Professional sports are a textbook example of a bilateral cartel made up of club owners and unionized players engaged in intrastate and interstate commerce. The club owners exercise monopoly power in the product market and monopsony power in the input market, whereas, the players try to countervail that monopsony power. In economics, a monopsony is a market with only one buyer in the market, often an input market. At the same time, this is analogous to the case of a monopoly in which there is only one seller in a market. These cartels confront each other in a love/hate, cooperation/conflict relationship with neither being strong enough to exercise total dominance over the other
The professional sports industry is a very unique entity. As an entity, it controls both activities and attitudes, solicits actions and reactions, and demands the immediate attention of fans, arbitrators, mediators, lawyers, judges, players, television networks, and management. However, as an entity, it is regulated as a business activity with and without exemptions from the federal government.
Historically, antitrust law has played a role in developing regulations, controls, and protections in the professional sports industry of today. Laws that include such major statutes as the Sherman Act of 1890, the Clayton Act of 1914, the Federal Trade Commission Act of 1914, the Norris-LaGuardia Act of 1932, the National Labor Relations Act of 1935, and other antitrust and labor relations acts. Court decisions and/or interpretations include such parties as: Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922); Flood v. Kuhn, 407 U.S. 258, (1972); Haywood v. NBA, 401 U.S. 1204 (1971); Brown v. Pro Football, Inc., 116 S.Ct. 2116 (1996) and Wood v. NBA, 809 F.2d 954 (2d Cir. 1987). Also, there is a history of concepts relating to protections and guarantees to all parties involved in the professional sports industry. Case studies show that in baseball, the “reserve clause” was the owner’s primary weapon for eliminating free competition in the market for players. Once a team obtained contractual rights to a player, it enjoyed exclusive rights to his services. Unless those rights were waived, traded, sold, or otherwise assigned to another team, the player was literally owned by the team with which he signed the original contract. Also, certain sports in the professional sports industry are classified as with antitrust labor exemption, whenever the players can file complaints with the government alleging unfair labor practices or without antitrust labor exemption, whenever the players cannot file complaints with the government alleging unfair labor practices.