Ownership Restrictions

NFL Cross-Ownership Rule

• Key factual findings:

1) Growing inter-sport competition between football and soccer concerning TV and local live gate

2) Limited availability of investors

3) No evidence of "confidential" information or of abuse of position by cross-owners

4) rule overly restrictive

2/ NASL v NFL

• Restraint of trade– Do you agree with 2nd Circuit’s

factual finding of a slim market for sports investors?

• Why do other NFL owners have a legitimate interest in approving sale of teams to new owners?

3/ NASL v NFL

• NFL response to MLS – allowing owners to own MLS teams in own city but not someone else’s – further illustrates the antitrust complexities of the issue

• Why did the league create these exceptions?– Horizontal agreement to protect selves from

competition– Vertical agreement to limit animosity and reprisals

among ‘partners’– ad hoc for Paul Allen

Ban on Public Stock Offering

• In what market does the NFL rule restrain trade?

• What is the effect on the rule on the price/ value of NFL stock?

/2 Sullivan

• Would corporate owners behave differently than family owners? In what ways?

• Are the NFL owners really concerned that co-owners are smart entrepreneurs committed to long-term success?

/3 Sullivan

• Parties agree that price for ownership interests is depressed, rather than artificially raised, by this rule– So why would owners adopt a rule that reduces

the overall value of their franchise?• According to the plaintiffs’ theory, who is harmed

by the NFL rule?

Problems with 1st Circuit’s Reasoning

• Court accepts NFL claim that its rule contributes to efficiency by precluding owners who will place short-term dividend interests of individual club s-holders instead of long-term interests of league [597]

– but court still finds rule overbroad b/c NFL has a LRA: it could allow corporate minority ownership while protecting long-term interest by insisting on majority control by non-corporate owner

• Do you agree with this reasoning?• In what market is trade restrained if league allows minority

ownership?• Real problem: unwillingness of league to get rid of incompetent

owner, the way a separate competition organizer would if not controlled by the owners

Ironies in Sports Law

• Benefits to Steelers of going public

Who Should Own Sports Teams?

• Member-owned teams• Capital investment or

leveraged debt• Refuse highest bid unless

owner is civic-minded• Member /private

partnership