Behind the Lockout, Part III

Behind the Lockout, Part III
March 14, 2011 by S.M. Oliva

Late in the afternoon of Friday, March 10, the impasse between the National Football League and the association representing its players moved from a mediator's conference table in Washington to a courthouse in Minneapolis. Since the government-created collective bargaining process failed, the answer now supposedly lies with the government-created antitrust system. A $9 billion business ceased operations because the principals are trapped between conflicting forms of government intervention.

Over the weekend, the press rushed to apportion blame between the NFL franchise operators and employees. None identified the state as the real culprit. But the truth is that both sides of the impasse have acted based on their perceived rational self-interest. Both sides heard the siren call of federal regulation and assume that following their chosen path will yield a better outcome than simply dealing with one another directly and honestly. As a result, both sides will now transfer millions in capital to outside attorneys ­ who are absolutely acting in their self-interest ­ to settle an internal dispute that could have been resolved years ago.

As is often the case, state intervention attempts to create positive "rights" that encourage the use of more government. In this dispute, the players opted to "decertify" their union. This is legalized trickery. The NFL Players Association did not cease to exist on Friday afternoon; it merely stopped claiming the "right" to use its government-granted franchise, via the National Labor Relations Board, to act as the exclusive representative of all current and future NFL players.

In lieu of the "right" of collective bargaining, the individual-but-still-well-organized players immediately asserted their "antitrust rights" under the Sherman Act, filing a lawsuit in Minnesota federal court accusing the NFL of numerous illegal "restraints of trade." More on that in a moment.

Antitrust forbids collusion to set prices. Labor law requires such collusion. The workaround is a ridiculous statutory provision that decrees, "The labor of a human being is not a commodity or article of commerce." Ergo it cannot be subject to the Sherman Act, which only applies to articles of commerce. But this exemption only applies when that "labor" belongs to a government-recognized union. If non-union laborers act in concert to improve their bargaining position, the antitrust authorities simply ignore the above exemption and resume intervening.

Consequently, the courts have said that while NFL players are part of a government-recognized union, they can only assert their labor-law "rights," not their antitrust "rights." Thus, decertification was necessary to clear the way for antitrust litigation.

In response, the NFL said it wants the government to ignore the union's decertification and allow the league, as an employer, to "exercise its right under federal labor law to impose a lockout of the union." This is an even stranger "right" than the antitrust rights the players claim. While there are some players who are unsigned free agents, most NFL players remain under contract to individual clubs, often for several more years. By "locking out" all players, the NFL, as a cartel of the individual clubs, claims the "right" to simply disregard those individual contracts in an attempt to pressure the negotiation of a separate collective bargaining agreement. A lockout, in this context, is a government-sponsored breach of contract. (Indeed, a non-antitrust element of the players' lawsuit alleges breach of contract and tortuous interference.)

This brings us back to the players' antitrust lawsuit, now before a Minnesota court under the short title, Brady v. NFL. The players target a number of specific NFL policies that allegedly violate the Sherman Act. Aside from the lockout itself, the lawsuit challenges the NFL Draft and overall limits on entering player contracts, the league-wide salary cap, and restrictions on free agency for veteran players whose previous contracts expired. These are all part of an illegal scheme to "suppress competition in the United States market for professional football players," according to the Brady complaint.

Yet all of these things existed under the collective bargaining agreement that just expired. The players, through their now-decertified union, agreed to all of these policies in some form. And by all media accounts, the players did not ask the NFL to abandon any of these policies during their recently collapsed labor negotiations. There were disagreements of degree, of course (i.e. the amount of the salary cap, number of years to obtain unrestricted free agency, etc.), but so long as everyone was operating under government labor law, these policies were fundamentally legal. Now that we're under antitrust law, suddenly they're illegal.

Mind you, I don't question the players' interpretation of antitrust doctrine. Their lawsuit is on as solid antitrust footing as one can expect. A number of the NFL's restraints, particularly the rookie draft, would have been declared a Sherman Act violation decades ago were it not for the congressionally mandate tension between antitrust and labor regulation. As long as you put something in a collective bargaining agreement with an NLRB-certified union, it's immune from antitrust scrutiny.

But this begs the question: Do the players want their antitrust lawsuit to succeed? Twenty years ago this same series of events played out. The union decertified, players filed an antitrust lawsuit, won a jury verdict against free agency rules, the league and players reached a comprehensive settlement, the union re-formed, and a new collective bargaining agreement was signed. Then as now, it's not about vindicating antitrust rights or abolishing anticompetitive business tactics; it's about maximizing labor's leverage when negotiations eventually resume to deal with the underlying dispute.

The NFL's leverage is greatest under government labor law, where the franchise operators can ignore their existing employee contracts and "lock out" their work force en masse to coerce acceptance of a cartelized labor policy. The players' leverage is greatest, or so they believe, under government antitrust law, where they can ignore the fact they've repeatedly agreed to several aspects of this cartelized policy and argue, without any sense of irony, that they're really victims of a massive conspiracy to suppress competition and subvert "the Magna Carta of free enterprise" (as Thurgood Marshall once described the Sherman Act). Once again, government policy takes a bad situation and exponentially complicates matters.