By: Mayel Tapia-Fregoso

Professional sports leagues in the United States (US) have existed since the first professional baseball league emerged in 1858. Since then, Major League Baseball (MLB), the National Football League (NFL), among other leagues, have dominated US sports with little competition from other independent leagues. These sports leagues have, in large part, escaped the comprehensive antitrust regulatory scheme laid out in the Sherman Antitrust Act. Despite the law’s enforcement, sports leagues have nonetheless enjoyed soaring profits because of their monopolies over broadcasting, labor, licensing, and media rights. Recent lawsuits against Major League Baseball and the National Football League are the latest in a series of cases designed to curb these professional leagues’ power and reveal the effects sports league monopolies can have on consumers.

A Brief History of Antitrust Regulation 

In 1890, Congress passed the Sherman Antitrust Act (Sherman Act), the first federal law outlawing monopolistic business practices. Congress designed the Act to combat previously unregulated industries, such as oil. Such industries were dominated by a single company and restricted interstate commerce. The Act empowered private parties to bring lawsuits against monopolist companies to enforce antitrust laws and seek damages for violations of the Sherman Act. Today, the Sherman Act “promotes consumer welfare by enhancing economic efficiency in commerce.”

Before the First Radio, There Was . . . Sports!

Professional sports have been a core part of American culture for more than one hundred years. The National Association of Base Ball Players was founded in 1858, eventually becoming Major League Baseball in 1903. Other major sports leagues, like the National Football League formed in 1920, were founded in the following decades of the twentieth century. These entities are the primary leagues within their respective sports, and have little competition from other leagues. 

How Do Professional Leagues Fit into Antitrust Laws’ Regulatory Scheme? 

Antitrust laws are designed to regulate national sports leagues, however some leagues are structured more like economic monopolies rather than single entities. In most sports leagues, along with its assets like land, player rights, media rights, and intellectual property. These teams collude with one another to control the supply of a product to increase profits, limit competition, and dominate the market.

Leagues with antitrust exemptions and those that have evaded the Sherman Act’s reach have monopolized their respective industry (labor, media rights, region exclusivity, licensing etc.). For example, if an athlete wants to play professional baseball, an MLB team must draft or sign the player, obtaining the rights to that player. Professional baseball athletes have few other options to play professional baseball besides MLB and MLB-affiliated minor league baseball teams (MILB). MILB teams or “farm teams” are teams affiliated with specific MLB clubs whose rosters are composed of players whose rights are owned by an MLB team. MLB teams have agreements with MILB teams to develop players they have signed or drafted, some of whom eventually feed that MLB team’s roster. MILB leagues and teams exist to develop players’ talent and provide MLB teams with a steady supply of players. MILB teams do not compete with any MLB teams—they are often located in small media markets. Currently, there are nine independent leagues composed of teams not affiliated with MLB teams. However, many of these leagues, like the American Association of Professional Baseball, have specific partnerships with MLB and, coincidentally or otherwise, do not have teams in any city where an MLB team plays. 

Other leagues have faced more direct competition. Over the years, a few independent football leagues have challenged the NFL’s foothold in the market. In 1986, the United States Football League (USFL), facing bankruptcy, challenged and defeated the NFL in an antitrust lawsuit. Despite finding that the NFL prevented the USFL from securing a television contract, the jury found the USFL was not damaged “except to the extent of $1.” In 2019, Charlie Ebersol and Bill Polian founded the Alliance of American Football (AAF), which held its season during the NFL’s offseason months. Even with the backing of a billionaire investor, the AAF could not stay afloat and ultimately failed because the NFL refused to partner with the league. In March 2024, a new United Football League will try its luck taking on the NFL this Spring.

The lack of competition from independent leagues has contributed to monumental revenues for these sports leagues. The NBA earns an estimated $12 billion annually, behind MLB’s $14 billion and the NFL’s astounding $25 billion.

Recent Challenges to Sports Leagues’ Anti-Competitive Behaviors

Recently, groups of plaintiffs are wielding antitrust laws to challenge leagues’ anti-competitive behaviors. In 2023, a group of plaintiffs filed a class action lawsuit against the NFL seeking $6.1 billion in damages, alleging that the NFL clubs conspired to suppress out-of-market telecasts of football games with the NFL’s broadcast partners. NFL games are distributed to broadcasters, like Fox and CBS, through regional coverage to only a specific region; for example, each team’s home market can view the games without blackout restrictions. In the NFL, a blackout restriction is when a team’s televised game is only available for viewership in that team’s media market.  To watch their team play, out-of-market fans must subscribe to NFL & DirecTV’s streaming platform called “NFL Sunday Ticket.” However, Sunday Ticket forces subscribers to choose between paying for every out of market game or not watching at all. The plaintiffs allege that the NFL and DirecTV collusion to suppress out-of-market telecasts violate the Sherman Antitrust Act. Judge Philip S. Gutierrez approved the plaintiff’s class-action status to two groups of Sunday Ticket subscribers and denied finding summary judgment for the NFL. In his order, Judge Gutierrez stated that a reasonable jury could find that the NFL conspired with its broadcasting partner to suppress telecasts in violation of the Sherman Act. The case is now heading for trial.

This is one of many lawsuits that has challenged the business model of professional sports leagues. MLB avoided a challenge to its antitrust exemption by settling a lawsuit filed by Tri-City ValleyCats and other non-MLB affiliated minor league teams. The plaintiffs alleged that MLB clubs colluded to cut ties with certain independently owned MILB teams, like the Tri-City ValleyCats, and their MLB affiliation. The aggrieved MILB teams argued that the MLB clubs replaced them with other MILB teams owned by MLB owners. The United States Court of Appeals for the Second affirmed the lower court’s decision to dismiss the case, citing MLB’s antitrust exemption. MLB settled with the plaintiffs before the US Supreme Court had a chance to consider the case.

Professional sports have become a multi-billion-dollar industry because of sports leagues’ successful business practices, which arguably cross the line into anticompetitive behavior. The recent wave of antitrust lawsuits highlights the call by some for tighter regulation of professional sports leagues and the consequences leagues’ anticompetitive behavior can have on consumers.