Most of us who follow MLS are paying attention to the labor negotiations between the league and the MLS Players Union. One thing is certain, no one wants to see a strike. We all want to see matches, and we are all aware that a strike right before the World Cup will be bad for the league, bad for the owners, bad for the fans, and bad for the players (particularly those who want to be on the plane to South Africa).
Free agency is one of the issues on the table. The players seemingly want it. But the league says in no uncertain terms that they don’t. As it stands, out of contract players can be held in limbo if they can’t agree on a new deal because their teams still hold their rights. Free agency would allow these out of contract players who are unwanted or unused by their teams to find a new home if there is a demand for their services.
The principled stance is simple. Players should be free to move when their contracts expire. In a piece on MLS negotiations, Ives Galarcep makes the following point regarding free agency:
How exactly would free agency within MLS hurt the league as long as the league has a salary cap? It really can’t, not from the standpoint where skyrocketing salaries would be a concern. As long as there is a salary cap, a maximum limit on non-DP contracts, and as long as the league’s player personnel department still signs off on deals, how could free agency hurt MLS?
It could have to do with MLS wanting to maintain control of player valuations, which could come under fire if teams were able to bid on free agent players. Suddenly a veteran highly-coveted by one team could potentially earn much more than his previous team, or the league, believes he is worth.
This goes against the single-entity ethos the league is built on, and allowing it would ultimately give more control and freedom to teams and take away control from the league itself (No, I don’t see the problem with this either).
Galarcep is absolutely right in many respects, but MLS free agency is not just about ethos. Nor does free agency just come down to player’s salaries going through the roof. The big free agency issue revolves around the legal implications of giving more control and freedom to teams, although you’ll probably never hear the league frame it like this. From the league’s point of view, it is pretty clear that it views single entity as a necessary component of the league’s growth and ultimate survival. Allowing free agency would be a nail in the single entity coffin, which explains the league’s reluctance to entertain the idea.
For years, professional sports leagues, presumably seeking to control costs, have argued that they are single entities for federal antitrust purposes. A single entity league can generally be characterized as one that maintains control over all business operations, meaning that the league owns all the teams, controls player contracts and salaries, sponsorships, and broadcasting deals, among other things. The major single entity perk is that it allows a league to engage in behavior, such as price collusion and controlling player movements, that would otherwise be anti-competitive.
Single entity treatment came out of Copperweld Corp. v. Independence Tube Corp., where the Supreme Court held that a parent company is incapable of conspiring with its wholly owned subsidiary in violation of antitrust laws because the two entities constitute a single entity with “complete unity of interest.” The standard to focus on here is the unity of interest. The more factors that suggest that the league is acting with a complete unity of interest, the more likely the league will be able to withstand antitrust scrutiny on the single entity issue. Free agency, however, opens the door to increased competition between teams, thereby creating a disunity of interest.
If the league truly believes that its long term success is largely predicated on maintaining its single entity status, a move to full-fledged free agency puts MLS in a position where the league’s success is potentially jeopardized by giving potential plaintiffs added ammunition to challenge its single entity structure.
As is, the league’s single entity status is already on shaky ground. In Fraser v. Major League Soccer LLC, the First Circuit Court of Appeals stated that MLS displayed “a diversity of entrepreneurial interests that goes well beyond the ordinary company.” The Court referred to the league as a “hybrid,” consisting of single entity elements and joint venture elements, and questioned why the league should be treated differently than other traditionally structured sports leagues. Although the First Circuit’s questions do not amount to a definitive legal holding on the league’s structure, the Court’s statements certainly open the door to future legal challenges on the issue. This is where the league needs to tread carefully, and is exactly where it is treading carefully. Any shifts in control from the league to teams are simply additional factors that would ultimately weigh against MLS in future antitrust challenges.
For the non-legalese inclined, think of it like this … the legal argument that allows for single entity legal treatment is like a game of Jenga. That’s right, Jenga. Bear with me here. As some of you may know, Jenga is a game that includes 54 wooden blocks. You build a tower consisting of 18 rows, with three blocks per row. Then teams alternate removing one block at a time from the tower and placing it on top of the tower. The team that removes the block causing the structure to fall loses.
Now, think of the Jenga blocks as the legal factors that add up to single entity status for MLS. One of those blocks is free agency. From a legal standpoint, no one can say for certain that removing the free agency block will cause single entity to crumble, but removing it makes it more likely that the league’s single entity status will fall.
To most of us, full-fledged free agency sounds fair. After all, most of us are free to change employers at anytime. However, from the vantage point of the league, if the Players Union holds out for free agency and succeeds, it may ultimately jeopardize the league’s single entity status, thereby putting the league on shaky financial ground. If the league is correct in its assessment of why earlier soccer leagues failed, the Union succeeding on free agency is potentially dangerous. But from a player’s perspective, that doesn’t mean you take free agency off the table. The players should keep it on the table as a negotiating tactic, especially if the league considers the issue essential to its long-term success. However, if the players believe that there is some merit to the league’s position, then they shouldn’t posture for too long and they should work in good faith towards finding an amicable solution that benefits both sides. We may see some movement if the two sides can simply agree on better terms for the players. Free agency might just be a red herring.
At the end of the day, free agency comes down to a simple question: What evidence does MLS have that supports their position that single entity treatment is the key to long-term success? If the league has thoroughly researched its position, it should be able to articulate why this path is the best way forward for the league’s long-term success. The league should explain its rationale in detail if it wants to take the public position that free agency is off the table. Otherwise, observers are right to be skeptical of the league’s general claim that single entity is necessary in perpetuity.
Conversely, MLS player representatives, if they really want free agency, should detail how the league can succeed if it is legally treated as a joint venture, which becomes increasingly likely if the Union ever wins the free agency argument. Without any of this information, it is difficult for outsiders to assess where the league should compromise on the free agency issue.
I’m not yet willing to believe that the Players Union is gung ho about free agency. We shouldn’t get caught up in what is a sticking point in the negotiations and what is a negotiating tactic because some of the issues that are “on the table” (e.g. free agency) might just be a negotiating tactic to get improved terms. For the sake of the game in North America, let’s hope that there’s a reasonable resolution around the corner.
Excellent post – this is the first time somebody is really exposing the issue. It is all about preserving the hope of being given single-entity protection. Many out there, journalist and blogger alike, have struggled to understand why MLS is clinging to no free agency – but this is exactly why.
The question that must be posed to the Union is where is the evidence of teams punishing players who are out of contract? The Kevin Hartmann story is extraordinarily well timed to provide anecdotal support to the Union’s position, but if he is really valued, someone will trade Kansas City something to obtain his services on the cheap.
The Union has blown this out of proportion I think. Show us the evidence first.
One thing is clear, the MLS cannot afford a work stoppage. Other well established leagues have suffered greatly due to the unforeseen consequences. It took a steroids infused assault on the record books to bring baseball back, I would hate to watch the soccer version with jacked-up soccer players in the MLS kicking the ball through the goal nets.
Great post… really straight to the point.
Doesn’t the league have a waiver priorty system. To further make your point the waiver system is like a controlled free agency system league wide.
To my knowledge the Waiver system allows teams to pass on a layer in a agreed upon order when a player is “cut” from the team. However if a team decides to use its waiver priorty to pick up the cut player it must pay the full salary of said player.
In an effort to move along this agreement can’t the league and players union allow the the player to become a true “free agent” once he player has passed through waivers?
I’m not a lawyer but it doesn’t seem to me that dropping the rights to a cut player once they have passed waiver would constitute the end of single entity. Plus it would allow the league to resign said player at a lower salary or for another league to pick up the player on a free transfer.
Bram — I suppose the league could do that. But I guess the question would be who would control how that player gets allocated? If the player is then “free” to negotiate with teams, then they teams will actually start competing with each other on the basis of who can provide the best terms to the given player. This action would resemble joint venture activity rather than the actions of a single entity.
Ultimately, it would come down to the details of how the league structured “free agency”. The freer it is, the more the league doesn’t resemble single entity. But it’s difficult to really say whether this action alone would result in a challenge and a subsequent court ruling that the league is not a single entity for these purposes.
Also, I think the difference between the waiver system and traditional fee agency is that, as I understand it (and I need to take a closer look), the MLS waiver system isn’t a competitive process, but it’s more like a draft run by the league. Traditional free agency is a competitive process between teams.
MLS can not afford a strike now. This would be bad for the owners, players and soccer in the US and could have ramifications over the next five years and perhaps beyond. The CBA should have been dealt with long before this month; to leave these issues unresolved this late into the process is irresponsible by the leaders of both sides of the negotiations.
At this juncture, they should just extend the current CBA — perhaps slightly modified — over the next year or so.
12th – I agree. After all that’s gone into developing the league, and the momentum that’s been built with some recent smart expansions, a strike or lockout will at least have some residual effect derailing these gains. Obviously, none of us can really tell the players what’s good for their personal livelihoods. But this isn’t the time for a lockout. Just when the league is starting to capture the attention of casual soccer fans. Just when Fox is about to show the Champions League final on regular network TV …the league wants to risk going offline? As you said, MLS can’t afford a strike now.
You finally explained what nobody could make clear before. At least now what MLS is doing makes a little sense (at least for the league).
Thank you for the post.
Another point about waivers, is if a player doesn’t get picked up then they can arrange trials with other teams to try and earn a contract, Lawson Vaughn did it, RSL has two players right now that where waived trying to earn contracts. I agree though that free agency isn’t the sticking point becuase we’ve been shown if their is an interest for a player a move would be made, I think the biggest sticking point are benefits for veteran players. I think most the guys who have spoken out Kris Klein for example, if his contract for this season is not guaranteed by July 1st he will no longer be with the galaxy, at his salary and the money they’ll have from selling Landon they can get a younger guy. When these guys scream players rights they mean veterans rights becuase I have heard nothing being said about, pay, about development of players, travel arrangments, roster sizes. These things in my mind are a better discussion, not the fact that kevin hartman doesn’t have a team becuase he wouldn’t sign a contract. Does anyone know what truly broke those negotiations down, was it that it wasn’t guaranteed, or was it the term length of the contract?
Alex – I’m not sure, and I doubt many people that aren’t in the room right now will be able to know the real sticking points with the respective sides. Typically in negotiations, the sides are relatively tight lipped about what exactly is on the table. And even when you hear people speak up, it’s hard to tell what there real intentions are. I’d speculate that contract terms and structure are getting the bulk of the attention just by looking at how players have been treated over time. MLS has long taken the position that disgruntled players who are pissed about their contracts should just suck it up because “that’s the way we do business.” It was almost like the league has been looking after the league first, and the players have almost been an afterthought or simply collateral to the league’s success. But now that the CBA has expired, people like Klein are thinking, “Hold up. Let’s fix this now. Because if not now, then when.” As for the details of what is being sorted out in the players contracts, sadly only those in the room know the real answer to that. But fundamentally, the players need to feel that they are also integral to the leagues success. And they are. But you can’t really tell that from the way their contracts are handled.
All this rhetoric still does not explain another facet of this issue – holding rights. Lets use Hartman as an example. Why should KC hold his rights? Why not MLS (the single entity)? And if either does hold his rights and are effectively blocking his ability to earn a living playing soccer then isn’t that a violation of some law?
For instance, why could he not play in the NASL? That is NOT part of MLS (the single entity) and why should an NASL Club have to compensate either KC or MLS for a player they no longer wish to employ?
I think Hartman has a good lawsuit and we could see him as the next “Bosman” of our time.
Nice article and I’m sure that is the reason but I do not want free agency as well as a fan of many different sports. The reason is simple. One of the things I like about MLS is that players make wages comparable to most americans. When they are right out of college they aren’t paid the best but as they improve and advance and show their worth their salary increases.
In MLB, NFL(which doesn’t guarantee contracts as well, I believe), NHL, NBA and a lot of European soccer leagues there are players that make ridiculous amounts of money that have either not proven themselves or are at the end of their careers and expect it. Free Agency is the main players in teams mismanaging their finances while seeking these high priced players to the point that teams go bankrupt.
In MLB have players like Jared Washburn making over 10 mil a years and he is a below average pitcher yet because of his years he is paid above average and then every year after the draft there is a rookie who without ever putting on a minor or big league uniform gets a big guaranteed contract from teams.
I want the players to be paid what is fair and make enough to live and get their fair cut of the profits but right now there are very few teams profiting. I think they should be allowed to move within the league after being let go without a team receiving compensation and hope that more money is put into players salaries to keep our best and bring in better talent but I am not in favor of something that has helped destroy teams I root for.
Interesting article! Good read!
MLS isn’t the greatest at artificially valuing talent. They constantly overpay and under pay for subpar talent. Seems to me the teams would do a better job negotiating their own deals.
Clive -
Thanks for the thoughtful and insightful post.
In response to your question: “What evidence does MLS have that supports their position that single entity treatment is the key to long-term success?”, I posit the following response:
The upward spiraling wage bills of NASL teams and a lack of a profitable national TV contract with that league. Single entity in MLS controls the former, facilitating costs controls until the latter is achieved.
As to the wage bill and MLS, I would tend to think that a salary cap would keep wage bills from spiraling upward. But as you indicate, opening the door to free agency puts cracks in the foundation of a single entity structure. It’s difficult to imagine “free” agency where all contracts are signed with MLS, and not individual teams.
Furthermore, MLS still does not have the kind of TV contract which shows it is here to stay. MLS TV contracts are “profitable” in that the league no longer pays for its games to air, but otherwise the revenue from TV is miniscule. Until MLS is negotiating for TV rights at a much higher gross number I am inclined to believe MLS’ claims of poverty.
Hey Colin — I agree with you about the rationale for single entity. But it just seems like all of the rationale is behind a curtain, which explains why so many people are so confused.
To your last point, I think it ties in nicely to what I think is the league’s position. That the league is not financially viable yet.
This conversation feels oddly reminiscent of a political debate. What I’m asking for is a bit of transparency because I think MLS probably has some pretty rationale positions. You just can’t expect people to keep taking your word for it. The generic statements will only work for so long.
OK Clive,
lets Assume that MLS and its waiver system plays out like I said in my original posting which i believe it does. After the player has cleared waivers he only has the right to negotiate with MLS not teams. In fact, the player never negotiates with the teams directly no matter what.
Players are sometimes chopped off rosters due to bloated salaries relative to there percived value. The coaching staff and team executives make this decsion which is an econominc and personnel one.
Then the player(s) filter through the waiver system.
What if at this point the players could be eligible for third party arbitration that is only triggered with the consent of a designated team executive for every team and the player?
If the player wins arbitration the contract is still garunteed by MLS. You could even have an arbitration fund that is managed by each team allowing more descretion by team executives in triggering Arbitration.
Bram!!!
We’re deep in the hypothetical now. So first, let me say that really the league can do whatever they want, and will keep up business as usual until there’s a legal challenge. At that point, given this would be under rule of reason analysis, we’re just weighing legal factors. So we’re just speculating here …
Now, what is the subject of arbitration in your example? What are you asking the arbitrators to decide?
Great writeup. I actually feel like I finally understand the issue of free agency and what it means to both sides.
Glad it made sense, Jay.
So it seems the Union was not posturing and they really do want free agency, and they are ready to strike over it. Isn’t there an acceptable middle ground that can accommodate player movement while leaving salary caps and such in place?
[...] bargaining agreement between MLS and the Major League Soccer Players Union expired. Clive wrote a great piece outlining the single entity issue a few months ago. With the Supreme Court’s recent decision [...]