The Analysis of Professional Sports Leagues as Joint Ventures

Abstract

This paper addresses whether the welfare analysis of the agreements and rules of a professional sports league should depend on the organisational form chosen by the league's participants. Courts have analysed sports leagues both as associations of horizontal competitors and as single entities. The former approach suggests much less tolerance for rules that affect competition. Drawing on the distinction between ex ante and ex post competition that has been found useful in the economic analysis of intellectual property rights, the authors suggest a middle road in the horizontal competitors versus single entity characterisations of professional sports leagues. For most fans of team sports, hard fought games between rival teams and season-long competition leading to the championship of a professional sports league epitomise the ideal of competition among independent entities. Yet professional sports teams cannot compete without a great deal of coordination on matters such as where, when, and how games will be played and the sequence of contests that will decide a league champion. The US antitrust laws frown on agreements and concerted action on the part of economic competitors, and this judicial skepticism has led to numerous courtroom battles over the appropriate extent of coordination in professional sports. In this paper we consider, from the perspective of competition policy, the conflict between the