Updated: Aug 29
The structure of America’s sports leagues is an ironic reflection of the country’s ethos towards capital and labor. We love the free market until it’s the wrong cohort who can take full advantage. Athletes’ salaries are artificially capped, but team profit is unlimited. Revenues are split…but the dollars in that pool are open to interpretation (see NHL CBA §50.1(a)), and players can choose where they want to play…if they stick around long enough (see MLB CBA Article XX(B)(1). Players’ lack of control over their own destiny is astonishing. Depending on the sport, the free market does not exist before an athletes’ late twenties and a player’s fate is often left to the team’s development system (see The Edmonton Oilers).
In May, I was at my buddy Joel’s place, watching his hometown Chelsea play for the FA cup. We spoke about the differences in player development and business structure of euro football and hockey and found great irony in football’s free market system contrasted against American sports’ egalitarian mandates. He then asked me an extremely law student question, “why is the draft legal?” Excellent question, Joel.
At first glance any league’s draft ought to violate the Sherman Act, and that’s exactly what NFL player, Yazoo Smith, argued in 1968. He contended that if not for the NFL draft he could have negotiated a far more lucrative contract as an NFL rookie. The District Court agreed and held the NFL draft was a group boycott, and therefore, a per se violation of the Sherman Act. On appeal, the DC Circuit’s analysis differed but came to roughly the same conclusion. It held the draft was not a per se violation of the Sherman Act but still monopolistic under the rule of reason; where the court balances a provision’s anticompetitive effects against its pro-competitive benefits.
Justice Wilkey laid the hammer down in his ruling opinion: “the draft that has been challenged here is undeniably anticompetitive both in its purpose and in its effect” and “the draft inescapably forces each seller of football serves to deal with one, and only one buyer, robbing the seller, as in any monopsonistic market, of any real bargaining power.”
So….why do the NFL, MLB, NBA, and NHL have drafts today? Collective bargaining. Months before Wilkey decided this case, the NFL’s lawyers brilliantly used two Supreme Court cases, Meat Cutters v. Jewel Tea & Connell Co. v. Plumbers and Steamfitters, to circumvent antitrust law under a “non-statutory labor exemption.” This theory binds parties of a collective bargaining agreement (“CBA”) to its provisions, whether they violate antitrust law or not. In the NFL’s case, it allowed the league to enforce the first-ever express entry-draft provision in its 1977 CBA and continued the NFLPA’s infinite ineptitude, which lasts to this very day.
PS. There are two awesome pieces on the subject:
1. Eriq Garder’s 2009 article “Rookie Abuse”: https://slate.com/culture/2009/04/in-1970-james-yazoo-smith-sued-the-nfl-to-shut-down-the-draft-what-happened-next.html
2. Joshua Kloke’s “The case for abolishing the NHL draft”: https://theathletic.com/2711295/2021/07/26/the-case-for-abolishing-the-nhl-draft-i-dont-think-its-that-crazy/?article_source=search&search_query=the%20case%20for%20abolish
Sources:  Smith v. Pro Football, Inc., 593 F.2d 1173 (D.C. Cir. 1978)  Smith v. Pro Football, Inc., 593 F.2d 1173, 1185 (D.C. Cir. 1978)  Id.  https://slate.com/culture/2009/04/in-1970-james-yazoo-smith-sued-the-nfl-to-shut-down-the-draft-what-happened-next.html