Antitrust Is Anti-Economics

By , Guest Blog

The other day, a commenter chastised me for saying an "organization" didn't learn from its mistakes. Organizations, of course, can't make mistakes, only individuals. I completely agree. I was speaking in metaphor, but it's important to discourage the careless use of collectivist terminology when discussing economics.

And that brings me back to American Needle, Inc. v. National Football League, the antitrust case argued before the Supreme Court yesterday. The question is whether the NFL is a "single entity" or a collection of 32 separate, competing businesses for antitrust purposes. A single entity has greater freedom under the Sherman Act than "competing" entities.

The operative words are "for antitrust purposes." In the absence of antitrust statutes, nobody would care whether the NFL was one or thirty-two entities. But with antitrust statutes, this question suddenly becomes the "most important sports law case in U.S. history," to quote law professor Michael McCann.

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Like all state-made law, antitrust emphasizes categorization. Antitrust practitioners spend hours upon hours labeling every economic actor and activity as a precursor to dividing them into "good" and "evil" piles. Joint ventures are good. Cartels are bad. Single entities are good. Multiple entities "colluding" are bad.

The NFL's dilemma is that it thwarts the simplistic labeling scheme of even the brightest antitrust lawyer. Teams compete on the field. They compete for the services of players, coaches, and administrators. But they also cooperate - er, "collude" - on matters like scheduling, revenue distribution, and playing rules. The NFL is both a a floor wax and a dessert topping.

So is the NFL a single entity or thirty-two separate entities? The answer is neither. Well, the economic answer is neither. The political answer is whatever five Supreme Court justice say it is. At the end of the day, antitrust is just another form of state-made law: The court is simply acting as an ad hoc legislature in deciding what arbitrary and capricious rule to apply for now.

Although there's a lot of economic-sounding rhetoric in antitrust cases, there's rarely any economic content. The NFL's brief states that "economic realities, not matters of form, dictate whether" the Sherman Act applies to the NFL. That's nonsense. This case is all about matters of form - political form - and the "economic realities" aren't, er, real.

The NFL claims that its individual clubs are not independent "sources of economic power." American Needle, the NFL Players Association, and dozens of antitrust academics claim they are. Murray Rothbard knew better:

"

The first truth to be discovered about human action is that it can be undertaken only be individual "actors." Only individuals have ends and can act to attain them. There are no such things as ends of or actions by "groups," "collectives," or "States," which do not take place as actions by various specific individuals. "Societies" or "groups" have no independent existence aside from the actions of their individual members. (Italics in original.)

"

The National Football League is a metaphor for a group project encompassing thousands of individuals who contribute specialized services. The NFL is a division of labor. That is the economic reality.

The political "reality" is trickier. Antitrust further complicates things. For example, the NFLPA - the union representing all NFL players - opposes any expanded "single entity" definition that reduces the NFL's antitrust exposure. This is hypocritical, because the NFLPA itself is considered a single entity for antitrust purposes. More to the point, the NFLPA has monopoly power to exclude any competing union, and it can compel any present or future player to abide by its state-sanctioned authority.

How do antitrust statutes rationalize the inconsistent treatment of the NFL and the NFLPA? It's simple. Antitrust only applies to commodities and acts of commerce. The antitrust statutes clearly state, "The labor of a human being is not a commodity or article of commerce." So by definition, state-sanctioned labor unions can never violate antitrust rules.

But the NFLPA enjoys an additional layer of privilege not afforded most other unions. As long as the NFL is defined as thirty-two separate entities, if and when labor negotiations break down, the NFLPA can "decertify" itself as a union and file an antitrust lawsuit against the NFL for "restraint of trade." This is what happened after the 1987 NFLPA strike. It's why the NFL is eager for the Supreme Court to define the league as a single entity - it removes the antitrust weapon of mass destruction from the NFLPA's arsenal.

This is what the state has wrought. Two groups of individuals with related economic interests - the NFL can't exist without the players, and vice versa - are forced to take up political arms in order to satisfy the whims of an irrational antitrust regime. It's great for the law professors who will spend years deciphering whatever half-hearted "ruling" the Court issues in this case, but it does nothing for the NFL's owners, managers, players, or customers.

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