21015_isi_altidore_zardes_diskerud_usmntmj020815201 Michael Janosz/isiphotos.com
Legal Analysis

MLS Could Retain Single-Entity & Offer Free Agency

MLS owners are vehemently opposed to free agency. MLS players believe it's essential. And UCLA School of Law Professor Steven Bank may have a compromise to satisfy both sides.
BY Steven Bank Posted
February 11, 2015
4:13 PM
IN A PREVIOUS COLUMN I argued that the major stumbling block in MLS’ collective bargaining negotiations with the MLS Players’ Union was not the concept of free agency per se, but rather the potential that true free agency could undermine the league’s status as a single entity.

This could fundamentally shift the balance of power in current and future labor deals by making the league more susceptible to an antitrust suit if negotiations broke down. Even if the parties did agree to some form of free agency subject to a salary cap this time around, the loss of leverage could push the league ever closer to the kind of unrestricted free agency in future negotiations that owners contend would be unsustainable.

In the past week, the level of rhetoric on these issues has only escalated.

MLS Commissioner Don Garber told the Orlando Sentinel that, "Our system is one that our owners fought hard to protect, it’s one that they bought into, particularly the new owners who have bought into the league, and that’s that our owners will not bid against each other for player services. And that’s a key aspect of our entire system.”

In comments to the Associated Press, Brad Evans, the player representative for the Seattle Sounders, countered that "We feel we deserve it now. We feel we've put in another five years of growing this league and especially those that have played in the league for 10 years. We think we should be able to choose where we go," Evans said. "We don't want astronomical prices. We understand the economics of it. We've had a phenomenal economics team look at where the league stands, where we stand as players, and we want what is fair for everybody."


Is there room for compromise? Can there be some version of free agency in a single-entity structure without necessarily dismantling the system? The short answer is Yes, but MLS may have to look to an unexpected institution—the University of California—for inspiration.

ONE OF THE DIFFICULTIES in finding some middle ground is that MLS’ use of a single-entity structure for a sports league is relatively unique. The NFL contended that its National Football League Properties was a single entity for purposes of licensing and marketing the name, colors, logos, and trademarks of the individual football teams. But the Supreme Court struck that down in a 2010 ruling, in part because, unlike MLS, the league as a whole made no pretenses of being a single entity.

The WNBA originated as a single-entity league, but abandoned that model in 2003 when the NBA brought in outside owners for the first time and permitted free agency. It’s difficult to find a precedent for a single-entity sports league that might be useful in identifying a path to compromise on the player movement question.

An alternative is to look outside sports for inspiration. One such possibility might be found in the academic world. Not the high theory of academic discourse, but rather the organization of academic institutions.

Universities generally appear to be fully separate institutions, but that is not always the case. UCLA and California (UC Berkeley), for example, compete for students, faculty, and research grants, as well as for trophies on the athletic fields. Legally, however, they are just two of the 10 different campus locations of a single academic institution called the University of California.

The Regents of the University of California, a separate corporation, is authorized by the California Constitution to manage the university, including holding legal title to all property at each campus, conferring all degrees regardless of campus, setting tuition for all campuses and programs, and employing all faculty and staff system-wide.

In such a single-entity university system, a form of faculty free agency exists, but it is circumscribed in a way that might be a useful model for MLS. Professors are free to move to other campuses of the University of California and campuses are free, with notice, to recruit professors from other campuses. The recruiting campus, however, can only offer a salary increase of one step on the university’s salary scale, which roughly translates to an 8% raise for the average professor—typically not enough to induce a move on its own.

The home campus has the opportunity to match that nomainal salary increase to help induce the professor to remain, but the campuses can’t continue bidding beyond that point.

The one exception is if the professor receives a bona fide offer from a university outside of the University of California, in which case both the home and recruiting UC campus may make a higher offer to compete with the compensation being offered by the outside institution. Under this approach, the university facilitates intra-campus faculty movement and offers some means of providing fair market value information, but does so without permitting its campuses to bid against each other and artificially drive up the cost of faculty for the university as a whole.

Let’s take an example of a current player to see how this might work in MLS. Gyasi Zardes of the Los Angeles Galaxy is certainly a hot commodity after his display for the U.S. national display against Panama. According to the MLS Players’ Union data, he played in 2014 with a base salary of $125,000 and total guaranteed compensation of $198,000. Not chicken feed by any means for a 23-year-old, but it wouldn’t be surprising if another MLS team—say, the San Jose Earthquakes—would be willing to pay him more.

Under the UC System, San Jose could offer him total guaranteed compensation of $213,840—a raise of 8% or $15,840—and the L.A. Galaxy could match that.

MLS and the Players’ Union could agree to a higher maximum percentage for salary raises offered in intra-league transfers—perhaps 20%, or $39,600 in Zardes’ case—but in either case it wouldn’t permit a bidding spiral that would jack up player costs leaguewide. San Jose could try to lure away Zardes with promises of a more prominent role on and off the field or a training environment more conducive to his development, but the offer of a raise probably wouldn’t be sufficient motivation on its own to induce Zardes to relocate. Nevertheless, the system would allow Zardes the opportunity to choose where he wanted to play at the end of his contract and the offer would generate a raise for him, which would provide at least some form of market-based mechanism for rewarding players.

If, however, Fulham came calling and offered £250,000, or roughly $380,775, in total compensation, then San Jose could up its offer to match or beat Fulham’s and the Galaxy could match that. If a bidding war developed at that point, it would be between MLS and Fulham, and not between San Jose and LA.

This single-entity version of free agency could be attractive to both MLS’s investor-operators and to players. It prevents one deep-pocketed investor-operator from driving up everyone’s costs by starting to offer extravagant salaries to pedestrian players. At the same time, it allows players to move freely and to get fair market value for their services—but in a manner that is consistent with the principles of a single-entity structure.

Would both sides agree to it? It's hard to say.

Players may complain that getting a competing offer from a non-MLS club is too high a bar and MLS may worry that encouraging players to get competing offers may actually lead some of their best players to take them and leave the league. Both complaints, however, are effectively present under the current system, making this proposal much less radical than it sounds. When coupled with an increase in the salary caps and minimum salaries, this could be a compromise that both sides could agree upon.

Steven Bank is Paul Hastings Professor of Business Law and Faculty Director, Lowell Milken Institute for Business Law and Policy, UCLA School of Law. He has taught courses in tax and business entity law, including a soccer law seminar entitled “Law, Lawyering, and the Beautiful Game.

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