Antitrust and Franchise Relocation in Professional Sports: An Economic Analysis of the Raiders Case

• DOI: 10.1177/0003603X9704200303
• Author: Kenneth Lehn,Michael Sykuta
• Date: 01 September 1997
• Published date: 01 September 1997
• Subject Matter: Symposium: Antitrust in the Sports Industry

The Antitrust BuiletinJFall1997 541

Antitrust

and franchise relocation

in professional sports: an economic

analysis

of

the Raiders case

BY KENNETH LEHN* and MICHAEL SYKUTA**

I.

Introduction

In 1984, the Ninth Circuit of the United States Court

of

Appeals

upheld alower

court

ruling that the National Football

League

(NFL) violated federal antitrust laws when it prohibited the Oak-

land Raiders from moving to Los Angeles.' While the

Raiders

case is frequently pointed to as a watershed for franchise reloca-

tion in professional sports, other cases have produced rulings that

*Professor of Business Administration, Katz Graduate School of

Business, University of Pittsburgh, Pittsburgh, PA.

** Research Professor, Katz Graduate School of Business, University

of Pittsburgh, Pittsburgh, PA.

AUTHORS· NOTE: Special thanks to Shane Hockins and Jennifer Ladisch

for

their capable research assistance.

Los Angeles Memorial Coliseum Commission v. National Foot-

ball League, et aI., 726 F.2d 1381 (9th Cir. 1984) [hereinafter Raiders].

© 1997 by Federal Legal Publications, Inc.

542

The antitrust bulletin

raise questions about the broad applicability

of

the Raiders deci-

sion. Two issues lie at the heart of these differences:

(I)

whether

professional sports leagues are individual entities or collections

of

independent firms, and (2) the net effects of relocation restrictions

on consumer welfare.

We examine the economic arguments made in court decisions

involving the relocation of professional sports franchises, with

particular

focus

on

the

arguments

made

in the

Raiders

case.

Before the Raiders case, San Francisco Seals, Ltd. v. National

Hockey League, et af.2 was the prevailing antitrust case involving

relocation

restrictions in professional sports. In this case, the

National Hockey League (NHL) was ruled to be a "single entity"

and hence not in violation

of

antitrust law since afirm

cannot

conspire with itself. The Seals decision continues to apply to the

NHL, but was rejected in both the Raiders case and a case involv-

ing the San Diego Clippers and the National Basketball Associa-

tion.! Although the Clippers court agreed with Raiders on the

inapplicability

of

the

single

entity

argument,

it

found

that

"[n]either the

jury's

verdict in Raiders, nor the court's affirmance

of

that verdict, held that afranchise movement rule, in and

of

itself, was invalid under the antitrust law."4 Instead, the issue is

the reasonableness of the rule and the way in which it is applied.

Amajor factor in determining the reasonableness of NFL Rule 4.3

(the section

of

the NFL's Constitution dealing with relocation

decisions) was the extent to which the application

of

that rule

unreasonably restrained competition. The Raiders court employed

anarrow interpretation of competition, considering primarily the

competition between local market clubs for local fans' dollars and

local advertising and media revenues.

We express skepticism about the basis for the Raiders decision

and find anecdotal support for

our

view by events that occurred

San Francisco Seals, Ltd. v. National Hockey League, et al., 379

F. Supp. 966 (Cal. Ct. App. 1974).

National Basketball Association, et al. v. SDC Basketball Club,

Inc., 815 F.2d 562 (9th Cir. 1987).

4[d. at 567.