OXFORD REVIEW OF ECONOMIC POLICY, VOL. 19, NO. 4, PP. 569-584
© 2003 Oxford University Press and the Oxford Review of Economic Policy Limited
Competition Law as a Constraint on Monopolistic Exploitation by Sports Leagues and Clubs
University of Illinois
Abstract
The sports industry is characterized by dominant leagues and clubs exercising economic power unconstrained by rivals or the threat of entry, often featuring market-division schemes. Leagues and clubs can raise price, lower output, and lower quality to fans, create an artificial scarcity of top-tier teams resulting in publicly subsidized stadiums, and impose labour-market restraints that significantly harm consumers by misallocating players, most obviously by inhibiting low-quality teams' quick improvement. Business decisions made by club-run leagues feature significant transaction costs, resulting in even greater inefficiency than would occur if leagues were controlled by a single entity. Many countries have employed settled principles of competition law, originating in the common law of restraint of trade, as a useful and meaningful constraint on the abuses of economic power in sports. Courts have prohibited agreements between clubs or leagues that distort prices or output, or render output unresponsive to consumer demand, unless the agreement is shown to be demonstrably necessary to achieve a pro-competitive goal. In this paper, I argue that consumers and sports fans will benefit from a more ambitious enforcement of these established principles of competition law.