Home-Field Disadvantage: How the Organization of Soccer in the United States Affects Athletic and Economic Competitiveness.

• Author: Velarde, Carolina I.

The United States men's soccer team failed to qualify for the 2018 World Cup. In the aftermath, soccer followers questioned the organizational structure supervised by the United States Soccer Federation. An analysis of the relationships between professional soccer leagues reveals potentially anticompetitive practices that may contribute to the subpar performance of the U.S. Men's National Team. This Note argues that the United States Soccer Federation is engaged in economically anticompetitive behavior that impedes the development of American soccer. Certain reforms, including an open-league system and player transfer fees at the youth development level, would enhance the economic and athletic competitiveness of soccer in the United States.

TABLE OF CONTENTS INTRODUCTION I. GETTING THE BALL ROLLING A. The Main Players in Soccer's Organizational Structure B. Different Ball Games: The Traditional U.S. Sports League Model and the Soccer Model C. Offside: Lining Up the Open-League System and Transfer Fees with Competition Laws II. BENDING THE STRUCTURE OF SOCCER IN THE UNITED STATES A. Conspiracy Under Section 1 of the Sherman Act B. USSF: The Twelfth Man on the Field C. Calling the Foul: The Conspiracy Between USSF, MLS, and USL Inhibits the Growth of Developmental Soccer in the United States III. CHANGING THE RULES OF THE GAME CONCLUSION INTRODUCTION

On October 10, 2017, the United States men's soccer team failed to qualify for the World Cup for the first time since 1986. (1) Following its defeat, sports analysts, coaches, players, and fans called for change in soccer team development in the United States. (2) Despite its success in other sports, the United States has struggled to reach the status of countries like Argentina, Brazil, Italy, England, the Netherlands, and Spain as an elite soccer nation. (3) Further, notwithstanding its large population, the United States has failed to produce a single player with the skill and fan base of international stars like Lionel Messi or Ronaldinho. (4) Perhaps this is simply the result of a lack of American interest in the sport itself. Or, conversely, the lack of interest may actually be a consequence of the team's poor performance. (5) Either way, improving American performance on the global stage and increasing American fandom go hand in hand. Professional soccer's anticompetitive structure is ripe for a reform that could both improve athletic performance and increase fan base interest. Indeed, in the aftermath of the United States' unsuccessful attempt to qualify for the 2018 World Cup, critics argued that American lack of interest is caused by the United States Soccer Federation's (USSF) unusual organizational structure. (6)

This Note argues that the USSF is engaging in economically anticompetitive behavior that inhibits the development of soccer in the United States. It contends that USSF should instead conform with Federation Internationale de Football Association (FIFA) regulations by adopting a promotion and relegation system and improving the transfer system at the youth development level. Part I explains the organizational structure of USSF, the differences between professional soccer and other American sports leagues, and the USSF and FIFA governing rules. Part II argues that USSF's anticompetitive practices amount to a violation of Section 1 of the Sherman Act. These practices degrade the athletic competitiveness of American soccer, inhibiting the improvement and expansion of development teams. (7) Part III proposes reforming the organizational structure of soccer in the United States by adopting the FIFA regime in place of the current, anticompetitive USSF rules.

1. GETTING THE BALL ROLLING

   This Part provides background information on the structure of professional and youth soccer. Section I.A explains the configuration of organized soccer in the United States market. Section I.B explains how professional soccer is different from other sports leagues in the context of antitrust law. Finally, Section I.C sets forth two key structural rules in soccer that most countries follow but the United States has refused to adopt.

   1. The Main Players in Soccer's Organizational Structure

      International soccer is hierarchical, and FIFA sits at the top. (8) FIFA is the governing body that oversees international organized soccer. (9) It generates hundreds of millions of dollars of revenue annually from its promotion and oversight of tournament play. (10) FIFA is divided into four general bodies: the Congress, the Executive Committee, the general secretariat, and a collection of standing and ad hoc committees. (11) These bodies govern the status of players, their transfer across teams, and compliance with relevant regulations. (12) The next level in the hierarchy consists of six confederations, divided roughly by continent. (13) Each continental confederation has a governing body, oversees a collection of national associations for each member country, and can create separate rules and regulations so long as they comply with those of FIFA, (14) Similarly, each national association can create its own rules, provided they do not conflict with the corresponding confederation's rules or FIFA's rules. (15) The national associations oversee all the individual clubs, which are separated into divisions according to their level of competition. (16) The United States is a member of the Confederation of North, Central America, and Caribbean Association Football (CONCACAF), one of the six continental confederations. (17) USSF is the national association governing the sport in the United States. (18)

      Article 14 of the FIFA Statutes provides that member associations like USSF can "manage their affairs independently and ensure that their own affairs are not influenced by any third parties." (19) As a result, USSF determines the structure of professional and amateur soccer organizations in the United States. (20)

      This Note focuses on the "Professional League Organization Members." (21) These member leagues are organized into three divisions or tiers, separated so that each division is roughly equal in athletic competitiveness and quality. (22) Division I consists of Major League Soccer (MLS) alone, the preeminent professional soccer league. (23) Division II, likewise, consists of only the United Soccer League (USL). (24) The North American Soccer League (NASL) was also a Division II member until USSF stripped its second division status in the fall of 2017. (25) In April 2017, USL announced the launch of a Division III league. (26) The following chart reflects a partial representation of this organizational structure: (27)

   2. Different Ball Games: The Traditional U.S. Sports League Model and the Soccer Model

      Both the structure and the culture of soccer in the United States are distinct from those of the other professional sports leagues. The National Football League (NFL), Major League Baseball (MLB), the National Basketball Association (NBA), and the National Hockey League (NHL) traditionally dominate the sports market. (29) Those leagues are built on contractual agreements among independently owned member teams, which compete both economically and athletically. (30)

      This business model, where a single organizing body (the league) sets the underlying rules of competition among independent teams, has given rise to antitrust questions. In National Collegiate Athletic Ass'n (NCAA) v. Board of Regents of the University of Oklahoma, the NCAA faced an antitrust challenge to its control over television-broadcast rights. (31) While the Supreme Court ultimately concluded that the NCAA went too far in restraining competition, it also made it clear that sports leagues require a high level of cooperation among competitors for their products to exist. (32) When sports teams within a league agree to certain restrictions, they necessarily exclude potential competitors, suppliers, and distributors of their products. (33) Accordingly, the Court did not condemn the agreements as per se illegal and stated that the decision "rest[ed] in large part on [the Court's] recognition that a certain degree of cooperation is necessary if the type of competition that petitioner and its member institutions seek to market is to be preserved." (34)

      USSF has faced similar antitrust lawsuits for restricting competition. For example, in 2001 the Los Angeles Memorial Coliseum Commission sued USSF and MLS. (35) The lawsuit alleged that the organizations had conspired to prevent other professional soccer matches from competing with MLS- or USSF-sponsored teams. (36) According to the plaintiffs, USSF used "its position as the purported sanctioning body for all professional soccer matches held in the United States" to adopt and enforce blackout dates against non-MLS teams. (37) When USSF does approve a non-MLS match, it "requires the payment of substantial fees," a barrier to compete that MLS does not have to overcome. (38) The plaintiffs argued that such restrictions on economic competition amount to unlawful restraints on trade, just as in NCAA. (39)

      But American professional soccer is distinct in a crucial way: it is structured as a so-called single-entity league. While teams in the NFL, NBA, and MLB retain economic autonomy apart from their leagues, MLS teams do not. (40) MLS is held as a single corporation rather than as a collection of individually owned teams. (41) When founder Alan Rothenberg designed the league, he ensured that MLS would centrally own and operate the teams, assign players and team personnel, and set local ticket and concession prices. (42) Though MLS has investors, those investors own shares in MLS itself, not in individual teams. (43) And, unlike in other leagues, operators may run more than one team at once. (44)

      Because of this structure, "MLS retains significant centralized control over both league and individual team operations." (45) This single-entity structure has shielded MLS from...