Oscar Robertson, Antitrust, and the Fight Against Monopsony Power in the NBA

• DOI: 10.1177/0003603X211023622
• Author: David Berri
• Published date: 01 September 2021
• Date: 01 September 2021
• Subject Matter: Introduction

Antitrust and Race Symposium

Oscar Robertson, Antitrust,

and the Fight Against Monopsony

Power in the NBA

David Berri*

Abstract

Labor markets in sports have historically been dominated by the monopsony power enjoyed by

owners. In the 1970s, Oscar Robertson argued in front of Congress that “ ...it’s terribly wrong for

anyone to limit anyone’s ability to earn more money.” The data make it clear that Robertson’s wages—

and the wages of other National Basketball Association (NBA) players—were indeed limited by the

NBA’s reserve clause. Robertson, though, didn’t just make speeches. As the head of the NBA’s Player

Association, he delayed a merger between the American Basketball Association and NBA and even-

tually created the NBA’s free agent market. His work dramatically increased the wages paid to NBA

players. These victories, though, didn’t last forever. The many limits today on player wages in the

NBA’s labor market suggest that Robertson’s fight has largely been forgotten by today’s NBA players.

Keywords

monopsony power, antitrust, collective bargaining, marginal revenue product, sports economics

What determines a worker’s wages? The neoclassical answer—taught by J.B. Clark in the nineteenth

century and frequently repeated in ECON 101 today—is that wages are determined by a worker’s level

of productivity and the functioning of supply and demand in an objective marketplace. In this view, a

worker’s pay simply reflects the workings of an impersonal market. And any government interference

in this competitive process will only lead to worse outcomes.

Historically, many economists appear to think the story originally told by J.B. Clark made sense. As

Clark argued in the nineteenth century, wages are determined by a competitive labor market. Sure,

economists were also aware of another model describing a monopsony. But not only is the textbook

monopsonistic model largely nonsensical as presented,

1

the textbook examples describing the pure

* Department of Economics andFinance, Southern Utah University, Cedar City, UT, USA

Corresponding Author:

David Berri, Department of Economics and Finance, Southern Utah University, 351 W University Blvd., Cedar City, UT 84720,

USA.

Email: berri@suu.edu

1. RONALD G. EHRENBERG &SMITH ROBERT’S,MODERN LABOR ECONOMICS:THEORY AND PUBLIC POLICY 79–85 (2000), note that a

monopsony faces a marginal expense for hiring workers that is in excess of the wage in the market. This occurs because—as

The Antitrust Bulletin

2021, Vol. 66(3) 328–358

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DOI: 10.1177/0003603X211023622

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monopsony model tend to focus on a mining town with one employer and apparently citizens

who didn’t have any feet!

2

Although many economists in the past might have mentioned the mono-

psony story briefly, the standard Clark—ECON 101—model generally appeared to dominate their

thinking.

At least, for those who didn’t study sports. Economists who thought about sports—beginning with

Rottenberg

3

and Scully

4

—have always known that wages are not determined by an impersonal labor

market. Wages are primarily determined by bargaining power. And when it comes to sports, the wages

of workers were historically reduced by the monopsonistic power held by the teams.

The study of sports doesn’t just allow one to theorize about the workings of a monopsonistic market.

Sports comes with an abundance of data on worker productivity. Consequently, Berri and Krautmann

5

didn’t just argue that Bob Gibson was likely exploited—or paid a wage less than his economic

value

6

—in 1968. These authors could also say that given Gibson’s esti mated production of wins

pitching for the St. Louis Cardinals that season (he was worth an estimated 10.38 wins), Gibson was

worth US$247,389 to the Cardinals.

7

Because he was only paid US$85,000, Gibson was definitely

exploited. And this exploitation came about because the labor market for baseball players in 1968 was

dominated by the monopsony power of the baseball team owners.

Gibson was not the only athlete exploited in 1968. The monopsony power enjoyed by

baseball teams in the 1960s was also enjoyed by other leagues like the National Basketball

Association (NBA). The purpose of this inquiry is to explore how the monopsony power of the NBA

was briefly broken in NBA. There are many players in this saga. But the one we will focus on is Oscar

Robertson.

Robertson became the head of the National Basketball Player’s Association (NBPA) in 1966. At the

time, he was the first black athlete to lead the labor union of a major men’s professional sports league.

In 1970, Robertson and the NBPA filed a suit—known as the “Oscar Robertson Suit”—to stop a

proposed merger between the NBA and the American Basketball Association (ABA). Six years later,

the leagues did merge. But that merger only came about after the NBA agreed to the “Oscar Robertson

Rule,” which established the NBA’s initial free agent market.

As the current NBA commissioner Adam Silver stated in 2020:

the model argues—for a monopsony to hire more workers, they must raise the wages of all existing workers. This feature in

the model can’t possibly match reality. Firms do not consistently pay workers the same wage (anyone who had a part-time job

at some point would see this). Why would an absolute monopsony feel obliged to do this? It appears whoever originated the

graphical representation of a monopsony invented this story simply to make the graph work.

2. Id. at 80. The classic example of a pure monopsony—from EHRENBERG &SMITH—is a mining town where the owner of the

mine employs everyone in the town. Although such a mine might have monopsony power (in fact, that seems likely), the

mining town can’t be a pure monopsony. People have feet. They can leave the town and go work someplace else. Obviously

leaving the town imposes a cost on workers, hence the mine would have monopsony power. But it would not be a “pure

monopsony.”

3. Simon Rottenberg, The Baseball Players’ Labor Market,64J.P

OL.ECON. 242 (1956).

4. Gerald W. Scully, Pay and Performance in Major League Baseball,64A

M.ECON.REV. 915 (1974).

5. David J. Berri & Anthony Krautmann, How Much Did Baseball’s Antitrust Exemption Cost Bob Gibson? 64 ANTITRUST BULL.

566 (2019).

6. JOAN ROBINSON defined the term exploitation in 1933. As obinson noted: “It (exploitation) is usually said that a factor of

production is exploited if it is employed at a price which is less than its marginal net productivity.” “Marginal net

productivity” is another way to say “economic value.” Today economists refer to “economic value” as marginal revenue

product. JOAN ROBINSON,THE ECONOMICS OF IMPERFECT COMPETITION 281–82 (2nd ed. 1969).

7. This assumes baseball teams were giving 50%of their revenue to their players. Berri & Krautmann, supra note 5, at 582 also

examine Gibson’s value if the split was 40%,60%,or70%. For all splits examined, Gibson was exploited.

Berri 329