Are the NBA and NFL Anticompetitive Organizations?

When we look back years from now, 2011 will be known as the “Year of Lockouts.” Even if the NBA manages to solve its disputes and does not resort to a lockout (unlikely but possible), the mere threat of a simultaneous labor stoppage in two of America's top three sports has never happened. But, when we look to evaluate how we got to this point and how to avoid lockouts in the future, one fundamental question will have to be answered: are the NBA and NFL anticompetitive organizations?

It's quite a loaded question. First off, what does anticompetitive really mean? Sure, both the NBA and NFL are organizations that have rules that regulate competition and keeps smaller markets in the game. Rules like structured free agency, the selection draft, and the salary cap are all technically anticompetitive; everyone knows that so there is no point in delving into detail there. But the bigger question still remains: are the NBA and the NFL so tightly regulated to ensure profits that they stifle true competition? The answer is yes but that is actually a good thing.

How do we know this? Because there is a third American league with rules but is not designed to be truly anticompetitive: Major League Baseball. Like the NBA and NFL, the MLB has a selection draft and structured free agency. But, it does not have any regulation of international free agent signings and there is no salary cap. That means that, even if they must cope with revenue sharing, an ordered draft, and complex free agency rules, top teams can still add significant talent every single offseason. But, has this been good for baseball? No, because it has resulted in reckless spending by certain teams, kept several franchises in the basement for decades, and prevented certain well-run franchises from holding on to their talent. In 2010, the New York Yankees had seven All Star players in their lineup and a payroll above two hundred million. The Pirates had a payroll under fifty million and, not coincidentally, have been in the competitive cellar since the early 1990s. And, two years after reaching the World Series with a very young team, the Rays lost seven critical players in free agency including All Star left fielder Carl Crawford. The result: year after year certain teams are competing deep into October while certain others rarely make it past September.

The NBA and NFL's approaches are radically different from that of MLB; their regulations keep the wealthiest franchises from monopolizing the best talent. Their design is anticompetitive because it prevents those teams from maximizing their opportunities and putting the best possible team on the field. But, that anticompetitive style actually increases competition within the league because the smaller franchises are, by and large, able to keep up. And, when the dust settles from the threatened lockouts of 2011, we will see how anticompetitive the NBA and NFL are: will they still keep smaller teams in the game or will they end up more like baseball?

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