Why are cartels like NHL legal in the US?

[Crede777]

First off, it's important to note that teams are independently owned franchises of the NHL. It's expected that franchises operating under a common corporation (the NHL) will cooperate.

Second, there's a collective bargaining agreement. CBA's and the existence of unions completely change the dynamics of labor laws. All sorts of things which would violate US Antitrust laws are valid when collectively negotiated and agreed upon between a company and a union.

 

[kurt]

It's hilariously rigged system: there's a salary cap, which is essentially an agreement between owners not to pay too much for workforce. This is extremely illegal probably almost everywhere except in the US. Funnily enough, there's no limit on how much you can charge for a ticket, for a beer, for a shirt and there's no limit on how much NHL can pay to Bettman or shareholders. But somehow there's still a limit of how much money you can use for building your team. Parity is an excuse, the real purpose the cap has is to draw as much money as possible away from the game to the pockets of owners.

But the biggest problem really is draft. Draft is essentially theft. Parity is again an excuse, the real purpose of the draft is to kill competition for players between clubs so they never have bidding wars and they can get best young players for peanuts. Jets paid only 300 000 dollars for Laine, which is laughable amount and just one example. It should have been three millions instead and probably would have been if there were no drafts and NHL teams would have to compete each other to get their players from other leagues. It is wrong for the other leagues which develop players through their most important years between 6-15 and then few years later these players are taken away with very little compensation. Draft is the reason for this, without it more money would flow to other leagues and teams would get an amount of $$$ you could call a real compensation. Again very little money goes for the game, most go to pockets of the owners. Money that should be used to develop the game, facilities, etc.

And I find it immoral that these megamoney (few are even even gigamoney) franchises take no part in developing young players. They just leave player development to other leagues, which have much less money and just pick finished product without having any part in developing them and total unwillingless to fund development, when they should be the biggest funders. The reason why hockey is so expensive is directly linked to the NHL, by far the richest hockey league, but still is a leech that just sucks and gives nothing back.

This is literally a corporated version of the Soviet Union. It is actually worse since this money doesn't even flow back and it is forever lost to the private bank accounts. But still somehow many people see Russian oligarchs funding a league from their own pockets a worse thing these NHL leeches sucking lot of money away from it with salary caps and drafts.

If you think the NHL is bad, wait until you learn about what the NCAA is up to as far as compensation rules are concerned.

 

[cutchemist42]

Maybe a different topic, (and not saying I agree or disagree really) but I have seen academics argue sport leagues are natural monopolies and should be regulated like them.

Made a post about it years ago.

 

[PCSPounder]

Being a soccer fan means I end up in this type of argument... a lot.

I think a little translation might be in order. I sense the OP was going a different direction than where this thread has gone. Of course, it's good to have the legal understanding out in front.

But I think the real questions being asked:

• Why do you tolerate this? Let the ticket prices get really high, then have the owner threaten to move a team... or at least have a ravenous pack of suitors without a team wanting to sabotage current franchises, et. Cetera.
• Why do you allow the business aspect of the game to outweigh the sporting aspect of it? Of course, that discussion generally leads to "every town has a team, now you institute pro/rel to try to keep everyone happy."

Of course, I can answer some of those, I certainly have a grasp of 2-3 common threads of thought on this board. I don't really want to rehash earlier pro/rel arguments and a couple other things here when, unlike the other major American sports, this board actually HAS that discussion on occasion.

But I do have one thought worth expanding on: why does this collection of fans act so feckless in front of owners?

 

[cutchemist42]

Pcs, you mean which group of fans are feckless? NA sport fans? NHL fans?

 

[PCSPounder]

Yes.

 

[Gnashville]

Jim Balsillie tried to argue what the OP is saying and filed a complaint against the NHL using the Canadian Competition Bureau after he was unable to move the Predators. He was arguing that the league prevented him from buying and moving the team to Hamilton (interesting how he did not mention his multiple lies, Tortious interference, and multiple violations of his purchase agreement) and that the league is a cartel preventing teams from moving at will.

It failed. Basically they ruled the league is a partnership between individual owners and the players union and as long as all parties are in agreement the league is legal.

 

[mouser]

Maybe a different topic, (and not saying I agree or disagree really) but I have seen academics argue sport leagues are natural monopolies and should be regulated like them.

Made a post about it years ago.

Can you offer any examples of those other "natural monopolies" and how they're regulated?

 

[Noldo]

Can you offer any examples of those other "natural monopolies" and how they're regulated?

Electricity, water supply, to an extent railways. Basically activities which require material infrastructure and benefit for large scale.

Interesting question has been whether Facebook, Google and other data driven business could qualify.

 

[KingsFan7824]

This is literally a corporated version of the Soviet Union. It is actually worse since this money doesn't even flow back and it is forever lost to the private bank accounts. But still somehow many people see Russian oligarchs funding a league from their own pockets a worse thing these NHL leeches sucking lot of money away from it with salary caps and drafts.

The NHL is worse than the Soviet Union?

If salary caps and drafts aren't wanted, the people involved have options. The Leafs ownership can play some politics, and convince more owners to go complete free market. The PA can not agree to these CBA's. Sit out for a couple years. Go play in Europe or Russia. There's enough money to be made playing in the NHL that they don't go that far though.

But I do have one thought worth expanding on: why does this collection of fans act so feckless in front of owners?

Not enough fans care enough to do anything else? Not that fans don't care, but it's the same as the players. I'm sure they don't want the draft or the cap. They would love to be complete free agents at 18, and have 31 unrestrained owners bidding for their services. They're not willing to do what it takes to do away with those things though. Fans could break the NHL if we wanted to, but fans are even less organized than players.

 

[cutchemist42]

Can you offer any examples of those other "natural monopolies" and how they're regulated?

Well basically in any city or province/state....

power companies
Transit
Water supply
Military
Military industrial
Resource industries
Telecoms in some countries
Cable in some countries
Insurance (in my province it is one)

They are regulated in a way where the maximum utility is achieved by the public. Its a way to acknowledge that some industries just settle into a dominant firm throughout observations of many economies, so you gotta stop gouging when it happens. Manitoba Hydro would never be allowed to be absurd with the prices.

Sport leagues in a way do settle into this, and you could say some leagues in the world are managed like a natural monopoly.

I keep trying to paste the Wikipedia on natural monopolies, but cant get it to work on my phone.

So maybe the NFL did naturally settle into the top league, while at the same time being allowed to gouge us and play cities off of other cities.

 

[Mickey Marner]

It's hilariously rigged system: there's a salary cap, which is essentially an agreement between owners not to pay too much for workforce. This is extremely illegal probably almost everywhere except in the US. Funnily enough, there's no limit on how much you can charge for a ticket, for a beer, for a shirt and there's no limit on how much NHL can pay to Bettman or shareholders. But somehow there's still a limit of how much money you can use for building your team. Parity is an excuse, the real purpose the cap has is to draw as much money as possible away from the game to the pockets of owners.

But the biggest problem really is draft. Draft is essentially theft. Parity is again an excuse, the real purpose of the draft is to kill competition for players between clubs so they never have bidding wars and they can get best young players for peanuts. Jets paid only 300 000 dollars for Laine, which is laughable amount and just one example. It should have been three millions instead and probably would have been if there were no drafts and NHL teams would have to compete each other to get their players from other leagues. It is wrong for the other leagues which develop players through their most important years between 6-15 and then few years later these players are taken away with very little compensation. Draft is the reason for this, without it more money would flow to other leagues and teams would get an amount of $$$ you could call a real compensation. Again very little money goes for the game, most go to pockets of the owners. Money that should be used to develop the game, facilities, etc.

And I find it immoral that these megamoney (few are even even gigamoney) franchises take no part in developing young players. They just leave player development to other leagues, which have much less money and just pick finished product without having any part in developing them and total unwillingless to fund development, when they should be the biggest funders. The reason why hockey is so expensive is directly linked to the NHL, by far the richest hockey league, but still is a leech that just sucks and gives nothing back.

This is literally a corporated version of the Soviet Union. It is actually worse since this money doesn't even flow back and it is forever lost to the private bank accounts. But still somehow many people see Russian oligarchs funding a league from their own pockets a worse thing these NHL leeches sucking lot of money away from it with salary caps and drafts.

This sounds exactly like any job I've ever had.

My salary has a 'cap' regardless of whether or not it's in writing. My employer may charge as much as they'd like for their product, so long as it sells, and are free to pocket any profit. They may pick and choose which applicants to hire, place them where they want and start them at a mostly non-negotiable base salary. And, to my knowledge, have never given a dime to any of the schools in which these skills required on the job were developed.

 

[Albatros]

I doubt your employer has a comparable position of monopoly.

 

[Shad]

I was under the impression that an average NHL market is a pretty low return investment when compared to alternative capital allocation.

According to Forbes, the Rangers make the most money with an income of $74.5 M. The team is valued at 1225M giving a yearly return of ~6% before inflation. The S&P 500 index returns an historical average of ~9% before inflation and is a passive, highly liquid, diversified investment.

 

[SmellOfVictory]

re: The cap: The agreement is between the owners AND the players union. Also, there are other real world examples of income control, such as fee guides for medical professionals.

re: The draft: The draft simply says "if you want to play for the NHL, team x gets first attempt to sign you and exclusive bargaining rights." Players are completely free to play for other leagues if they don't like this fact. This doesn't strike me as much different from working for a company, and that company telling you that you need to work in a particular department if you do want to work for that company.

 

[Albatros]

The draft is a cartel ordering a potential employee to work for a particular company accepting particular non-negotiable working conditions.

 

[93LEAFS]

The draft is a cartel ordering a potential employee to work for a particular company accepting particular non-negotiable working conditions.

It is negotiable because it was done via a collective bargaining. The players don't have the rights as individuals, but they do have them as a collective.

 

[Albatros]

How can a professional not already employed by the cartel participate in this collective bargaining with the cartel?

 

[93LEAFS]

How can a professional not already employed by the cartel participate in this collective bargaining with the cartel?

Anyone who joins a union job has previously had rights negotiated for them by previous union members, they don't get to create their own terms. That is simply the basis it works under. They may trade lower entry level pay, for more vacation days or better benefits. The players have chosen not to fight the draft.

You are employed by the NHL, that is the company you work for, from there you are sent to whatever division of that potential company. You also aren't forced to sign your ELC.

 

[Albatros]

All NHL teams are individual companies that normally would compete in a free market environment, but have formed a cartel to eliminate that free competition.

 

[Ducks DVM]

The players have decided that guaranteed contracts and having their travel and medical bills not come out of their own pockets while playing are far more important perks than the ability to be a free agent as a teenager. The laws allow for that trade.

I find it odd how proponents of unfettered free agency often think that there should be transfer fees. If the player is free to do what they want, they should be able to do what they want. Transfer fees just reduce them to being a different type of property.

 

[golfortennis]

Collusion happens when two unrelated businesses (e.g., McDonald's and Taco Bell) make an agreement to avoid bidding wars. That's not the case here, the NHL isn't going to bid against ITSELF for its own employees.

I can think of 280 million reasons why this analogy is not correct.

The salary cap, etc., may make for a different playing field, but it is collusion if the NHL franchises agree not to bid freely.

 

[LeHab]

I was under the impression that an average NHL market is a pretty low return investment when compared to alternative capital allocation.

According to Forbes, the Rangers make the most money with an income of $74.5 M. The team is valued at 1225M giving a yearly return of ~6% before inflation. The S&P 500 index returns an historical average of ~9% before inflation and is a passive, highly liquid, diversified investment.

You have to account for team valuation as well. If you use Forbes (questionable source) estimates as a source between 2006 and 2016 NYR value has gone up by 300-400% + dividends. Meanwhile S&P 500 with dividends reinvested is up about 75%. In recent years most sport team franchises valuations have gone crazy up, how sustainable that is remains to be seen.

 

[93LEAFS]

All NHL teams are individual companies that normally would compete in a free market environment, but have formed a cartel to eliminate that free competition.

They aren't, they are franchises within the NHL set up. That isn't a cartel. Any other league is free to start up and offer these players more. These are the rules that have been created through collective bargaining.

 

[Albatros]

Such league abusing its position of monopoly is precisely a cartel.