Court Rules MLS a "Single Entity"

Court Rules MLS a 'Single Entity' Barring Antitrust Claim

Decision a major blow to soccer players' case

Boston, April 20, 2000 -- In a ruling that all but dismisses a longstanding antitrust suit against Major League Soccer (MLS), a federal judge concluded that the league is a "single-entity" exempting it from Section 1 of the Sherman anti-trust law. That section prohibits "contracts or combinations by two or more" in restraint of trade.

In his 25-page decision, U.S. District Court Judge George O'Toole ruled that MLS cannot be liable under section 1 because that statute only applies to "two or more" conspiring to restrain trade. He added that because MLS is structured as a limited liability company with "owner-investors," rather than separate and distinct team owners, it is not within the purview of the statute.

The court therefore granted summary judgment on the issue in favor of the league without the necessity of a trial. The lawsuit was filed by by eight MLS players challenging the league's single-entity structure, which allegedly kept salaries artificially low due to a mandated salary cap and restrictions on the movement of players. [click here for complete decision]

Longstanding Dispute

The issue of leagues as single entities has been fought for the last 15 years [click here for definition]. The relatively few courts which have decided these cases have generally noted that traditional league structures are not "single entities" and therefore subject to antitrust claims regarding restrictions on movement of franchises and salary/benefits (if no union is involved). However, there has been precious little case law on newer league structures such as the MLS, WNBA and future leagues in women's soccer and the XFL.

In this ruling, the court noted: "the business organization of MLS is quite centralized. The league owns the teams themselves; disgruntled operators may not simply 'take their ball and go home' by withdrawing the teams they operate and forming or joining a rival league. MLS also owns all intellectual property related to the teams. It contracts for local-level services through its operators, who act on its behalf as agents. Operators risk losing their rights to operate their teams if they breach the governing Agreement. The Management Committee exercises supervisory authority over most of the league's activities. It may reject, without cause, any operator's individual attempt to assign the rights to operate a team. "

It added: "MLS is what it is. As a single entity, it cannot conspire or combine with its investors in violation of § 1, and its investors do not combine or conspire with each other in pursuing the economic interests of the entity. MLS' policy of contracting centrally for player services is unilateral activity of a single firm.

The court did not dismiss the entire case. Allegations regarding transfer fees and monopolistic practices under a different section of the antitrust laws remain. An appeal is planned.

To read my views on this issue, click here.