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Breaking down the NASL v. USSF antitrust court decision

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Let’s break out the legalese to explain why a court ruled against the NASL this past weekend.

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Last weekend, the North American Soccer League learned a federal district court had ruled in favor of the United States Soccer Federation in a lawsuit filed in September. At the time, the NASL had just found out that the USSF had not granted the league a waiver to stay certified as one of two Division II professional soccer leagues. This would force the league to either drop down to Division III or fold. In response, the NASL filed a lawsuit attempting to block the removal of their D-II status. Judge Margo Brodie of the U.S. District Court for the Eastern District of New York ruled that while the NASL would be hurt by this decision, an injunction blocking the change would be inappropriate. Let's explain what all this means.

The NASL's lawsuit relied on antitrust law in their attempt to block the loss of D-II designation. They basically made two claims. They said that the USSF and Major League Soccer were conspiring to force the NASL to fail instead of becoming a stronger league and competing with MLS. The NASL also claimed the USSF's standards for the leagues created a monopoly for Division I soccer, thus constituting an unfair business practice. Judge Brodie didn't rule on whether the accusations were true, instead ruling that the NASL did not provide enough evidence for these (Sounder at Heart has a really good breakdown of the arguments and the idea of irreparable harm). Here, let’s focus on antitrust law and the policy implications.

Antitrust is about making sure companies do not restrict competition. To simplify, the two big parts are criminal collusion and monopolization. Basically, the government wants to avoid the creation of cartels (where a group works together to fix prices) and the domination of one entity that can set whatever price it wants. The NASL said that both of those are happening in their filing, which you can find here. Such an argument was always doomed for a couple reason.

First, there was the monopolization claim. The NASL argued that the USSF specifically wanted to keep MLS as the D-I league and set up standards for D-I authorization that they knew the NASL could not meet in order to keep them from competing for D-I soccer, which they describe as a specific market (as opposed to D-II soccer, international soccer, club soccer, and other sports, which they argued were separate markets). Further, the NASL argued that the USSF set the standards for D-II at such a level specifically in order to cause the collapse of the NASL.

Second, the NASL argued that, particularly through Soccer United Marketing (I chronicle how they make their money here), USSF is conspiring with MLS to keep NASL out of D-I and cause the NASL to fold. Judge Brodie ruled that the NASL would be irreparably harmed by losing D-II status and there's a major conflict of interest between MLS and the USSF through SUM. Still, the judge denied the NASL's injunction anyway. So, what happened? The big rule you can't ever forget with antitrust: Antitrust is about competition, not competitors.

Antitrust is about making sure competition is preserved, not about keeping competitors afloat. Just because a company is failing doesn't mean that the government is going to swoop in to save it, even if that leaves only one competitor in the market. This is the crucial point. Yes, losing D-II status will be devastating for the NASL. Yes, there are massive problems with SUM. But, the NASL is in this position because they have run their business very, very poorly for a long time and not because of some anti-competitive act by the USSF.

The NASL's complaint is all about division standards. However, the USSF has had league standards in some shape or form for decades, with regular evaluations of those standards. Indeed, those standards are often circumvented with the federation frequently awarding waivers. Even when the NASL first started, the league did not meet those requirements and required waivers for failing requirements for the number of teams and geographic diversity. The league never reached the standard for league size, yet up to this point, the USSF was willing to grant the waivers. Those league standards are meant to keep the leagues, and the clubs within those leagues, on the path to meeting standards that match the associated prestige for that level. It is an attempt to stabilize professional soccer, with generous exceptions granted so long as leagues and the teams that constitute them have a path to meeting the standards and work towards being successful. These standards are specifically designed to help mitigate and protect leagues from cannibalizing themselves, developing an unsustainable product, and eventually collapsing.

For the past two years, the NASL has been on the verge of collapse. It looked like the league might cease to exist when I wrote about the problems last September, yet somehow, the problems have only worsened, which is saying something for a league that wound up seeing its largest investor, Traffic Sports USA, convicted for money laundering and banned from the sport. The newest expansion team, the San Francisco Deltas, came into the league looking incredibly ill-prepared. Their marketing was such a disaster, the owner pleaded with fans to come to games and boost attendance in a proposal that superficially looked like a pyramid scheme. Attendance has been stagnant all year, to put it charitably.

Just last year, five teams either closed up shop or jumped ship. This year, the Deltas looking like they too will close up shop just after their inaugural season (possibly with the league championship trophy in tow), while North Carolina FC may defect to the USL. The NASL could have just 7 clubs remaining, including the two expansion teams expected for San Diego and Chicago for 2018. Along with all of this incompetence, while MLS increasingly gathered strength and the USL grew and eventually surpassed their beleaguered competitors, the NASL insisted (dropping stacks of cash to back up that insistence) that they were the true future of D-I soccer and would over take MLS.

It is in this context that the NASL filed their lawsuit. They chased something that never was within reach, vastly mismanaged their business, failed to so much as assemble a plan to correct their mistakes, and then sued when they had to face the consequences for their repeated irresponsibility and incompetence. After they had failed to such a point that the federation could not continue to prop them up, they tried to go in front of a judge and have the law blow up those requirements that they could not meet under the guise of a conspiracy for which they had no real evidence.

If you are a fan of pro/rel, you should be outraged. The NASL is trying to take a collection of failing clubs and blow up the league designation structure, all in an attempt to put themselves at the top of the pyramid. For a while now, individual clubs and the NASL at large have been pushing for promotion and relegation with the argument that it would improve American soccer and offer a better product to fans. Now, that is clearly exposed as a farce, with the NASL and its owners clearly having no regard for a meritorious system and wanting merely to enrich themselves. When the grim reality of relegation comes, they decided to throw a tantrum and try to destroy the rest of the system with it.

What happens next? SB Nation Soccer outlined the appeals process for the NASL, and given the very unlikely nature of that appeal, they point out the grim reality of clubs being forced to fold, switch to the USL, or drop to D-III. For the USSF and MLS, this should be a big warning. MLS escaped culpability when faced with an antitrust suit 15 years ago in Fraser v. Major League Soccer. While extremely profitable, that SUM partnership could come around to bite them if they aren't careful, and they should clean up those clear conflicts of interest to avoid future antitrust claims. Still, the NASL is in serious trouble, and when it comes to their status as a Division II league, their argument is on thin ice.