Antitrust and inefficient joint ventures: Why sports leagues should look more like McDonald's and less like the United Nations

Stephen F. Rossa, Stefan Szymanskib

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

Antitrust law generally favors joint ventures that allow separate firms to integrate economic functions while continuing to compete as independent entities. In evaluating the risks to competition that joint ventures could pose, insufficient attention has been paid to the risk that joint ventures with market power may be structured so that the parties, acting in their independent self-interest, will prevent the venture from providing innovative goods and services responsive to consumer demand. In these cases, it may be better if a single firm provided services rather than having them provided jointly. We illustrate this problem by challenging the conventional wisdom that sports leagues must be organized and run by clubs participating in the sporting competition. The fastest-growing competition in the United States is organized by NASCAR, a distinct business entity that is not controlled by the drivers who participate in stock car races. We suggest that the club-run sports leagues in the major North American sports impose significant costs on sports fans in a variety of markets. If, instead, relevant rules were decided by an independent Board of Directors of "NFL, Inc.," "MLB, LLC," or the like, we suggest that franchise allocation, broadcast rights, effective club management, marketing and sponsorship, and labor markets would be regulated more efficiently and more responsively to consumer demand. Our analysis blames significant transactions costs for the inability of club owners who run leagues to reach efficient, consumer-responsive results. These same transaction costs may prevent an efficient restructuring of sports leagues. Thus, we apply conventional antitrust doctrine in innovative ways to argue that courts could view the current structure as an unlawful refusal of club owners to participate in a sporting competition that they themselves cannot control, which we argue unreasonably restrain trades and unlawfully maintain monopoly power.

Original languageEnglish (US)
Title of host publicationThe Comparative Economics of Sport
PublisherPalgrave Macmillan
Pages87-138
Number of pages52
ISBN (Electronic)9780230274273
ISBN (Print)9780230232242
DOIs
StatePublished - Mar 31 2010

Fingerprint

Joint ventures
McDonald's
Clubs
Sports leagues
United Nations
Transaction costs
Owners
Consumer demand
Labour market
Monopoly power
Sponsorship
Economics
Venture
Board of directors
Franchise
Sports fans
Market power
Antitrust law
Car
Marketing management

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)
  • Business, Management and Accounting(all)

Cite this

Rossa, Stephen F. ; Szymanskib, Stefan. / Antitrust and inefficient joint ventures : Why sports leagues should look more like McDonald's and less like the United Nations. The Comparative Economics of Sport. Palgrave Macmillan, 2010. pp. 87-138
@inbook{2103ab8ebd6d49bc9bdad02d1d0a49a9,
title = "Antitrust and inefficient joint ventures: Why sports leagues should look more like McDonald's and less like the United Nations",
abstract = "Antitrust law generally favors joint ventures that allow separate firms to integrate economic functions while continuing to compete as independent entities. In evaluating the risks to competition that joint ventures could pose, insufficient attention has been paid to the risk that joint ventures with market power may be structured so that the parties, acting in their independent self-interest, will prevent the venture from providing innovative goods and services responsive to consumer demand. In these cases, it may be better if a single firm provided services rather than having them provided jointly. We illustrate this problem by challenging the conventional wisdom that sports leagues must be organized and run by clubs participating in the sporting competition. The fastest-growing competition in the United States is organized by NASCAR, a distinct business entity that is not controlled by the drivers who participate in stock car races. We suggest that the club-run sports leagues in the major North American sports impose significant costs on sports fans in a variety of markets. If, instead, relevant rules were decided by an independent Board of Directors of {"}NFL, Inc.,{"} {"}MLB, LLC,{"} or the like, we suggest that franchise allocation, broadcast rights, effective club management, marketing and sponsorship, and labor markets would be regulated more efficiently and more responsively to consumer demand. Our analysis blames significant transactions costs for the inability of club owners who run leagues to reach efficient, consumer-responsive results. These same transaction costs may prevent an efficient restructuring of sports leagues. Thus, we apply conventional antitrust doctrine in innovative ways to argue that courts could view the current structure as an unlawful refusal of club owners to participate in a sporting competition that they themselves cannot control, which we argue unreasonably restrain trades and unlawfully maintain monopoly power.",
author = "Rossa, {Stephen F.} and Stefan Szymanskib",
year = "2010",
month = "3",
day = "31",
doi = "10.1057/9780230274273",
language = "English (US)",
isbn = "9780230232242",
pages = "87--138",
booktitle = "The Comparative Economics of Sport",
publisher = "Palgrave Macmillan",

}

Antitrust and inefficient joint ventures : Why sports leagues should look more like McDonald's and less like the United Nations. / Rossa, Stephen F.; Szymanskib, Stefan.

The Comparative Economics of Sport. Palgrave Macmillan, 2010. p. 87-138.

Research output: Chapter in Book/Report/Conference proceedingChapter

TY - CHAP

T1 - Antitrust and inefficient joint ventures

T2 - Why sports leagues should look more like McDonald's and less like the United Nations

AU - Rossa, Stephen F.

AU - Szymanskib, Stefan

PY - 2010/3/31

Y1 - 2010/3/31

N2 - Antitrust law generally favors joint ventures that allow separate firms to integrate economic functions while continuing to compete as independent entities. In evaluating the risks to competition that joint ventures could pose, insufficient attention has been paid to the risk that joint ventures with market power may be structured so that the parties, acting in their independent self-interest, will prevent the venture from providing innovative goods and services responsive to consumer demand. In these cases, it may be better if a single firm provided services rather than having them provided jointly. We illustrate this problem by challenging the conventional wisdom that sports leagues must be organized and run by clubs participating in the sporting competition. The fastest-growing competition in the United States is organized by NASCAR, a distinct business entity that is not controlled by the drivers who participate in stock car races. We suggest that the club-run sports leagues in the major North American sports impose significant costs on sports fans in a variety of markets. If, instead, relevant rules were decided by an independent Board of Directors of "NFL, Inc.," "MLB, LLC," or the like, we suggest that franchise allocation, broadcast rights, effective club management, marketing and sponsorship, and labor markets would be regulated more efficiently and more responsively to consumer demand. Our analysis blames significant transactions costs for the inability of club owners who run leagues to reach efficient, consumer-responsive results. These same transaction costs may prevent an efficient restructuring of sports leagues. Thus, we apply conventional antitrust doctrine in innovative ways to argue that courts could view the current structure as an unlawful refusal of club owners to participate in a sporting competition that they themselves cannot control, which we argue unreasonably restrain trades and unlawfully maintain monopoly power.

AB - Antitrust law generally favors joint ventures that allow separate firms to integrate economic functions while continuing to compete as independent entities. In evaluating the risks to competition that joint ventures could pose, insufficient attention has been paid to the risk that joint ventures with market power may be structured so that the parties, acting in their independent self-interest, will prevent the venture from providing innovative goods and services responsive to consumer demand. In these cases, it may be better if a single firm provided services rather than having them provided jointly. We illustrate this problem by challenging the conventional wisdom that sports leagues must be organized and run by clubs participating in the sporting competition. The fastest-growing competition in the United States is organized by NASCAR, a distinct business entity that is not controlled by the drivers who participate in stock car races. We suggest that the club-run sports leagues in the major North American sports impose significant costs on sports fans in a variety of markets. If, instead, relevant rules were decided by an independent Board of Directors of "NFL, Inc.," "MLB, LLC," or the like, we suggest that franchise allocation, broadcast rights, effective club management, marketing and sponsorship, and labor markets would be regulated more efficiently and more responsively to consumer demand. Our analysis blames significant transactions costs for the inability of club owners who run leagues to reach efficient, consumer-responsive results. These same transaction costs may prevent an efficient restructuring of sports leagues. Thus, we apply conventional antitrust doctrine in innovative ways to argue that courts could view the current structure as an unlawful refusal of club owners to participate in a sporting competition that they themselves cannot control, which we argue unreasonably restrain trades and unlawfully maintain monopoly power.

UR - http://www.scopus.com/inward/record.url?scp=84998829049&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84998829049&partnerID=8YFLogxK

U2 - 10.1057/9780230274273

DO - 10.1057/9780230274273

M3 - Chapter

AN - SCOPUS:84998829049

SN - 9780230232242

SP - 87

EP - 138

BT - The Comparative Economics of Sport

PB - Palgrave Macmillan

ER -