Talegating: The antitrust exemption

Many questions still swirl around the eye of the NFL's labor storm - through the rooms where the formal negotiations between the NFL owners, usually just called ‘the league’, and the NFLPA. As tends to be the case in modern labor negotiations, the questions at hand are about money - how much is there really, where does it come from, and how will it be divided? Also as usual, these are not simple queries.

The questions of the CBA and the rights of owners and union are extraordinarily complex, and to understand why much of it is the way it is, you have to examine the league's history. The NFL lobbied hard throughout the 1940s and 1950s to be granted an antitrust exemption from the US government. In exchange for obtaining that exemption (an exemption which creates large amounts of money for them and protects them against various legal entanglements), they agreed to various qualifiers which now empower the players' union. The league would like to see that change. The players, and so far the courts, are far less interested in that outcome.

It's my understanding that because very few businesses (other than the NFL and the insurance companies) have such an exemption, claiming that the union shouldn't have the rights that it does misses at least two essential points. There are three points, really - the first is a recognition of the basic idea that people do have the right to freely speak, and to freely associate and peacefully, as a group, do so in ways that protect their livelihood - to hold differently is a violation of the Constitution itself.

So, point two is that when the NFL pushed so extensively for this exemption, it was entirely their choice and no one forced it upon them. Quite the opposite - they fought for that exemption, they lobbied in Congress, they appeared before a sub-committee of the Judiciary Committee and they testified that this was both necessary and, of course, beneficial for the league and also for the multitide of Americans who partake in sports as spectators and consumers. Sometimes we forget this part, but Congress has tried to hold to recognizing that the league exists in its current form at the pleasure of the representatives of the people, and that the people have a right, in some degree, of influence on keeping the sport on course. Because the NFL was successful in this effort, the second issue is a recognition that there is no legal similarity with any business that doesn't hold that exemption. It is a trade-off that the league desired, and they cannot hold the benefits without accepting the other sides of it. One of those sides is the right of the union to argue as a whole, and to decertify if that protects their interests.

What is decertification? It is the process by which the players disallow the union to represent them. There are two reasons for decertifying now. The first is that if the NFLPA doesn’t do so now, they cannot for six months, and that takes us to the theoretical start of training camp and possibly the season. The players’ leverage, and that is what this is about, comes now.

The other reason is simple: the players currently have Judge David Doty presiding, a justice who has been hearing the issues surrounding the NFL and NFLPA since the early 1990s. If the players don’t decertify now, the case may move out of Doty’s courtroom, and the players may feel that they are losing a potential ally. Doty is familiar with the situation and just as importantly, he came up with a compromise during the last round of legal disagreements that created wealth for both players and owners that went beyond expectations. He’s a tough, grizzled ex-Marine who brooks little interference in his court and he has a history of achieving success at establishing workable solutions to these labor problems. He has not had a history of finding for the owners, but that does not suggest prejudice on his part. Rather, it speaks to the weakness of the arguments that the owners have brought before the court.

There has been some confusion as to why the owners were found to be incorrect with regard to their attempted use of TV monies to build a ‘war chest’ that would help them hold out in the event that they locked out the players. The owners were dinged on this 'war chest' issue because they were trying to use something that they did not own and were trying to force all five networks to make changes in their contracts that would benefit only the owners if there was to be a work stoppage (lockout) and that would hold back monies from the players that the players have a legal right to under such circumstances. Because legally the players have a right to their portion of those funds, the owners would, in essence, be using funds that in part belong to the union in order to enforce a lockout. That is a violation of the current legal situation. Here’s how, via ESPN's Lester Munson:

In his 28-page ruling, Doty criticized special master Stephen Burbank for legal errors and erroneously concluding earlier this month that the NFL can act like a self-interested conglomerate when in fact it is bound by legal agreements to make deals that benefit both league and player.

Doty instead declared that the NFL violated its agreement with the union, which had asked that the TV money be placed in escrow until the end of any lockout. A hearing, yet to be scheduled, will be held to determine potential damages for the players as well as an injunction involving the TV contracts.

Whatever your feelings on unions, this is an unusual situation that does not bear a comparison to a bakery, delivery service or manufacturing firm: none of them holds the antitrust exemption that permits the NFL to function as it does. The league tried to use the TV revenue purely for its own benefit, despite the fact that the funds belong mutually to the players and the league. That’s why the NFL lost. Doty pointed out that the league attempted this to "advance its own interests and harm the interests of the players." As a matter of the facts of the case, that’s exactly what the league attempted to do.

Suggestions that the players shouldn’t have as much ‘power’ as they do here ignores the fact that the players have the exact power that both Congress and the league itself have vested in them. Are they using this to their advantage? Of course. Did the league try and do the same to their advantage? Certainly. The difference in this case was that the league’s attempt was in violation of the pertinent statutes, and the actions of the players were not. The agreement between owners and players states that the owners are responsible for obtaining maximum revenue from the lucrative TV contracts, and that the players and owners will share that revenue. The owners attempted to circumvent that agreement. They lost, and they should have. It was an attempt at fraud. Let’s visit the facts:

TV Contracts and Revenue

For the past three years, the owners have been tailoring their TV contracts specifically to prepare for a lockout. They have been renegotiating contracts with the five separate networks that carry NFL football to include lockout clauses and inserting lockout provisions into coaches' contracts. This behavior has been obvious, clear and based purely on self-interest - they have attempted to avoid paying the players their share of these TV revenues despite their clearly spelled out obligations to do so. This is, for all the talk to the contrary, not an issue of whether unions are ‘good’ or ‘right’ or how one feels about owners versus employees. Whatever a person’s own opinion of those questions, contracts have been executed in violation of the regulations governing the owners’ legal obligations to the players. It may be civil, rather than criminal law, but the owners have broken the rules regardless, and they know it. They did it deliberately, and with malicious intent. They also were caught, and now they have to pay the piper. My heart does not break for them. I would feel the same way if the players union had been caught in similar circumstances.

"The record shows that the NFL undertook contract renegotiations to advance its own interests and harm the interests of the players," wrote Judge Doty. It’s hard to be more direct than that. Additional information  on the specifics of what the league tried to do and why it was struck down can be found here.

Decertification

If the union decertifies - which is their legal right, assuming that certain standards are met - the players have a right to negotiate as individuals. The owners no longer are in a situation in which they can take monies from the networks, since there would be no games, and the owners would have been trying to use funds that are only theirs as a part of the total revenue - theirs and the players - to maintain the lockout.

This is not the first time a similar situation has come up. The players decertified back in 1989, and the legal issues were gone over with a fine tooth comb at that time, too. The owners declared the actions of the players' union to be a ‘sham’, and we’re starting to hear that term again. It didn’t work for them then, and it’s highly unlikely to work now. The courts have already ruled once on this and it isn’t probable that a different verdict will be reached.

So, why decertify? It’s simple, really. A labor union cannot bring an antitrust suit, and they can’t ask for an injunction to halt an action - a lockout, in this case - that puts the members of the union in financial peril. Therefore, there are two separate issues that are about to come up.

The first is the injunction, and from the players’ standpoint, it’s the toughest. It will get the owners group back into court, and it may provide a setting for renewed negotiations. That could be the good side. The bad side for the players and the fans is that injunctions are apparently rarely granted in such cases. This is one that the owners would likely win - it’s hard to prove that immediate harm will be the result of failing to grant an injunction. That’s the standard to which the union will be held.

The second reason to decertify is more in favor of the players. By decertifying, they are able to bring antitrust lawsuits against the league owners. Would they have a chance to win such a lawsuit? Yes - in fact, it’s unlikely that they would lose. Football is, for all intents and purposes, a monopoly. Claiming that other teams have tried and failed to break that monopoly doesn’t help the owners’ cause - that only speaks to the extent of the monopoly. No other league has five TV contracts worth billions of dollars. With a total of 9 billion dollars in revenue and no other league competing for the services of college football's elite players, the NFL has what is a sweetheart deal. In American Needle vs. the NFL, the league tried to make the case (after almost a decade of lobbying Congress for an antitrust exemption) that it was not a monopoly. The courts found against them. In fact, as rare an outcome as this is, all nine judges found against them. That doesn’t leave a door open to revisit the issue. The NFL has a monopoly in fact - Judge Doty, in his ruling on the networks, described the NFL as having “consistently characterized gaining control over labor as a short-term objective and maximizing revenue as a long-term objective...advancing its negotiating position at the expense of using best efforts to maximize total revenues for the joint benefit of the NFL and the Players."

That’s where it stands. It’s an ugly situation that is made worse by the fact that there is a legal trail that is many years long, during which the owners have attempted to execute clauses in their network contracts that the networks themselves were uncomfortable with for the simple reason that they are in violation of the agreements between owners and players. The next steps may be decertification and the filing of antitrust lawsuits. Those are long and arduous. It’s probable that the players will win, but at what cost? A year or more of the game could be lost forever, and while football became the most popular sport in the US some decades back, the circumstances of the NHL and their 1994 lockout should provide a cautionary note. You can lose a war by winning at too high a cost. Let’s hope that both sides recognize this and get on with the business of playing NFL football.

Learn to laugh at yourself. You will be ceaselessly amused. - Sri Gary Olsen

You can reach Doc at .(JavaScript must be enabled to view this email address) or follow him on Twitter @alloverfatman

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