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Source link: http://archive.mises.org/4751/black-thursday-for-monopolists/

“Black Thursday” for monopolists

March 2, 2006 by

The sports press has dubbed today “Black Thursday” for the National Football League, because team owners and the players’ union, the NFLPA, failed to extend their collective bargaining agreement (CBA) past its scheduled expiration date of 2007. While the breakdown in talks will not cause an immediate work stoppage, the NFL’s 32 clubs are now scrambling to deal with the short- and long-term economic fallout of the NFLPA’s decision to exercise its monopoly power over the NFL’s labor supply.Under the current CBA, each team abides by the same maximum cap on player salaries, which is expected to be $94.5 million for the 2006 season that officially began yesterday for accounting purposes. In 2007, the CBA’s final year, there is no cap, meaning teams can theoretically spend as much as they want to sign players. The cap amount itself is based on a percentage of league revenues specified in the CBA. The current impasse is largely over what revenues are included in the salary cap pot and what percentage of that is “guaranteed” to the players. The NFLPA wants 60% of revenues while the league has only offered 56.2%.

The NFL wanted a CBA extension completed now so that it could raise the 2006 salary cap by $10 million to $15 million, thus affording teams more room to sign players for this season. The NFL also wants to ensure the cap stays in place for 2007 and beyond. Conversely, the NFLPA wants an uncapped year in 2007, figuring that wealthier owners will go on a spending spree; also, once there is an uncapped year, the union reasons it will be impossible to go back to a salary cap again in the short term.

Here’s the problem. With the impasse, the 2006 salary cap is now fixed at $94.5 million, and several teams that had anticipated an extension and a salary cap increase must cut players by 10 P.M. today in order to get under this year’s cap. Hence the “Black Thursday” appellation.

Here’s a second problem. Since the NFLPA has no incentive to continue negotiations, the union is expected to “decertify” itself as the players’ exclusive representatives. Why would the union do this? Because then federal antitrust law would restrict the team owners’ ability to determine new labor rules for themselves. If the NFL teams negotiate a contract with a union given monopoly status by the government, that is considered a “free market” outcome by the state. But if the players are able to negotiate their own contracts free of the NFLPA or a CBA, any voluntary collective action by the owners to adopt internal rules (such as a salary cap) presumptively violates the “right” of players to receive the “benefits of competition” among owners. Thus, the players and their “decertified” union can then sue the NFL in federal court and have a judge impose “pro-competitive” rules on the league. Then, the NFLPA can “re-certify” and resume its monopoly status and negotiate a new CBA on terms it considers more favorable.

This is essentially what happened in 1987, when the NFLPA went on strike in the middle of the season, only to decertify for nearly six years while using the courts to prevent the NFL from exercising their right to govern their own league. The 1993 CBA, which remains in force, was the product of that process. History seems likely to repeat itself.

Curiously, I have yet to find any criticism in the sports press about the NFLPA’s use (and abuse) of monopoly power. Of course, whenever a sports writer has even the mildest disagreement with Major League Baseball and its owners, there is no hesitation in calling for repeal of that sport’s statutory antitrust exemption. It’s worth nothing that the baseball exemption does not confer any monopoly power on baseball; it merely allows MLB (or any other baseball league that may exist) to exercise its property rights free of potential interference by antitrust lawyers and courts. All sports player unions, in contrast, enjoy a federal monopoly grant that forbids individual players from breaking with the union and prevents leagues from deciding their own personnel and financial rules.

{ 3 comments }

Ben March 2, 2006 at 2:53 pm

Excellent post.

One small question, though. When you say, “All sports player unions, in contrast, enjoy a federal monopoly grant that forbids individual players from breaking with the union…” I’m not sure that’s quite accurate. For example, Barry Bonds is not a member of the MLBPA by choice.

Skip Oliva March 2, 2006 at 3:23 pm

Even if a player is not a member of the union, he is still bound by the terms of the union-controlled CBA. For example, if a sport has a maximum player salary, as does the NBA, a player can’t negotiate for a higher salary even if he is not an actual member of the NBPA, the basketball players union.

Plowman March 3, 2006 at 6:12 am

As a huge fan of the NFL, I hardly even know where to begin with this news — but it certainly is, or possibly will be on Sunday, a “black” day when/if the CBA is not renewed. I definitely agree that the NFLPA has abused and is abusing it’s government backing, although I’m not totally aware of what specific government interventions have or will favor it.

It seems to me that the NFL players are currently compensated very fairly, but the knee-jerk media has typically portrayed this as an issue of “greedy owners” not paying enough. I was extremely heartened, though, by an ESPN poll showing that the average Joe disagrees with the pundits. Here is a question from their “Sportsnation” poll:

5) Who do you think is most to blame for the current labor impasse?

67.2% Gene Upshaw and the players’ union
32.8% Paul Tagliabue and NFL owners

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