Monday, May 5, 2008

Applying Antitrust Labor Exemptions to Professional Golf and Tennis

Daniel Kaplan of SportsBusiness Journal (subscription only) has an interesting piece in this week's edition in which he reveals that The ATP World Tour is losing millions of dollars because of steep legal expenses tied to an antitrust lawsuit brought by one of its tournaments against the men’s circuit (5/5/08, Mounting Legal Expenses Add to ATP's Losses). According to sources, last year the ATP lost $5 million, and it is projected to lose $6.4 million this year. The ATP event in Hamburg, Germany, filed an antitrust suit against the ATP for trying to downgrade the event in the tour’s tier structure next year as part of the calendar remake. The Monte Carlo event also sued the ATP over the same issue, but that lawsuit was settled.

I've always thought that rules and regulations established by the ATP, PGA and LPGA should be exempt from the antitrust laws under the same rationale for exempting rules established by professional sports unions and rules established by the unions and leagues via the collective bargaining process. Although they are not certified as labor unions under the National Labor Relations Act, all three associations essentially act as labor unions and serve as the voice and representative of the players as a collective group.

When labor unions enact rules and regulations in their own self-interest, those rules and regulations may have an anti-competitive affect on third parties. Hence, the rationale for what's known as the statutory labor exemption. The source of the statutory exemption is found in the Clayton Act and the Norris-LaGuardia Act, and it "removes from the coverage of the antitrust laws certain legitimate, albeit anticompetitive, union activities because they are favored by federal labor policy." Powell v. NFL, 678 F.Supp. 777, 782 (D. Minn. 1988). For example, courts have exempted claims by agents against unions alleging that agent regulations adopted by the unions constitute an illegal restraint on trade. See Collins v. Nat’l Basketball Players Ass’n, 850 F. Supp. 1468, 1474 (D. Colo. 1991), aff’d 976 F.2d 740 (10th Cir. 1992). The U.S. Supreme Court, in H.A. Artists & Associates v. Actors’ Equity Ass’n, 451 U.S. 704 (1981), held that labor unions acting in their own self-interest and not in combination with nonlabor groups are statutorily exempt from the antitrust laws. If the ATP or PGA adopted regulations governing agents with various certification requirements, should the simple fact that they are not certified as labor unions subject them to antitrust scrutiny?

The non-statutory exemption insulates from the antitrust laws league rules and regulations that constitute mandatory subjects of collective bargaining (i.e. "wages, hours and working conditions") and that primarily affect only the parties to the collective bargaining relationship. All three associations -- ATP, PGA and LPGA -- have player representatives that serve on their boards of directors. The board votes on all sorts of subjects that affect the players and which are akin to "working conditions" -- for example, issues concerning format of play, where they are going to play their tournaments, how they are going to be ranked, etc., etc. The ATP's board of directors is made up of three player representatives and three tournament representatives. When the player and tournament representatives adopt rules and regulations that govern their particular sport and primarily affect only them -- which is essentially analogous to collective bargaining between unions and leagues -- why should those rules and regulations be subject to antitrust scrutiny?

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