Last week the North American Soccer League took its gloves off and readied for a battle. The NASL filed an antitrust lawsuit against the U.S. Soccer Federation in the U.S. District Court for the Eastern District of New York, insisting that its survival hinges on this case.
NASL’s complaint invokes federal antitrust law to argue that USSF is breaking the law. To that end, NASL contends that USSF and three alleged co-conspirators—Major League Soccer, Soccer United Marketing and United Soccer League—have unlawfully prevented NASL from competing with MLS as a Division I pro soccer league. Further, NASL asserts, USSF has sought to illegally strip NASL of its placement as a Division II league. It has done so, NASL maintains, so that MLS's favored minor league, USL, can become the sole Division II league.
NASL demands a preliminary injunction that would block USSF from revoking NASL’s Division II status. It also requests a permanent injunction that would prevent USSF from classifying leagues by division.
NASL warns that unless it obtains these remedies it could be driven out of existence. In such a scenario, NASL asserts, soccer fans would be the real victims. Their choice in men’s professional soccer in the U.S. and Canada would be greatly diminished.
NASL claims that it is a victim of a “conspiracy.” Could you explain the legal significance of that assertion?
Section 1 makes it illegal for competing businesses and other entities—including non-profit organizations like USSF—to conspire in ways that unreasonably harm economic competition. Such harm is normally shown through higher prices, fewer choices of a product or service or diminished quality in a given marketplace.
Here, NASL argues that USSF—a national governing body under FIFA—has taken steps with the help of its co-conspirators to damage competition across men’s professional soccer in the U.S. and Canada. NASL charges that USSF has effectively made it impossible for NASL to compete with MLS as a top-tier league. Also, NASL insists, USSF now seeks to bar NASL from competing with USL as a second-tier league. These arguments directly relate to competition. One less competing league, so the logic goes, means that the remaining league becomes a monopoly over a particular level of pro soccer. With that status, the remaining league—in this case MLS for Division I and USL for Division II—theoretically has fewer incentives to innovate. Likewise, the remaining league can charge consumers (fans) higher prices and pay labor (players) less.
In order to prevail, NASL will need to convince a court that its depiction of competition fits relevant markets. NASL’s complaint expends considerable energy distinguishing top tier/Division I soccer teams from second tier/Division II teams. Likewise, NASL insists that Division I and Division II are not substitutes for one another. For instance, NASL highlights the existence of higher-value sponsorships and more national associations for Division I teams than are typically found among Division II teams.
NASL also maintains that fans of professional soccer do not consider other pro sports leagues, such as the NFL and NBA, to be viable substitutes for Division I and Division II men’s professional soccer. Those leagues “have different rules of play” and appeal to fans with different kinds of interest.
NASL’s desire to describe top-tier and second-tier soccer as unique carries significance under antitrust law. NASL is more likely to prove that USSF is unlawfully harming competition if NASL can show that the relevant market for competition analysis is limited to these two soccer leagues. USSF, in contrast, will be poised to argue the relevant markets are less fixed and more dispersed. Along those lines, USSF will claim the relevant markets span across the sports and entertainment industries—and thus any USSF rules that limit competition in soccer are not especially impactful when considering the totality of sports and entertainment offerings for consumers.
Under the relevant standard, Rule of Reason, NASL will need to show that USSF’s rules harm competition more than they help it. With that in mind, expect USSF to argue that in the absence of USSF rules that limit competition, it would be difficult, if not impossible, to organize men’s pro soccer in economically beneficial ways. USSF could stress that soccer leagues across the world are designed as pyramid structures with multiple divisions—albeit with promotion and relegation, which does not exist in the U.S. and Canada. Further, given the volatility in professional soccer in the U.S. and Canada over the years, USSF may be able to persuade a court that its structure is essential to ensuring that U.S. soccer fans receive a reliable product and one in which sponsors will invest.
NASL also raises a monopoly claim. How strong is that claim?
NASL’s monopoly claim invokes Section 2 of the Sherman Act. Section 2 prohibits an entity from intentionally acting as an unlawful monopoly in a relevant market. Here, NASL charges that USSF has ensured that MLS enjoys monopoly status for Division I soccer in the U.S. and Canada. USSF has done so, NASL contends, by trying to destroy NASL and thus wipe out any competition. NASL also asserts that USSF desires to see USL become a monopoly of Division II soccer.
Whether NASL can prove its monopoly claim will depend on whether MLS and USL’s market positions reflect willful acquisitions of power rather than simply being good at what they do. In other words, if MLS has enjoyed full control over top tier men’s pro soccer because of its organizational strengths, then it would be more difficult for NASL to prove the existence of an illegal monopoly.
How does FIFA fit into this dispute?
NASL is a member of USSF and USSF is a member of FIFA. Statutes promulgated by FIFA require that “disputes affecting leagues, clubs, members of clubs, players officials” go first to arbitration before they can be heard in a court. FIFA uses the Court of Arbitration for Sport in Lausanne, Switzerland as a forum for arbitration matters.
Instead of seeking a remedy through arbitration, NASL has sought relief through a U.S. federal court. To be sure, USSF will argue that the court should dismiss NASL’s lawsuit as not yet “ripe”—meaning, NASL is contractually obligated to first try arbitration before seeking court intervention.
In response, expect NASL to contend that it should not be obligated to arbitrate matters that pose an immediate threat to its existence. If NASL were forced to arbitrate, it may not be able to obtain the kind of remedy it seeks—a preliminary injunction.
Why is NASL’s chief lawyer an important part of this controversy?
(more to come)
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https://www.si.com/soccer/2017/09/25/nasl-us-soccer-lawsuit-questions-fifa-kessler
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