Legal Status - Profesional Athletes Straipsnis

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Citation: 11 Sports Law. J. 223 2004
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The Legal Status of Professional Athletes:
Differences Between the United States and the
European Union Concerning Free Agency
Andreas Joklik"
1. INTRODUCTION ................................................................................. 224

II. A DEFINITION OF SPORTS LAW ........................................................ 225
A . The US. Approach.................................................................. 225
1. First Group: Sports and the Law ................................... 225
2. Second Group: Development from "Sports and
the Law" to "Sports Law" ............................................. 226
3. Third Group: Sports Law as a Substantive Area
of Law ............................................................................. 227
B. The EuropeanApproach ......................................................... 228
1. Sports and the Law in the European Union .................. 228
2. Sports and the Law in the National Legal Systems
of the EU Member States ............................................... 229
III. SPECIAL ISSUES OF LABOR LAW AND SPORTS IN THE USA ............. 231
A. FreeAgency, Collective Bargaining,andPlayer
Transfers.................................................................................. 23 1
B. MajorLeague Baseball........................................................... 231
1. Baseball's Antitrust Exemption and the
Development of Free Agency ........................................ 231
2. Collective Bargaining in Baseball and Its Impact
on Free A gency ............................................................... 233
3. Player Transfer and Compensation ................................ 235
a. The Trading System .............................................. 235
b. Status of a Player After the Contract Has
Expired .................................................................. 236
C NationalFootballLeague....................................................... 236
1. Free Agency in the NFL ................................................. 237
* The author obtained the title Magister Juris at the Faculty of Law, University of
Vienna, Austria, in 2001. He attended the LL.M. program at Tulane University School of Law in
2002/2003 and is a member of the New York Bar. This Article was originally written as part of
the LL.M. program at Tulane University School of Law in 2003. The author would like to thank
his parents for all the personal and financial support and Professor Gary Roberts, Deputy Dean of
Tulane University School of Law for his help and useful assistance. The author is sponsored by
the Doctoral Scholarship Program of the Austrian Academy of Sciences.
223
224 SPORTS LA WYERS JOURNAL [Vol. I11
2.
Antitrust and Collective Bargaining in Football
and Its Impact on Free Agency ...................................... 238
3. Player Transfer and Compensation ................................ 243
D. A BriefLook atBasketballandHockey ................................ 243
1. National Basketball Association ............................. I....... 243
2. National Hockey League ............................................... 245
Wv SPECIAL ISSUES OF LABOR LAW AND SPORTS IN THE EU AND
AUSTRIA............................................................................................ 246
A. The FreeMo vem ent of Workers............................................. 246
1. The Bosm an Case ........................................................... 247
2. The Lehtonen Case ......................................................... 249
3. The D eliege Case ........................................................... 250
B. Consequences ofthe Three Cases on Professional
Sportsin E urope...................................................................... 251
C Collective Bargainingin ProfessionalSports ........................ 252
V C ONCLU SION .................................................................................... 253
I. INTRODUCTION
All over the world, sports are a very important part of society. Over
the years, the money invested in sports and the revenues earned through
the commercialization of sports have increased dramatically. Today "3%
of world GNP [gross national product] is estimated to be accounted for
by sports business."' Also, for example, the money generated from
television broadcasting contracts has grown rapidly: in the United States
the National Football League (NFL) earned $4.65 million from the first
nationwide TV contract with CBS in 1962, and increased to $2.2 billion
in 1998 for five television and cable contracts.2 In the United States, the
so-called "gross national sports" product in 1998 was $350 billion.'
Another example is the rise of NFL-related merchandise sales to $3.5
million per year.' Parallel with the evolution of sports to big business, the
number of litigations connected to sports has increased and the scope of
legal issues involved has broadened. Consequently, the legal status of the
single athlete has to be defined in a new way.
This Article focuses on the legal status of athletes in the United
States and in the European Union (EU), as well as the major differences
1. PROFESSIONAL SPORT IN THE EU: REGULATION AND RE-REGULATION 1 n. 1 (Andrew

Caiger & Simon Gardiner eds., T.M.C. Asser Press 2000) [hereinafter PROFESSIONAL SPORT IN
THE EU].
2. See PAUL C. WEILER & GARY R. ROBERTS, SPORTS AND THE LAW 389 (2d ed. 1998).
3. SeeTimothy Davis, Whatls SportsLaw, 11 MARQ. SPORTSL.J. 211,216 (2001).
4. SeeWEILER & ROBERTS, supra note 2, at 390.
2004] U.S. AND EU FRE AGENCY
between these two legal systems. To compare the legal situation

concerning athletes today, it is first necessary to define the term "sports
law."
II. A DEFINITION OF SPORTS LAW

Anyone trying to find a definition for sports law has to prove first
that such a legal discipline exists. There is no doubt that legal aspects
connected to sports have increased significantly during the last decades,
but is there a substantive area of law called sports law? In the United
States, as well as in Europe, there is an ongoing debate about whether
sports law is an identifiable body of law or if it is a collection of different
legal aspects concerning sports, which can be summarized under the
topic "sports and the law."5
A. The US. Approach

In the United States, the discussion about the existence of sports law
as an independent legal body began during the late 1970s when two
authors, John Weistart and Cym Lowell, questioned the traditionalist
view that no field such as sports law existed.6
Today three different opinions concerning this topic can be
identified. The first group holds the view that no substantive area of law
named sports law exists. A second group argues that, presently such an
independent corpus legis cannot be identified but due to the latest
developments, it is possible that such a corpus may develop in the future.7
The third group supports the idea of an independent legal discipline
called "sports law."8
1. First Group: Sports and the Law

According to this position, all the cases connected to sports are
simply the result of the application of law to the sports industry.9 Several
basic areas of law can be involved such as administrative law, tax law,
contracts law, torts law, intellectual property law, labor law, and antitrust
5. See Davis, supra note 3, at 211. See generallyKenneth L. Shropshire, Introduction."

Sports Law, 35 AM. Bus. L.J. 181 (1998); Simon Gardiner, Birth of a LegalArea: Sport and the
Law or SportsLaw, 5 SPORT & L.J. 10 (1997).
6. See JOHN C. WEISTART & CYM H. LOWELL, THE LAW OF SPORTS, at ix (1979).
7. See Davis, supra note 3, at 212-13.
8. Seeid.at 212-14.
9. Id. at 212.
SPORTS LA WYERS JOURNAL [Vol. I11
law, but this subsumption of sports under different traditional bodies of

law does not create sports law as an independent field of law.'"
2. Second Group: Development from "Sports and the Law" to

"Sports Law"
As mentioned previously, Weistart and Lowell published the theory
of sports law as an identifiable body of law in the late 1970s." Even
though the authors agreed with the predominant opinion of that time that
sports law did not exist as a separate field of law, their research showed
that several unique problems related to the sports world existed and
required a special legal analysis.'2 Consequently, the application of law
to these unique problems led to special outcomes "that would not occur
in other context."' 3 As an example of this special analysis in the context
of sports, Weistart and Lowell cite the special application of the statutes
against sex discrimination and the application of sections 1 and 2 of the
Sherman Act to sports.' As a consequence, the peculiarities of sports
should always be taken into consideration when a body of law is applied
to the field of sports."
In the past few years the idea of sports law as a developing
independent field of law was revitalized again. Most commentators
recognize that there is no law unique to sports," but on the other hand
they point out the increasing number of federal and state statutes dealing
with sports that have an impact on the sports business.' 7 Examples of
these sports-related statutes are the various agent regulatory acts and the
state boxing regulations.'8 Another factor that has to be considered is the
growing interest of science in sports and its relationship to law. More
law schools are focusing on sports and the law each year.'9 Also, the
increased interest of lawyers" and the growing impact of sports
regulations on clubs and athletes support the idea that sports law may
become an independent body of law in the future.'
10. See MICHAEL J. COZZILLIO & MARK S. LEVINSTEIN, SPORTS LAW 5 (1997).
11. See WEISTART & LOWELL, supra note 6, at xix.
12. See Davis, supra note 3, at 213-14.
13. Id
14. See WEISTART & LOWELL, supra note 6, at xviii-xix.
15. Seeid at xix.
16. See Shropshire, supranote 5, at 182; see alsoDavis, supranote 3, at 211.
17. See genenully Shropshire, supra note 5.
18. See id at 182.
19. Davis, supranote 3, at 213.
20. See TIMOTHY DAVIS, ALFRED D. MATHEWSON & KENNETH L. SHROPSHIRE, SPORTS
ANDTHE LAW: A MODERN ANTHOLOGY 8 (1999).
21. Davis, supranote 3, at 211.
2004] U.S. AND EUFREEAGENCY
All the arguments mentioned above characterize the present status

in a way that it is too early to speak of sports law as a substantive body of
law, but they also support the possibility that "sports and the law" may
eventually develop into "sports law."
3. Third Group: Sports Law as a Substantive Area of Law

The scholars who support the view that sports law exists as a
separate field of law have to prove this opinion. They have to use
established academic methods to evaluate what constitutes an
independent field of law. The most important factors were provided by
Timothy Davis:
1. unique application by courts of law from other disciplines to a
specific context;22
2. factual peculiarities within a specific
23 context that produces problems
requiring specialized analysis;
3. issues involving the proposed discipline's subject matter
24 must arise in
multiple, existing, common law or statutory areas;
4. within the proposed discipline, the elements of its subject matter must
connect, interact, or interrelate;
5. decisions within the proposed discipline conflict with decisions in
other areas of the law and decisions regarding a matter within 26 the
proposed discipline impact another matter within the discipline;
6. the proposed discipline must significantly affect 27 the nation's (or the
world's) business, economy, culture or society;
7. the development of interventionist legislation to regulate specific
relationships;28 29
8. publication of legal casebooks that focus on the proposed discipline;
9. development of law journals and other publications specifically
devoted to publishing writings that fall within the parameters of the
proposed field;3"
10. acceptance of the proposed field by law schools;3
11. recognition by legal associations, such as bar associations, of the 32
proposed field as separately identifiable substantive area of the law.
22. Id.at 217.

23. Id.
24. Id.
25. Id.
26. Id.
27. Id at 218.
28. Id
29. Id
30. Id.
31. Id.
32. Id
Even though some of the requirements of recognition as a

substantive body of law are met, the overall opinion today denies sports
law the status of an independent field of law. The future will show if an
independent area termed "sports law" will develop and be recognized by
all experts in the United States.
B. The EuropeanApproach
1. Sports and the Law in the European Union
Due to the creation of the EU, two different levels of law exist
parallel in the member states of the EU: the supranational33 community
law (i.e., the Treaty of the European Community (EC Treaty)) and the
national laws of the fifteen different member states. 4 Potential conflicts
in a member state between the two legal systems are resolved by the
principle of primacy or supremacy of community law: when a conflict
arises between the two legal systems, the community law will override
the application of the applicable national law. 6
Therefore the first step of a legal analysis in the context of sports
must always occur on the level of EU law. Does the EU have the
competence to regulate sports through the Treaty of the European
Community? The EU can only govern those topics which are explicitly
mentioned in the EC Treaty. 7 The text of the EC Treaty does not
mention sport in any context (as it does, for example, with culture in
article 128(1) EC)"' but the European Commission created the European
Model of Sports in 1998, which addressed the specialties of European
sports, its social role, and the impact of those structures on the legal
regulation of the sports world." However, the European Model of Sports
is not a mandatory source of law and has no legal impact.
Even though the EU has no regulatory force to govern sports, the
European Court of Justice (ECJ) stated in Walrave & Koch v Assn
33. For a definition of supranationality, see RUDOLF STREINZ, EUROPARECHT 5, 48-49

(C.E Muller Verlag 2001).
34. See id at 54-57.
35. See EC TREATY art. 10; see also PAUL CRAIG & GRAINNE DE BURCA, EU LAW-TEXT,
CASES AND MATERIALS 256 (2d ed. 1998). See also Van Gend & Loos, C-26/62 [1963], where the
European Court of Justice first held the Supremacy of the Community Law. In the Member
States, see also Costa EWEL, C-6/64 [1964] and Simmerthal II, C-106-77 [1978], where the ECJ
held the Supremacy of the Community Law.
36. See CRAIG & DE BURCA, supra note 35, at 256; see also STREtNZ, supra note 33, at 57.
37. See JOCHEN FRITZWEILER, BERNHARD PFISTER & THOMAS SUMMERER,
PRAXISHANDBUCH SPORTRECHT 484 (1998); see also 3 MARTIN KAROLLUS, MARKuS ACHATz &
PETER JABORNEGG, AKTUELLE RECHTSFRAGEN DES FUI3BALLSPORTES 101 (Linde Verlag 2003).
38. See id.
39. SeePROFESSIONAL SPORT IN THE EU, supra note 1, at 6.
2004] U.S AND EUFREEAGENCY
Union Cycliste International° that the law of the EU must be applied to

sports as long as sports is part of an economic activity defined in article
2 of the EC Treaty.4' Consequently, this means that sports, as an
economic activity, are governed by the four fundamental freedoms 42 of
the EC Treaty.43 Approximately twenty years later, this holding" had a
ground-breaking impact on the ECJ's ruling in Union Royal Belge des
Societies de Football(ASBL) v Bosman," which changed the European
sports scene completely.
Although many different legal disciplines 46 are involved in sports,
there is no field termed "sports law" existing on the level of EU law.
Rather, the term "sports and EU law" would define the situation
appropriately.
2. Sports and the Law in the National Legal Systems of the EU

Member States
In Europe, the history of law in sports differs from the United
States. In Europe, as well as in the United States, commercialization was
the main reason for the increasing involvement of law in the world of
4
sportsY. However, there are two remarkable distinctions between the
development in the United States and in the different member states of
the EU. First, in the EU, the intention of many sport clubs traditionally
was not to make money, but to win competitions. Many of the clubs
were organized as nonprofit associations in order to give people the
opportunity to compete in a special sport. The second difference is, in
Europe, the influence of state law on the sport world traditionally was
very limited because very little economic interests were involved. Due
to the lack of necessity of state regulations, the sports world started to
40. SeeWalrave & Koch v. Ass'n Union Cycliste Int'l, C-36/74 [1974] ECR 1405.
41. See FRITZWEILER, PFISTER & SUMMERER, PRAXISHANDBUCH, supra note 37, at 484;
see also 3 KAROLLUS, ACHATZ & JABORNEGG, supra note 37, at 101-02; PROFESSIONAL SPORT IN
THE EU, supranote 1, at 27-28.
42. Freedom of movement of persons (article 39 EC Treaty), freedom to provide services
(articles 49-55 EC Treaty), Free movement of goods (article 28 EC Treaty) and Free movement of
capital (articles 56-60 EC Treaty); see also PROFESSIONAL SPORT IN THE EU, supra note 1, at 92-
99.
43. PROFESSIONAL SPORT IN THE EU, supra note 1,at 46.
44. This holding was also affirmed in Deliege v Liege Ligue Francophonede Judo, C-
51/96 and C-191/97 (2000) ECR 1 and in Lehtonen & Castors Canada Dry Namur-Braine v
FRBSB (Belgian BasketballFederation),C-1 76/96 (2000) ECR 1.
45. SeeECR 1-4921 (1996) 1 CMLR 645.
46. See 3 KAROLLUS, ACHATZ & JABORNEGG, supranote 37, at 103.
47. See id.at 1.
48. See id.
49. See FRITZWEILER, PFISTER & SUMMERER, PRAXISHANDBUCH, supra note 37, at 6.
develop, through the different governing bodies, its own private norms,
called lex sportiva.7 The state and the courts tried to protect the freedom
of the sports associations and their self-sufficient lex sportivd' much
more than courts in the United States.
With the appearance of advanced economic interests in the sports
business,52 EU courts held that the norms of the sports associations had to
be in accordance with national law and public international law.
Consequently, sports associations cannot create their own legal system,
which exists parallel to state law or public international law, but have to
act in the framework of state law. 3 According to European authors, the
legal analysis of sports is categorized into two columns: (1) The national
law of a state, including public international law and (2) the lex sportiva4
These two columns are often inconsistent with one another.5
Because most of the EU member states are civil law countries, the
existence of a legal discipline and its stage of development are defined
by the number of statutes dealing with this area. The only EU member
states with systems of statutes concerning sports are Belgium, France,
Greece, The Netherlands, Portugal, and Spain. 6 In most of the remaining
EU states the creation of such special sport statutes for professional
sports are now in progress.
With this historical background, a discussion about "sports law" and
"sports and the law" in Europe cannot be adequately compared to the
United States. There is no independent area termed "sports law" because
the number of statutes dealing with issues of the sports industry are very
small. Consequently, the number of law schools dealing with the role of
law in sports and the number of academic publications (books, law
review articles, etc.) are not significant today. "Sports and the law,"
therefore, is the appropriate expression for the application of law to
sports in most of the member states.
The only EU member state where a similar discussion to the United
States can be found is Great Britain. Due to Great Britain's common law
system, the problems and arguments arising in that discussion are similar
to those in the United States. In Great Britain, the stage of development
of law in sports is higher than in the rest of Europe. Numerous cases
50. See id.at 5-6.

51. See id at 6.
52. In the year 2001 two to three percent of EU's GNP was produced by the sports
business. See2 KAROLLUS, ACHATZ & JABORNEGG, supranote 37, at 12 (2001).
53. See id; see also PROFESSIONAL SPORT IN THE EU, supra note 1, at 5.
54. See PROFESSIONAL SPORT INTHE EU, supranote 1, at 5-8.
55. See id.at 5.
56. See 3 KAROLLUS, ACHATz & JABORNEGG, supra note 37, at 84-86.
dealing with different disciplines of sports were decided in Great Britain.

In some law schools the curriculum of sports law focuses on this case
law. Additionally, numerous books and law review articles were written
in Great Britain. A group of practitioners strongly support the idea of
sports law and have tried to convince the public of the existence of sports
law.57 However, in Great Britain this is not the leading opinion.
III. SPECIAL ISSUES OF LABOR LAW AND SPORTS IN THE USA

A. FreeAgency, Collective Bargaining,andPlayerTransfers
Two of the most important labor law issues connected to sports are
free agency and restraint on player movement from one team to another.
Even though there are similarities between the four major sports leagues
in the United States and sports leagues in Europe, the legal basis is
different. The problems in Europe are mainly based on the statutes of
EU law concerning the four basic freedoms and competition law.
Whereas the concerned fields of law in the United States are antitrust law
and labor law. To analyze the legal status in the United States, it is
important to distinguish between the four major leagues.
B. MajorLeague Baseball
1. Baseball's Antitrust Exemption and the Development of Free
Agency
In the late 1880s and the early 1900s, players tried to gain control of
their employment relationship with their clubs." During that period,
there was little public concern for workers' rights, there was no
sophisticated labor law enforced by the courts, and "federal legislation
was extremely hostile to collective union activity."" Because of these
circumstances during those years, courts were not willing to give
baseball players any control over their employment.6" The key issue that
led to increased litigation was the reserve system, which the players
viewed as a restraint of trade.
57. SIMON GARDINER, SPORTS LAW 97-100 (2001).

58. See Peter N. Katz, Comment, A History of Free Agency in the United States and
Great Britan: Who Is Leadingthe Charge., 15 COMP. LAB. L.J. 371, 374 (1994).
59. Jon S. Greenwood, What Major League Baseball Can Learn from Its International
Counterparts: Building a Model Collective BargainingAgreement for MajorLeague Baseball,
29 GEO. WASH. J. INT'L L. & ECON. 259, 264 (1995).
60. See id.
SPORTS LA WYERS JOURNAL [Vol. I I
The main components of the reserve system in baseball were (1) a

reserve list and (2) a reserve clause in standard player contracts.' All
league members accepted the listing of players by their teams and it was
common practice of all clubs not to interfere with a contractual
relationship between a reserved player and his team.62 The reserve clause
in the standard player contract contained an option clause that allowed a
club to renew an expired player contract with the same terms, including
the option clause for another year, unless a new agreement was
negotiated or the player was awarded free agent status.63 In practice, the
result of the clause was to bind the player to the team for the life of their
careers. Players in all leagues challenged, basing their claims on section
1 of the Sherman Act." To find a violation of section 1 of the Sherman
Act, three major components have to be fulfilled: (1) the existence of a
contract, combination, or conspiracy (2) a restraint of trade, and (3) effect
on trade among several states.65
However, the courts have given MLB an exemption from antitrust
laws. The baseball exemption is a result of the court's intervention in this
area.66 The baseball antitrust exemption was created through several
court decisions. The first major case that mentioned the exemption was
the decision in American League Baseball Club of Chicago v Chase&,
where the judge held that baseball was not interstate commerce and,
therefore, not subject to an antitrust violation under the Sherman Act.66
In 1922, this holding was upheld by the United States Supreme Court in
FederalBaseball Club of Baltimore v NationalLeague of Professional
BaseballClubs,9 where the Court again determined that baseball was not
interstate commerce but a local sport." In 1951, Earl Toolson brought an
antitrust suit, after he was banned from playing in Major League
Baseball (MLB) due to a nonreported transfer in his minor league
career.7' In Toolson v New York Yankees, 2 the Court affirmed its holding
61. SeeWEILER& ROBERTS, supranote 2, at 119.

62. See id.
63. See id.; see also Philip R. Bautista, Congress Says, "Yooou're Out!!"to the Antitrust
Evemption of Professional BasebalL A Discussion of the Current State of Player-Owner
Collective Bargainingand the Impact of the Curt Flood Act of 1998, 15 OHIo ST. J. ON Disp.
RESOL. 445, 457 (2000).
64. See WEILER& ROBERTS, supra note 2, at 126.
65. Id.
66. See Katz, supra note 58, at 379.
67. 149 N.YS. 6 (N.Y Sup. Ct. 1914).
68. Seeid.at 17.
69. 259 U.S. 200 (1922).
70. See id at 209.
71. See Katz, supra note 58, at 379 n.49.
72. 346 U.S. 356 (1953).
2004] US. AND EUFREEAGENCY 233
in Federal Baseball and once again explained that baseball was not
interstate commerce." The Court stated that it would not act because
Congress did not intend for baseball to be subject to antitrust scrutiny
under the Sherman Act.7"
The last major case concerning baseball's antitrust exemption is
Flood v Kuhn.75 Curt Flood played for the St. Louis Cardinals from
1958 to 1963 and was traded, against his will, to the Philadelphia
Phillies. Flood claimed to be a free agent and wanted to bargain with
another MLB team himself His request for free agent status was
denied and consequently Flood filed a suit challenging the reserve
system based on a violation of section 1 of the Sherman Act. The
Supreme Court again upheld baseball's antitrust exemption, reaffirming
Toolson and FederalBaseball79
2. Collective Bargaining in Baseball and Its Impact on Free Agency

The baseball players' long war for free agency and free movement
was strongly supported by the evolution of unions and collective
bargaining during the last century. To analyze the development of free
agency in baseball, it is necessary to recapitulate the history of collective
bargaining in the United States in general and in baseball in particular.
In the United States, unions for baseball players have existed since
1885.80 Similar to all other unions, the Supreme Court made the baseball
player unions subject to antitrust scrutiny under the Sherman Act." This
position changed with the enactment of the Clayton Act in 1914 when
the Clayton Act exempted collective activities of unions from antitrust
litigation. Notwithstanding this exception, courts continued to issue
injunctions in favor of management, hindering the unions from acting
effectively.83 This situation changed in the 1930s when the Norris-
73. See id at 357.

74. See id.; see also Katz, supra note 58, at 380.
75. 407 U.S. 258 (1972).
76. See id. at 265.
77. See id.
78. See id.
79. See id. at 282-83.
80. See Katz, supra note 58, at 381.
81. See Greenwood, supra note 59, at 264.
82. See id at 264.
83. See id. at 265. For example, the Supreme Court held in Duplex Pn'ntingPress Co. v
Deeingthat antitrust law and federal injunctions are applicable in situations where the unions do
not engage in lawful conduct, but in restraint of trade. 254 U.S. 443, 465 (1921). See WEILER &
ROBERTS, supra note 2, at 190.
LaGuardia Act was enacted?' The Norris-LaGuardia Act barred courts

from enjoining strikes and other kinds of employee self-help, even when
the conflict went beyond the usual limits of a labor dispute.85 The third
important act in this is the National Labor Relations Act (NLRA) which
was enacted by the Wagner Act in 1935 and established the National
Labor Relations Board (NLRB).86 The NLRB serves as adjudicatory
panel for labor conflicts and certifies unions, who then can legitimately
represent the employees.87 Additionally, the board guarantees employees
the right to organize in unions and imposes a duty on employers to
bargain in good faith with the union."
This led to the formation of the Major League Baseball Players
Association (MLBPA) in 1954. The importance of MLBPA increased
continuously and in 1968 it reached its first collective bargaining
agreement with MLB owners that included an arbitration clause for
player grievances. 9 The major topics addressed through collective
bargaining in the 1970s were salary arbitration and the concept of free
agency.
Using the option clause in all contracts, MLB clubs could renew
expired player contracts for an additional year, until a new agreement
was reached or the player was granted free agency.9 Since the option
clause was perpetually renewing, this system created a lifetime reserve
system. It was impossible to dispute successfully this reserve system in
the court because of baseball's antitrust exemption.9' Through the
collective bargaining agreement, arbitration was implemented to resolve
conflicts between players and their employers. Consequently it was
possible for the players to challenge the reserve system through private
arbitration instead of public litigation.92 In National & Ameican League
ProfessionalBaseballClubs v MLBPA,93 two major league players, Andy
Messersmith and Dave McNally, challenged baseball's reserve system
with the support of the union, after their request for free agency was
declined. The head arbitrator, Peter Seitz, decided in favor of the
players and held that while it was possible to negotiate a reserve system
84. See WEILER & ROBERTS, supra note 2, at 190.

85. See id
86. Seeid at 191.
87. Greenwood, supra note 59, at 265-66.
88. See id.; See also WEILER& ROBERTS, supra note 2, at 191.
90. See supraPart III.B. 1.
91. SeeKatz, supranote 58, at 415.
93. 66 Lab. Arb. Rep. (BNA) 101 (1975) (Seitz, Arb.).
94. See id.
with a continuously renewing option clause in the contract, the option

clause was not implied into a contract without it being bargained for."
This decision was affirmed by the United States Court of Appeals for the
Eighth Circuit96 and free agency became one of the major issues in the
next collective bargaining agreement." The creation of free agency
eventually led to a continuous rising of players' salaries and has been a
constant issue of collective bargaining between players and owners.
3. Player Transfer and Compensation

Player transfers are similar in all major leagues in the United States
as well as in the various sports in Europe. The key issue is always the
question of compensation. A distinction has to be made between the
situations where the contract between club and player is still valid
(trading system) and those cases where the contract is expired. If the
contract is expired and the current employing team requires compensa-
tion to allow an athlete move to a new team, free agency and player
movement are restricted.
a. The Trading System

Under this arrangement, a team who trades a player to another team
is compensated by the service of other players, by money, or by draft
picks. MLB, the NFL, and most European sport leagues9 use this
system. This trading system has enormous impact on the individual
athlete because he has no control over the club and the place where he is
traded.' °° On the other hand, the demand for compensation by the current
club can deter a potential new club from hiring a player who wants to
change his employer. The only way for a player to avoid this situation is
to include a no-trade clause into his contract.'0 ' This practice was not
very common in the last decade. Owners always defended this policy,
claiming that competitive balance was being preserved by this system;0 2
however, it definitely is a limitation on players' ability to choose their
employers.
95. See Bautista, supra note 63, at 457.

96. See id.
97. SeeWEILER & ROBERTS, supanote 2, at 248.
99. See infra Parts N.A. 1-.2.
100. SeeKatz, supmrnote 58, at 411.
101. See id
102. Seeid
b. Status of a Player After the Contract Has Expired

In MILB an athlete has to play at least six years with an MiLB team
to qualify as free agent.' 3 It is still possible to implement option clauses
into players' contracts, but only if the player agreed to it."° When the
team owner exercises the option clause after the expiration of the player's
contract, the player must stay with his current team for an additional
year.' 5 In most cases, the terms of the contract for the additional year
have not substantially changed. Consequently, players tend to sign new
contracts with better conditions with the current team rather than playing
the additional year under the terms of the old contract and then moving to
a new team.' 6 In practice, implementing an additional year is still a
restraint on free agency.
A critical issue is the possibility of compensation for the loss of a
free agent. MiLB uses a system where only amateur draft choices are
used to compensate teams when free agents decide to move to another
club.' 7 This system is similar to the one that the NFL used under the
Rozelle Rule,' but its effect is much less restrictive than it was for NFL
players. In MLB, the amateur draft does not have the same importance
that it has in the NFL or the National Basketball Association (NBA)
because drafted players normally are not on the roster as often as in the
NFL or the NBA.' 9 This means that an amateur draft choice for an MLB
team is less valuable than for an NFL team or an NBA team." The result
of this discrepancy is a less restrictive effect on baseball players' free
movement. The loss of an amateur draft choice in exchange for signing a
player means lower costs for a MLB team than for an NFL or NBA team
and therefore it is easier for a single athlete to switch from one employer
to another."'
C. NationalFootballLeague
For athletes in the NFL, the way to free agency was characterized
by a lot of litigation since the American Professional Football
103. See supra Part III 1.1.2; see also Richard E. Bartok, NFL Free Agency Under
AntitrustAttack, 1991 DuKEL.J. 503,513 (1991).
104. SeeKatz, supra note 58, at 411.
105. See id.
106. Seeid.
107. SeeBartok, supranote 103, at 514.
108. See infra Part II.B.2.
109. SeeBartok,supmrnote 103, at 514.
110. See id.
111. see also Katz, supranote 58,at412.
See id.;
Association was founded in 1920."2 Until 1950, the owners basically

dictated the employment relationships with the players completely and
put restraints on players' ability of free movement." 3
1. Free Agency in the NFL

Similar to MLB, the Standard Player Contract in the NFL originally
contained a reserve clause that allowed teams to renew the contracts with
their players perpetually."4 In 1947, the NFL implemented a new system
which allowed the teams to use the renewal clause only once."' After
playing the optional year, the player was eligible to be a free agent and
could then sign a contract with another NFL team.' 6
The first major step to free agency resulted from Radovich v NFL 7
in 1957. William Radovich left the NFL to play in a competing league,
but later wanted to return to the NFL. He filed an antitrust suit against
the unofficial league practice that excluded from the NFL those players
who used to play for a rival league." 8 The United States Supreme Court
held that only baseball, but not the NFL or other professional sports, was
exempted from antitrust scrutiny under the Sherman Act."9
In 1962,2' R.C. Ownes was the first player to use his right to move
to a new team after playing out his optional year.'2 ' In response to that
development, the owners and Commissioner Pete Rozelle added, with the
consent of the National Football League Players' Association (NFLPA), a
rule to the collective bargaining agreement called the Rozelle Rule. 2
This rule required a team who wanted to sign a free agent to negotiate an
acceptable agreement with the new team about compensation.' 3 If the
two teams could not reach a satisfactory solution the Commissioner
would be entitled to determine the form and the amount of
compensation.' The compensation could consist of players, draft
112. See Scott E. Beckman, NFL Players Fight for Freedom: The History ofFree Agency
in the NFL,9 SPORTS LAW. J. 1, 2-3 (2002).
113. See id.at 3; see also Katz, supra note 58, at 384.
114. See Bartok, supra note 103, at 503; see also Katz, supra note 58, at 386.
115. SeeBartok, supranote 103, at 509.
116. See id.
117. See Radovich v. NFL, 352 U.S. 445,446 (1957).
118. Seeidat447.
119. Seeidat451.
120. Interestingly it took fifteen years after implementation of the provision in the standard
player contract, until the first athlete used this right.
121. SeeBeckman, supra note 112, at 10.
122. SeeWELER& ROBERTS, supra note 2, at 179.
123. See Beckman, supra note 112, at 10.
124. See WEILER & ROBERTS, supra note 2, at 179; see also Katz, supra note 58, at 386-87;
Bartok, supranote 103, at 509 n.37.
choices, or both. 2 ' Even though the Rozelle Rule clearly guaranteed
every player the possibility to shift to another team after he played out the
option year, its practical effect was a restriction of player movement. No
team wanted to take the risk of an unknown compensation by the
Commissioner, therefore, in most of the cases the only choice for a player
was to re-sign with his former team. 6 Therefore, the Rozelle Rule had
practically the same effect as baseball's reserve system.121
2. Antitrust and Collective Bargaining in Football and Its Impact on

Free Agency
As in baseball, the formation of unions and the development of
collective bargaining'28 had an essential impact on free agency in football.
In 1968, the NLRB certified the NFLPA as the exclusive bargaining
representative of the NFL players.2 9 Even though the Rozelle Rule was
implemented in the first two collective bargaining agreements negotiated
by the NFLPA, Joe Kapp, who was playing for the New England Patriots,
challenged the rule in court, claiming a violation of the Sherman Act.'
The district court concluded that the Rozelle Rule was unreasonable, but
Kapp could not prove any damages.' Nevertheless, the decision in
Kapp strengthened the players in their battle against free agency
restrictions. In 1977, John Mackey and a group of other NFL players
sued the NFL, the Commissioner, and the twenty-six member teams for
an antitrust violation through the use of the Rozelle Rule.'32 In Mackey v
NFL' the court faced two major issues. First, the players alleged that
the Rozelle Rule formally provided them free agency after expiration of
their contracts but had the practical effect of restricting their ability to
sign with another team.'34 The second issue that arose was whether the
Rozelle Rule was covered by the collective bargaining exemption from
antitrust scrutiny since it was implemented in the collective bargaining
agreements between the owners and the NFLPA.'33
125. See WELLER & ROBERTS, supm note 2, at 179; see also Beckman, supra note 112, at
10.
126. See Mitch Truelock, FreeAgency hn the NFL: Evolution or Revolution, 47 SMU L.
REv. 1917, 1926 (1994).
127. SeesupmaPartlI.B.1; seeasoWEILER& ROBERTS, supmnote 2, at 179.
128. See supia Part III.B.1.
129. See Beckman, supa note 112, at 11.
130. Seeid; see also Kapp v. NFL, 390 F. Supp. 73, 74 (N.D. Cal. 1974).
131. See Beckman, supanote 112, at 12.
132. Seeid; seealsoTruelock,supa note 126, at 1926-27.
133. Mackey v. NFL, 543 E2d 606 (8th Cir. 1976).
134. Seeid at 611; SeealsoWEILER& ROBERTS, supranote2, at 179.
135. SeeWELER& ROBERTS, supa note 2, at 179.
Section one of the Sherman Act was designed to forbid restraint of

trade and to promote competition, but courts have stated that only
unreasonable restraint of trade constitutes a violation. "' A violation can
occur either as a per se violation or as a violation under the rule of reason
standard.'37 The application of antitrust law in sports has unique aspects
because it is necessary for the sports industry to have a number of
anticompetitive activities off the field to ensure the existence of the game
on the field.'38 The courts recognize the necessity to conspire, but they
also express that these pro-competitive effects have to be balanced
against the anticompetitive effects of an agreement. The courts have
been unwilling to use the per se standard; therefore, in most free agency
cases the rule of reason doctrine was applied.' There are two relevant
exemptions in labor law to be considered: (1) the statutory labor
exemption and (2) the nonstatutory labor exemption. If these exemptions
are applicable, the alleged conduct cannot be challenged under antitrust
law.'4 The statutory labor exemption protects certain union activities,
which are in their nature anticompetitive, from a challenge under the
Sherman Act."' The statutory labor exemption is based on the Clayton
Act and the Norris-LaGuardia Act and applies only to unilateral union
activities and not to the relationship between an employer and the union
members.' 2 The nonstatutory labor exemption was created by the courts
to protect those areas of labor policy not protected by the statutory labor
exemption. ' Because the nonstatutory labor exemption is not an express
provision in a statute, but created by the courts, its application by the
courts involves a balancing test between antitrust policy and labor
policy.'"
The district court in Mackey stated that the Rozelle Rule was so
obviously against public policy that it qualified as a per se violation. '
The district court also held that under the rule of reason test, the pro-
competitive effects would not outweigh the anticompetitive effects, and
therefore section one of the Sherman Act would be violated.'46 The NFL
tried to defend the rule by arguing that it was a product of arms-length
136. SeeBartok, supranote 103, at 516; seealsoTruelock,supranote 126, at 1919.

137. SeeBartok, supanote 103, at 516.
138. See id.at 517; see alsoTruelock, supmnote 126, at 1919-20.
139. See Bartok, supranote 103, at 518.
140. SeeTruelock, supranote 126, at 1920.
141. See id.
142. See id at 1920-21.
143. See id
144. Seeid at 1921-22.
145. See id at 1927; see also Beckman, supranote 112, at 13 n.68.
240 SPORTS LA WYERS JOURNAL [Vol. I I
bargaining with the union and was therefore covered by the nonstatutory
labor exemption. 47 The court rejected this argument and found that the
Rozelle Rule was implemented against a union with weak bargaining
power and, consequently, the rule could not qualify as the result of good
faith bargaining.'18 The NFL then appealed to the Eighth Circuit, which
upheld the holding of the district court. In its opinion, the Eighth Circuit
developed certain principles for the application of the antitrust law to
player restraint. 49 The court explained that the statutory labor exemption
would not apply, but that the NFL and its member clubs could
theoretically be protected by the nonstatutory labor exemption.'5 °
Furthermore, the court developed a three-prong test for the application of
the nonstatutory labor exemption:' 5'
(1) Provision must effect only the 5parties
2 of the collective bargaining
agreement (players and owners),'
(2) A mandatory subject of collective bargaining must be involved,'53
(3) The subject 5 concerned must be the result of bona fide arm's-length
bargaining.1 4
The court considered the first two factors to be favorable for the League
and concentrated its analysis on the third factor. 5 The court found that
the Rozelle Rule was not the result of bona fide arm's-length
bargaining'56 and found that the rule violated the Sherman Act.'57
The Eighth Circuit reversed the opinion of the district court and
stated that the unique nature of professional football made the application
of the per se rule inappropriate.' 58 Consequently, the court applied a rule
of reason analysis and concentrated on whether the Rozelle Rule was
essential in maintaining competitive balance and, if so, whether there was
a less restrictive alternative.' 9 The court found several anticompetitive
effects of the Rozelle Rule, among them the restriction of player
movement.' 0 The court then balanced the anti-competitive effects with
147. See Beckman, supm note 112, at 12-13.

148. See id at 13-14.
149. SeeTruelock, supra note 126, at 1927.
150. See Mackey v NFL, 543 E2d 606, 623 (8th Cir. 1976).
151. See Beckman, supra note 112, at 14-15.
152. See Mackey, 543 E2d at 615.
153. See id
154. Seeid.
155. See Beckman, supranote 112, at 15.
156. See Mackey, 543 E2d at 616.
157. Seeid at 617-23.
158. Seeidat619.
159. See idat 620.
160. See id
the pro-competitive effects (e.g., the equal strength of the teams on the
field) and ultimately decided that the Rozelle Rule was "far more
restrictive than necessary to serve any legitimate purpose."''
The consequences of Mackey on the business of professional
football were massive because for the first time, players could move to
another team freely after playing out their option year.' In response, the
owners implemented a system that provided teams with the right of first
refusal and a compensation system in the next collective bargaining
agreement.'63 This system allows a team to match the offer of another
team to retain their player, and if they lose their player, they are
compensated with a draft choice. 1" This arrangement also puts
limitations on the free agency of an individual player.'65 After the
expiration of the 1982 collective bargaining agreement, several NFL
players brought an antitrust suit against the NFL, alleging that this
system violates the Sherman Act.'66 The key question was whether the
nonstatutory labor exemption extended after the collective bargaining
agreement expired and, if it did, for how long.'67 Both the district court
and the Eighth Circuit Court of Appeals held that the nonstatutory labor
exemption continued after a collective bargaining agreement expired.' 6
In defining how long the exemption would last, the circuit court reversed
the lower court's ruling that the exemption ended upon impasse in the
collective bargaining negotiations.' The court ruled that the exemption
also continued to apply after impasse had been reached because the
parties still had all the labor law remedies available to them.'7° However,
the court did not explain how long the exemption would apply."'
Because of the applicability of the nonstatutory exemption, the right of
first refusal and the compensation system were exempted from antitrust
scrutiny, and the players lost this case.
After the victory in the Powell v NFL case, the NFL implemented a
new system, Plan B, which allowed clubs to name thirty-seven players
161. Id.at 622.

162. See Beckman, supra note 112, at 17.
163. See id; seealso Katz, supm note 58, at 389.
164. SeeKatz, supranote58, at 389.
165. SeCWEILER & ROBERTS, supanote 2, at 204.
166. See Powell (I) v. NFL, 678 E Supp. 777, 778 (D. Minn. 1988); Powell (II) v. NFL 690
E Supp. 812 (D. Minn. 1988); Powell (III) v. NFL, 930 F.2d 1293 (8th Cir. 1989).
167. SeeTruelock, supm note 126, at 1932.
168. Seeid; see alsoBeckman, supranote 112, at 22-27.
169. See WEILER & ROBERTS, supm note 2, at 205.
170. This opinion was affirmed in 1996 by the Supreme Court in Brown v Pro Football,
Inc., 518 U.S. 231,234 (1996).
171. SeeWELLER& ROBERTS, supm note 2, at 205.
SPORTS LA WYERS JOURNAL [Vol. 1 1
who would
' remain subject to the right of first refusal and compensation
system. 72 As a result, teams reserved their best players and the other
players became free agents after expiration of their contracts.
Consequently, teams began to compete for the free agents, which resulted
in increased salaries, while the salaries of the best players remained
nearly the same.173 The union decertified itself to avoid an application of
the nonstatutory labor exemption in the next antitrust suit.'74 This was
followed by a lawsuit filed by Freeman McNeil, challenging this new
restraint on players' movement. 5 A key finding by the district court in
McNeil v NFL was the inapplicability of the labor exemption because
the decertification of the union ended the collective bargaining
relationship between teams and players.'76 The case went to the jury, and
it found that the right of first refusal and the compensation system
violated section 1 of the Sherman Act.'77 Although Plan B helped
maintain competitive balance among the teams, it was more restrictive
than necessary.' The case settled before it reached the Eighth Circuit.
The players negotiated an agreement with the team owners, which
became the collective bargaining agreement between the union and the
League after the union was recertified.'79
The impact of the cases mentioned above and the new collective
bargaining agreement on free agency was positive. Despite the fact that
the agreement did not provide unrestricted free agency for all players, the
players' overall situation improved. The latest collective bargaining
agreement provided for different types of free agents, such as
unrestricted free agents, restricted free agents, and exclusive rights free
agents.'8" This collective bargaining agreement has restored labor peace
and has helped push football to the high popularity of today.
172. Seeid at 206; seealsoBeckman, supra note 112, at 27.

173. See Beckman, supranote 112, at 28.
174. See WEILER & ROBERTS, supla note 2, at 206; see also Beckman, supra note 112, at
29.
175. See generallyMcNeil (I) v. NFL, 764 E Supp. 1351 (D. Minn. 1991); McNeil (II) v.
NFL, 790 E Supp. 871 (D. Minn. 1992); McNeil (III) v. NFL, CIV No. 4-90-476, 1992 WL
315292 (D. Minn. 1992).
176. See Beckman, supranote 112, at 32-33.
178. Seeid
179. Seeid at 1945.
180. Beckman, supra note 112, at 44. For a definition of each type, see Brian E.
Dickerson, The Evolution of Free Agency in the National Football League: Unilateral and
Collective BargainingRestrictiveness, 3 SPORTS LAW J. 165, 183-95 (1996), and NFL-NFLPA
COLLECTIVE BARGANING AGREEMENT arts. XIX-XXX.
3. Player Transfer and Compensation

The compensation system for losing a player is similar in both the
NFL and MLB. 8l ' The NFL collective bargaining agreement provides
different methods of compensation that uses the right of first refusal,
unrestricted free agency, restricted free agency with compensation, and a
salary cap.'82
D A BriefLook atBasketball andHockey

The legal statuses of the NBA and the National Hockey League
(NHL) are similar to the legal status of the NFL. Because the baseball
antitrust exemption does not apply to either the NBA or the NHL, both
leagues are subject to antitrust scrutiny."3 The rules challenged by NBA
and NHL players (reserve clause, salary cap, right of first refusal, etc.)
impose the same restrictions that are imposed upon the players in the
NFL and MLB.
In Robertson v _NBA, 84 the NBA faced an antitrust claim similar to
the claims in FloodandMackey, and the court held that the player draft'85
and the reserve clause were a restraint of trade.' 6 In hockey, the key case
involved the World Hockey League, ' which was a rival league to the
NHL. As in Mackeyand Robertson, the hockey players prevailed in their
case. 188
1. National Basketball Association

An important case concerning the impact of antitrust law on the
system of collective bargaining in the NBA is Wood v NBA 9 where
Leon Wood, a first round draft pick in the 1984 NBA draft, filed an
antitrust suit against the NBA.' 9 Wood argued that the salary cap of the
draft system, implemented through a collective bargaining agreement,
violated antitrust law because it caused a disproportion in the salaries of
181. See supra Parts lII.B.3, C.3.

182. SeeKatz, supra note 58, at 412.
183. Michael Tannenbaum, A Comprehensive Analysis of Recent Antitust and Labor
LitigationAffecting the NBA andNFL, 3 SPORTS L.J. 205, 217 (1996).
184. See Robertson v. NBA, 389 E Supp. 867, 873-76 (S.D.N.Y. 1975).
185. See, e.g., Smith v. Pro Football, 593 F.2d 1173, 1189 (D.C. Cir. 1978).
186. Robertson, 398 F Supp. at 873-76.
187. See generally Phila. World Hockey Club v. Phila. Hockey Club, 351 F. Supp. 457
(E.D. Pa. 1972).
188. SeeWEtLER& ROBERTS, supranote 2, at 198.
189. 809 E2d 954 (2d. Cir. 1987).
190. SeeTannenbaum,supra note 183, at 207.
players with different talent.'"' The Second Circuit disagreed with

Wood's argument and held that through the fundamental principles of
federal labor law,'92 employees are entitled to eliminate competition
among themselves by choosing an exclusive bargaining representative,
such as a union.' 3 The decision of the Second Circuit'94 demonstrated to
the sports world that any rule implemented through collective bargaining
by the union and the league is precluded from antitrust scrutiny by the
nonstatutory labor exemption.'
In NBA v Williams,'6 the court addressed an issue that was also
addressed in Powell,97 whether the NBA was exempted from an antitrust
claim if it maintained the status quo by enforcing rules such as the
college draft or the right of first refusal after the expiration of a collective
bargaining agreement.'99 Even though the Eighth Circuit used a different
analytic method in Williams than the court did in Powell, the Eighth
Circuit reached the same result.'99 The Powellcourt did not agree with
the Eight Circuit and the National Basketball Players Association's
(NBPA) argument that the enforcement of the collective bargaining rules
concerning the college draft and the right of first refusal after expiration
of the agreement was a violation of antitrust law.99 The court determined
that the nonstatutory labor exemption extended when leagues
implemented their last best offer after impasse."' Along with the holding
in Powell, this was another step favoring team owners, because in
practice it meant that the owners could impose conditions unilaterally as
soon as a bargaining impasse was reached.92
The Williams case was the beginning of a huge labor dispute
between the league and the union after the collective bargaining
agreement had ended in the end of the 1994-1995 season.0 3 After
avoiding decertification of the union as the players' bargaining unit, the
191. Seeid
192. See29U.S.C. § 159(2003).
193. SeeWEILER& ROBERTS, supm note 2, at 201; see also Wooo 809 E2d at 959.
194. Which in fact disagreed with the analysis in Mackey. See WEILER & ROBERTS, supra
note 2, at 201-04, 209.
195. Seeid at 204.
196. SeeNBA v. Williams, 45 E3d 684, 685-87 (2d Cir. 1995).
197. See supra Part III.C.2.
198. See John Croke, An Examination of the Antitrust Issues Surrounding the NBA
DecertificationCrisis,5 SPORTS. L.J. 163, 167 (1998).
200. SeeCroke, supmnote 198, at 170.
201. Seeidat 171.
203. SeeCroke, supra note 198, at 175.
parties reached a new collective bargaining agreement, which provided

free agency to the players that paralleled that given in football.
2. National Hockey League

In general, the NHL experienced troubles similar to those of other
leagues. In McCourt v CaliforniaSports, Inc., the NHL faced a similar
claim, when Dale McCourt challenged the system implemented for
awarding a player as compensation for signing another player. " Even
though the district court found that this compensation system had not
been reached in bona fide, arm's-length bargaining (and therefore the
nonstatutory labor exemption did not apply), the United States Court of
Appeals for the Sixth Circuit held that the reserve system, including the
compensation system, was negotiated for during the collective bargaining
process." 5 Therefore the NHL was protected by the nonstatutory labor
exemption."6
After this decision, many disputes arose in the NHL and reached
their peak during the 1992 season with a players' strike0 7 and an owner
lockout in the 1994-1995 season.' The free agency system, which was
provided for in the collective bargaining agreement, was similar to the
systems in the other leagues and provided for unrestricted free agency for
veteran players and compensation through draft picks for the loss of
younger players.
Considering the developments over the last decades and looking at
the different cases in the different leagues, it can be said that today a
balance between unrestricted free agency and leagues' interest in having
competitive teams has been reached. Through the existence of collective
bargaining agreements and through the application of the nonstatutory
exemption to these agreements, labor peace has been reached in all four
major leagues and this guarantees the existence of professional sports in
the United States.
204. See McCourt v. Cal. Sports, Inc., 600 E2d 1193, 1194-97 (6th Cir. 1979).
205. SeeWEILER & ROBERTS, supranote 2, at 199.
206. See id
207. See id. at 200.
208. See id.; see also Peter Goplerud III, Collective Bargainingin the NationalFootball
League: A HistoricalandComparativeAnalysis, 4 VILL. SPORTS & ENT. L.J. 13, 36 (1997).
246 SPORTS LA WYERS JOURNAL [Vol. I I
IV SPECIAL ISSUES OF LABOR LAW AND SPORTS IN THE EU AND

AUSTRIA
A. The FreeMovement of Workers
As mentioned above, the EC Treaty does not address sports in any
of its articles,21 ° but the ECJ has applied the articles of the EC Treaty to
sports when economic activity is involved."' The key question in the
labor law area connected to sports, therefore, is whether an athlete's job
performance is an economic activity subject to article 39 of the EC
Treaty concerning the freedom of movements for workers. According to
prevailing case law of the ECJ, job performance for payment (in contrast
to gratuitous work) is a part of economy in terms of article 2 of the EC
Treaty. 1' 2 The main characteristics for job performance in exchange for
payment are: (1) working during a defined period of time, (2) for
another person according to this person's instructions, (3) receiving
payment for this performance, and (4) the work must be done in personal
dependence from the employer (which means that the employer can fix
the hours when the employee has to work).2 3
According to article 39 of the EC Treaty, a citizen of one EU
member state working in another EU member state cannot be
discriminated against because of his nationality.214 This free movement of
citizens requirement prohibits both direct and indirect discrimination.2 '
This gives each citizen of an EU state the right to move and to work in
any country of the EU. It prohibits the countries of the EU from passing
statutes that violate this right. If article 39 of the EC Treaty is fulfilled, it
applies to professional athletes employed by a club or team.
In the sporting context, in 1974, the ECJ held that article 39 could
be enforced against sporting federations in Walrave.1 6 Walrave and Koch
were two professional pacemakers in motor-paced cycling." 7 The
international governing body for cycling, Union Cycliste Internationale,
had a rule that required the same nationality for the pacers, such as
Walrave and Koch, and the cyclists, stayers, who wanted to compete in
210. See PROFESSIONAL SPORT IN THE EU, supm note 1, at6.

211. See supra notes 33-57 and accompanying text.
212. See STREINZ, supm note 33, at 264; see also 2 KAROLLUS, ACHATZ & JABORNEGG,
supm note 37, at 29 (2001).
213. See 2 KAROLLUS, ACHATZ & JABORNEGG, supra note 37, at 29 (2001) (quoting ECJ
decisions in MartrnezSala C-85/96 (1998) 1-2691 and Meeusen C-337/97 (1999) 1-3289.
214. ECTREATYart. 39(2).
215. See STREtNZ, supra note 33, at 303; see also 2 KAROLLuS, ACHATZ & JABORNEGG,
supranote 37, at 31 (2001).
216. SeePROFESSIONAL SPORT INTHEEU, supra note 1,at 46.
217. Seeid.at27.
2004] U]S. AND EU FREEAGENCY
the World Championship in this sport.2 8 Walrave and Koch challenged

this rule and the ECJ ruled that, in general, the EC Treaty applied to the
sports business as long as it qualified as an economic activity. The court
also held that a sport is an economic activity as long as it is exercised as
employment or service against payment."9 In its judgment, the ECJ
created a very important exception for national teams that is still valid
today: as long as only national teams are competing against each other,
the EC Treaty does not apply."' The grounds for this exception were
found in the fact that national teams, as opposed to the clubs, do not
engage in economic activity.22 ' To apply the articles of the Treaty in this
context would make no sense because, for example, Germany could
otherwise nominate eleven Italians in a national soccer game against
England, which does not seem to be reasonable. Based on this, the court
decided against Walrave and Koch. This decision evidences a rare
judgment in Europe where the ECJ realized that the application of law to
sports demands a consideration of the unique nature of the sports
industry.
In its judgment in Don 2 21 the ECJ extended the scope of the EC
Treaty even more, in holding that even "semi-professional soccer
player[s] were workers for the purpose of Article 39.*,221 In Dona the
court also affirmed the exception of national teams competing against
each other from the EC Treaty.
1. The Bosman Case

About twenty years later, the ECJ dealt with sports again in
Bosman, a major sports case concerning article 39.224 This case had an
enormous impact on "the migration patterns and mobility of professional
sportsmen and women intra the European 2Union25
and inter the European
Union and countries outside of its borders."
Jean-Marc Bosman, a Belgian soccer player, wanted to leave his old
employer RC Liege, a first division soccer club in Belgium, and play for
218. See id
219. See FRITZWEILER, PFISTER & SUMMERER, PRAXISHANDBUCH, supra note 37, at 497.
220. See id
221. See id.
222. SeeDona v. Mantero, (1976) E.C.R. 1333, 1342.
223. PROFESSIONAL SPORT INTHE EU, supra note 1, at 46.
224. Union Royale Belge des Societies de Football ASBL v. Bosman, (1995) 12 E.C.R.
4921.
225. PROFESSIONAL SPORT INTHE EU, supra note 1, at 107.
a second division club, Club US Duenkirchen, in France.226 Under the

governing Union of European Football Associations (UEFA) transfer
rules at that time, Bosman's old club, RC Liege, was entitled to get a
transfer fee from the new club, US Duenkirchen, even though his
contract was terminated.227 Bosman filed a claim at a national court in
Belgium. Bosman's claim challenged the UEFA transfer rules, which
permitted a club to demand a transfer fee for a player whose contract had
expired and was under no contractual obligation with his former
employer.228 Bosman also sought a declaratory judgment of the
compatibility of the transfer rules and other national restrictions with the
four substantial freedoms of the EC Treaty.29 At the time of the Bosman
holding, only three foreign players (including those of other EU member
states) and two foreign players, who played for at least five years in this
particular country, were allowed to be nominated for a game under UEFA
rules.3
In accord with article 177 of the EC Treaty, the Belgian court
submitted the case to the ECJ 3 ' Concerning article 39 of the EC Treaty,
the court had to answer two key questions:
(1) Does the interpretation of the EC Treaty entitle a club to ask for a
transfer fee, even though
22 all contractual obligations between club and
athlete are terminated?
(2) Does the interpretation of the EC Treaty allow international and
national governing bodies to create rules that limit the number of
nominated
2 33
athletes, even though they are citizens of a EU member
state?
In its judgment, the court stated that UEFA's transfer system was a
violation of article 394 of the EC Treaty, because it limited the free
movement of workers within the EU.15 The court also held that all rules
which were laid down by governing bodies restricting the number of
226. See id at 28; see also FRITZWEILER, PFISTER & SUMMERER, PRAXISHANDBUCH, supM
note 37, at 499.
227. See PROFESSIONAL SPORT INfTE EU, supr note 1,at 28.
228. See id.
229. See id.
230. The so-called 3+2 rule.
231. See id.
232. See Union Royale Belge des Societies de Football ASBL v. Bosman, (1995) 12
E.C.R. 4921,4925.
233. Seeid.
234. At that time article 48.
235. See PROFESSIONAL SPORT IN THE EU, supm note 1, at 28; see also FRITZWEILER,
PFISTER & SUMMERER, PRAXISHANDBUCH, supra note 37, at 499.
20041 US. AND EUFREEAGENCY
players of other EU states were in violation of article 39.236 Such rules

are an unreasonable discrimination based on nationality and a violation
of article 39.237 In its earlier decision in Dona, the ECJ only stated an
exception for national teams representing
238 a country in a sporting
competition against another country.
2. The Lehtonen Case

The two other major sports cases decided by the ECJ following the
Bosman decision were the Lehtonen case 239 and the Delige case.24° Juri
Lehtonen was a Finnish basketball player who was transferred to the
Belgian basketball club Castors-Braine. At that time, one rule of the
international governing body for basketball, F6d6ration Internationale de
Basketball (FIBA), stated that in Europe no club was allowed to put a
player on the roster who played in the same year for another European
club and who was transferred to the new club after February 28th. 4' The
Belgian basketball association also adopted this rule.242 Lehtonen had
played for another European club that season and was transferred to
Castors-Braine after February 28th. Consequently, the Belgian national
governing body denied Lehtonen the license to play for his new team."
Castors-Braine played its games with the Finnish player and the
governing body sanctioned the club by awarding all the games against
Castors-Braine.24 Again, the ECJ ruled that sport-governing bodies were
not immune from the application of the EC Treaty.2 6 The court also
ruled that transfer deadlines were a restriction on a player's freedom to
move from one member state to another, 27 but that such deadlines could
be justified if the governing body had legitimate sporting reasons for
inventing them. 8 In Lehtonen the main justification was to maintain the
competitive balance (public interest exception) because late transfers
236. See PRoFESSIONAL SPORT INTHE EU, supra note 1, at 28.

237. See id
238. See supraPartIVA.
239. See Lehtonen & Castors Can. Dry Namur-Braine v. Fed'n Royale Belge des Societes
de Basket-Ball ASBL, (2000) 4 E.C.R. 2681, 2682-83.
240. See Deliege v. Liege Ligue Francophone de Judo, (2000) 4 E.C.R. 2549, 2550-51.
241. See 2 KAROLLUS, ACHATZ & JABoRNEGci, supanote 37, at 23 (2001).
242. See id
243. See id
244. See id
245. Seeid.at 24.
246. See PROFESSIONAL SPORT INTHE EU, supra note 1, at 47.
247. See2 KAROLLUS, ACHATZ & JABORNEGG, supmnote 37, at 24 (2001).
248. See PROFESSIONAL SPORT IN THE EU, supra note 1, at 48.
could have a substantial impact on the strength of a team.249 The very

broad application of the EC Treaty on the sports business stated in
Bosman was narrowed in Lehtonen. If it is necessary to keep the
competitive balance in a particular sport, an exception to article 39 may
be possible.
3. The Deliege Case

The last important case in the trilogy of cases concerning sports was
the ECJ's judgment in Deliege, where the selecting process of national
governing bodies for international competitions was challenged.2"'
Christelle Deliege, a Belgian judoka,"5 ' was not nominated for the most
important judo tournament of the year in Paris.252 As a consequence, her
chances to participate in the 1996 Atlanta Olympic games were
prejudiced and Deliege sought to challenge those nomination criteria." 3
The main two issues in this case were (1) whether amateur athletes were
workers in the sense of the EC Treaty and (2) whether organizers of
sporting events can restrict entry to them and, if so, on what grounds.254
Concerning question (1), the court explained that the status of an
athlete as an amateur does not automatically implicate the absence of
economic activity.2" Deliege was engaged in economic activity because
she was performing for payment, but not in personal dependence 261 from
some other entity (club or other employer). " She was subsidized by
sports organizations and received money from sponsors.2 58 Her
participation in judo tournaments indirectly created an economic activity
because the organizer could sell tickets, acquire sponsors, and sell
broadcast rights. 59 An athlete who participates in a sporting event
without receiving payment may be subject to the EC Treaty because of an
indirect involvement in an economic activity.260 The activities of an
249. Lehtonen v. Fed'n Royale Belge des Societes de Basket-ball ASBL, (2000) 4 E.C.R.
2681, 2682-83. In this case, Lehtonen was mainly transferred for the play-off games, but did not
participate in the qualification games for the play-offs. See id.
250. PROFESSIONAL SPORT INTHE EU, supm note 1, at 49-50.
251. See 2 KAROLLUS, ACHATZ & JABORNEGG, supranote 37, at 14 (2001).
252. See id
253. See id
254. See PROFESSIONAL SPORT INTHE EU, supa note 1, at 50.
255. Seeid.
256. See id
257. See 2 KAROLLUS, ACHATZ & JABORNEGG, supra note 37, at 30 (2001); see also
PROFESSIONAL SPORT INTHE EU, supra note 1, at 49-52.
258. See PROFESSIONAL SPORT IN THE EU, supranote 1, at 49-52.
259. See id
260. See PROFESSIONAL SPORT INTHE EU, supranote 1, at 50.
2004] US. AND EUFREEAGENCY
athlete under the described circumstances are not considered

employment, but services, because the sportsmen act independently and
not in personal dependence of an employer. Thus, those athletes enjoy
the protection of article 49 of the EC Treaty, which deals with the
freedom of services.26" ' Finally, the court ruled that the question of
whether sportsmen are workers, in terms of article 39, or provided
services, in terms of article 49, is a question of fact that is to be decided
individually by the national court that has jurisdiction over the particular
case.262
The second issue the court addressed was the restriction of entry to
international sporting events. The ECJ accepted the fact that it is
unavoidable to have quotas based on entry-criteria that are justified and
not arbitrary.263 In general, the selection for a national team can restrict
an athlete's ability to perform in a specific tournament which can affect
his economic opportunities based on his nationality. 2' The ECJ left this
question unanswered because it did not speak of nationality as basis for
selection, but of affiliation to a national federation.265 The main
distinction from the Lehtonen case is that the public interest (sporting
interest) in that case was to have fair playoff games, which is in the
consumers' interest.26 In Deliege, the public interest, according to the
Advocate General's view, was the possibility for every nation to compete
with a representative team; thus the entry restrictions were justified. 67
However, some authors believe that the consumer interest is not to see a
representative of every country, but to see the best athletes or teams in
competition.268
B. Consequences ofthe Three Cases on ProfessionalSports in Europe

The issue of consumer interest (representation of each nation vs.
competition of the best teams and athletes) is a very controversial one
and there are examples where the quotas based on nationality were
changed. For example, in the European Champions League of soccer,
the national champions of each country were previously allowed to
participate. UEFA has changed the rules and now the countries with the
strongest leagues, such as Italy, England, Spain, and Germany, are
261. See 2 KAROLLUS, ACHATZ & JABORNEGG, supranote 37, at 30 (2001).
262. See id
263. Sec PROFESSIONAL SPORT INTHE EU, supranote 1, at 50.
264. Seeidat51.
265. See id
266. See id.
267. See id. at 52.
268. See id.
allowed to participate with more teams 269 and countries with smaller
leagues, like Austria, have to go through a thorough qualification modus.
This system has had a positive impact on the markets and on consumer
interest in the countries with big leagues, but it has had a negative impact
on the market of those countries that compete very rarely.20 The example
of the soccer Champions League shows how the European sports world
has adopted American ideas. It also perfectly demonstrates the two
different concepts that exist in some sports. In the United States, the
commercial activity created by the leagues is the driving power, whereas
in Europe the competition between the athletes and teams from different
countries usually was the driving force. Because many different states
exist in Europe, the competition between clubs, national teams, and
athletes of rivaling states are the main elements of professional sports.
Competition between nations or teams and athletes creates the high
emotions among consumers in Europe and increases consumer interest.
It was necessary to have all national soccer champions in the Champions
League. With the mentioned change of the participation rules, UEFA
chose the American concept of sports, namely to enhance the competitive
balance of the sport and, as a consequence, the increased quality of the
product. This resulted in increased broadcast and merchandising
revenues, but also to the exclusion of teams coming from countries with
weaker leagues.
After the Bosman decision, which determined a broad scope of
article 39 for sports, the application of the EC Treaty was narrowed
through Lehtonen and Deliege to sports, leaving sporting federations
autonomy for decisions. Like courts in the United States, the ECJ
supports the idea that sporting federations are more qualified to make
sporting decisions than judges or juries; therefore, the rules of the game
should always be designed by the governing bodies. If it is necessary for
courts to intervene, then they should always consider the uniqueness of
sports in applying the law.
C. Collective Bargaininghn ProfessionalSports

There is no provision which deals with collective bargaining in the
EC Treaty. It is the subject matter of the member states. There are only a
few countries within the EU that have passed statutes allowing collective
bargaining in professional sports: Spain, which has a quite developed
269. Seeid.at53.
270. Austrian teams only qualified five times in the last ten years.
2004] U S. AAD EU FREEAGENCY
system, and the Netherlands.27 ' France, Greece, Belgium, and Portugal
also have statutes that provide a basis for collective bargaining between
teams and players.Y
V CONCLUSION
Interestingly, the issues in the United States, as well as in the

countries of the EU, concerning professional sports and law are similar.
There is no doubt that the courts in the United States have had to decide
more cases in this area and the law dealing with professional sports is
more sophisticated. In both jurisdictions, the issue of free agency was
the driving power for athletes to challenge the governing bodies'
autonomy from legal intervention. Athletes in the United States
challenged restraints on players' movements nearly thirty years earlier
than their European colleagues.
Why did European athletes challenge the restraint on their
movement so late? The answer to this question lies in the different legal
remedies that were available in the United States and Europe. First, U.S.
sportsmen found a perfect legal basis for their claims in antitrust law.
Second, effective unions were founded in the end of the 1960s, which
supported the players in reaching their goals. The situation in Europe
was much more difficult. Governing bodies in the various sports had a
very strong position; as mentioned before they enjoyed a lot of autonomy
concerning free agency, e.g., the UEFA defined the basic transfer rules,
as well as the rules concerning the numbers of players from foreign
countries that teams can nominate on a European level. There was no
legal basis to challenge those rules apart from EU Law; national antitrust
law in Europe tended to be not as effective as in the United States and
UEFA was a European federation, outside the jurisdiction of national
courts. The Treaty of Rome, as the basis of EU law, was signed in 1957
and it took some time to develop a sophisticated field of EU law. In the
1970s, lawyers first realized that the EU law could provide a basis for
challenging the rules of European sports governing bodies. However, it
took another twenty years until Jean-Marc Bosman finally filed his suit.
Additionally, strong unions comparable to the U.S. unions in sports were
missing.
Interestingly, the concerns of the governing bodies in the USA and
in Europe were similar. In the United States and Europe, it was believed
that free agency would ruin professional sports, competitive balance
271. See 3 KAROLLUS, ACHATZ & JABORNEGG, supm note 37, at 84-86.
272. See id
could not be preserved, and player salaries would increase dramatically.

It is an amazing coincidence that in both major cases, Mackey and
Bosman, the main defense of the team owners' was that competitive
balance has to be preserved and in both cases the courts rejected this
defense. The courts agreed that having competitive balance among the
various teams was a legitimate goal, but there were less restrictive
alternatives to achieve it.
Even though U.S. athletes started their fight for free agency earlier
than European athletes, the status today concerning free movement is a
better one within the EU. Due to the extreme strict enforcement of the
four freedoms, all players, whose contracts are expired, can move to any
team they want to without any compensation within the borders of the
EU. Under the collective bargaining agreements of the major U.S.
leagues there are still some restrictions on free agency.
On the other hand, U.S. courts tend to consider the special nature of
sports in their judgments. It may be easier in a common law system for
the courts to do this, because of their ability to create law. In most
European countries, courts have to apply the general statutes designed by
the legislature to a sport specific problem. It is sometimes impossible to
give enough attention to the specialties of the sports world simply
because the interpretation of a statute does not allow it.
Two fields of law that played a very important role in the United
States in connection with sports, antitrust law and labor law, definitely
will be very important in the European sports world in the future. It is
not the antitrust law of the EU member states that is going to have an
impact on sports, but EU competition law. The structure of EU
competition law can be compared to U.S. antitrust law, and some lawyers
have tried to challenge rules of governing bodies on this basis before the
ECJ. For example, in the Bosman case, one of the claims filed was based
on a violation of articles 81 and 82 of the EC Treaty, which are
comparable to the Sherman Act. The ECJ did not have to decide this
claim because the court held that the transfer rules were a violation of
article 39. Nonetheless, lawyers think that there is a good chance that
many rules and agreements of governing bodies could be challenged
with competition articles 81 and 82. No case concerning this issue has
been decided.
As stated above, collective bargaining in Europe does not have the
same impact on sports as it has in the United States. But, as mentioned
before, many countries are working on special statutes, which could give
a legal basis for collective bargaining agreements in sports and it is very
2004] U.S. AND EUFREEAGENCY 255
likely that collective bargaining is going to be a big issue in sports in the

future.
The topic of foreign players on a team roster is still controversial in
Europe, but is not yet an issue of discussion in the United States. In three
of the four major U.S. sports, with the exception of ice hockey, most of
the players are U.S. citizens and only outstanding foreign players have a
chance to get on teams. Baseball, as well as American football, is played
mostly in the United States; therefore, the danger of an increasing
number of foreign players is limited. Basketball is played in many
countries of the world and the service of foreign players is normally
cheaper than the service of U.S. players. What if many teams decide to
sign a lot of foreign players to reduce costs? How would the league
react, how would the fans react, and how would courts decide possible
restrictions for foreigners?
In Europe, the law has to continue the process of developing basic
solutions for the unique problems that sports produce. The courts in the
United States have finally developed such a basis during the last three
decades, but it is not clear today what the future problems in the area of
labor law and sports are going to be.

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Citation: 11 Sports Law. J. 223 2004

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1. INTRODUCTION ................................................................................. 224

1. PROFESSIONAL SPORT IN THE EU: REGULATION AND RE-REGULATION 1 n. 1 (Andrew

between these two legal systems. To compare the legal situation

II. A DEFINITION OF SPORTS LAW

A. The US. Approach

1. First Group: Sports and the Law

5. See Davis, supra note 3, at 211. See generallyKenneth L. Shropshire, Introduction."

law, but this subsumption of sports under different traditional bodies of

2. Second Group: Development from "Sports and the Law" to

All the arguments mentioned above characterize the present status

3. Third Group: Sports Law as a Substantive Area of Law

22. Id.at 217.

Even though some of the requirements of recognition as a

33. For a definition of supranationality, see RUDOLF STREINZ, EUROPARECHT 5, 48-49

Union Cycliste International° that the law of the EU must be applied to

2. Sports and the Law in the National Legal Systems of the EU

50. See id.at 5-6.

dealing with different disciplines of sports were decided in Great Britain.

III. SPECIAL ISSUES OF LABOR LAW AND SPORTS IN THE USA

57. SIMON GARDINER, SPORTS LAW 97-100 (2001).

The main components of the reserve system in baseball were (1) a

61. SeeWEILER& ROBERTS, supranote 2, at 119.

2. Collective Bargaining in Baseball and Its Impact on Free Agency

73. See id at 357.

LaGuardia Act was enacted?' The Norris-LaGuardia Act barred courts

84. See WEILER & ROBERTS, supra note 2, at 190.

with a continuously renewing option clause in the contract, the option

3. Player Transfer and Compensation

a. The Trading System

95. See Bautista, supra note 63, at 457.

b. Status of a Player After the Contract Has Expired

Association was founded in 1920."2 Until 1950, the owners basically

1. Free Agency in the NFL

2. Antitrust and Collective Bargaining in Football and Its Impact on

Section one of the Sherman Act was designed to forbid restraint of

136. SeeBartok, supranote 103, at 516; seealsoTruelock,supranote 126, at 1919.

147. See Beckman, supm note 112, at 12-13.

161. Id.at 622.

172. Seeid at 206; seealsoBeckman, supra note 112, at 27.

3. Player Transfer and Compensation

D A BriefLook atBasketball andHockey

1. National Basketball Association

181. See supra Parts lII.B.3, C.3.

players with different talent.'"' The Second Circuit disagreed with

parties reached a new collective bargaining agreement, which provided

2. National Hockey League

IV SPECIAL ISSUES OF LABOR LAW AND SPORTS IN THE EU AND

210. See PROFESSIONAL SPORT IN THE EU, supm note 1, at6.

the World Championship in this sport.2 8 Walrave and Koch challenged

1. The Bosman Case

a second division club, Club US Duenkirchen, in France.226 Under the

players of other EU states were in violation of article 39.236 Such rules

2. The Lehtonen Case

236. See PRoFESSIONAL SPORT INTHE EU, supra note 1, at 28.

could have a substantial impact on the strength of a team.249 The very

3. The Deliege Case