Understanding Antitrust Laws in Professional Sports

Baseball’s free agent era was created by the Supreme Court’s ruling in the Curt Flood case.

Define the term monopoly: A market situation where one producer (or a group of producers acting in concert) controls the supply of a good or service, and where the entry of new producers is prevented or highly restricted.

Name the federal antitrust laws that have a substantial impact on sports: Competition law.

Name two of the exemptions from antitrust laws that have been used in the sports industry: Baseball's antitrust exemption and the broadcasting exemption in the Sports Broadcasting Act.

Provide an example of a sports league rule that has become the subject of antitrust litigation because of accusations that the rules are too restrictive: Professional Sport Applications.

The court in Smith v. Pro Football concluded that the NFL draft violates antitrust law as an unreasonable restraint on trade.

What are the benefits and consequences of salary caps?

• Talent distribution and competitive balance
• Higher attendance and increased revenues
• Increased competition and media exposure

What is collusion? An improper secret agreement between two or more entities to defraud or deprive others of their property or rightful share, or to otherwise indulge in illegal activity.

What is price fixing? Price fixing is the maintaining of prices at a certain level by agreement between competing sellers.

What is the difference between Section 1 and Section 2 of the Sherman Act? Section 1 requires two or more persons, while one person alone can violate Section 2. Section 1 is concerned with agreements that restrain trade, and Section 2 deals with monopolies. Section 2 requires a threshold or necessary amount of monopoly power to already exist.

What is the term for an illegal agreement among members of a group (such as a professional sports league) to set prices at a certain level to avoid competition among group members over these prices? Price fixing.

What is the term that describes measures that would be taken to decrease the size of a professional sports league or organization? Points contraction.

Which of the following is not a purpose for the antitrust laws in the United States? To promote competition and efficiency in the marketplace.

Which of the following is the correct description of the Rozelle rule? Free agency was allowed, but any team that signed a free agent was required to compensate the team losing the player.

Which of the four major U.S. professional sports leagues still does not have a player salary cap? NHL.