Monopsony and Salary Suppression: The Case of Major League Soccer in the United States

Article excerpt

I. Introduction

Professional soccer in the United States has historically found limited success. Prior to the founding of Major League Soccer (MLS), the North American Soccer League (NASL) was the only professional league in the country's history to attain status as a top tier league. While many European countries sustained first division leagues, as well as various subordinate developmental leagues, the United States lacked both the depth of talented players and the financial backing to support such a system. The NASL, established in 1968, found limited success, but eventually folded in 1985 due largely to wide financial disparities between the competing clubs, and a lack of centralized control. In 1988, the Federation Internationale de Football Association (French for International Federation of Association Football), known as FIFA, granted the United States Soccer Federation (USSF) the right to host the 1994 World Cup. As a provision for being awarded the World Cup, the USSF promised to re-establish a first division professional soccer league in the United States. Adopting a single-entity model, the MLS was founded in 1995 as a limited-liability corporation under Delaware law. (1) The league is managed by a board of directors and investor-operators who head the operations of individual clubs. Ultimately however, the league "own(s) and operate(s) all of the teams in the league, assign(s) players and team personnel, and set(s) local ticket and concession prices." (2) The League has grown and expanded in its fourteen seasons from seven to fifteen clubs and three more will be added by 2010. (3) While the league still posts an overall annual operating loss, some clubs operate in the black and the league appears to be trending toward profitability. (4)

The MLS adopted its single entity structure because of the stability and potential benefits such a system provides for a young, developing league. Under the single-entity structure, the league "can increase the value of its sponsorship agreements by ensuring league-wide sponsors that individual clubs will not enter into sponsorship agreements with competitor firms that dilute the value of the league-wide sponsor's investment." (5) This allows MLS to secure long term sponsorships with major corporations. In 1996, the first year of MLS play, sponsorships with Adidas, Budweiser and Pepsi were secured with long-term deals. (6) The corporate structure of the league also increases purchasing power and leads to economies of scale. Investor-operators make executive decisions to support the league's wellbeing as opposed to the interests of individual teams. Most importantly, and perhaps controversially, the single-entity structure gives MLS monopsony power over the U.S. professional soccer labor market while still protecting it against anti-trust laws. This structure reduces competition for players between teams and therefore lowers individual player's bargaining power for contracts with the league and is designed to suppress player salaries. (7)

In 1997, the players sued MLS, claiming various anti-trust violations against the MLS. The players claimed that the single-entity structure was simply a conspiracy among team owners to fix player salaries and therefore in violation of Section 1 of the Sherman Anti-Trust Act which states; "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." (8) The players also claimed that the MLS monopolized the market for first division professional soccer in the United States and colluded with the USSF to do so, a violation of Section 2 of the Sherman Act; "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony. …