Major League Soccer: Deciphering the Single Entity

E Pluribus Unum? (image:  awfulannouncing.com)

E Pluribus Unum? (image: awfulannouncing.com)

OTF’s Alex White puts a legal magnifying glass to that confounding soccer league known as MLS…

One of the things I struggled with most when I started to watch Major League Soccer was the question of how exactly it all fit together. I anticipated the clubs were stand-alone entities, but the league would often pop into negotiations, and “free agents” had to enter the Re-Entry Draft, and there is an “allocation order” to certain international signings but not others, et cetera.

Recent high-profile player acquisitions only added to my confusion: Who is pulling these strings? Is MLS notifying teams of player availability? Is the league negotiating, and funding (or actively blocking) transfers? When a player signs with a club, who is he actually contracting with? Who pays the players? How is direct league intervention like this not considered collusion, especially since other leagues have been accused of it while doing far less?

When compared to soccer leagues in other countries, the structure of MLS is difficult to wrap your head around. Elsewhere, each club stands on its own; it contracts with players and coaches themselves, and its success or failure is derived from a Darwinian, free-market oriented promotion/relegation system.

From the American perspective, MLS’s nature is both more surprising and less. While the fact that MLS turns its back on such free-market entity independence seems counter to our culture, American fans are used to the concept of their teams as franchises within a single-entity closed system. All of our nation’s most popular sports have been monopolized in fact, like the National Football League in the present, or by law, as Major League Baseball’s was when a judge told us so back in the 1920s.

Likewise, the arguments MLS uses today, based upon protecting the investment of its owners and ensuring the long-term survival of the league, would ring true to baseball and gridiron followers of the early 1900s. In many ways, MLS has gained its comfortable government protection on the trail blazed by those other sports leagues, who argued for the investment of their owners or defended their salary cap as negotiated with a players’ union.

But MLS is not the NFL, and it’s not MLB. Besides through our own common sense, we know this because judges told us so.

In the early 2000s, a group of veteran players gathered to sue MLS as anti-competitive for allegedly keeping wages down and for allegedly colluding to do so. The case was named for one of those players, and Fraser v. MLS could have been the American Bosman ruling, opening up the market for players’ services at home as it is in Europe. Ironically though, those “socialist wacko” courts across the pond stood up for the rights of the individual in the latter, while the US decision touted the importance of collective effort in the former.

The “Background” section of the case is an especially good read to learn more about how MLS works. The league was built to be a much more cohesive structure than the American sports leagues that preceded it. For example:

•  All MLS players are employed by the league itself, not their respective clubs.
•  The league retains all intellectual property and negotiating rights, but employs owner/operators to manage the individual clubs.
•  Individual clubs have the authority to control player personnel within the organization (including intra-MLS trades), subject to the salary cap (currently set at approximately $3.10 million for 2014).
•  Stadium gate receipts go to the league, with a percentage given back to the individual owner/operator.
•  Owner/operators sit on MLS’s board and committees and collectively make league-wide decisions.

For the judges presiding over Fraser v. MLS, all these marks were in the league’s favor. They were careful not to weigh in on whether collectively bargained agreements or sport monopolies were a good thing, but summed up that MLS fit more logically as a single entity than not. While this seems perfectly illogical against American free-market sensibilities and the example of other leagues world-wide, it is those very leagues that helped MLS’s case.

MLS was able to successfully argue that it was really competing with those international leagues [insert punchline here], and therefore, even a USSF Division I certification meant the league was not a monopoly in the US marketplace. The player-plaintiffs had actually played abroad and could theoretically do so again.

The differences between MLS and NFL are drawn more starkly thanks to an even more recent case, American Needle v. NFL, which cemented the fact that the NFL is 32 individual teams working together. The throwball clubs each contract with their own players, keep their own intellectual property rights, and operate in a more financially independent manner—all in stark contrast to the single-entity MLS detailed above. (In the case, the court ruled that the NFL could not sell all 32 teams’ IP rights for, for example, merchandising, because that would essentially be collusion between competitors)

So that settles what MLS is and what it isn’t.

Or does it?

MLS has changed since Fraser in 2002, most notably through the high-profile stars it brings in via the Designated Player rule. While the rules of that game remain opaque, we know it is the clubs themselves who are footing the bill, with the occasional help from the league in the form of negotiation, transfer-fees, and salary assistance. MLS is notoriously tight-lipped about these details, so we remain confused by whether MLS or a club owns a player to keep or sell as they choose—not to mention how these players are being chosen to land with the clubs they do. That said, we know, ultimately, players’ contracts are indeed owned by the league.

But as MLS embarks on its new high-spending stage (with Clint Dempsey, Michael Bradley, and Jermaine Defoe to start) — intervening in the affairs of select franchisees in ways that seem to reward high-attendance and big markets — the issue of legality seems less important to me than whether I like what’s going on.

I’m left uneasy by league intervention into teams’ rosters, which is close to undermining enjoyment of the games themselves. When the rules are constantly changing, conspiracy theories are too hard to avoid.

For example, Toronto, a team that hit the market with fantastic attendance, only to see it plummet, was recently reborn with a new executive team that wants to show its ambition. Once Toronto was notified of a US national team member abroad’s availability (Bradley), his transfer was facilitated with league negotiations and funds (overlooking other clubs, and in seeming contradiction to well-defined league allocation agreements), just in time for a league opener with Seattle and Clint Dempsey – for whom the same description could be used.

I’m not sure I will ever shake the feeling that Major League Soccer is manipulated.

Imagine if the NFL, despite its established draft order, allocated this year’s best college quarterbacks to Buffalo and Jacksonville (or Cleveland or…) and picked up a bit of their salaries for the team? Or if MLB negotiated a star Japanese pitcher’s salary (and negotiation fee), paid half of it, and sent him to kick-start the rebuilding job for the Cubs (or the Mets or…)?

MLS is placing players around the board like chess pieces. Sure, the teams may be the ones actually playing the games, but the league is deciding how many queens each has. The whole thing feels like a shell game, like a fictional drama, or an overly edited reality TV show.

It’s one thing for a club to form a “superteam,” or for clubs themselves to fight over superstars to maintain balance, but when it’s so artificial the product itself begins to ring hollow. To be fair though, the NFL attempts a similar manipulation – one example is scheduling based on previous records (a discussion of MLS scheduling will need a whole ‘nother article).

The simple fact is, since its creation, MLS teams aren’t truly competing against each other, but as a whole against other sports or the rest of the world.

Looking back at that statement, it’s the “aren’t truly competing against each other” phrase that sticks with me.

****

For more on these topics, including legal analyses, click on the recommended reading below…

Fraser v. MLS

The Case Itself 

The Wikipedia 

A Law Review Article 

American Needle v. NFL

The Case Itself 

A Good Article 

Federal Baseball Club v. National League

The Case Itself 

The Wikipedia 

OTF’s Alex White is a Georgian-in-exile who’s fallen for the Windy City, and an Illinois attorney—but for the love of all that is Good, do not get your legal advice from something you saw once on the internet, including anything he says. Follow Alex for non-legal opinions @A1exWhite or send him an email at alexander.mc.white@gmail.com

7 thoughts on “Major League Soccer: Deciphering the Single Entity

  1. For the most part, you have a pretty nice summary of how the league is structured but it all comes off the rails when you get into conjecture here:

    “Once Toronto was notified of a US national team member abroad’s availability (Bradley), his transfer was facilitated with league negotiations and funds (overlooking other clubs, and in seeming contradiction to well-defined league allocation agreements)”

    This is false. Bradley wasn’t handed to Toronto; all teams were notified of his availability and at least three teams tendered offers, chronicled here:

    http://mobile.philly.com/blogs/?wss=/philly/blogs/thegoalkeeper/&id=239421211

    The only thing that raises eyebrows about all this is the Edu signing shortly thereafter where it became apparent that U.S. international Designated Players are only exempt from the allocation order if the league contributes no funds to the transfer fee.

    Clearly, though, this was a rule the teams have known about since it was made, evidenced by the fact that Philly traded for DC’s allocation order spot.

    Certain players such as Bradley or Dempsey are judged by league officials to “move the needle” when it comes to general interest and tv ratings. While it’s not ideal that something like this be based on entirely subjective criteria it’s very much in the league’s authority, given the single-entity structure.

    • Cody, Thanks for the kind words, and for posting the link with insight. You’re right that there’s certainly conjecture in how I’m interpreting the Bradley and Dempsey acquisitions–but that’s part of MLS’ issue shaking conspiracy theories. Until we actually know what’s going on (or simply what rules are in place to govern transactions), it’s going to be difficult for me trust in the “rule of law” of the system. If you lost a silent auction, wouldn’t you want to at least know what the other bids were? (Particularly if the auctioneer is paying part of the expenses!) And why is that auctioneer so concerned with the display case I would have put it in?

      But you hit the nail on the head–if the league is a single entity, it’s within the league’s authority to put players wherever it wants, in whatever competitive arrangement they think best. However, that nature seems to be changing. Your link mentions that Toronto put up more money than Philly (and at least one other). So, aren’t the two competing with eachother?

  2. The NFL only makes schedules based on record for two games. The other 14 games are division games and a rotation of one division in conference and one division out of conference. http://bleacherreport.com/articles/1606598-how-is-the-nfl-schedule-created

    Single Entity has kept MLS alive. Without it the league would have done years ago. Like everything in MLS the rules keep evolving (DP rule and salary cap). It is time to get rid of some of the old player acquisition rules, like get rid of the allocation order and give players signing with MLS more of a choice where they want to play or use the Super Draft as a way of obtaining players rights.

    We will have to see what happens when the next CBA is negotiated.

    • John, great link on NFL scheduling, thanks. Yes, only two games, but there’s a big difference between 8-8 and 10-6!

      You make a key point with the CBA–I’ll be very curious to see how all the free-spending and shadowy rules hold up to the Players’ negotiations. Hopefully we’ll get to learn a lot more about how the league works

  3. I really appreciate your write-up. It’s very good, and shows genuine concern. I tend to be on the side that MLS as single entity was a necessity at the time of its founding and perhaps in the first decade. However, your point about the fact that many of the star player moves seem manipulated is truly a concern. The MLS is likely going to suffer if this attitude and practice isn’t addressed soon. While MLS is certainly the big man on the block, they are certainly not alone as an option anymore. I think the NASL has a good chance of becoming a true competitor to MLS.

  4. Pingback: Taking Major League Soccer to FIFA Court | On The Fire

  5. Pingback: Soccer Potpourri | OverLapping RunOverLapping Run

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