Brent Tuchner and Andrew Goldberg
Economics
Miss Robson
April 13, 2012
NFL BLOG
The National Football League (NFL) has been a topic of discussion over the past couple years. While football is the primary topic, another topic has been whether or not the NFL is a monopoly. The claim comes from the NFLPA, who claim that the NFL uses its league powers to prevent player salaries from escalating. A monopoly is a commodity controlled by one party. In this case the commodity is professional football and the party is the NFL. An example of a monopoly is the LCBO. In Ontario, alcohol can only be sold by the LCBO. It is run by the government and it is the only licensed liquor supplier in Ontario. No other business or individual can sell liquor and therefore the prices are not set by the market. The Ontario government is the party that controls the commodity—alcohol. The NFL claims that it is not a monopoly and says that it is a cartel. A cartel is a formal agreement among competing firms. It is a formal organization in which producers and manufacturers agree to fix prices, marketing and production. Cartels, unlike monopolies are legal.
The National Football League is the highest level of professional American football in the United States and to most it is considered the top professional football league in the world. The creation of the NFL dates back to the early 1900’s. In 1920 several representatives of many professional American football leagues and independent teams founded the American Professional Football Association (APFA). The APFA contained only 11 teams and it was soon renamed the National Football League which now contains 32 teams. The teams are an amalgamation of eleven teams from the APFA, three teams from the All-America Football Conference and the remaining 10 teams were from American Football League. The NFL and AFL merged in 1960, greatly expanding the league. This led to the creation of the Super Bowl, the Pro Bowl and other divisional championships. Today, the National Football League is among the most attended domestic sports league in the world with an average attendance per game of 66,960 fans.
There is heated debate in the business and legal community as to whether the NFL is a monopoly or a cartel. In the private sector monopolies are illegal and therefore the National Football League claims it is a cartel. It is a formal organization with 32 separate companies that are free and operate under a governing body (the NFL). The league allows teams the freedom to set their price for the tickets or anything sold within their stadium. For example, any NFL owner can charge as much or as little as they want (parking ticket, souvenirs, refreshments, etc.). Additionally, the league allows teams to compete for players. Teams are not allowed to get together and determine a salary cap for a player or a position. The NFL is an open market and the owner is allowed to determine a players worth. As a result, the NFL claims that it is not a monopoly and in fact, a cartel.
There are, however some who believe that the NFL is in fact a monopoly. In mid-June 2009, American Needle sued the National Football League for being a monopoly. American Needle Inc. was one of the former hat suppliers of the NFL teams. There contract was with some of the teams and was negotiated on a team by team basis. This relationship existed until the NFL signed a contract with Reebok. The Reebok contract was for the supply of hats for every NFL team. As this contract was league wide, it eliminated all American Needle business with the NFL. American Needle sued the NFL and claimed the league violated the antitrust laws, acting as a monopoly. Needle stated that all 32 teams worked together to freeze it out of the NFL-licensed hat making business, signing an exclusive 10-year license with Reebok. Another reason people may view the NFL as a monopoly is because of its television license. The television rights to broadcast the NFL games are the most lucrative and expensive rights of any American sport. Currently, the NFL has made agreements and signed contracts with television networks such as CBS ($3.73B), NBC ($3.6B) and Fox ($4.27B) as well as ESPN ($8.8B) which is a combined total of $20.4 billion to broadcast all NFL games. These agreements and contracts come into question when deciding whether the National Football League is in fact a monopoly or not. With these two situations it seems as though the NFL has taken matters into their own hands and signed contracts and made agreements which controls the entire 32 teams instead of each team being individual competing corporations.
Why can’t each team sign with whichever network it chooses? Why can’t each team be sponsored by whoever they want? Why isn’t each team making unilateral decisions? These questions still remain and given the evidence given above, there are many who believe that what the NFL is a monopoly and in violation of the Sherman Antitrust Act. Without the antitrust restraint, the league would be able to kill free agency and restrain the competitive bidding amongst teams for the best players and coaches. It would also allow the league to dictate the prices and prevent teams in the same market for competing for fans by offering discounts. In conclusion, it would allow teams to act in concert to require that all sales of tickets in the secondary market be channeled through a brokerage system owned and licensed by the league.
Now this brings us to one last question: Is the NFL a monopoly or not? How can the NFL change their course of actions so that they are still able to sign agreements and take matters into their own hand without being criticized, and accused of being a monopoly? The answer to our final question is that the courts have declared that the NFL is a cartel but in some situations can be viewed as a monopoly. Each team has control over the way they operate, what they sell at concessions with the exception of clothing articles and TV contracts. In our opinion, the NFL clearly controls the commodity of football and is therefore, a modern day monopoly.
Video:
Bibliography:
http://washingtonexaminer.com/politics/beltway-confidential/2011/04/nfl-monopolies-and-unions/144290
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