Antitrust Damages

The extent to which sports leagues can make their own rules has a long history in sports law. This is complicated by the competing and often contradictory objectives from owners, some of whom are profit maximizers, while others are sportsmen owners who simply want to field a winning team. In the hopes of creating competitive balance, many leagues have adopted a myriad of rules – including revenue sharing, salary caps, and player drafts – which can have unintended consequences. While a league may believe it is acting in a pro-competitive manner, because franchises must collaborate to reach these agreements, some league decisions may run afoul of antitrust laws.

SportsEconomics analyzes the entire range of economic issues that arise in antitrust cases, including market definition and market power, market structure and entry conditions, pricing and other conduct affecting competition, profitability, liability and damages. We identify key issues, apply appropriate economic and financial theories, and use empirical techniques to develop independent and objective analyses and opinions.

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• Antitrust Damages

Antitrust Liability

The extent to which sports leagues can make their own rules has a long history in sports law. This is complicated by the competing and often contradictory objectives from owners, some of whom are profit maximizers, while others are sportsmen owners who simply want to field a winning team. In the hopes of creating competitive balance, many leagues have adopted a myriad of rules – including revenue sharing, salary caps, and player drafts – which can have unintended consequences. While a league may believe it is acting in a pro-competitive manner, because franchises must collaborate to reach these agreements, some league decisions may run afoul of antitrust laws.

SportsEconomics analyzes the entire range of economic issues that arise in antitrust cases, including market definition and market power, market structure and entry conditions, pricing and other conduct affecting competition, profitability, liability and damages. We identify key issues, apply appropriate economic and financial theories, and use empirical techniques to develop independent and objective analyses and opinions.

Click here to link to our case study:

• Antitrust Liability

Breach

Objectives.
More than 2,000 retired NFL players led by Anthony “Herb” Adderley (a Hall of Fame NFL player) filed a class action lawsuit against the National Football League Players Association claiming the NFLPA breached its fiduciary duty to obtain player licensing and marketing opportunities in a fair and equitable manner consistent with the best interests of the retired players, and breached its contracts with the players to include them in group licensing deals. The suit claimed that the NFLPA owed and owes each represented player a share of the more than $100 million in annual revenues the NFLPA (through Player’s Inc) received from promoting and marketing active and retired NFL players.

Challenges & Methodologies.
While the claims were multi-faceted and involved an assessment of the size of the revenues generated by Player’s Inc and the potential damages resulting from those licensing revenues that was due to the retired players, Dr. Rascher was asked to opine and to serve as an expert witness on issues related to sports economics. The four issues he focused on were to: 1) examine the importance of retired players in building the NFL brand and therefore in generating revenues from licensed merchandise related to that brand (including econometric analysis), 2) to determine a range of commissions in sports related to selling licensed merchandise, 3) to determine the amount of group licensing revenues active players receive through the NFLPA versus what the NFLPA kept and to compare that percentage “commission” to other professional sports leagues, and 4) to analyze the Department of Labor’s LM-2 filings and NFLPA financials to understand the size of the players’ licensing business and what share of this business should be shared with the retired players.

Through the work of Dr. Rascher, the Plaintiffs argued that the damages could come from a fund of nearly $68 million in group licensing revenues that had been built up over recent years, but were unallocated for any particular task of the NFLPA. Dr. Rascher also found that the NFLPA kept 69 percent of group licensing revenues where as other entities such as MLBPA typically kept between 10 and 40 percent.

Outcomes.

Dr. Rascher filed two expert reports, testified at deposition, and at trial. After brief deliberations following the three-week trial and nearly 20 months after the suit was filed, a federal jury ordered the NFL Players Association to pay $28.1 million to retired players after finding the union failed to properly market their images. The jury said the union owed the retirees $7.1 million in actual damages for failing to include them in lucrative marketing deals with Electronic Arts Inc., sporting card companies and other sponsorship agreements.

Damages Assessment

Given the high costs and risks of operating in the sports industry, frequent litigation ensues and experts are required to assess liability and damages claims in such lawsuits involving sports entities and their investors.

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• Sponsorship Valuation

• Stadium Lease Between City and Team

Financial Valuation of Facilities

The valuations of sports franchises and leagues are particularly complicated, given the infrequency of transactions and the limited supply of opportunities to enter professional leagues. While traditional valuation analysis typically examines comparables in the same market, this is analysis is complicated for sports franchises, as leagues control the location and proximity of franchises and franchise financial structures are generally confidential.

Moreover, the variances between professional leagues differ with regard to franchise availability, location, facility contracts and ownership, majority or minority stakes, player contracts, and a number of variables that are frequently in flux. The limited number of franchise transactions and the variances in team operating structures and assets make it especially important to understand and analyze these differentiating factors when valuing any of a team’s assets. Further complicating this is the fact that sportsmen owners, who are not necessarily profit maximizers, can skew the underlying economic value of the assets.

One asset commonly included in team valuations is the facility in which the team plays and operates. Whether or not the team owns or leases the facility, the high costs of these agreements and the duration of the commitment make these venues an increasingly important factor in a team’s financial success. Stadium leases have become core assets of professional sports franchises, and the financing of the construction of state-of-the-art facilities have become a common factor in the negotiations between teams and the communities in which they are located.

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• Financial Valuations of Facilities

Financial Valuation of a Team

The valuations of sports franchises and leagues are particularly complicated, given the infrequency of transactions and the limited supply of opportunities to enter professional leagues. While traditional valuation analysis typically examines comparables in the same market, this is analysis is complicated for sports franchises, as leagues control the location and proximity of franchises and franchise financial structures are generally confidential.

Moreover, the variances between professional leagues differ with regard to franchise availability, location, facility contracts and ownership, majority or minority stakes, player contracts, and a number of variables that are frequently in flux. The limited number of franchise transactions and the variances in team operating structures and assets make it especially important to understand and analyze these differentiating factors when valuing any of a team’s assets. Further complicating this is the fact that sportsmen owners, who are not necessarily profit maximizers, can skew the underlying economic value of the assets.

One asset commonly included in team valuations is the facility in which the team plays and operates. Whether or not the team owns or leases the facility, the high costs of these agreements and the duration of the commitment make these venues an increasingly important factor in a team’s financial success. Stadium leases have become core assets of professional sports franchises, and the financing of the construction of state-of-the-art facilities have become a common factor in the negotiations between teams and the communities in which they are located.

Click here to link to our case study:

• Financial Valuation of a Team

Financial Valuation of a Professional Sports League

The valuations of sports franchises and leagues are particularly complicated, given the infrequency of transactions and the limited supply of opportunities to enter professional leagues. While traditional valuation analysis typically examines comparables in the same market, this is analysis is complicated for sports franchises, as leagues control the location and proximity of franchises and franchise financial structures are generally confidential.

Moreover, the variances between professional leagues differ with regard to franchise availability, location, facility contracts and ownership, majority or minority stakes, player contracts, and a number of variables that are frequently in flux. The limited number of franchise transactions and the variances in team operating structures and assets make it especially important to understand and analyze these differentiating factors when valuing any of a team’s assets. Further complicating this is the fact that sportsmen owners, who are not necessarily profit maximizers, can skew the underlying economic value of the assets.

One asset commonly included in team valuations is the facility in which the team plays and operates. Whether or not the team owns or leases the facility, the high costs of these agreements and the duration of the commitment make these venues an increasingly important factor in a team’s financial success. Stadium leases have become core assets of professional sports franchises, and the financing of the construction of state-of-the-art facilities have become a common factor in the negotiations between teams and the communities in which they are located.

Click here to link to our case study:

• Financial Valuation of a Professional Sports League

League Regulation

Sports leagues are very unique, complex entities. More than any other industry, sports leagues exhibit aspects of joint ventures, single entities, cartels, monopolies, competitive markets, etc. Due to these diverse structures and characteristics, even the courts have found it unclear how to view and treat sports leagues.

This is complicated by the competing and often contradictory objectives from owners, some of whom are profit maximizers, while others sportsmen owners who simply want to field a winning team. Competitive balance is unique to sports and is the reason for many of the extraordinary rules that sports leagues adhere to. These rules, such as revenue sharing, salary caps, and player drafts, can have unintended consequences. While a league may believe it is acting in a pro-competitive manner, because franchises must collaborate to reach these agreements, some league decisions may run afoul of antitrust laws.

An analysis of league structure, strategies, tactics, team conduct, and incentives are an important aspect of league management. We specialize in understanding how to optimally structure a league, what rules to use and to what extent, and the impacts of the rules and expected outcomes.

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• League Regulation

Liability

Given the high costs and risks of operating in the sports industry, frequently litigation ensues and experts are required to assess liability and damages claims in lawsuits involving sports entities and their investors.

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• Liability

Mergers & Acquisitions

Our experience in antitrust and other forms of litigation consulting allows us to provide empirical and theoretical analyses of mergers and acquisitions. We have been engaged to advise firms involved in mergers and acquisitions, as well as antitrust agencies, about the potential economic antitrust and competitive implications of the proposed transactions. While our services have been employed in mergers and acquisitions in multiple industries, our expertise and primary focus are in the entertainment, media, and sports industries.

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• Mergers & Acquisitions