FRANCHISE LOCATION & ENTRY

Horizontal and Vertical Restraints in Antitrust LawAddyston Pipe: bid-rigging agreement among competitors is a naked cartel and is per se illegalSylvania: TV manufacturer limit on where its brand can be resold by dealers is vertical restraint and subject to Rule of ReasonUS v General Motors: Car manufacturer limit is per se illegal when acted under concerted pressure from rival car dealers seeking to rid selves of rivalSealy: Mattress manufacturer limit on where its brand can be resold is horizontal because defendant company was a joint venture of all the rival sellers

Are Sports League Agreements Horizontal or Vertical?Raiders finds NFLs structure has both horizontal and vertical attributes vertical: impose best interests of whole league on individual clubshorizontal: owners collude in own clubs selfish interests

Current issue in Europe, with restraints imposed by governing boards, not clubs

Raiders I rule of reasonFirst look to see if NFL significantly restrained tradeImagine if there were 4 rival leaguesAny concern if AFL decides not to let Raiders relocate to LA?In real life, who competes with NFL?

Raiders I justificationsPromote investment and inhibit free riding

Loss of TV Revenue or other harm to geographic scopeWould geographic concerns balance concerns justify blocking these relocations?Canucks, Flames and Oilers all move to USPirates, Twins, Royals, and Brewers move to NJ, Brooklyn, White Plains, and Stamford CT

/2 Raiders I justificationsMaintain rivalriesCould NL block Giants move to east coast?Operational concernsNHL block StL move to Saskatoon?NBA block Kings move to Tokyo?

/3 Raiders I justifications Stability, fan loyalty, and recouping local investmentInterleague competition Does this support Rule 4.3?

Is Raiders I special?NFL made no showing that transfer would have any harmful effect on leagueIf so, why did owners reject move 22-0?

Apply Raiders I to SealsWould the NHLs veto of the Seals relocation from be ok if purpose was...to promote strategy to maximize TV audience in US? to allow NHL to expand by finding a more suitable owner in Vancouver?to protect Toronto Maple Leafs TV and marketing monopoly in English Canada

Post-Raiders litigationRaiders II: offset damages with gain from franchise relocationClippers: clarifies that Raiders I is fact-specificRams: can charge fees to cover league lossesWhat is the social problem with franchise relocation?

ANTITRUST ISSUES WITH THE SELECTION OF A PARTICULAR OWNER OF AN EXISTING FRANCHISELevin: P wants to join Ds, not compete with themReason for rejection matters (although means no summary judgment)

REJECTION OF CLUB SEEKING NEW ENTRY INTO THE LEAGUEHow does the NFLs refusal to expand to Memphis affect inter-league competition (i.e. competition with another league)?How does the refusal affect intra-brand competition (i.e. competition with other clubs within the NFL?)

REFUSAL TO EXPANDAre there any reasons to question a leagues refusal to expand? Why cant the NFL owners always be relied upon to expand except for legitimate business reasons?Does Art 37 of the NHL Constitution offer meaningful protection against unwarranted refusals to expand?

UNLIMITED EXPANSIONIs it desirable to force a monopoly sports league to admit anyone who wants to join the league?

ALTERNATIVE WAYS TO PREVENT TAXPAYER SUBSIDIESBan on state aidssubsidies distort competition to unfairly help club (e.g. US v Cdn NHL)exploit consumersEU bans while US Congress doesntJudicial/Administrative regulation of entry (Braves)

ALTERNATIVE OF PROMOTION & RELEGATION: The ConceptThe Patriot LeagueNJ, Connecticut, Columbus, Las Vegas, Portland, Orlando, Indianapolis, San Antonio, Buffalo, SacramentoRelegation playoffNBA2

P&R: Legal ArgumentsRestraint of trade in market for competition organizing services leagues provide these services to clubs, who provide team servicesWhere clubs control league decisions, this is a horizontal agreement, like SealyUnlike Grizzlies, clubs ARE in competition with each other: to stay in top leagueResulting scarcity allows league to increase price

P&R: Policy ArgumentsEntry by meritReduce taxpayer exploitationInteresting relegation racesPrevent teams exploiting loyal fans (Bulls)Induce small market investmentBetter 2nd tier competition than AAA

P&R ConclusionsHave I persuaded you that the FTC should bring a case and issue and order requiring P&R? Are there any better alternatives?