Pushback by the NFL’s finance committee to Las Vegas Raiders principal owner Mark Davis’ plan to sell a minority stake in his team to Tom Brady on account of a discounted price raises potential antitrust questions that go to the heart of how pro leagues operate.
The Washington Post reported last week that NFL team owners are unlikely to ratify Brady’s deal at a meeting scheduled for Tuesday. Brady intends to purchase as much as 10% of the Raiders, which Sportico recently valued at $5.77 billion, and Davis has offered Brady a discount of around 70%. Brady would need at least 24 of the 32 ownership groups to approve the transaction, and team owners normally follow the recommendation of the finance committee.
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The possibility of the NFL rejecting Brady, one of the greatest players in league history, is stunning. A seven-time Super Bowl champion and five-time Super Bowl MVP, Brady retired from the NFL in February. He’ll join Fox Sports next year as an NFL color commentator.
As the Raiders’ principal owner, Davis has substantial discretion in how he runs the team. He can hire who he wishes and has ultimate say over player transactions. But like other owners, Davis contractually cedes some autonomy to the league for the common good. All teams must present a certain image, compete fairly and accept commissioner Roger Goodell’s authority.
So owners control their teams, sort of.
Sports leagues have sometimes been compared to franchisors, like fast food chains, with franchisees bound to ensure product and marketing consistency. Courts usually regard leagues as joint ventures, with a league maximizing teams’ collective interests even at the expense of individual teams or owners. Judges usually give leagues a good deal of deference, too, in how they run their operations.
But the NFL and its teams must still follow the law in restricting individual team decision-making. They are vulnerable to antitrust claims under Section I and Section 2 of the Sherman Antitrust Act. Section I prevents competing businesses—including competing teams in the same league—from conspiring to unreasonably restrain competition. Section 2 prohibits monopolies and conspiracies to monopolize.
The finance committee threatening to block the sale of the Raiders to Brady could be viewed as a group boycott or price fixing under antitrust law. The finance committee is composed of seven owners of competing teams, and the committee operates with the NFL’s blessing. Davis and Brady could argue owners, in coordination with the league, have anticompetitively joined forces to harm them. Davis could assert he and Brady are free to set the terms of their deal. Davis might insist the discounted price reflects the added reputational or celebrity value Brady would provide the Raiders.
The NFL would have defenses. The league would argue that Davis contractually agreed to follow a review process of prospective buyers and, through the league constitution, accepts Goodell having arbitration authority over grievances involving teams and owners. The NFL would try to convince a judge to dismiss a case to Goodell’s arbitration.
If that strategy sounds familiar, it’s because the NFL has successfully used it to dismiss some of Brian Flores’ racial discrimination and retaliation claims. The NFL would also argue it’s in the collective interest of teams for franchise values to be maximized, an argument that would be strengthened if the league has an evidence-backed track record of pursuing that objective.
The NFL is no stranger to defending against antitrust claims, including those brought by the Raiders and Brady.
In the early 1980s, Al Davis—Mark’s father—waged a multiyear antitrust battle with the NFL over other team owners rejecting his planned move of the Raiders from Oakland to Los Angeles. Davis alleged the league and teams illegally conspired to prevent the relocation of a franchise to a larger and more economically prosperous market. Davis ultimately prevailed and moved the team.
Brady was part of two historic lawsuits against the NFL. Though his 2015-16 litigation over Deflategate garnered the most attention, Brady along with Peyton Manning and several notable other players sued the NFL and its teams in 2011 over alleged antitrust violations. The players argued a league lockout amounted to a group boycott and price-fixing agreement in violation of Section 1. The U.S. Court of Appeals for the Eighth Circuit sided with the NFL, but only after Brady & Co. won at the district court level.
The NFL is currently facing a class action antitrust lawsuit brought by Sunday Ticket subscribers. They maintain the league and its teams have violated antitrust law by pooling telecast rights, then exclusively licensing out-of-town games to DirecTV (now YouTube TV), and that teams ought to compete more against one another in negotiating broadcasting deals.
The NFL (and other major leagues) has long insisted that leagues are single entities, meaning the league and its teams are functionally one, much like a parent company and wholly owned subsidiary or different brands produced by the same company.
They raise this argument for legal purposes: A single entity is not subject to Section 1 of the Sherman Act because there are no competing businesses—they’re all one. Unfortunately for the NFL, the U.S. Supreme Court bluntly rejected that argument in American Needle v. NFL (2009), where all nine justices held the NFL and teams, which are individually owned (unlike a parent and wholly owned subsidiary), are not a single entity.
Could Davis and Brady team up to sue the NFL should their deal be rejected? Unlikely, but remember that this is the NFL, which is no stranger to dramatic legal controversies.
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