Each month there is a new development regarding the Penguins' signing of Russian phenom, Evgeni Malkin (See my Sept. 18 post and my Aug. 17 post). In the latest development, the Russian team Metallurg Magnitogorsk filed an antitrust lawsuit in U.S. District Court in Manhattan on Thursday against the NHL and the Pittsburgh Penguins. Here are some of the allegations made by the Metallurg according to the press release:
- The signing of Malkin to an NHL contract was a "blatant and deliberate tampering and interference" with the Russian team's existing agreement. The Penguins knew or should have known that Malkin was under contract to a Russian team when they signed him.
- The NHL and the Penguins violated antitrust laws by conspiring in a group boycott and refusing to deal with Russian hockey clubs regarding player transfers. The NHL and its clubs have "decided to play hardball" with Russian hockey clubs to punish them for the Russian Ice Hockey Federation's rejection of a new general agreement governing the transfer of foreign players to the NHL, and that the NHL told its clubs that they were free to sign NHL contracts with Russian hockey players already under contract with Russian hockey clubs if the players secured releases according to Russian labor law.
The antitrust claim, however, is creative. Section 1 of the Sherman Act makes unlawful agreements to restrain trade. When the league enacts a rule or makes a direction, it's deemed an agreement among all of the member clubs for purposes of Section 1. If the press release is accurate that the Metallurg is alleging that the NHL told the clubs they could sign Russian players if the players secured releases, then I don't see a Section 1 antitrust problem because the NHL is essentially saying to the clubs, first make sure that the players are not bound to a contract with another team under Russian law. In other words, there is no agreement to restrain trade. All you really have here are individual NHL teams taking the initiative on their own to negotiate and sign players to contracts.
The Metallurg could also be asserting a Section 2 claim, which makes it unlawful to monopolize or to attempt to monopolize. Section 2 claims are very difficult to establish. Here, the fact that the NHL and the Russian hockey league were unable to reach a transfer agreement is probably not sufficient. Moreover, the Russian hockey league is not a fledgling league trying to compete with the NHL in the U.S. -- it's a well-established league in another huge country that arguably competes with the NHL for Russian players. The fact that the NHL may have more money and is able to draw the top talent doesn't make for an antitrust violation. On the other hand, it could be argued that the NHL has a "natural monopoly" in the U.S. and, therefore, its conduct in dealing with competitors is going to be more heavily scrutinized. But regardless, if the NHL negotiated a transfer agreement in good faith, the Metallurg should definitely lose on Section 2.
Geoff Rapp brought to my attention that there was another lawsuit filed this week, which has not received much press, by the Russian hockey club Lokomotiv Yaroslavl against the NHL, the Calgary Flames and the Edmonton Oilers alleging similar claims involving the signing of Andrei Taratukhin of the Flames and Alexei Mikhnov of the Oilers. So this issue is not going away anytime soon for the NHL. If the NHL loses on summary judgment, I predict settlement (i.e. transfer agreement)....because, as Gary Roberts put it once, "anytime you put an antitrust lawsuit in front of a jury, it's a crapshoot."
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