure healthy competition and didn’t want to see competitors getting together to fix the market. That was the beginning of antitrust laws in the U.S.

The NFL & Antitrust Violations

How does this apply to the NFL? The NFL has 32 individual teams that are all competitors. These competitor teams have gotten together and imposed a number of limits that restrict the marketplace for players.

For example, the CBA provides for a salary cap, places limits on free agency and restricts the number of players a team can employ at 53.

As well, the college draft system grants each team exclusive negotiating rights for the players it selects in the annual NFL draft. These exclusive rights extend for a period of one year. When a team selects a player in the NFL draft, the team is “deemed to have automatically tendered the player a one year NFL Player Contract for the Minimum Active/Inactive List Salary then applicable to the player.”

The teams even share revenues.

Generally, competitors that get together and place restrictions on trade open themselves up to an antitrust claim.

Question: How then do the NFL teams get away with these antitrust violations?

Answer: Since these restraints on competition are placed in the CBA, the NFL is protected. Think of the CBA as a bubble and all that matters is what's in the bubble. This means that so long as the CBA is in place, the league insulates itself from an antitrust claim.

Decertification: What Is It?

That’s where decertification comes in.

When the Union decertifies it disbands, or put more bluntly, it kills itself. So if the Union decertifies, it will cease to exist.

If the Union decertifies, then the CBA no longer applies. This makes sense because the CBA is the agreement between the Union and the NFL teams, and if the Union isn’t around anymore, then the CBA can’t apply.

When the CBA no longer applies, then the antitrust violations in the CBA suddenly come into play and the players could sue the NFL for antitrust violations (this assumes that NFL unilaterally imposes the same conditions in the labour market for players as exists under the CBA, which it would otherwise since without it we would have a free-for-all).

Decertification bursts the CBA bubble.

So the series of events goes like this:

decertification => CBA doesn’t apply => players launch antitrust lawsuit against the NFL

Not The First Time: Reggie White & Others Took on the NFL

But so what – why should the NFL care?

Well, the NFL would have a tough time with this type of lawsuit and they could end up paying a lot of money if they lost in court. An antitrust lawsuit could result in a catastrophic award of monetary damages against the NFL.

The Union has done this before. After a disastrous 1987 strike, complete with player defections, the Union decertified and players filed an antitrust lawsuit. Players became plaintiffs, with names such as Freeman McNeil and Reggie White leading the way. The McNeil case gave the NFL a glimpse of the impact of antitrust liability. The jury returned a verdict with total damages of $1,629,000 to be split among just four players. The NFL promptly settled the matter when a class action lawsuit was subsequently launched.

So this answers the next question – what’s the benefit of decertifying? If the Union decided to decertify, the hope would be that the threat of antitrust lawsuits would pressure the NFL to negotiate a favourable CBA and not lock the players out.

So let’s add one more thing to the series of events:

decertification => CBA doesn’t apply => players launch antitrust lawsuit against the NFL => lawsuits try to pressure NFL to prevent lockout and agree to new deal

NFL Has Options & They Will Fight

The NFL is not without options, and it could challenge the decertification. The NFL could argue that a collective bargaining relationship continues to exist between the players and the NFL, and that the Union’s act of decertifying is merely an act of posturing. So while the Union has decertified, the NFL would argue, it is still operating behind the scenes in some capacity.

The NFL teams could also argue they are not in violation of antitrust laws. Although there are restrictions in place, they are necessary to operate the league. They may have more success justifying that position with the salary cap, since it promotes competitive balance. However, they would have more trouble justifying things like the free agent and college entry player restrictions.

As a side note, antitrust laws don’t apply to a single entity – only to a group of competitors. The NFL could argue that they are a single entity and therefore not in violation of antitrust laws. However, this won’t fly. They’ve tried it numerous times and have lost – most recently this year in the U.S. Supreme Court case American Needle (copy of the decision embedded in link).

Decertification is not something done lightly so the Union will move cautiously.

Goodell and the owners have made their displeasure with the current arrangement well known. So expect the NFL to really dig their heels in, and if need be, fight decertification.


Aaron Gordon said...

Great stuff here Eric. Its the best explanation I have read about desertification so far. Although its slightly outdated (1985) there is a very insightful article in the UCLA Law Review by Gary R. Roberts on Antitrust cases and the NFL. He argues sports teams fall into a gray area not yet established (and still not after American Needle) by the Supreme Court. After all, American Needle says they are not a single entity, but at the same time, a league of one fails by definition.

Eric Macramalla said...

Thanks for your feedback Aaron. Hopefully this article can fill in some blanks. I found that the reports were generally this: decertification can prevent a lockout, which is not accurate. Antitrust law is awfully complex as well. I read the article you mentioned - though it was excellent. If I may, here is another terrific article - Sean W.L. Alford, Comment, Dusting off the AK-47: an examination of NFL players’ most powerful weapon in an antitrust lawsuit against the NFL, 88 NORTH CAROLINA LAW REVIEW 212 (2009) and here's the link -

Aaron Gordon said...

Excellent, thanks for the recommendation. I am really interested in the very nebulous relationship between antitrust law and sports. If I may ask a lightly unrelated question, I have read that the American Needle case doesn't apply to things like the Madden franchise and TV contracts. Is that accurate, and if so, why?

Eric Macramalla said...

Hi Aaron - sorry for the late response. You are correct - the American Needle does not apply to the Madden franchise and tv contacts. The American Needle case applies specifically to the licensing of intellectual property. That covers things like licensing out the use of the Colts trade-mark for jackets, hats and shirts. In that American Needle case, the NFL tried to argue that it was a single entity and therefore exempt from antitrust laws. The Court said no - you are not a single entity and tossed the case back to the lower court. At that point, the NFL would have to argue that while we are not a single entity for the purpose of licensing intellectual property, we need all the teams (ie competitors) to work together. Justifying it this way is relying on the rule of reason which is a defence. The NFL has tried to argue many times that it's a legal entity and exempt from antitrust laws. They haven't been successful. So while American Needle was seen as a landmark case it really wasn't. It just confirmed a well-established principle that the NFL is not a single entity. The reason the case was so hot at the time was because if the NFL won, then it might throw a serious wrench in the Union's decertification strategy.

One more thing: while the American Needle case strictly applies to the licensing of IP, really it has broader ramifications that could apply to TV, video games, etc. Why? Because again it confirms the NFL is not one entity.