Our Restraint on Trade has Failed to Sufficiently Restrain Trade

Roger Goodell, commissioner of the NFL, today weighed in on the evils of market pay for newly drafted rookies:

NFL commissioner Roger Goodell said it's "ridiculous" to reward untested rookies with lucrative contracts, and wants the issue addressed in contract talks.

"There's something wrong about the system," Goodell said Friday. "The money should go to people who perform."

Goodell referred to Michigan tackle Jake Long's five-year, $57.75 million contract -- with $30 million guaranteed. Long was the first overall draft pick by the Miami Dolphins in April.

"He doesn't have to play a down in the NFL and he already has his money," Goodell said during a question-and-answer period at the end of a weeklong sports symposium at the Chautauqua Institution. "Now, with the economics where they are, the consequences if you don't evaluate that player, you can lose a significant amount of money.

This is, of course, complete nonsense. While it is true that Jake Long hasn't played in the NFL, what matters is the expected value of his future play. Goodell's statement that you lose money if you mis-evaluate a player is laughable. If Tom Brady goes down with a career ending injury tomorrow, then that puts a damper on the Patriots hopes. Sports, like life, are unpredictable. To the extent that this is especially true of rookies (and I'm not actually convinced it is for offensive tackles), then the uncertainty shows up as lower salaries. Problem solved!

If teams don't want to pay for high draft picks, they can choose not to sign them. Remember that fiasco a few years ago when Minnesota failed to get their pick in on time? Other teams were allowed to step right in and take their picks. This shows the ridiculousness of the claims made by some that high draft picks are now something teams want to avoid. If they really did want to not use their picks, they are perfectly free to not do so.

The owners have put in place a system (the reverse order draft) which decimates the bargaining power of potential players and which would be instantly ruled an illegal restraint on trade in any other industry. Having installed this laughably anti-market system, the owners want us to be sympathetic that they just can't stop themselves from paying potential franchise-saving players money, and this is bad because it's "risky".

The owners, as usual, are full of crap, and yet for some reason the sporting public continues to support these taxpayer-money-stealing, cartel-managing, lying billionaires against the athletes they all love. It's a mystery to me.

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You're overlooking a few things here.

If you think the owners want a rookie salary scale for the top draft picks to reduce player pay and thus boost their own profits, via such "restraint of trade", that's not what is going on here.

The amount that the teams must spend in the aggregate on salaries is set by the collective bargaining agreement with the union, and a salary cap for top rookies wouldn't reduce it at all, the same money would just go to other players. Similarly, under the per-team salary cap set by the union contract, giving a lower salary to Long would just increase the amount of pay going to other players by the same amount.

OTOH, Goodell is right that the huge pay going to Long and the other *handful* of top draft picks (we are talking of only about five players a year here, so it's really not a big-deal for the league as a whole) before they play a down *does* create serious morale and cap-management problems for the teams involved.

The top draft pick salaries are *not* free-market rate signings, so it is erroneous to compare them to the signings of players like Brady, who got their contracts by going into free agency or threatening to do so, and thus did get (sort of) free market pay.

Thinking that the "one-buyer one-seller" negotiating relationship that the draft produces always works in the team's favor is naive. Such a relationship certainly can favor the "seller", the player. (See how the MLB players union has exploited arbitration.) And it does in the NFL for the top handful of players. You mentioned the Minnesota "fiasco" -- and you are right, it was universally deemed a fiasco! Nobody said, "smart bargaining!".

That is, for the top draft picks the owners are under tremendous pressure from the fans and media to get a signing done. If the fans think their top draft pick is the next Peyton Manning, and they always do, even though the real-life odds of it are slight, they and the media will crucify the owners for letting him get away for to save a few bucks. My God, those Morons dropped from 1st to 4th in the draft FOR NOTHING!!! And there are bonfires outside the stadium. Which is bad for the owners.

So the owners order the GMs who are trying to build winning teams, "pay up", and the top draft picks are overpaid. There are several studies by economists -- there are lots of economist sports fans -- showing the top draft picks are in fact significantly overpaid, systematically. It's a true fact. The owners want to get out of this.

BUT that is not likely to happen soon. The players union has to agree to it in the contract, and it isn't any more interested in players getting fair, free-market pay any more than the owners are. To go along with a salary scale for the top draft picks it wants something back from the owners.

But because the problem only affects maybe five teams a year, and doesn't affect the owners' bottom line at all, zip $0 net, the owners as a group aren't interested in paying the union anything for it. So here we are. In the next full contract re-negotiation maybe a rookie salary scale will get thrown in as part of the deal-making, maybe not.

IOW, this is not a case of owners trying to screw workers. It's a case of the league and the union making a deal.

And remember the union is not a fan of free markets for players. Tom Brady and veterans like him who are successful in their first few years get huge deals in free agency because the union screws the players in the first few years of their careers, and average players later, by imposing the draft and the standard terms of initial player contracts for just-drafted players.

These terms do keep players (other than the top five picks or so) underpaid for the first few years -- then, if you are a *top* player going into free agency, you suddenly have maybe 20 teams bidding for you because all the other top players at your position are under contract to somebody. This isn't a free market either. You now get mega-bucks, you are overpaid, because you are a veteran and you are good.

If every player in the league was a free agent every year, with the same aggregate league pay as specified under the contract, a true free market, you'd never get money like that.

IOW, the players union, like all unions, favors its veteran and most influential members at the cost of its younger and more transient ones. The guys who are in the league four years as marginal players -- that is, average players -- take a hit from the union to benefit the small minority of "name" players who are in the league for eight or ten years and get to go through FA bidding a couple times for the big bucks each time.

And, of course, the owners and players union together work to protect their golden goose of a monopoly that pushes out the golden eggs to them both. Unlike other sports, notably MLB and the NHL, they really do work well together at that as their first priority. And they also work well together to maximize their monopoly take from the public and jointly impose restraint of trade on non-union players for mutual gain -- see the collective bargaining agreement-based league deal with the NCAA and the "Maurice Clarett" court decision.

As that shows, your description...

"The owners have put in place a system (the reverse order draft) which decimates the bargaining power of potential players and which would be instantly ruled an illegal restraint on trade in any other industry."

... is just plain wrong. The owners didn't impose anything. They negotiated the draft with the union. The union wants it and defended it in the Clarett case. Does the draft screw potential players, then non-union, to keep their wages down to benefit the veteran union members?

Sure it does! That's how collective bargaining works everywhere, not just in football but everywhere.

As the judge said in the Clarett case:
"That's what unions do, they protect people in the union from people not in the union," said Judge Sonia Sotomayor, extending her point to say the league and union could decide not to have a draft, as long as they agreed on it. That, she said, was the essence of labor law. "It might not be nice," she said. "But it's not illegal."
Note well -- according to the judge, the NFL could go "free market" with no draft at all, if the union agreed.

So this is not a case of powerful league owners screwing helpless individual players -- it's a case of two monopolies taking a public-relations motivated bargaining stance before their next round of one-to-one negotiations.

There's no "good guy" or "bad guy" to it -- just a couple of monopolies dealing with each other.

The owners, as usual, are

The owners, as usual, are full of crap, and yet for some reason the sporting public continues to support these taxpayer-money-stealing, cartel-managing, lying billionaires against the athletes they all love. It's a mystery to me.

A lot of people like professional sports. People especially love bringing new teams to their cities or getting better venues to watch those teams in when they know they aren't going to pay a proportional amount based on their own interest and can spread the cost of their favorite type of entertainment onto everyone else. Same thing with funding for the arts and similar public goods.

Government financing for professional sports, among other public goods and bailouts and subsidies for businesses, seems to draw the most ire because all involved are now very wealthy (players and owners).

I'm mildly suprised, with all the new means of watching and following sports, that the threat of a team leaving town remains such a concern for people.

Perhaps I was unclear. I'm

Perhaps I was unclear. I'm not surprised that people like professional sports (I do myself). What surprises me is that people so strongly side with the billionaire owners against the millionaire workers. See the comments on the ESPN article I linked earlier, or on this follow up from Gene Wojciechowski, which are an almost entirely one-way stream of anti-player invective. I'm the resident right-wing union-hater around here, and even I find the management love given out in professional sports perplexing.