How MLS Restrains the Non-Player Labor Market – Potentially in Violation of Antitrust Laws

The legal relationship between MLS and its players is complex and something I will explore in a future article in my series of articles on MLS. The present article concerns legal issues in MLS as to non-players employed by the clubs,[1] including but not limited to coaches, trainers, executives, and sales staff.

To understand the issue at hand, a primer of antitrust law is helpful. Section 1 of the Sherman Act (1890) prohibits “every contract, combination or conspiracy in restraint of trade.”[2] The Supreme Court subsequently clarified that only “unreasonable” restraints are illegal.[3] Most Section 1 cases are analyzed through the “rule of reason,” a three-step, burden-shifting framework: (1) the plaintiff must first show that the challenged restraint has a substantial anticompetitive effect; (2) if the plaintiff carries that burden, the defendant must show a procompetitive rationale for the restraint; and, (3) if the defendant satisfies its burden, the plaintiff must show that the procompetitive benefits can be achieved through less restrictive means.[4]

Importantly, since antitrust law is concerned with economic competitiveness, the challenged restraint and its procompetitive and anticompetitive traits must be analyzed within a relevant market.[5] As is hopefully obvious, labor markets, i.e., the markets for employees, are subject to antitrust laws.[6] Finally, antitrust law remains a powerful remedy by virtue of the fact that the law calls for treble (triple) damages as well as attorney’s fees.[7]

I turn now to three practices of concern within MLS.[8]

First, on an annual basis, MLS collects data from each club about the club’s personnel, including, generally, the types of departments, the number of people in each department, the types and number of executives, and, most importantly, the compensation paid to employees.[9]

Second, with the help of the data it collects, MLS assists clubs in negotiating with their employees as to compensation and position, e.g., by telling the club the range of and average salaries for particular positions or where a particular employee’s salary ranks as compared to his peers at other clubs.

Third, MLS generally requests or requires that clubs interested in hiring an employee away from another club, contact that club and advise it of their interest in the employee.

I believe these practices have the effect of restraining the non-player labor market in MLS, potentially in violation of antitrust law. It should be clear that MLS’ collection and dissemination of data about club personnel salaries suppresses the salaries of club personnel. Clubs should be competing for personnel, offering a better position or pay to entice an employee from one club to another. However, clubs are able to use the salary data from MLS both in making offers to new employees and in negotiating with their current employees. For example, if an athletic trainer requests a raise, the club may be able to learn from MLS that the athletic trainer is already the tenth highest paid athletic trainer and that the trainer’s salary is only $15,000 less than the highest paid athletic trainer in the league. With that information in hand, the club can comfortably throttle any raises offers made to the athletic trainer and be less concerned about responding to the athletic trainer’s demands since they know the boundaries of the market. Moreover, if another club wanted to hire that athletic trainer, the club will know how much the highest paid athletic trainer currently receives and cap its offer accordingly.

This is the type of information sharing that the Federal Trade Commission (FTC) and Department of Justice (DOJ) warn against. Specifically, those agencies have explained that when it comes to the “the sharing of competitively sensitive information – such as recent, current, and future prices, cost data, or output levels,” the agencies are “concern[ed]” that doing so “may facilitate price or other competitive coordination among competitors” in violation of the antitrust laws.[10] Salaries are prices in the labor market. And the sharing among MLS clubs of salaries has the purpose and effect of facilitating price coordination among clubs which are competing for personnel, to the detriment of that personnel.

Next, turning to MLS’ instructed practice of requiring clubs to speak with the other club before hiring away an employee, this too potentially runs afoul of DOJ and FTC guidance. As explained by those agencies, “[a]n individual likely is breaking the antitrust laws if he or she: agrees with individual(s) at another company about employee salary or other terms of compensation, either at a specific level or within a range (so-called wage-fixing agreements), or agrees with individual(s) at another company to refuse to solicit or hire that other company’s employees (so-called ‘no poaching’ agreements).”[11] Indeed, Duke University recently agreed to pay $19 million to settle allegations it had entered into a no-poach agreement with the University of North Carolina concerning faculty members.

While MLS’ practice may not be an explicit “no poach” agreement, it substantially chills the labor market within MLS. Club personnel will be understandably reticent to seek out new employment with another MLS club if their current employer is going to find out – that is a surefire way for that employee to be viewed as disgruntled and/or expendable. MLS would likely dispute that it has its own labor market for purposes of antitrust law (as club employees often come from many other industries). But undoubtedly many MLS club employees move around within the league (or want to) after having learned certain MLS-specific skills or knowledge at a club.

Antitrust cases are notoriously complex and difficult to prove, often requiring extensive and contested economic analysis. MLS would for sure have defenses to the issues I have raised, including but not limited to the relevant market, whether there is actually any restraint agreed upon by the clubs, whether the clubs’ conduct is merely “parallel,”[12] and that the clubs’ sharing of data is reasonably necessary for the operation of the MLS joint venture. Nevertheless, I think I have set forth above a prima facie case of concerning conduct which unnecessarily and unfairly restricts the pay and movement of non-player personnel within MLS.

Christopher Deubert is Principal at Law Office of Christopher R. Deubert, Esq. You can see more at www.deubertlaw.com.

[1] Some may be familiar with MLS’ status as a “single-entity” in which MLS employs the players, potentially providing an antitrust defense. However, non-player personnel are employed by clubs and thus the single-entity argument is not available. [2] 15 U.S.C. § 1. [3] Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 87 (1911). [4] See NCAA v. Alston, 141 S.Ct. 2141, 2160 (2021). [5] Id. at 2151-52. [6] Id. at 2154. [7] 15 U.S.C. § 15. [8] It is my understanding that other sports leagues engage in the same or similar practices but have chosen to focus on MLS as part of this series of articles. [9] See Section 15 of the the MLS Constitution, available as Exhibit B to Utah Soccer, LLC d/b/a Real Salt Lake’s Motion to Compel Arbitration and Dismiss or, in the Alternative, Stay the Proceedings, Petke v. Utah Soccer, LLC, Case No. 190907265 (Utah Dist. Ct. Oct. 7, 2019). [10] Dep’t of Justice and Fed. Trade Comm’n, Antitrust Policy Statement on Sharing of Cybersecurity Information (Apr. 10, 2014), at 4-5 n.12, available at https://www.ftc.gov/public-statements/2014/04/department-justice-federal-trade-commission-antitrust-policy-statement. [11] Dep’t of Justice and Fed. Trade Comm’n, Antitrust Guidance for Human Resource Professionals (Oct. 2016), at 3, available at https://www.justice.gov/atr/file/903511/download. [12] See, e.g., Kelsey K. v. NFL Enters., LLC, 254 F. Supp. 3d 1140 (N.D. Cal. 2017).