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Case 1:17-cv-05495-MKB-ST Document 3-3 Filed 09/20/17 Page 1 of 80 PageID #: 119

UNITED STATES DISTRICT COURT


EASTERN DISTRICT OF NEW YORK

NORTH AMERICAN SOCCER LEAGUE, LLC,

Plaintiff,

v.

UNITED STATES SOCCER FEDERATION,


INC.,

Defendant.

Civil Action No. 1:17-cv-5495

EXPERT DECLARATION OF STEFAN


SZYMANSKI

September 20, 2017


Case 1:17-cv-05495-MKB-ST Document 3-3 Filed 09/20/17 Page 2 of 80 PageID #: 120

Table of Contents
1. Assignment and Summary of Opinions.....................................................................3
2. Experience, qualifications and prior expert testimony, and scope of work ...........3
3. The Organizational Structure of Pro Soccer in the United States and Canada differs
greatly from that used throughout the rest of the world, and creates conflicts of interest
not found elsewhere ...........................................................................................................4
4. The Alleged Conspirators have market power in the alleged Relevant Markets for
top-tier and second-tier mens professional soccer leagues located in the United States
and Canada .........................................................................................................................9
4.1 Market definition begins with a relevant product and focuses on the ability of substitutes to constrain prices
in that market .............................................................................................................................................................. 10
4.2 The distinction between league sports and ad hoc competition among teams is critical to proper market
definition .................................................................................................................................................................... 12
4.3 There is a relevant antitrust market for mens professional league soccer competition in the United States
and Canada ................................................................................................................................................................. 14
4.3.1 Other league-sports do not compete in the alleged markets .................................................................. 18
4.3.2 Non-league soccer events do not compete in the alleged markets ........................................................ 20
4.4 The Alleged Conspirators have Market Power in this relevant market ......................................................... 22
5. Anticompetitive Effects .............................................................................................23
5.1 Divisional Criteria in soccer is typically associated with the promotion and relegation system.................... 23
5.2 NASL teams are in fact competitive on the field with MLS teams ............................................................... 26
5.3 The development of divisional status regulation in the US ........................................................................... 26
5.4 The divisional regulations are arbitrary, and arbitrary regulation is harmful to consumers, hence
anticompetitive ........................................................................................................................................................... 28
5.5 Changing NASLs divisional status will have a direct effect on the ability of teams to participate in
significant competitions outside the NASL ................................................................................................................ 31
5.6 Changing NASL divisional status will have a direct effect on the ability of NASL teams to sell attractive
league games in competition with USL ...................................................................................................................... 33
6. Potential Procompetitive Justifications ...................................................................35
6.1 No valid pro-competitive justification for divisional structure as implemented by USSF............................. 35
6.2 There is no basis to believe each league needs to be continental in scope (e.g., there are multiple
regional/national leagues in Europe) .......................................................................................................................... 38
6.3 No reason for a ratcheting up of the number of teams per league ................................................................. 40
6.4 NASL currently satisfies practically all USSF DII requirements .................................................................. 42
6.4.1 Number of Teams ................................................................................................................................. 42
6.4.2 Country of Teams ................................................................................................................................. 42
6.4.3 Time Zones ........................................................................................................................................... 42
6.4.4 Metropolitan Area Population .............................................................................................................. 43
6.4.5 Stadia Size ............................................................................................................................................ 43
6.4.6 League Full-Time Staff ........................................................................................................................ 43
6.4.7 Team Full-Time Staff ........................................................................................................................... 43
6.5 No reason for divisional structure at all in system without promotion/relegation, etc. .................................. 44
6.6 Ruinous competition defense ........................................................................................................................ 45
6.7 Competitive balance defense ......................................................................................................................... 47
6.8 Comparison to sports leagues that operate on the North American model: baseball, basketball, American
football, and hockey ................................................................................................................................................... 48
7. The Anticompetitive Harms of the restraints at issue outweigh any potential asserted
Procompetitive Benefits, and these potential benefits, if any, could be achieved with no
restrictions at all or far Less Restrictive Alternatives ..................................................51
8. Signature ....................................................................................................................53

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1. ASSIGNMENT AND SUMMARY OF OPINIONS

1. Plaintiffs Counsel have asked me to undertake an economic analysis of the divisional structure and

criteria imposed by the United States Soccer Federation (USSF), and to assess their antitrust implications.

My focus has been on an assessment of the alleged relevant market, whether the Alleged Conspirators have

market power within that market, and whether use of that market power has led to anticompetitive effects.

As will be seen below, I conclude that there are relevant markets for (1) top-tier mens professional soccer

leagues located in the US and Canada, and (2) second-tier mens professional soccer leagues located in the

US and Canada, in which the Alleged Conspirators have jointly created market power through the conduct

challenged in this litigation, which has led to anticompetitive effects within those markets.

2. I have also been asked to assess commonly offered procompetitive justifications for the conduct in

suit, as to whether the aims offered are in fact procompetitive, and to the extent such benefits exist, to provide

an estimate of the comparative weight of the harm versus the benefits. As will be seen below, I did not find

any valid procompetitive benefits from the typically asserted justifications for the conduct in suit, and

consequently did not find that such benefits outweigh the clear anticompetitive impact of the conduct in suit.

3. In approaching this assignment, I have relied upon a number of documents, including material

provided by counsel and third-party files, laid out in full in Appendix A. I am a sports economist by

profession (as discussed in my qualifications below and detailed in my C.V., which forms Appendix B) and

I rely on my knowledge of the sports economics literature as well as the history of the sport of association

football (soccer). To the extent I specifically cite to an article or study, I include that title in this report and

in my list of materials in Appendix A.

4. I reserve the right to change my opinion if new information is presented either through discovery

or elsewhere.

2. EXPERIENCE, QUALIFICATIONS AND PRIOR EXPERT TESTIMONY, AND SCOPE OF


WORK

5. My name is Stefan Szymanski and I live in Ann Arbor, Michigan. I am the Stephen J. Galetti

Professor of Sport Management at the University of Michigan. I hold an MA from the University of Oxford

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in Politics, Philosophy and Economics, and an MSc and PhD in Economics from London University. My

complete curriculum vita is attached as Appendix B.

6. My primary field of research is the economics of sports. I am the author of seven books, two edited

books, and more than 100 peer reviewed articles. As well as sports, I have published research on antitrust

issues, mainly, though not exclusively, as they relate to sports. I have been retained in many legal cases

relating to sports, including antitrust cases. I was an expert witness for the UK governments Office of Fair

Trading in 1999, in relation to the collective sale of Premier League soccer broadcasting rights. Subsequently,

I have advised both the UK government and the European Commission on issues related to collective sale of
soccer rights in Europe. I have written extensively about the antitrust implications of the regulation of soccer

in Europe, in particular the system known as Financial Fair Play. I was also a cosignatory to the amicus brief

of sports economists in American Needle v. NFL.

7. I am being compensated at my usual and customary hourly rate of $500 per hour, plus

reimbursement of expenses. In my work on this matter, I have been assisted by OSKR staff, working under

my supervision and control. I was also assisted by Dr. Guy Wilkinson. I have no direct financial interest in

the outcome of this matter.

3. THE ORGANIZATIONAL STRUCTURE OF PRO SOCCER IN THE UNITED STATES AND


CANADA DIFFERS GREATLY FROM THAT USED THROUGHOUT THE REST OF THE
WORLD, AND CREATES CONFLICTS OF INTEREST NOT FOUND ELSEWHERE

8. Soccer is the worlds most popular sport. In its modern form, the games history stretches back
1
more than 150 years. Professional leagues have existed since 1888. There are approximately 125 fully

professional soccer leagues operating in 75 countries. Beneath these teams, there are several hundred semi-
2
professional leagues. FIFA estimated in 2006 that there were 113,000 professional players worldwide.

1
125 years of the Football League and the top flight which team comes top?; April 17, 2013; The
Guardian (theguardian.com); (bit.ly/2xcTeiF).
2
Kunz, Matthias; 265 million playing football; July, 2007; FIFA Magazine (fifa.com); (bit.ly/2xdnmdC).

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9. The governance structure of international soccer is fundamentally different from that of most other

professional sports in the United States. Soccer leagues are not fully self-governing, but are affiliated with

(nonprofit) national associations whose role is to promote the game in general, at amateur as well as

professional levels. National associations are affiliated to continental associations (such as UEFA or

CONCACAF) and to the world governing body FIFA, whose statutes and regulations set out the
3
organizational structure of the sport.

10. Both amateur and professional players are registered with the national association, which then

represents the game at every level of competition, provides training, supports the refereeing officials at
games, manages discipline and organizes the national teams (men, women, senior and junior). A soccer club

is only recognized by FIFA if it affiliates to the national association, ensures that its players are registered

with the national association, and accepts the national rules. An important rule is that clubs must
4
unconditionally release players to represent their national team if called upon to do so.

11. In almost every country, clubs participate in leagues that are organized hierarchically, with

professional leagues at the very top and predominantly amateur leagues at the bottom. Each league has a

specific place in the hierarchy, which is defined by the institution of promotion and relegation. According to

this system, the best performing teams in a given league at the end of the season are promoted to play in the

next division further up the hierarchy, while their places in the lesser league are taken by the worst performing
5
teams in the immediately senior league. This process is determined by sporting merit, rather than any other

criteria, such as financial capacity.

12. In the US, the Big Four professional sports leagues (Major League Baseball, the National

Basketball Association, the National Football League and the National Hockey League) evolved without

3
FIFA Statutes, April 2016; (http://bit.ly/26r3IoH).
4
FIFA Regulations on the Status and Transfer of Players (2016) Article 1, para. 1: Clubs are obliged to
release their registered players to the representative teams of the country for which the player is
eligible to play on the basis of his nationality if they are called up by the association concerned. Any
agreement between a player and a club to the contrary is prohibited.
5
See Szymanski, S., 2006. The Promotion and Relegation System. Handbook on the Economics of Sport.
Edward Elgar Publishing.

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being answerable to a national governing body and without a hierarchical system of promotion and

relegation.

13. Soccers governing body in the US, the United States Soccer Federation (USSF), was founded in
6
1913 and affiliated to FIFA in 1914. The US sent a national team to the first FIFA World Cup in Uruguay
7
in 1930. In principle, the USSF functions in the same way as any other governing body in FIFA. For

example, it is currently engaged jointly with the national federations of Canada and Mexico in bidding to
8
host the 2026 FIFA World Cup.

14. Professional soccer leagues have existed in the US for more than a hundred years, but they initially
struggled to gain popular appeal. In 1988, the US was awarded the right to host the 1994 FIFA World Cup

on the understanding that the governing body would use the profits and general interest stimulated by the

event to launch a new professional league. This eventually materialized in the form of Major League Soccer
9
(MLS), which conducted its inaugural season in 1996.

15. MLS was established as a single-entity league, meaning that a player contracts centrally with the

league rather than with a team, and teams contribute a share of their revenues to MLS to cover salaries. MLS

owns all teams, with the team owners actually owning stock in MLS and given individual responsibility

for local revenues and costs associated with games played, while the league is responsible for selling

broadcast and sponsorship rights. Rather than owning their teams, Team owners control a share in MLS,

while the Commissioner runs operations.

16. In 2001, MLS created Soccer United Marketing (SUM) as a separate company to operate as its

marketing arm. This included jointly negotiating the TV rights to both MLS and the USSFs mens and

womens national teams. Doing so enabled SUM, now the sole rights holder of all high-level American

soccer (pro league and national teams), to sell a joint package at a higher value to TV broadcasters. In turn,

6
History Timeline; US Soccer (ussoccer.com); (bit.ly/1rxl0y3); accessed September 9, 2017.
7
History Timeline; US Soccer (ussoccer.com); (bit.ly/1rxl0y3); accessed September 9, 2017.
8
Straus, Brian; USA, Mexico, Canada bid unveils preliminary city host candidates for 2026 World Cup;
August 15, 2017; Sports Illustrated (si.com); (on.si.com/2i2x4K5).
9
History Timeline; US Soccer (ussoccer.com); (bit.ly/1rxl0y3); accessed September 9, 2017.

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SUM would redistribute this added value back to both MLS and USSF. This network of relationships is

illustrated below.

Figure 1. USSF, SUM, and MLS

17. The close relationship between MLS, SUM, and USSF represents a significant conflict of interest

for USSF. This is evident from the financial intertwining of the three organizations. A single manDon
10
Garberis Commissioner of MLS, CEO of SUM, and sits on the governing council of USSF. Rather than

maintaining an arms length relationship, MLS, USSF, and SUM are essentially business partners. Evidence

of the economic significance of the relationship between these three organizations can be gleaned from the

financial statements of USSF and its Form 990 disclosures (see Appendix C).

18. In an interview for Sports Illustrated, Don Garber said Sunil [Gulati, President of USSF] and Dan

[Flynn, Secretary General] had this view that as the governing body of the sport they would make
11
commitments on the commercial side and on the competitive side to have MLS be the leader of the sport.
He continued to say, Thats not something that exists in other parts of the world. I believe that Sunil could

have made a different decision when he came in as president (in 2006), and had he made that decision MLS

10
USSF 2015 Form 990, p. 7. Don Garber: Commissioner; Major League Soccer (mlssoccer.com);
(bit.ly/2foWNsd); accessed September 15, 2017.
11
Wahl, Grant; 15 years of The Don: Under Garber, MLS stayed afloat, has taken strides; December 3,
2014; Sports Illustrated (si.com); (on.si.com/2xmlDDY).

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isnt what it is today. Because we are joined at the hip. Garbers explanation is essentially a recognition

that USSF is not in a position to be an honest broker in disputes among MLS and its competitors.

19. One effect of the intertwining of SUM and MLS is that related-party transfers can be manipulated

to create accounting statements that diverge from the true economic health of the two entities. SUMs

shareholders are past and present MLS owners, and SUMs principal assets are MLS and USSF broadcast
13
rights. Per the terms of its agreements with USSF, SUM pays a share of revenues back to USSF and then

distributes the remaining profits to its MLS majority shareholders. In 2017, Bloomberg valued SUM at over

$1.8 billion, based on the sale of Providence Equity Partners shares back to MLS for approximately $450
14 15
million. MLS spokesmen have repeatedly claimed that MLS clubs are loss-making, and in 2017 Forbes
16
estimated the annual operating losses of the league at $20 million. Despite this, MLSs franchise entry fee
17
is $150 million, and MLS has publicly stated it may soon reach $200 million. This suggests that MLS

owners profit from SUM and properties that ultimately belong to USSF.

20. In 2016, Roger Pielke Jr., an expert on the governance of sports, identified a number of conflicts of

interest in USSF, including the opacity of relations with MLS and SUM, and suggested that its governance

12
Wahl, Grant; 15 years of The Don: Under Garber, MLS stayed afloat, has taken strides; December 3,
2014; Sports Illustrated (si.com); (on.si.com/2xmlDDY).
13
In addition, SUM markets the Mexican national soccer team (men) in the US. In recent years, Mexico
has played more games in the US than in Mexico. See Baxter, Kevin; Mexico's national soccer team
finds a great home venuein the US; March 28, 2015, LA Times (latimes.com); (lat ms/2y4TVIe).
SUM sells sponsorship rights globally on behalf of CONCACAF, the regional confederation of
national associations that includes USSF, and markets individual tournaments (such as the 2016 Copa
America Centenario). Thomas, Ian; CONCACAF Gold Cup leads summer soccer lineup for SUM;
May 8, 2017; SportsBusiness Journal (sportsbusinessdaily.com); (bit.ly/2x2d5S2).
14
Providence Equity Partner had purchased a 25% stake in 2012, but that percentage had been diluted in
the intervening years. Soshnick, Scott, and Porter, Kiel; Providence sells share of soccer marketing
business back to MLS; June 19, 2017; Bloomberg (Bloomberg.com); (bloom.bg/2sOc0LL).
15
Associated Press; MLS commissioner Don Garber says league losing money, but profile rising; July
30, 2015; ESPN (espn.com); (es.pn/2eUJClQ).
16
Smith, Chris; Major League Soccers most valuable teams; August 16, 2017; Forbes (forbes.com);
(bit.ly/2vVsq78).
17
Gonzalez, Roger; MLS Expansion: Heres what to know about the 12 cities to submit franchise bids;
February 1, 2017; CBS Sports (cbssports.com); (cbsprt.co/2vN02jk). MLS provides update on future
expansion fees; August 1, 2016; MLS (mlssoccer.com); (bit.ly/2jo9Dvc).

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standards fell below internationally recognized levels. This opacity provides a fertile breeding ground for

the sorts of related-party transactions than can mask profit or shift surpluses from a taxed entity to a non-

profit. This may help to explain the apparent paradox of rising team values (a sign of economic profit) in a

league which appears to show accounting losses.

21. In other countries, it is not uncommon for representatives of league clubs to sit on the national

governing body and for the national governing body to be closely involved with the running of the leagues

at the highest level. However, the promotion and relegation system minimizes the opportunities for the

governing body to favor one team or group of teams over another. Outside the US, the owners of any club
are broadly free to invest more, deliver a superior on-field performance, and win their way into their countrys
19
highest tier of soccer. Unlike in the US, virtually all other countries leagues membership fluctuates from

season to season and all clubs are subject to intense competitive pressures. In the US, as MLS Commissioner

Don Garber openly admits, the USSF has insulated MLS teams from direct competition. The only

competitive threat comes from the growth of rival leagues, such as NASL. By demoting NASL, USSF is

further protecting its business partner MLS, using arbitrary regulations that no other soccer federation in the

world deems necessary, in order to achieve the anticompetitive goal of protecting competitors rather than

competition.

4. THE ALLEGED CONSPIRATORS HAVE MARKET POWER IN THE ALLEGED RELEVANT


MARKETS FOR TOP-TIER AND SECOND-TIER MENS PROFESSIONAL SOCCER
LEAGUES LOCATED IN THE UNITED STATES AND CANADA

22. NASL is a professional soccer league with eight member clubs located in Edmonton (Alberta),

Indianapolis (Indiana), Jacksonville (Florida), Miami (Florida), Brooklyn (New York), Cary (North

18
Pielke Jr., Roger; US Soccer and Conflicts of Interest; May 12, 2016; Soccernomics (soccernomics-
agency.com); (bit.ly/2wRgbG2).
19
In 2009, the European governing body (UEFA) introduced Financial Fair Play, a system of regulation
aimed primarily at clubs to restrict their spending on players to levels no greater than the sum of
revenues from tickets, merchandise, broadcasting and sponsorship. This was intended to address
problems of insolvency faced by some clubs. See UEFA Club Licensing and Financial Fair Play
Regulations, 2015; (uefa.to/2wn94Ic). Note that these regulations apply only to clubs seeking to
participate in pan- European competitions arranged directly by UEFA, rather than participants in
league competitions at the national level only.

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20
Carolina), Bayamn (Puerto Rico) and San Francisco (California). The league organizes a schedule of

games across the season, oversees the competition and its regulation (including services such as game

referees), and provides marketing and promotional services to the competing teams. The clubs organize

teams, employ players, employ coaches and training staff, pay for the stadium, charge customers for entrance

to the stadium to watch games, and sell related goods and services such as food, beverages, and parking near

the stadium.

23. Sports involve multiple overlapping markets teams sell tickets, concessions, sponsorships,

television rights, etc. NASL and its teams compete in all of these markets. But, in order to have access to
these various markets, league-sports teams require a league. As alleged, the principal markets at issue in this

case are (1) for top-tier mens professional soccer leagues located in the US and Canada, and (2) for second-
21
tier mens professional soccer leagues located in the US and Canada.

24. In the following section, I explain the process by which economists identify relevant antitrust

markets and discuss the key features of the industry as relates to the process of market definition.

4.1 MARKET DEFINITION BEGINS WITH A RELEVANT PRODUCT AND FOCUSES ON THE ABILITY OF

SUBSTITUTES TO CONSTRAIN PRICES IN THAT MARKET

25. In identifying a relevant product market, economists make use of several kinds of evidence. First,
22
one must identify a relevant product, typically based on Plaintiffs allegations. Here Plaintiffs allege the

two distinct relevant products are (1) top-tier mens professional soccer leagues located in the US and
Canada, and (2) second-tier mens professional soccer leagues located in the US and Canada. As is typical,

once a relevant product (or here, products) is determined, the normal next step is to identify products that

have similar descriptions and functions as the relevant product, which is useful for identifying the set of

20
California United and San Diego are both in the process of joining NASL. In addition, I understand that
as of September 2017, NASL has signed letters of intent (LOIs) from seven additional teams: Boca
Raton FC (Florida), Boston City FC (Massachusetts), Detroit City FC (Michigan), FC Arizona
(Arizona), Hartford City FC (Connecticut), New Orleans Jesters (Louisiana), and Virginia Beach City
FC (Virginia). Six of these LOI teams propose to play in 2018, which would yield 14 NASL teams
next year, even after the anticipated departure of two teams.
21
An ownership market has been found to constitute a relevant market in other cases, most notably
Sullivan v. NFL, a case that involved NFL football and soccer ownership.
22
Horizontal Merger Guidelines; August 19, 2010; FTC (ftc.com); (bit.ly/21jA9Tt ); pp. 8-13.

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products that are most likely to be close competitive substitutes for the relevant product. In most

circumstances, competition arises among so-called differentiated products, i.e., products with different

qualities and technical characteristics. In this case, the relevant products are differentiated. Each league has

distinct teams with distinct identities, including their geographic location and their historical performance.

This serves as a source of product differentiation because it causes the products that one league offers not to

be perfect substitutes for the products that another league offers, even within the same tier.

26. The fact that products are differentiated does not determine whether the products are competitive

substitutes in a (common) relevant antitrust market or not. In the end, whether products are in the same
market is not simply a matter of functional definition and technical description, but is a matter of whether

customers regard the products as sufficiently close substitutes, such that the price charged for one product

imposes a competitive constraint on the price charged for another product. The process of deciding which

products actually are competitive substitutes is fact driven, and the evidence that is used depends on the

characteristics of the products and the nature of competitive interactions among participants in the market.

27. The core underlying fact that economists seek to uncover in defining a relevant market is the cross-

elasticity of demand between the relevant product and each product that is a plausible close substitute. If

the cross-elasticity of demand between two products is high, an attempt by the producer of one product to

increase price will cause a large increase of sales to the other product, assuming that the price of the other

product remains unchanged. To the extent that this substitute renders a price increase unprofitable, the

alternative product has imposed a competitive check on the relevant product, demonstrating that the two are
sufficiently close substitutes to share a single relevant market.

28. In some cases, econometric models can be used to estimate the cross-elasticity of demand between

the relevant product and each candidate for inclusion in the relevant market. The basic idea is to estimate

the relationship between the price of the relevant product and variables that capture the supply and demand

conditions that determine its price, such as its technical features, its marginal cost of production, and the

prices of its most plausible substitutes. Unfortunately, making an econometric estimate of the cross-elasticity

of demand can be very difficult, and is sometimes impossible. Markets with infrequent transactions are one

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23
such example, and in the market for team ownership, transactions are rare. Moreover, estimation of the

cross-elasticity is often hazardous if transaction prices are estimates drawn from the media rather than

confirmed contract prices. These problems are common in the market for sports franchises.

29. To overcome the problem that estimating the cross-elasticity of demand from econometric models

is often impossible or unreliable, economists frequently employ other indicators of the degree of competition

between two products to determine whether they are in the same markets. The Horizontal Merger Guidelines

(herein Merger Guidelines) jointly published by the US Department of Justice and the Federal Trade
24
Commission list the kinds of evidence that bears on defining the relevant market. This evidence includes
documents from buyers, sellers, and informed third parties that contain information about which products

are commonly regarded as competitive substitutes, the nature and extent of downstream competition in the

buyers output markets, and the costs of switching products.

4.2 THE DISTINCTION BETWEEN LEAGUE SPORTS AND AD HOC COMPETITION AMONG TEAMS IS

CRITICAL TO PROPER MARKET DEFINITION

30. Sporting competition can be structured in a number of ways. In team sports, it is possible to organize

ad hoc games (called friendlies within the soccer community, often called exhibitions or scrimmages

in other sports). This product offering is simply a form of barnstorming in which teams travel from city to

city offering up exhibition matches. Each game played is of no consequence beyond the game itself.

Championships, by contrast, provide a context beyond the game itself, thereby sustaining greater interest by
fans. There are essentially two types of championship structure commonly operated, although in practice

there are also hybrid forms.

31. At one extreme, there is the single-elimination championship. An example of this kind of

championship is March Madness, organized by the NCAA. Each team remains in the competition as long as

23
As Edgeworth Economics writes in a white paper, there is relative scarcity of professional sports
teamsSports franchises are rarely available for purchase See The sale of professional sports
franchises; October 29, 2014; Edgeworth Economics (edgewortheconomics.com); (bit.ly/2xeDdIL ).
For example, the NFL is the largest US league with 32 teams, yet no team has sold in the last three
years. See Ozanian, Mike; The next three NFL teams that might be sold; July 26, 2016; Forbes
(forbes.com); (bit.ly/2xr0nfg).
24
Horizontal Merger Guidelines; August 19, 2010; FTC (ftc.com); (bit.ly/21jA9Tt ); pp. 3-6.

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it is winning, losers are instantly eliminated 32 in the first round, 16 in the second, eight in the third, four

in the fourth, two in the fifth, leaving two teams to contest the final championship game. This is an exciting

form of competition, but it has clear drawbacks as a business model. With half the teams playing only one

game, the competition lacks a regular schedule of competition for most teams.

32. At the other extreme is league competition. League competition provides context while also

securing a regular season of guaranteed competition for each team. League competition has three main

characteristics: (1) teams play all or many of the other teams across the season to generate a ranking based

on win percentage or a similar metric, (2) league competition continues from season to season with a
relatively stable membership structure, such that teams build up a following and rivalry with other teams in

the league, and (3) the pre-determined metric for ranking teams leads to a league champion, either simply by

placing first in the regular season, or by a post-season playoff system limited to a subset of the highest ranking

teams. While in North American sports, a post-season playoff is the norm, most soccer leagues around the

world typically rely solely on regular-season results to determine their annual league champion.

33. League structure encourages fans to develop loyalty to a team and enables the team to develop a
25
stable business. Over time, several professional leagues have developed a hybrid model, combining the

stability of regular-season play with the excitement of single-elimination play, via playoffs. From a business
26
perspective, however, these leagues generate most of their revenues in regular-season league play.

34. It has long been customary for teams to play ad hoc games in pre-season, and also to go on tours to

unexploited markets (typically abroad) in order to spread interest in the league and/or team product. Such

games may have limited meaning, but the attractiveness of the championship concept is such that even these

games are promoted in the context of league or single-elimination contests (often under the name of a

corporate sponsor). It is important to distinguish these games from league-play proper. For example, in

recent years some of the leading European soccer clubs have linked pre-season tours of North America to

25
Generally speaking, single elimination tournaments are sustainable business models only when the teams
have some other sources of revenues and fans, e.g. NCAA schools and colleges in relation to March
Madness, and national soccer teams in relation to the FIFA World Cup.
26
For example, in the NFL there are 256 regular-season games but only 11 post-season playoff games.

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form the International Champions Cup. On the face of it, this sounds like it might be a serious competitor in

the league-play market, but in fact the clubs do not take the competition seriously, often resting star players
27
and agreeing not to compete at full throttle.

35. This key distinction, between regular (usually annual) league-based play on the one hand, and

episodic barnstorming on the other, is important to keep in mind when analyzing the products and markets

in question. Specifically, I use league-based sports as a key component of what scholars (and the antitrust

authorities) commonly call the relevant product, which is the foundation of market definition and analysis
28
in antitrust, a process which is laid out in detail in the Merger Guidelines. Thus, within the alleged market
for, say, top-tier mens professional soccer leagues located in the US and Canada, I rule out the possibility

that ad hoc events, like annual single elimination tournaments, compete within the same market as league-

based competition.

4.3 THERE IS A RELEVANT ANTITRUST MARKET FOR MENS PROFESSIONAL LEAGUE SOCCER

COMPETITION IN THE UNITED STATES AND CANADA

36. League competition in general has proved to be the most popular and durable organizational
29
structure in modern sports, and most revenue from professional sports is generated in the framework of

league competition. This is because it typically ensures a more reliable schedule for teams and fans by
30
providing an entire season of play, compared to the various forms of barnstorming discussed above.

37. MLS is currently a monopoly supplier of top tier professional mens soccer leagues in the US and
Canada. Demand for these services comes from teams/owners/promoters wishing to play in these forms of

season-long, league-based competition. The supply of second tier professional mens soccer leagues in the

27
Redford, Patrick; The best fake soccer in the world is played right here in the USA; July 30, 2014;
Deadspin (deadspin.com); (bit.ly/2x9XNZ9).
28
Horizontal Merger Guidelines; August 19, 2010; FTC (ftc.com); (bit.ly/21jA9Tt ); p. 7.
29
See e.g. Szymanski, S. 2009. Playbooks and Checkbooks: An introduction to the economics of modern
sports. Princeton University Press, Chapter 2, Organizing Competition.
30
The ability for league sports to build stronger brands can be seen in comparing the relative success of the
New York Knicks, who participate in league sports, to the Harlem Globetrotters, who stage a series of
barnstorming events, even in light of the Knicks poor performance over the last decade-plus.

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US and Canada was until this year restricted to USL and NASL, and if Division II status is withdrawn from
31
NASL, then USL will in effect be handed a monopoly.

38. While a full-fledged examination of cross elasticities across leagues team prices is not possible, a

rough-and-ready assessment can be made through a simple review of expansion team prices. Given the
32
limited supply, MLS expansion fees are very large: currently $150 million, and potentially reaching $200
33
million soon. These fees alone suggest that there is a scarcity of top tier professional mens soccer leagues,

otherwise competition would tend to drive these fees down closer to the marginal administrative (and

opportunity) cost of adding an additional team to an existing league. In contrast, while USL and NASL
expansion prices are comparable to each other, they pale in comparison to MLSs. USL expansion fees are
34 35
in the region of $5 million, while NASL expansion fees are similarly in the single-digit millions. However,

if competition at the DII mens level is removed because of the USSFs actions, then expansion fees for what

would be a monopoly DII league (USL) would be likely to rise.

39. For an amateur soccer club seeking to become professional or for anyone seeking de novo entry

into owning a professional soccer team, there are limited options. On the demand side, there is limited scope

for substitution away from the existing professional soccer leagues. Establishing a soccer club requires a

specialized set of skills, both for organizing talent on the field and administering and promoting the club off

the field. Given these specialized skills, adopting a different sport entirely is unlikely to be an attractive

option. Finding alternative geographic regions to ones that leagues already operate in is also unlikely to be

attractive, given that the club is likely to have put down roots in an existing community, and a relocation

would entail the acquisition of a new fan base. For a club that is entering the market or seeking to move up

from the amateur to professional level, this would be very challenging.

31
As I detail in Section 5.6, MLS owns or affiliates with a majority of USL teams, effectively rendering
USL a developmental arm of MLS.
32
Gonzalez, Roger; MLS Expansion: Heres what to know about the 12 cities to submit franchise bids;
February 1, 2017; CBS Sports (cbssports.com); (cbsprt.co/2vN02jk).
33
MLS expansion team fees to rise, could reach $200 million; August 1, 2016; Sports Illustrated
(SI.com); (on.si.com/2h83uCI).
34
Baxter, Kevin; USLs ambitious efforts paying off with rapid growth, great ownership; May 20,
2017; Los Angeles Times (latimes.com); (lat.ms/2rQXvCH).
35
Leischner, Zack; Will the NASL expand in 2018? Four cities that hope so; April 12, 2017; Soccer
n Sweet Tea (soccernsweettea.com); (bit.ly/2xbmzbd).

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40. Supply-side substitution could arise in two ways. First, existing clubs and/or organizers of new

clubs (which could be formed by for-profit entrepreneurs or not-for-profit associations) seeking to join a

professional soccer league could band together and set up their own league. This requires a good deal of

coordination and is likely to be challenging. On the one hand, teams operating in close-knit geographic areas

may be able to coordinate, but they will quickly saturate their local market; on the other hand, teams operating

at a distance from each other are likely to face significant obstacles to coordination. These include differences

in local tastes and preferences, the need to coordinate the timing of entry to the market, and the need to create

a common brand that appeals to fans in different geographic markets. Another likely factor is the scheduling
of kickoff times that are suited to broadcasts aimed at fans in different time zones.

41. The second form of supply side substitution could be the formation of a new professional soccer

league by organizers of leagues in other sports. This has in fact happened before: in 1894, the National

League (baseball) established a professional soccer league including teams from Baltimore, Boston,
36 37
Brooklyn, New York, Philadelphia and Washington. The league folded within weeks. I am unaware of

any subsequent attempt by an existing league in another sport to create a professional soccer league in North

America.

42. The fact that there is a lack of substitutes in the market for mens professional soccer leagues is

supported by the evidence of expansion teams and rising expansion fees in MLS. Since 2006, the league has
38 39 40
added a net of ten teams, while expansion fees have risen from $7.5 million to $150 million. MLS has
41
announced that expansion fees may soon reach $200 million.

36
Football With the Feet: The Kicking Game that is Fast Becoming Popular; October 7, 1894; New York
Times (query nytimes.com); (nyti.ms/2h8s8Q6).
37
The Football League Disbands; October 21, 1894; Washington Post (washingtonpost.com);
(bit.ly/2yefyXt).
38
Standings 2006; MLS (mlssoccer.com); (bit.ly/2eMZvHr); accessed September 9, 2017 and Standings
2017; MLS (mlssoccer.com); (bit.ly/2vVEo0y); accessed September 9, 2017.
39
Ozanian, Mike; David Beckham to Earn Huge Windfall From New York's MLS Expansion; May 21,
2013; Forbes (forbes.com); (bit.ly/2wwasU9).
40
Gonzalez, Roger; MLS Expansion: Heres what to know about the 12 cities to submit franchise bids;
February 1, 2017; CBS Sports (cbssports.com); (cbsprt.co/2vN02jk).
41
MLS expansion team fees to rise, could reach $200 million; August 1, 2016; Sports Illustrated
(SI.com); (on.si.com/2h83uCI).

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43. Though rumored to be increasing as well, NASL and USL remain far more modest, with current

expansion fees below $10 million in both leagues. MLS has apparently felt it could raise prices by far more

than a typical SSNIP of 5 percent, without fear of would-be owners substituting away to USL or NASL.

Figure 2. Expansion Fees


MLS, NASL, and USL Expansion Fees, 1996-Present
(USD millions)
Year MLS Fee Source NASL Fee Source USL Fee Source
1996 Original Team $5 Forbes
1998 MIA $20 Forbes
1998 CHI $5 Forbes
2005 SL $7.5 Forbes
2005 CHV $7.5 Forbes
2007 TOR $10 Forbes
2008 SJ $20 Forbes
2009 SEA $30 Forbes
2010 PHI $30 Forbes
2011 POR $35 Forbes
2011 VAN $35 Forbes
2012 MON $40 Forbes
2015 ORL $70 Sentinel
2015 NYC $100 Forbes
2016 MIA $1-$9 The Guardian OTT $5 Telegraph
2016 OKC $1-$9 The Guardian
2016 PR $1-$9 The Guardian
2017 ATL $100 ESPN
2017 MIN $100 USA Today
2018 LA $110 LA Times SD $1-$9 Union-Tribune FRE $5+ Fresno Bee
TBD 24th Team $25* ESPN
TBD 25th Team $150 MLS
TBD 26th Team $150 MLS
TBD 27th Team $200^ MLS
TBD 28th Team $200^ MLS

Notes
* Per his 2007 MLS player contract, David Beckham is eligible for a discount expansion fee of $25
million. He currently leads the ownership group for Miami's MLS application, which is favored, but not
confirmed, to become the 24th MLS team.
^ MLS President Mark Abbott has stated that future expansion fees "could be as high as $200 million."

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44. As for the geographic component of market definitions, given the geographic scope of league

competition (spanning the United States and Canada), it is unlikely that the geographic market for team

ownership is anything larger or smaller than the entirety of those two countries. Womens professional soccer

leagues in the U.S. and Canada have struggled and two leagues have failed in recent years. Currently

womens pro soccer leagues do not represent a competitive restraint on mens pro leagues and can be
42
considered a separate market.

4.3.1 Other league-sports do not compete in the alleged markets

45. The standard economic approach to studying the demand for attending games in each sport yields

information that is directly relevant to the alleged relevant markets in this case. Published research exists

that seeks to explain home attendance among teams in a sport, for either each game or an entire season, on

the basis of measures such as the size of the local market, the quality of the home team and, in studies of

individual game attendance, the quality of the visiting team, the attributes of the playing facility, and ticket
43
prices. A few studies examine the effect on demand of the presence of competing teams in the same locality,

both in the same sport and in other sports. This helps to inform the question of whether other sports impose

a competitive restraint on the prices of soccer teams within the alleged markets.

46. In terms of the product definition, one key question is whether league-based teams in a sport other

than soccer (or in the extreme, the sale of other forms of non-sports entertainment) are reasonable substitutes

for the relevant product of league-based soccer teams in either tier one or tier two. In some sense, with

sufficient access to capital, investing in one investment opportunity does not preclude investing in another.

However, for the purposes of market definition, the focus is on whether the existence of a given investment

alternative, such as the purchase of an NFL team, imposes a pricing restraint on the ability to sell a soccer

42
The Womens United Soccer Association folded in 2003. Its replacement, Womens Professional
Soccer, folded in 2012. NWSL is the most recent attempt at a womens professional league in the
United States and Canada. In 2016, when asked about its prospects, Commissioner Jeff Plush replied,
No one is pretending that weve arrived. See Waldron, Travis; There are signs that a U.S. womens
soccer league is finally working; January 21, 2016; Huffington Post (huffingtonpost.com);
(bit.ly/1nq348X).
43
For a comprehensive discussion of the relationship between demand studies and market definition in
professional team sports, see Winfree, Jason. 2009. Fan Substitution and Market Definition in
Professional Team Sports Leagues, The Antitrust Bulletin, 54(4), pp. 801-22.

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franchise in, say, MLS. For would-be owners, a change in the franchise price for a major (or minor) league

baseball, basketball, football, or hockey team is unlikely to have a substantial effect on prices for soccer

teams.

47. While not directly addressing this question, there is literature on the related question of whether

fans see different sports as being direct substitutes for each other. Here the evidence generally supports the

conclusion that fans of one sport see other sports entertainment as weak substitutes, and forms of non-sports
44
entertainment as weaker still. Rascher, Brown, Nagel, and McEvoy (2009) used the natural experiment of

the NHL lockout (that cancelled the 2004-05 season) to conclude that potential competitors, including minor
hockey league teams and the NBA, saw slight, but statistically significant increases in attendance. While

this is much stronger than a SSNIP test (i.e., not a 5-10% price increase, but the cancelling of the season

which economists think of as an infinite price increase), the NBA saw a 3.2% increase in attendance, the

American Hockey League a 5.7% increase, and the East Coast Hockey League a 3.6% increase. These

increases were associated with the lockout, while controlling for other factors.

48. Winfree, McCluskey, Mittelhammer, and Fort (2004) found that the closer two teams are in terms
45
of home-field location, the lower attendance is at each team, relative to two teams that are farther apart.

Moreover, the study found that when a new team moves into the area of an existing team, there is an

additional, initial reduction in attendance for the incumbent team. The study cites the relocation of the Kansas

City Athletics to Oakland in 1968, leading to a drop in the San Francisco Giants initial attendance by nearly

a third. When modeling the effects on MLB relocation, Winfree, et al., found that each mile closer an MLB

team moves from the sample average translates to 1,544 fewer attendees for the year, or nearly $47,000 in

ticket revenue losses. The move of the Montreal Expos to Washington D.C. was expected to lower the

Orioles first year attendance by 5%, and 1% each year thereafter. The identified pricing effects are typically

statistically significant, but economically small in magnitude, meaning that while there is limited competition

44
Rascher, Daniel & Brown, Matt & Nagel, Mark & McEvoy, Chad. 2009. Where did National Hockey
League Fans go During the 2004-2005 Lockout?: An Analysis of Economic Competition Between
Leagues. International Journal of Sport Management and Marketing, 5(1, 2).
45
Winfree, Jason, Mc Cluskey, J., and Mittelhammer, R., and Fort, R. 2004. Location and attendance in
major league baseball. Applied Economic, 36(19).

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across sports for live attendance on the margin, the economic impact of this competition on prices is fairly
46
limited. Given the low measures of pricing constraints from one sport to another at the fan level, it is

unlikely that potential owners would see purchase of a baseball team to be a reasonable substitute for the

purchase of a soccer team. Team ownership in different sports provides access to different sets of downstream

customers with different demand functions. I conclude that a would-be hypothetical monopolist of either top

tier or second tier mens professional soccer would be able to impose a price increase without fear of losing

profit from substitution away by would-be owners to other non-soccer entertainment options.

4.3.2 Non-league soccer events do not compete in the alleged markets

49. A related question is whether barnstorming events serve as substitutes for league-based soccer. I

am not aware of any studies in the academic literature on this question, but it seems clear that if a

barnstorming event were scheduled in the same city on the same day as a regular-season league-based game,

there would be a stronger substitution effect than for an event from a different sport. The questions are then

how often do such overlaps occur, and how much impact do these overlaps have on league attendance.

50. To address these questions, I looked at the last five years of the International Champions Cup (ICC)

and the impact on MLS attendance. Each summer, approximately 15 ICC exhibition games occur in the

United States and Canada among teams from several European soccer leagues, including the English Premier

League (EPL), Italys Serie A, and Spains La Liga. Because this overlaps with the US-based leagues soccer

seasons, it provides a test of the impact. Across five seasons, there were 57 such games, in contrast with

1,677 scheduled MLS games. Only 16 MLS games took place in the same metropolitan area and within

46
Where effects have been found to be of economic consequence, its often focused on specific
submarkets, such as the market for selling luxury suites to corporations, for which it may be the case
that the ability to entertain clients dominates the specific sport in question. For example, Shapiro,
DeSchriver, and Rascher (2012) found that each additional competing sports facility in the marketplace
lowered the price of a luxury suite by about 15%. See Shapiro, DeSchriver, and Rascher, 2012.
Factors Affecting the Price of Luxury Suites in Major North American Sports Facilities. Journal of
Sport Management, 26(3).

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three days of one of the barnstorming matches. Average attendance for those 16 MLS games was in fact 2%
47
higher than those same teams home games for all other matches.

Figure 3. MLS Attendance During the ICC

MLS "Barnstorming" Dates Relative to Season Average, 2013-Present


Date Home Team Attendance Average % +/-
8/3/2013 San Jose Earthquakes 10,525 10,436 1%
7/23/2014 San Jose Earthquakes 10,525 10,355 2%
7/25/2014 Colorado Rapids 14,652 15,071 -3%
7/26/2014 Toronto FC 22,591 22,086 2%
7/30/2014 DC United 16,171 14,765 10%
7/30/2014 Chicago Fire 13,532 16,076 -16%
8/2/2014 New York Red Bulls 20,862 19,421 7%
7/18/2015 Seattle Sounders 40,403 44,247 -9%
7/18/2015 Toronto FC 25,032 23,451 7%
7/26/2015 New York City 32,041 29,016 10%
7/26/2015 DC United 19,125 16,244 18%
7/19/2017 New York Red Bulls 17,392 20,959 -17%
7/19/2017 New York City 22,011 23,428 -6%
7/21/2017 Orlando City 25,527 25,235 1%
7/22/2017 New York City 26,025 23,428 11%
7/29/2017 Los Angeles Galaxy 25,667 22,027 17%
Average 21,380 21,015 2%

Notes
[1] All listed games were played within three days of a local ICC game.
[2] Games played outside the home team's regular stadium were excluded when calculating average
attendance for the home team.

Sources
[1] International Champions Cup Match-by-Match Results
[2] MLS Match Reports
[3] SportsBusiness Journal MLS Attendance Reports
[4] Soccer Stadium Digest MLS Attendance Reports

51. From this, I conclude that even a relatively close functional substitute such as a live barnstorming

event does not impose a competitive pricing restraint on league-based live play.

47
Likewise, those ICC games that took place in the same metropolitan area and within three days of an
MLS game filled to 76% of arena capacity, compared to filling to 78% in all other ICC matches in the
US and Canada. There is virtually no effect on either ICC attendance or MLS attendance when the two
competitions play in the same place around the same time, suggesting that they are not substitutes.

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4.4 THE ALLEGED CONSPIRATORS HAVE MARKET POWER IN THIS RELEVANT MARKET

52. In paragraphs 16-22 above, I explained how USSF and MLS are, in the words of MLS

Commissioner Garber, joined at the hip. This occurs primarily through the medium of SUM, which

packages MLS properties with other soccer properties in the North American market. These properties are

either controlled by USSF (such as the rights to the US mens and womens national teams) or USSF can use

them to obtain a favorable negotiating position (e.g., the marketing of games played by the Mexican national

team in the US). The fact that SUM is essentially a merger of MLS and USSFs licensing arms is clear to the

public; for example, consider this Philadelphia Inquirer headline after SUMs most recent television deal:
48
MLS, US Soccer officially announce new TV deal with ESPN, FOX, Univision. The Inquirer reported

the eight-year contract to be worth $720 million. SUM consolidates North American soccer properties by

combining professional and national team rights, uses this leverage in negotiating with broadcasters, and

sends the wealth back to USSF and SUMs shareholders, who are owners of MLS teams. SUM is barely
49
distinguishable from MLS; MLSs website lists SUM president Kathy Carter as an MLS executive.

53. This relationship with USSF gives MLS significant power in the market for first tier mens

professional soccer leagues in North America. Potential entrants to the market must account for USSFs

commitment to MLS. When NASL emerged as a potential competitor, MLS moved quickly to bring USL

under its wing as a feeder league (discussed in more detail below in Section 5.6), which it could then use to

squeeze NASL out, luring away its teams. In the event that NASL were to fold, it would be unlikely that any

new entrant would seek to challenge the dominance of MLS/USL under the protection of USSF.

Consequently, the market would become completely monopolized.

54. The Department of Justice explains that the Supreme Court has defined monopoly power as
50
the power to control prices or exclude competition. USSFs conduct with respect to NASL has clearly

48
Tannenwald, Jonathan; MLS, US Soccer Officially announce new TV deal with ESPN, FOX,
Univision; December 13, 2015; The Philadelphia Inquirer (philly.com); (bit.ly/RHipSo).
49
Kathy Carter: President, Soccer United Marketing; Major League Soccer (mlssoccer.com);
(bit.ly/2fcd5YS); accessed September 15, 2017.
50
Competition and Monopoly: Single-Firm Conduct Under Section 2 Of The Sherman Act (Chapter 2),
available at https://www.justice.gov/atr/competition-and-monopoly-single-firm-conduct-under-section-
2-sherman-act-chapter-2#N 9 , citing United States v. E. I. du Pont de Nemours & Co. (Cellophane),
351 U.S. 377, 391 (1956).

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had precisely this effect, previously having excluded NASL from competing in the top tier of US/Canadian

league soccer, and now threatens to exclude NASL from competing in the second tier of US/Canadian league

soccer. The fact that the USSF controls entry and thus has the power to exclude competition in each tier

of the market through its divisional licensing process is the very definition of market power.

5. ANTICOMPETITIVE EFFECTS

55. In this section, I explain how, given the Alleged Conspirators market power in the alleged relevant

markets, the divisional criteria established and applied by USSF harms competition, including the reduction

of choice and on-field quality available to downstream consumers, by shielding MLS from competition and

entrenching the MLS/USL collusive arrangement into the future.

5.1 DIVISIONAL CRITERIA IN SOCCER IS TYPICALLY ASSOCIATED WITH THE PROMOTION AND

RELEGATION SYSTEM

56. The promotion and relegation system, which is characteristic of the overwhelming majority of

national soccer league systems around the world, creates a natural hierarchy among leagues. If the least

successful teams in Division I (DI), for example, are automatically relegated to Division II (DII) at the end

of the season, to be replaced by the most successful teams from DII, then it is clear that DI is deemed to have

a higher rank in the hierarchy. Fans and players are naturally drawn to the higher levels of competition. This

is the accepted norm in world soccer: of the 50 countries I examined with multiple professional soccer

leagues, 96% employ a system of promotion and relegation. This list includes:

Figure 4. Promotion/Relegation System by Country


# Country Professional Leagues Promotion Relegation System
1 Albania 2 Yes
2 Algeria 2 Yes
3 Argentina 4 Yes
4 Austria 2 Yes
5 Belarus 3 Yes
6 Belgium 2 Yes
7 Brazil 4 Yes
8 Bulgaria 2 Yes
9 Canada 3 No
10 Chile 3 Yes
11 China 3 Yes
12 Colombia 2 Yes
13 Czech Republic 2 Yes

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# Country Professional Leagues Promotion Relegation System


14 Egypt 2 Yes
15 England 4 Yes
16 France 2 Yes
17 Germany 3 Yes
18 Greece 2 Yes
19 Hong Kong 2 Yes
20 Hungary 2 Yes
21 India 2 Yes
22 Indonesia 2 Yes
23 Iran 4 Yes
24 Italy 3 Yes
25 Japan 3 Yes
26 Mexico 2 Yes
27 Morocco 2 Yes
28 Netherlands 2 Yes
29 Nigeria 2 Yes
30 Norway 2 Yes
31 Paraguay 2 Yes
32 Peru 2 Yes
33 Poland 3 Yes
34 Portugal 2 Yes
35 Russia 3 Yes
36 Scotland 2 Yes
37 Serbia 2 Yes
38 South Africa 2 Yes
39 South Korea 2 Yes
40 Spain 2 Yes
41 Sweden 2 Yes
42 Switzerland 2 Yes
43 Thailand 2 Yes
44 Tunisia 2 Yes
45 Turkey 2 Yes
46 Ukraine 3 Yes
47 Uruguay 2 Yes
48 United States 3 No
49 Venezuela 2 Yes
50 Vietnam 2 Yes

57. The United States and Canada, the only two countries with MLS teams, are the only exceptions.

58. The economic standing of leagues around the world varies substantially. In terms of revenues, the

English Premier League far exceeds MLS and is close to matching the four major US (non-soccer) leagues,

while the smaller professional leagues throughout the world have negligible revenues. These differences are

also reflected in wages levels. In global terms, MLS ranks with the smaller leagues, but is by no means the

smallest, as is illustrated in the table below. This leads me to conclude that the capacity to sustain a league

structure based on promotion and relegation is largely independent of economic strength. For example, it

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would be no more difficult to operate the system in the US than it is, say, in England (much larger wage

expenditure than MLS), Kazakhstan (similar), or Poland (much smaller).

Figure 5. Promotion/Relegation System Among Top Countries


Countries by Top League Club Average Wages, Number of Professional
Leagues, Promotion and Relegation System, 2015
(EUR millions)
Top League # Professional Employs Promotion/
Rank Country Club Average Leagues Relegation System
1 England 106.3 4 Yes
2 Germany 54.9 3 Yes
3 Italy 51.7 3 Yes
4 Spain 48.9 2 Yes
5 France 37.8 2 Yes
6 Russia 27.8 3 Yes
7 Turkey 22.8 2 Yes
8 Netherlands 11.9 2 Yes
9 Switzerland 11.1 2 Yes
10 Belgium 9.8 2 Yes
11 Portugal 9.6 2 Yes
12 Austria 7.6 2 Yes
13 United States 7.5 3 No
14 Kazakhstan 6.9 1 Yes
15 Ukraine 6.1 3 Yes
16 Denmark 6.0 1 Yes
17 Scotland 5.8 2 Yes
18 Greece 4.3 2 Yes
19 Sweden 4.1 2 Yes
20 Norway 3.6 2 Yes
21 Poland 3.3 3 Yes

Notes
[1] UEFA Club Average multiplied by 0.79 to reflect UEFA's previous estimate of the percentage of club wages that
are paid to players, as opposed to coaches and other staff.
[2] USD converted to EUR based on the exchange rate on September 27, 2015, the date the MLS data was released.
[3] Both Kazakhstan's and Denmark's Top Leagues relegate to semiprofessional leagues.

Sources
[1] UEFA European Club Footballing Landscape Club Licensing Benchmarking Reports
[2] Denver Post

59. Since the USSF has chosen not to adopt the naturally hierarchical system of promotion and

relegation, there is no obvious reason that one league should be defined to be better or worse than another.

Given a (figurative) level playing field, any league should be as capable of delivering an entertaining season

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of league competition as any other. However, the USSF has chosen to employ a hierarchical nomenclature

for rival professional leagues and to impose financial, administrative and technical conditions on the teams

in these leagues as a condition of maintaining a given status. Because these conditions are unrelated to the

competitive outcome of on-field competition, this hierarchy is inherently artificial and anti-competitive.

5.2 NASL TEAMS ARE IN FACT COMPETITIVE ON THE FIELD WITH MLS TEAMS

60. In fact, on-field competition shows that NASL teams are competitive with both MLS and USL

teams. The Lamar Hunt US Open Cup is the predominant stage for interleague competition in the United

States. Since NASLs founding in 2012, its teams have won at least 40% of their games against both MLS

and USL teams in the Open Cup.

Figure 6. Interleague Results

MLS, NASL, and USL Head-to-Head Results, 2012-Present


Lamar Hunt US Open Cup
vs. MLS vs. NASL vs. USL
W% W L W% W L W% W L
MLS --- --- --- 60% 26 17 80% 49 12
NASL 40% 17 26 --- --- --- 48% 12 13
USL 20% 12 49 52% 13 12 --- --- ---

Notes
[1] Excludes any friendly and/or exhibition matches occuring outside the Lamar Hunt US Open Cup.
[2] Extra time and penalty shootout wins/losses are treated the same as wins/losses in regulation time.

Sources
[1] Pendleton, Mike; "US Open Cup interleague play: How do they fare head to head?"; May 31, 2016; Fifty Five One
(fiftyfive.one); (bit.ly/2eXo3NW).
[2] US Soccer Open Cup Results

5.3 THE DEVELOPMENT OF DIVISIONAL STATUS REGULATION IN THE US

61. From a historical perspective, the US divisional system is a relatively recent phenomenon within

professional soccer. Since 1894, there have been a number of attempts to organize professional soccer

leagues in the US. The most successful in the first half of the 20th century was the American Soccer League

(ASL), which operated from 1921-32. In the second half of the 20th century, the original NASL operated

from 1968-1984. Neither league was given divisional status (which did not exist), and the USSF regulations

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in 1975 specified only that professional leagues were required to maintain sufficient geographic coverage

and maintain at least eight teams in competition.

62. Rules on divisional status were adopted in 1995 only when MLS was about to enter the market -
51
- and specified three levels (DI, II, and DIII). These regulations specified, inter alia, the minimum number

of teams, the percentage share of US teams, the minimum size of markets served, the dimensions of the

playing field, minimum salary and operating budgets, requirements relating to the league office (such as

opening hours), media coverage, and the personal commitment of team owners to the promotion of soccer in
52
the US.
53 54 55
63. Since then there have been revisions to the requirements in 2008, 2010, and 2014. These

requirements appear to have moved in step with the development of MLS. For example, between its

foundation in 1996 and 2006, MLS fluctuated between 10 and 12 teams, had limited live match broadcast

coverage, never surpassed the average attendance figures of the inaugural season, and struggled to grow. In

2007, MLS garnered a full slate of TV coverage and reached 13 teams for the first time, before adding another

team in 2008. The 2008 requirements for DI status differed little from those in 1995, with the same minimum

number of teams, and, as before, there were no requirements for franchise performance bonds or franchise
56 57
owner net worth. Similarly, the requirements for DII status remained largely unchanged. In 2010, USSF

added significantly to the requirements for DII status, and by 2014 added significantly to the requirements

for DI status. Over this period, MLS rapidly increased the number of franchises, from 14 in 2008 to 19 in

51
USSF Men's Professional Outdoor League Standards, Division I Adopted May 21, 1995, Divisions II and
III Adopted April 20, 1996
52
USSF Men's Professional Outdoor League Standards, Division I Adopted May 21, 1995, Divisions II and
III Adopted April 20, 1996
53
USSF Professional League Standards, 2008.
54
USSF Professional League Standards, 2010.
55
USSF Professional League Standards, February 28, 2014.
56
USSF Men's Professional Outdoor League Standards, Division I Adopted May 21, 1995, Divisions II and
III Adopted April 20, 1996; USSF Professional League Standards, 2008.
57
USSF Men's Professional Outdoor League Standards, Division I Adopted May 21, 1995, Divisions II and
III Adopted April 20, 1996; USSF Professional League Standards, 2008.

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58 59
2012, and announced four additional franchises by 2017. MLS only surpassed the total attendance record

set in its inaugural 1996 season in 2005, only beat the average attendance record in 2011, and saw average
60
match attendance increase by 16% from 2008 through 2014. The 2010 and 2014 requirements involved both

ratcheting up existing requirements (e.g., minimum team numbers and time zones) as well as new
61
requirements (e.g. on franchise performance bonds and franchise owner net worth). See below for a table

detailing the changes in USSF requirements.

Figure 7. USSF Regulations


Summary of USSF Professional Soccer League Requirements, 1995-Present
New New New Time Principal All League Team
Metro
MLS League Teams Teams Time Zones Owner Owners Stadia Full Full
Div Year Bond Area
Teams Teams^ w/in w/in Zones w/in Net Net Size Time Time
Pop.#
3 Years 6 Years 6 Years Worth Worth Staff Staff
I 1995 0 10 0 0 3 0 $0 $0 $0 1m 15k 1 11
I 2008 14 10 0 0 3 0 $0 $0 $0 1m 15k 1 11
I 2014 19 12 2 0 ET, CT, PT 0 $1m $40m $70m 1m 15k 4 11
II 1996 10 8 0 0 2 0 $0 $0 $0 750k 5k 1 0
II 2008 14 8 0 0 2 0 $0 $0 $0 750k 5k 1 0
II 2010 16 8 2 4 2 3 $750k $20m $0 750k 5k 1 11
II 2014 19 8 2 4 2 ET, CT, PT $750k $20m $0 750k 5k 1 11
III 1996 10 8 0 0 0 0 $0 $0 $0 0 2k 0 0
III 2008 14 8 0 0 0 0 $0 $0 $0 0 2k 1 0
III 2014 19 8 0 0 0 0 $250k $10m $0 0 1k 1 0

Notes
^ 75% of league teams must be located within the United States.
# 75% of league teams must be located within Metro Areas of the indicated population.

Source
[1] USSF Professional League Standards, 1995, 1996, 2008, 2010, 2014

5.4 THE DIVISIONAL REGULATIONS ARE ARBITRARY, AND ARBITRARY REGULATION IS HARMFUL TO
CONSUMERS, HENCE ANTICOMPETITIVE

64. These restrictions represent an artificial and arbitrary restraint on competition which underwrites

the position of MLS while handicapping potential rivals. The application of arbitrary divisions is potentially

58
2008 Standings; MLS (mlssoccer.com); (bit.ly/2ftIPpi); accessed September 17, 2017. 2012
Standings; MLS (mlssoccer.com); (bit.ly/2jBKeOV); accessed September 17, 2017.
59
Couch, Ben; MLS announces expansion process and timeline; December 15, 2016; MLS
(mlssoccer.com); (bit.ly/2wUwUZ0).
60
Attendance Project: MLS; Kenn (kenn.com); (bit.ly/2xJBcpg); accessed September 17, 2017.
61
USSF Professional League Standards, 2010, and USSF Professional League Standards, February 28,
2014.

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harmful to competition; in practice, it does indeed appear to have harmed competition. From an economic

perspective, the USSF can be considered a (private) regulator of competition, much like the FDA or FCC

(save for the absence of a government mandate enshrined in law). They may have a legitimate interest in

promoting rules that benefit consumers, improve quality, increase output, and ensure competition. However,

efforts to favor some firms over others for reasons unrelated to those procompetitive goals cross a line into

anticompetitive territory. Moreover, unlike the FDA, which is a legally constituted element of the executive

branch of the US government, USSF has no such mandate from the public to act on its behalf. This provides

further incentive for USSF to act opportunistically and to use its self-assigned (private) faux-regulatory
power for the anticompetitive benefit of the alleged conspirators, rather than for the good of the public as a

whole.

65. Suppose, for example, that the FDA announced that bakers would be categorized into three

divisions, depending on the number of bakeries operated, where they were located, the net worth of their

owners, the gender of their employees, and their staff budgets. Clearly, those who qualified as DI bakers

would proudly display their FDA approval, but there is no reason to think that their bread would be any better

than that produced by DII bakers. Just as one would find such governmental regulation to be contrary to the

public interest, so too is a divisional system for soccer in which on-field quality is not the sole (or primary)

determinant of a teams division. For this reason, the USSFs professional league regulation system is

anticompetitive, without even the benefit of having been enacted by the public through its governmental

bodies.
66. The divisional designation of professional soccer leagues is likely to harm consumers in exactly the

opposite way that a trademark helps them: the latter is intended to prevent confusion on the part of consumers

about the true nature of the product, while the former misleads consumers into thinking that irrelevant

differences are important. For example, any consumer reading that USSFs requirements needed to qualify

as a DI mens league were greater than USSFs requirements to qualify as a DI womens league would be

likely to conclude that womens soccer in the US is less developed, less popular, and less capital intensive

than mens soccer. It might also be interpreted as a signal to potential investors that USSF does not consider

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womens soccer to be attractive or have significant market potential. Contrary to this impression, the largest
62
TV audience for a soccer game in the US was the Womens World Cup Final in 2015.

67. As a matter of economics, it is generally accepted that consumers are able, under normal

circumstances, to identify the quality of a product by inspection and experience. In some cases, such as where

sellers are better informed about product quality than consumers and the accumulation of sufficient

experience takes too long, product certification by regulatory bodies can be useful. Examples include health

care and education, as well as more everyday purchases, such as food quality and restaurants kitchens

cleanliness. However, in sports markets it is very easy for fans to gain experience and realize product quality
quickly (especially when the competing leagues play matches against each other). Product certification by a

regulatory body under these circumstances is both superfluous and potentially anticompetitive.

68. It is a fundamental principle of sporting competition that the quality of players and teams can only

ultimately be determined by direct competition. The winner of the Super Bowl or the World Series claims

their title as a result of direct competition. In sporting terms, one cannot say that one team is better than
63
another if they have not played each other. To take another example, one cannot say whether Babe Ruth or

Oscar Charleston were better baseball players, because the segregation in the era in which they played meant

that they could never play under comparable conditions. As a specific example of this issue, it would be

misleading to designate the Negro Leagues as minor leagues from a sporting point of view.

69. The use of arbitrary criteria to designate league quality is likely to reduce output and thus is

anticompetitive because of the effect it will have on potential entrants to the market. Consider, for example,

the regulation requiring each team in a given division to have a principal owner who controls at least 35% of

the shares in the franchise and who has a net worth in excess of $40 million (DI), $20 million (DII), or $10

62
Tannenwald, Jonathan; The most-watched soccer games in US television and online streaming history;
June 9, 2017; The Inquirer (philly.com); (bit.ly/2fdbzm6).
63
A seeming exception to this rule was the long-running practice in the United States of crowning a college
football champion by a poll of sports writers, a system so controversial that it even provoked demands
for restructuring by the President of the United States (Wogan, J.B.; A new playoff is coming; June
27, 2012; Politifact (politifact.com); (bit.ly/2w21iiN)). The FBS subdivision of the NCAA has now
adopted the more conventional post-season playoff system to determine the national champions,
consistent with all other NCAA championships.

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million (DIII). In many other parts of the world, soccer clubs are owned not just by wealthy individuals, but

by members associations. This includes some of the largest and most popular clubs, such as Real Madrid
64
and FC Barcelona in Spain, and Bayern Munich in Germany. When touring the US, these clubs attract

significantly larger audiences than MLS matches, yet they could fail to meet USSFs requirements to play in
65
a US, DI league because of their ownership structure. There are several teams in the US that currently attract

significant numbers of fans without meeting USSFs financial requirements to play at the professional level.

For example, Detroit City FC, established in 2010, regularly attracts crowds of 7,000 to watch amateur level

soccer, and probably would not be able to meet USSFs DIII principal owner qualification based on the
wealth of their current owners, even though they operate very successfully and would likely be able to
66
maintain a professional payroll.

5.5 CHANGING NASLS DIVISIONAL STATUS WILL HAVE A DIRECT EFFECT ON THE ABILITY OF TEAMS
TO PARTICIPATE IN SIGNIFICANT COMPETITIONS OUTSIDE THE NASL

70. The demotion of NASL from DII to DIII imposes an additional anti-competitive restraint with

regard to national and international soccer competition. Specifically, the demotion decreases the chances of

an NASL team winning the Lamar Hunt US Open Cup, and thus decreases the chances of an NASL team

competing in the CONCACAF Champions League.

64
All three clubs currently rank in Forbes top 15 most valuable sports teams in the world, with Barcelona
and Real Madrid both placing in the top five. See Badenhausen, Kurt; Full list: The worlds 50 most
valuable sports teams 2017; July 12, 2017; Forbes (forbes.com); (bit.ly/2w2at2V). The nearest
comparable example of this ownership structure in the United States is the Green Bay Packers, a
football team in a relatively tiny market that is nevertheless extremely successful financially. Were
owned by this community, says Packers CEO Mark Murphy, a former NFL player and players
union leader. For details on the Packers unique (for the NFL) ownership structure, see "Green Bay
Packers Ownership Structure Remains the Ideal; April 6, 2012, League of Fans (leagueoffans.org);
(bit.ly/2j7evzH).
65
Thus for example, division 1 teams were required by the 2014 Pro League Standards to have at least one
principal owner controlling at least 35% of the company and with a net worth of over $70 million. By
definition a membership association such as Bayern Munich, Real Madrid or FC Barcelona cannot
have a principal owner. Similarly, given the Green Bay Packers ownership structure, the NFL would
not qualify as a Division I league under the USSFs divisional standards if they were applied to
American football leagues.
66
Biglin, Kevin; Detroit City FC 2017 Season Review; Detroit City FC (detcityfc.com); (bit.ly/2hbjy33).

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71. The Confederation of North, Central American and Caribbean Association Football is a regional

governing body, acting under FIFA authority and in compliance with its statutes, and its membership consists

of all the national associations in the region including the USSF. As such, it also organizes competitions

both for national teams and clubs; one of these competitions is the annual CONCACAF Champions League,
67
the regions premier competition for clubs. Twenty-four clubs from CONCACAF sub-regions compete

in the tournament, four of them from the United States. Of these four clubs, three come from MLS (the

winner and runner up of the MLS Cup, and the winner of the Supporters Shield (regular-season champion)).
68
The remaining club is the winner of US Open Cup tournament.
72.
The Lamar Hunt US Open Cup, established in 1914, is the oldest and largest annual national soccer

club competition in the United States. Traditionally participation is open to all USSF leagues: professional,

semi-pro and amateur. The winner is currently awarded $250,000 and the slot to compete in the CONCACAF

Champions League. In reality, however, the ability of a club team to advance in the competition is severely

limited by its USSF league status and division, which determines which round the club can enter the

competition. For example, in 2016, 48 Open division (mostly semi-pro and amateur) teams competed in

24 games in the first round of the tournament. In the second round, the winners of the first 24 games were

joined by 18 clubs from USL (then USSF DIII). In the third round, the winners of round two were joined by
69
nine NASL teams. These winners went on to play the MLS clubs to determine the Round of 16 competitors.

Clearly, the teams which enter later in the competition have a higher probability of making it to the end. If

NASL is demoted to DIII, its clubs will have to enter the competition earlier than USL or MLS clubs, and
70
thus face a higher chance of elimination.

67
About the Scoitabank CONCACAF Champions League; CONCACAF (concacaf.com);
(bit.ly/2vVeiqE); accessed September 14, 2017.
68
Qualifying 2011/2012; CONCACAF Champions (concacafchampions.com); (bit.ly/2wY6fgt);
accessed September 14, 2017.
69
Lamar Hunt US Open Cup reveals format and schedule for 2016 competition; US Soccer
(ussoccer.com); (bit.ly/1Qihlv3); accessed September 14, 2017.
70
The most recent team to win the U.S Open Cup from outside USSF Division I were the Rochester
Rhinos, a member of the USL, in 1999.

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5.6 CHANGING NASL DIVISIONAL STATUS WILL HAVE A DIRECT EFFECT ON THE ABILITY OF NASL
TEAMS TO SELL ATTRACTIVE LEAGUE GAMES IN COMPETITION WITH USL

73. When regulators second-guess the appropriate identity and characteristics of competitors in the

market, the practical effect is likely to be harm to competition in the market. As well as discouraging entry,

the rules adopted by USSF protect MLS from the threat of competition. This is consistent with other business

practices of MLS that have harmed the development of professional league soccer in the US.

74. Unlike the major leagues in the US for other sports (like American football), there is a global market

for talent in soccer and MLS is not a dominant buyer in that market. Many of the top US players prefer to

work overseas, mainly in Europe, where salaries are much higher and the ability to compete against more
challenging opponents can lead to more growth as an athlete. The average player salary spending per club in

MLS in 2017 was below average club salary spending in Portugal and Belgium, and comparable to Austria

and Kazakhstan, based on 2015 data released by UEFA (see Figure 5 above). MLS also is struggling to attract
71
TV viewing.

75. The classification of leagues by divisional status has encouraged the perception that the status of

MLS as the only DI league sanctioned by USSF reflects a willingness of USSF to do everything it can to

ensure that MLS remains dominant. This perception is supported by the close relationship between USSF,

SUM, and MLS, described above in paragraphs 16-22. It is common for those who defend the business model
72
of MLS to point to SUM as the underlying basis for the financial success of MLS. In such an environment,
teams are likely to infer that seeking to affiliate with MLS, either by purchasing a franchise or by becoming

a team in a feeder league, is likely to be preferable to aligning with competing leagues. This assessment

would be in no small measure attributable to the anti-competitive bias of USSF, exemplified by it arbitrary

divisional classification.

76. NASL was formed in 2010 by teams dissatisfied with the USL-1 league, which at the time had DII

status and was not seen as sufficiently ambitious. When USSF granted NASL DII status, the rump of USL-

71
Szymanski, Stefan; MLS and the market for TV soccer in the US; July 1, 2017; Soccernomics
(soccernomics.com); (bit.ly/2wjZsch).
72
Ilyas, Adnan; How MLS makes money for its owners; August 29, 2017; SB Nation (sbnation.com);
(bit.ly/2eZ8Xvc).

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1 started the USL Pro league, for which USSF granted DIII status. In 2013, USL agreed to become the reserve

league of MLS, and several MLS teams created farm teams to play in USL.

77. Only one year before, in 2012, MLS did not have a business relationship with any of the eleven

USL teams. Then MLS announced a partnership for MLS to affiliate with USL teams. MLS stated, This
73
partnership represents the first step in a long-term alliance between MLS and USL PRO In 2014, the
74
Los Angeles Galaxy became the first MLS team to go beyond an alliance and purchase a USL team outright.

Only three years later, of the current 30 USL teams, MLS affiliates with 11, MLS owns ten, and MLS is
75
currently planning to affiliate with or own two more. In total, MLS will have a relationship with 77% of
USL teams. In 2015, USSF granted USL DII status, effective 2017.

78. Thanks in part to a competitive advantage created by USSFs protection of the monopoly status of

MLS and its collaboration with USL, MLS/USL has lured away four NASL franchises since 2011. Montreal

Impact and Minnesota FC have joined MLS, and Ottawa and Tampa Bay have joined USL.

79. Without the underlying support of USSF for MLS, including its use of divisional classification to

signal its support of MLS as the dominant league in the US, it is unlikely that USL would have been able to

compete effectively with NASL. If USSF and MLS had conspired to design a scheme to remove the threat

posed by NASL as a potential competitive rival to MLS, it would have been natural to find ways to support

USL, NASLs DII competitor, as form of proxy war.

80. The reduction of NASL from twelve to eight teams suggests that the rules in dispute in this matter

are anticompetitive, rather than based on valid, objective criteria. USSFs anticompetitive conduct has

undermined the competitive position of NASL, and USSF is using the consequences of its own conduct as

justification for the demotion of NASL from DII to DIII; it is a perverse form of economic victim blaming.

But for the misconduct of USSF at issue in this case, NASL would be a stronger, more vibrant league.

73
MLS and USL Pro announce partnership; January 23, 2013; San Jose Earthquakes
(sjearthquakes.com); (bit.ly/2yg6Mbg).
74
LA Galaxy announce USL PRO team LA Galaxy II; January 29, 2014; Los Angeles Galaxy
(lagalaxy.com); (bit.ly/2fqgsbh).
75
The complete list of MLS-USL affiliations, partnerships for 2017; March 23, 2017; MLS
(mlssoccer.com); (bit.ly/2frZ9qv).

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6. POTENTIAL PROCOMPETITIVE JUSTIFICATIONS

6.1 NO VALID PRO-COMPETITIVE JUSTIFICATION FOR DIVISIONAL STRUCTURE AS IMPLEMENTED BY


USSF

81. Labeling leagues using arbitrary categories to create an artificial hierarchy has no practical benefit

to the development of professional soccer in the US. Notwithstanding the long history of professional soccer

in the US, its development has lagged behind the major league sports because of lesser consumer interest.

From an economic perspective, the most likely way to achieve a breakthrough is through robust competition.

Regulation based on arbitrary and anti-competitive classification is likely to have a chilling effect on investor

incentives and, rather than illuminating consumers, is more likely to confuse them.

82. As a matter of economic theory, unrestricted competition in the market is likely to maximize

consumer welfare, except in cases of significant market failures. Market failure can arise because of:

(i) asymmetric information (one side of the market is better informed about product quality than

another)

(ii) externalities (economic transactions have significant economic effects on consumers other than

those directly involved in the transaction)

(iii) the fact that the goods or services supplied are public goods (which has the specific meaning in

economics that consumers are non-excludable, such that there is no enforceable mechanism for

recovering costs through prices, and that the goods and services provided are non-rival in

consumption, meaning that consumption by one consumer does not reduce the consumption

opportunities of other consumers)

(iv) economies of scale (meaning that the supply of a given quantity of goods or services to the market

has a strictly lower cost the smaller the number of suppliers).

83. In the absence of such factors, efforts to regulate a market, especially by private agreement rather

than under formal government auspices, are often just veiled attempts to create conditions favorable to the

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76
generation of super-competitive profits or other anticompetitive outcomes. Moreover, even if there is reason

to believe that true market failure is possible, this is not sufficient to sustain the argument that regulation will

improve matters for consumers. In the economics literature there is extensive analysis of the problem of
77
regulatory failure. This can arise where regulators are badly informed, or have been captured by special
78
interests, or have objectives that do not coincide with those of consumers. There is reason to think that all

three of these sources of regulatory failure could affect the regulation of professional soccer in the US.

84. The primary interest for fans in any sports league is the quality of play on the field. By its nature,

information on this aspect of the leagues is widely collected and disseminated and easily available from a
variety of media outlets that can be freely accessed. Other factors may influence the decision of consumers

to become fans, go to games, and watch them on TV or other media. These include location, the personality

of the players, the nature of rivalry with particular opponents, and so on. Declaring that game X is of DI

standard and game Y is of DII standard, and therefore by implication inferior, is potentially confusing if there

is no basis for this claim in terms of the quality of play of the teams.

85. For example, the fact that a team can claim to fill each and every required management position

(general manager, director of marketing/sales, director of communications/media, relations, director of

promotions/community relations, director of game operations, head coach, assistant coach, trainer, ticketing

manager, finance director, and clerical staff) with a full-time employee, rather than a part-time employee,

does not mean that the team provides better entertainment to fans or that the quality of its product is
79
unambiguously superior. Nor is there any reasonable basis to believe that hiring full-time clerical staff,

76
For example, it might be in the private interest of all retail merchants to limit evening shopping hours
simply to ensure more leisure. However, allowing such regulation would confuse procompetitive
results (more convenient shopping) with market failure because in the absence of an agreement the
competitive outcome involves stores being open after dinner, to the benefit of consumers.
77
A good discussion in the legal context is Breyer, S. 1979. Analyzing Regulatory Failure: Mismatches,
Less Restrictive Alternatives, and Reform. Harvard Law Review, 92(3), pp. 547-609
78
Using the example of retailer hours, in many countries (and even some American states), merchants have
been able to pass legislation to limit evening and weekend hours, to the detriment of consumers but to
the private benefit of merchants.
79
This is one difference between teams meeting D1 and DII standards for mens professional leagues- see
USSF Professional League Standards, February 28, 2014.

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rather than part-time clerical staff and the associated extra expense, will in the end lead to a higher quality
80
team product rather than, say, hiring part-time clerical and using the cost savings to hire better players.

86. There exists a well-researched sports economics literature on the determinants of success in

professional soccer leagues, and this issue has been a primary focus of my own research career. The principal
81
determinant of success is player expenditure. This is because playing talent is widely recognized and players

sell their services in a highly competitive global market with many buyers and sellers. Wage rates tend to

reflect ability. Teams with larger budgets are more successful. Nowhere in this literature has any peer-

reviewed study identified full-time employees as a critical success factor.


87. I know of no equivalent league licensing procedures that are applied by national associations to

leagues anywhere else in the world. The FIFA Statutes require that leagues are subordinate to the national
82
association, and their statutes and regulations are approved by the national association. Beyond this, I am

unaware of national associations placing requirements on leagues concerning the economic organization and

management of league clubs. Licensing of clubs, rather than leagues, has become common in recent years.

This is covered in Regulation 9 of the FIFA Statutes, which also deals with the principle that participation in

championships should depend principally on sporting merit. Regulation 9 permits the national association to

organize a licensing procedure that can apply criteria to determine a clubs participation in the domestic

league championship whereby the emphasis is on sporting, infrastructural, administrative, legal and

financial considerations. Licensing decisions must be able to be examined by the member associations body
83
of appeal. It would be possible for USSF to adopt an equivalent licensing process for each professional

80
Indeed, if anything this standard seems to argue that administrative inefficiency is a proxy for superior
on-field play.
81
For example see Szymanski, S. and Smith, R. 1997. The English football industry: profit, performance
and industrial structure. International Review of Applied Economics, 11(1). pp.135-153; Szymanski,
S., 2000. A market test for discrimination in the English professional soccer leagues, Journal of
Political Economy, 108(3), pp.590-603; Hall, S., Szymanski, S. and Zimbalist, A.S., 2002. Testing
causality between team performance and payroll: the cases of Major League Baseball and English
soccer. Journal of Sports Economics, 3(2), pp.149-168; Peeters, T. and Szymanski, S. 2014.
Financial fair play in European football. Economic Policy, 29(78), pp.343-390; Szymanski, S., 2015.
Money and Soccer: A Soccernomics Guide. Nation Books, Chapter 2.
82
2016 FIFA Statutes, Article 20.
83
FIFA Statutes, April 2016; (bit.ly/26r3IoH); p. 73.

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team in the federation (although not for teams in Canada), but this would also expose the conflict of interest,

given the commercial relationship between USSF and MLS.

6.2 THERE IS NO BASIS TO BELIEVE EACH LEAGUE NEEDS TO BE CONTINENTAL IN SCOPE (E.G., THERE
ARE MULTIPLE REGIONAL/NATIONAL LEAGUES IN EUROPE)

88. There are several examples of USSFs regulatory over-reach. Consider the requirement that 75%

of teams must be from the US. Depending on division status, a league must cover at least three (DI men) or

two (DI women and DII men) time zones. Depending on division status, 75% of a leagues teams must be

located in markets that have populations in excess of 1 million (DI men), 750,000 (DI women and DII men),
or 500,000 (DII women). There is no obvious economic basis for these requirements, and as illustrated by

the experience of other countries where soccer is highly successful. For example, in Germany,

unquestionably a nation where soccer is successful at all levels, there are 16 state-level governments, but

historically the Bundesliga, which is the highest level of league competition, is dominated by teams from just

two states North Rhine/Westphalia and Bavaria neither of which include Germanys largest city, Berlin,

or its second largest city, Hamburg. Currently almost half (eight of 18) of the teams are from these two states,

and six states are not represented by any team. Moreover, the majority of Bundesliga teams (10 of 18) are

based in cities with fewer than 300,000 residents, ranging all the way down to TSG Hoffenheim, based in

Sinsheim, with a population under 40,000.

89. The same holds across each of the most successful European leagues. In Britain, the English
Premier League, whose televised games are more popular among US television audiences than any US-based
84
league, currently includes teams in Burnley, Barnsley, and Wigan, each of which has a population under
100,000, making them smaller than Surprise, Arizona or West Jordan, Utah. In Italy, Serie A includes teams

from Cagliari (population: 150,000), Ferrara (population 134,000) and Sassuolo (population 41,000).

84
In 2016 MLS reported share of TV viewing amounted to 7% of total soccer viewing in the US,
compared to 22% for the English Premier League: Szymanski, Stefan; MLS and the market for TV
soccer in the US; July 1, 2017; Soccernomics (soccernomics.com); (bit.ly/2wjZsch).

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Spains La Liga features teams from Eibar (population 28,000) and Girona (99,000). Frances Ligue 1

includes Guingamp (population 7,200), Bastia (population 43,000) and Lorient (population 58,000).

90. Stadium size also varies quite a bit across these dominant European leagues. Serie As Benevento,
85
Cagliari, and SPAL of Ferrara all play in stadiums with capacities under 18,000. FC Ingolstadt and FC
86
Darmstadt of the Bundesliga also have facilities below 18,000. Spains Eibar plays in a stadium that holds
87
fewer than 8,000 fans and Leganes, Getafe, and Girona all play to fewer than 18,000. French Ligue 1 teams

in Dijon, Bastia, and Angers play to fewer than 18,000 fans. The EPLs AFC Bournemouth plays in Dean
88
Court, with a capacity under 12,000.
91. The regulation of time zone coverage also makes little economic sense. At present, only a tiny

fraction of US TV viewers tune in to watch pro league US soccer, and for the game to grow in the US this

audience needs to grow. There are any number of ways a league might help to achieve this goal. For example,

one possible route would be the development of regional leagues, e.g. on the East Coast or Pacific Coast.

Such leagues have no shortage of potential fan markets, could promote local rivalries, and could generate

large audiences and valuable TV contracts that would enable them to attract top players and provide

competition at an elite level. This is essentially how collegiate sports have organized themselves in the

United States. For example, the ACC is located almost entirely in the Eastern Time zone and the Pac-12 is

primarily in the Pacific Time zone, yet both are considered major leagues (or power conferences in

collegiate jargon). Yet according to USSF, such a league would not automatically qualify for DI status

because of the time zone coverage. This is another example of the regulator second-guessing the optimal

economic structure of the league, with potentially chilling effects on investment.

85
Furgierle, Marcello; FIGC: Benevento Stadium requires major work to meet Serie A standards; June
17, 2017; Calicio Finanza (en.calcioenfinanza.com); (bit.ly/2h9rfua). Italy: Here's Cagliari's
temporary stadium in more detail; March 15, 2017; Stadium Database (stadiumdb.com);
(bit.ly/2w24Od6). Paolo Mazza; Transfer Markt (transfermarkt.com); (bit.ly/2xJlgTV); accessed
September 17, 2017.
86
Audi Sportpark; The Stadium Guide (stadiumguide.com); (bit.ly/2hb2g9O); accessed September 17,
2017. SV Darmstadt 98, Stadium Information; Bundesliga (bundesliga.com); (bit.ly/2f4V238);
accessed September 17, 2017.
87
Ipurua Stadium; SDEIBAR (sdeibar.com); (bit.ly/2jCIyVx); accessed September 17, 2017.
88
England: Dean Court to grow, but still Premier League's smallest; March 24, 2016; Stadium Database
(stadiumdb.com); (bit.ly/2wA53eJ).

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92. In Europe, which possesses the strongest professional leagues both in economic and sporting terms,

there is a patchwork of league organizations across the continent. Roughly speaking, North America and

Europe are similar in terms of population size, geographic area, and level of economic development.

However, Europe is, from an economic point of view, arbitrarily divided on regional lines into national

associations that govern the sport and restrict the operation of leagues to national territories. From Lisbon to
89
Moscow spans four time zones, just as in the United States. Yet none of the leagues based on the European

continent span even two time zones, and the most popular of Europes leagues, the English Premier League,

operates in the far western time zone of the continent. EPL is nevertheless broadcast live throughout the
90
continents four time zones.

93. Alongside national soccer leagues in Europe, there are very successful pan-European competitions,

the Champions League and Europa League. Most of the clubs that compete in these competitions come from

a single time zone (covering Germany, Spain, France, Italy, the Netherlands, Belgium, Switzerland and

Austria). The European governing body has member federations spread across 17 time zones (from

Greenland in the west to the Bering Straits in east), but there is no requirement that entrants to the Champions

League must represent any particular number of time zones.

6.3 NO REASON FOR A RATCHETING UP OF THE NUMBER OF TEAMS PER LEAGUE

94. As explained above, for much of the history of soccer in the United States, USSFs minimum

acceptable number of teams has been eight. USSF only raised the threshold once MLS was significantly

above it. As a simple matter, the USSF deemed eight teams adequate for DII status for the last decade, and

I know of no change in the last six months that suddenly would turn an eight-team league from a success to

89
Iceland is also in UEFA and shares a time zone with Portugal, Ireland and the UK during winter but not
during Daylight Savings Time/Summer Time. Parts of Greenland also share the same time zone as the
UK, with the rest extending three time zones to the west. Russia beyond the Urals spans far more time
zones.
90
The EPL is broadcast in the UKs own time zone (the Western European Time Zone), in the Central
European Time Zone (such as in Germany) which is one hour ahead of the UK, in Eastern European
Time Zone (such as in Lithuania) which is two hours ahead, and in the Moscow Time Zone (Russia)
which is three hours ahead. Similarly, in the United States, the September 9 Pac-12 game between
Stanford and USC was broadcast live through the country on ABC, including throughout the Eastern
Time Zone, three hours ahead of local time in Los Angeles where the game was played.

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a failure. Even if one argued that there is some necessary minimum threshold, whatever benefit such a

standard would offer must hinge on it being consistently maintained. Ever-changing standards fail to

provide leagues with the ability to plan for the long-term, and instead create uncertainty that is likely to result

in anticompetitive outcomes. It appears the changes at issue were chosen as a means of insulating first MLS,

and now also USL, and that these restraints are likely to create a barrier to entry since the absence of a

predictable league size threshold provides disincentives for investment by would-be owners who might

suddenly, and for no obvious reason, find themselves in a league below the minimum threshold.

95. Even if the standard were not continually in flux, generally speaking, imposing some minimum
threshold on the number of teams for success is likely to have perverse effects on league structure. If a league

has eight strong markets and is able to develop a strong fan following using this format, arbitrarily imposing

a requirement that the league expands to, say to twelve teams, could potentially lead to an ill-placed eleventh

or twelfth club, which in turn would lower the quality of league play.

96. Leagues have a natural incentive to expand if profitable opportunities exist expansion fees are a

way for incumbent teams to profit from the brand value they have helped to build up, and a growing footprint

can be attractive to broadcasters who seek to reach television audiences. Plus, to the extent there is demand

for soccer in unserved markets, expansion is a natural way for a league to grow its national fan base. Thus,

regardless of any USSF mandate, leagues have ample incentives. A mandate becomes a binding constraint

when expansion is not perceived by the league to be in its own best interests. If expansion is profitable, the

mandate is irrelevant, and if expansion is not profitable, then expansion will harmful league interests.
97. I understand that, in reaction to the recent change in USSF stipulations with respect to minimum

league size, NASL has signed several new clubs to LOIs, conditional on NASL remaining in DII. This

expansion may be wise for NASL, but to the extent it has only been done to meet USSFs 10- or 12-team

minimum, it is likely to be contrary to the stated mission of USSF to produce healthy soccer leagues in the

United States. To the extent NASL would expand into the new markets anyway, the mandate is unnecessary,

and to the extent they would not have done so absent the mandate, the mandate works at cross purposes to

the success of soccer leagues in the United States. It is almost impossible for such a mandate to have a

procompetitive outcome relative to an unconstrained market.

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6.4 NASL CURRENTLY SATISFIES PRACTICALLY ALL USSF DII REQUIREMENTS

98. In 2017, NASL and USL both had provisional DII certification, even though USSF stated that
91
neither league met all the requirements. On that basis, USSF indicated that it would enforce regulations

going forward, but not retroactively. USSF has now revoked NASLs DII status for the 2018 season, even

though NASL meets USSFs arbitrary, anticompetitive regulations in nearly every respect. Any practical

distinction between a league the USSF would certify and NASL is non-existentexcept for an insider

connection to the USSF-SUM-MLS relationship.

6.4.1 Number of Teams

99. Effective 2010, USSF required a DII league to expand to ten teams within three years, and twelve
92
within six years. Of NASLs eight current members, a few may leave, while California United and San

Diego are in the process of joining to play in 2018. In addition, I understand that NASL has signed LOIs
93
with six additional teams that propose to play in 2018, which would provide NASL with 14 teams, meeting

USSFs requirement.

6.4.2 Country of Teams

94
100. Effective 1996, USSF required a DII league to field 75% of its teams within the United States.

NASL will have only one non-US team, in FC Edmonton. NASL would meet this requirement.

6.4.3 Time Zones

95
101. Effective 2010, USSF required a DII league to field teams in two US time zones, and effective
96
2014, required a DII league to expand to Eastern Time, Central Time, and Pacific Time within six years.

NASL will field teams in Eastern Time, Mountain Time, and Pacific Time in the 2018 season, with two

91
Associated Press; U.S. Soccer denies NASL Division 2 status for 2018; September 5, 2017; ESPN
(espn.com); (es.pn/2wr8IeQ).
92
USSF Professional League Standards, 2010.
93
Furthermore, NASL has signed an LOI with a subsequent team to begin play after 2018.
94
USSF Men's Professional Outdoor League Standards, Division I Adopted May 21, 1995, Divisions II and
III Adopted April 20, 1996, p. iii.
95
USSF Professional League Standards, 2010.
96
USSF Professional League Standards, February 28, 2014, p. 7.

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additional years remaining to expand to Central Time by the 2020 season. The NASL thus currently meets

the criteria that in 2010 was deemed sufficient, and will soon meet the stricter requirement that was not

introduced until 2014.

6.4.4 Metropolitan Area Population

102. Effective 1996, USSF required a DII league to field 75% of its teams in metropolitan areas with
97
populations of 750,000 or more. All NASL teams play in such metropolitan areas, meeting this
98
requirement.

6.4.5 Stadia Size

103. Effective 1996, USSF required a DII league to play only in stadiums with capacities of 5,000 or
99
more. Of the teams NASL will field in 2018 that have designated stadiums, all play in a stadium that seats
100
5,000 or more. The new expansion teams have yet to select stadiums. NASL currently meets this

requirement and is on track to do so in 2018.

6.4.6 League Full-Time Staff

101
104. Effective 1996, USSF required a DII league to have a full-time CEO or commissioner. NASL has

a full-time commissioner, meeting this requirement.

6.4.7 Team Full-Time Staff

105. Effective 2010, USSF required a DII league to field a full-time employee in ten different non-
102
clerical positions. Though not every employee may be full-time, NASL teams perform all of these

97
USSF Men's Professional Outdoor League Standards, Division I Adopted May 21, 1995, Divisions II and
III Adopted April 20, 1996, p. iii.
98
See Appendix D.
99
USSF Men's Professional Outdoor League Standards, Division I Adopted May 21, 1995, Divisions II and
III Adopted April 20, 1996, p. iii.
100
See Appendix E.
101
USSF Men's Professional Outdoor League Standards, Division I Adopted May 21, 1995, Divisions II
and III Adopted April 20, 1996, p. iii.
102
USSF Professional League Standards, 2010.

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functions. Of the 80 non-clerical positions in the ten USSF-specified categories across the eight current
103
teams, 76 (95%) are filled, according to the publicly available front office listings of each team. The new

expansion teams have yet to announce their front office listings.

6.5 NO REASON FOR DIVISIONAL STRUCTURE AT ALL IN SYSTEM WITHOUT PROMOTION/RELEGATION,


ETC.

106. Absent a promotion and relegation system, there are no pro-competitive reasons to impose a

divisional structure. Within a promotion and relegation system, the hierarchy emerges naturally, and intense

competition ensues. Indeed, the intensity of this competition is so great that firms struggle to generate an
104
economic profit, and club owners and league organizers frequently complain that it is difficult to earn a

return on investment. Indeed, even though soccer is a well-established commercial activity in Europe,
105
insolvency is commonplace.

107. Although it is common for producers to portray such a situation as dire (e.g. corporate insolvencies),

from an economic perspective this is a good example of successful market competition. Economic profits,

as defined in standard textbooks, are close to zero, and since there are few, if any, economic rents, consumer

surplus is at a maximum. Entry to the market is only lightly regulated, there is intense competition, and

teams that disappoint fans with poor results are severely punished through relegation. In some cases this

leads to insolvency, and consequently new investors enter and take over failing teams. In a competitive

market, we would expect some level of insolvency among the weakest competitors on the margin, and a
system designed to prevent such insolvency is clearly focused on protecting competitors, rather than

competition.

103
See Appendix F.
104
While the absence of economic profit may appear to be a negative outcome, economists include in their
definition of break-even a fair return on invested capital, meaning a team with profit of zero would
likely have a healthy accounting profit (absent efforts to disguise such profits).
105
Szymanski, S. 2017. Entry into exit: insolvency in English professional football. Scottish Journal of
Political Economy, 64(4), p. 419-444. Scelles, N., Szymanski, S. and Dermit, N. 2016. Insolvency in
French Soccer: The Case of Payment Failure. Journal of Sports Economics, doi:
10.1177/1527002516674510.

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108. Within this system, the divisional hierarchy has clear purpose to reward sporting success and

penalize sporting failure. Without this system, there would be little point in such a system from a European

perspective. And yet, the US system has adopted the hierarchy without the essential promotion/relegation

component, turning it into a form of arbitrary branding rather than a system for regulating team placement

across leagues. The system adopted by USSF is in fact best suited to creation of monopoly at every level of

professional soccer and to the extinction of competition.

6.6 RUINOUS COMPETITION DEFENSE

109. From the foundation of MLS, the league was preoccupied with the belief that ruinous

competition among the owners would destroy the league financially. This drove their decision to create a

single entity structure:


MLSbelievesthatbyinitiallystructuringtheleagueasasingleentitywhichownsalloftheteamsitwillbeabletoexercise
thetypeoffinancialcontrolwhichwasabsentfromNASLthatisrequiredforasuccessfulleague.Sostructured,theleague
106
canavoidthedestructive,economicallyirrationalcompetitivespendinginwhichownersofsportsteamsoftenengage.

110. Over the years, league officials have expressed this underlying rationale for the single entity model
107
in various ways. In this sense, MLS has adopted the classic position of a cartel, which by agreement

restrains the natural tendency toward competition in the market. Members of the cartel restrain themselves

from individually profitable actions (e.g. increasing output) in order to produce a collective gain (e.g., higher

prices or a lower probability of insolvency). This can only work, however, if the cartel has some market
108
power to begin with. In the Fraser case, where the players union brought an antitrust claim against MLS,
the league owners argued that they had no market power because the market for players is global, not

national. In contrast, in this case the relevant market is defined as the market to top tier mens professional

football leagues in the U.S. and Canada, and, as the only sanctioned league in this category, MLS possesses

106
Major League Soccer Business Plan and Confidential Memorandum, November 10 1993, p.8. This
document was submitted to FIFA and formed the basis of the business plan.
107
E.g the idea that owners will sit around a table and decide how they will collectively chart the turbulent
waters of professional sports is something that I believe will always exist, Garber added. Because if
it didn't, Major League Soccer would not be here today, and I don't believe it would be able to do what
it needs to do in this incredibly competitive environment to succeed. The MLS CBA: Unpacking
Don Garbers recent comments on single-entity; September 24, 2014; Brotherly Game
(brotherlygame.com); (bit.ly/2fedD0a).
108
Fraser v. MLS, 2002.

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a monopoly. The combination market power among leagues but a lack of market power among players

is likely to lead to a situation in which the collective profit-maximizing level of talent in US-based soccer is

below what would occur in a world in which MLS competed for talent with other US-based leagues. The

result is lower quality soccer at DI. If the USSFs determination to exclude the NASL from the second tier

market is maintained, the same will be true for USL and the quality of mens professional league soccer in

that market.

111. USSF might seek to defend the monopoly status of MLS by arguing that sanctioning a second DI

mens pro league would create excessive competition (e.g., for player services) and therefore drive teams out
of business. However, the Supreme Court discarded the ruinous competition defense long ago in 1898, and

as Hovenkamp observes, In general, any policy of promoting reduced output in pursuit of some alternative
109
goal should be off the antitrust table. The ruinous competition defense has also been considered in the

context of the sports industry and found wanting:


Thus,courtshaverefusedtoallowownerstojustifyplayerrestrictionsonthegroundsthatrequiringteamstocompetewith
eachotherwouldleadtoruinouscompetitionorthatateamneedstoexercisemonopsonypoweroveraplayerforacertain
periodoftimeinordertorecoupitsinvestmentindevelopingtheplayer'sskills.Courtshaveheldthatthereisnothingunique
aboutsportsleaguescomparabletotheleagues'specializedneedforcompetitivebalancethatwouldjustifypermitting
110
themtoraisethesedefenses.

112. In any event, even if it were true in the 1990s (when USSF was helping to launch MLS based on

its directive from FIFA) that some form of mercantilist-style protectionism was needed to nurture the

seedling soccer industry until it could grow hardy, that is clearly not the case today. MLS is thriving, seeking

to expand with increasing expansion fees. At this point, the biggest impediment to further growth of the

popularity of soccer in the United States is that player wages trail far behind many DI leagues in Europe,

some DII leagues in Europe, and some DI leagues outside Europe such as leagues in Argentina and Brazil.

113. Legally, MLS may be a single entity. This creates a natural tendency to economize on talent on the

margin, unless there is pressure from other US-based leagues to force MLS to see a need to talent to reach

its core audience. By ending the protection that USSF has given MLS, and that it seeks to strengthen by

109
Hovenkamp, Herbert J., Progressive Antitrust. 2017. University of Illinois Law Review, p. 27.
110
Ross, Stephen F., 1997. The Misunderstood Alliance between Sports Fans, Players, and the Antitrust
Laws. University of Illinois Law Review, 1997(519).

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further demoting NASL to DIII, competition and the quality (and thus revenue base) of soccer in the United

States and Canada can be enhanced.

114. The simplest alternative to the present system would be to abolish the divisional classification and

allow rival leagues to compete on the basis of the quality of the product that they offer to consumers.

Alternatively, the USSF could maintain the divisional status of the present system but allow promotion and

relegation on sporting merit, as officially supported by the statutes of FIFA, the world governing body to

which USSF belongs.

6.7 COMPETITIVE BALANCE DEFENSE

115. One of the most commonly cited defenses of restraints on competition is the competitive balance

defense. From an economic perspective, this consists of three elements:


1. Inequality of resources leads to unequal competition.
2. Fan interest declines when outcomes become less uncertain.
111
3. Specific redistribution mechanisms produce more outcome uncertainty.
116. This argument has been employed to try to justify restraints on competition in numerous antitrust

cases over the years. However, both the second and third legs of this argument are difficult to sustain.

117. As concerns the second leg, it simply is not clear that fans are affected by competitive balance in

any systematic way that is measurable or consistent. There exist a number of literature surveys on this issue,

which all conclude that the relationship between any particular measures of competitive balance is at best
112
ambiguous.
113
118. As far as the third leg is concerned, there is a substantial literature, dating back to 1956,
establishing that in general league rules cannot manufacture competitive balance in the long-run, because

111
Szymanski, Stephan., 2003. The Economic Design of Sporting Contests. Journal of Economic
Literature, 41(4), p.1153.
112
Borland, J., and R. Macdonald. 2003. The Demand for Sports. Oxford Review Of Economic Policy,
19(4), 478502. Dalziel, M., Downward, P., Parrish, R., Pearson, G., Semens, A. 2013. Study on the
Assessment of UEFAs Home Grown Player Rule Negotiated procedure EAC/07/2012, Chapter 3.
Szymanski, S. and Winfree, J. 2014. On the Optimal Realignment of a Contest: the Case of College
Football. Economic Inquiry.
113
Rottenberg, Simon. 1956. The Baseball Players Labor Market. Journal of Political Economy, 64, pp.
242-58.

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talent will gravitate towards markets in which that talent generates the most revenue regardless of rules
114
designed to distribute talent away from this privately optimal result.

119. Even if it were the case that competitive balance (however defined) enhanced demand, it is not clear

how conferring divisional status could affect it. If all teams were required to meet identical standards and

this extended to the distribution of resources (financial or otherwise), then it might be argued that this would

promote competitive balance within a given league. But in reality, the standards are only minimum standards

and are not even applied to all teams equally. For example, only 75% of teams are required to come from

markets with populations greater than 1 million, so some teams could be based in much smaller markets.
Without any upper limits, the rules are not tailored to promote equality. If equality in any dimension regulated

by the divisional standard of USSF mattered for competitive balance (which is not clear), then it appears that

the rules would make no measurable contribution to promotion of such balance.

6.8 COMPARISON TO SPORTS LEAGUES THAT OPERATE ON THE NORTH AMERICAN MODEL: BASEBALL,
BASKETBALL, AMERICAN FOOTBALL, AND HOCKEY

120. USSFs arbitrary and anticompetitive regulations are without comparison in United States

professional sports:

114
An important economic result, often ignored by laypeople, that the introduction of free agency did not
reduce, and may have increased, competitive balance in pro sports. See Noll, Roger G. 1991.
Professional Basketball: Economic and Business Perspectives. Business of Professional Sports;
Horowitz, Ira. 1997. The Increasing Competitive Balance in Major League Baseball. Review of
Industrial Organization, 12(3), pp. 373-87; and Lee, Travis. 2010. Competitive Balance in the
National Football League after the 1993 Collective Bargaining Agreement, Journal of Sports
Economics, 11(1), pp. 77-88.

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Figure 8. USSF Regulations Comparison

USSF Professional Soccer League Requirements vs. USA Hockey's League Regulations, 2017
New New New Time Principal All League Team
Bond/ Metro
League Teams Teams Time Zones Owner Owners Stadia Full Full
Org. Div Letter Area
Teams^ w/in w/in Zones w/in Net Net Size Time Time
of Credit Pop.#
3 Years 6 Years 6 Years Worth Worth Staff Staff
USSF I 12 2 0 ET, CT, PT 0 $1m $40m $70m 1m 15k 4 11
USSF II 8 2 4 2 ET, CT, PT $750k $20m $0 750k 5k 1 11
USSF III 8 0 0 0 0 $250k $10m $0 0 1k 1 0
USA
Pro 0 0 0 0 0 $0 $0 $0 0 0 0 0
Hockey
USA Jr
8 0 0 0 0 $250k $0 $10m 0 3.5k 5 3
Hockey Tier 1
USA Jr
12 0 0 0 0 $100k $0 $0 0 0 7 0
Hockey Tier 2
USA Jr
6 0 0 0 0 $0 $0 $0 0 0 0 0
Hockey Tier 3

Notes
^ 75% of league teams must be located within the United States.
# 75% of league teams must be located within Metro Areas of the indicated population.

Sources
[1] USSF Professional League Standards, 2014
[2] "2017-18 Annual Guide"; 2017; USA Hockey (usahockey.com); (bit.ly/2xYMHpD).

115 116 117 118


121. USA Baseball, USA Basketball, USA Football, and USA Hockey do not regulate

professional sport leagues in the United States to any degree. USA Hockeys regulations of its amateur junior

leagues are the only regulations that bear any resemblance to USSFs, though they say nothing about time

zones, metropolitan area population, or stadium sizeand most importantly, concern leagues of amateur,

adolescent athletes, not adult professionals.


122.
One illustration of the absurdity of the USSFs divisional rules is that even a major league such as

the NHL would have failed to meet them. For many years, the NHL operated with fewer than 75% of its
teams located within the United States, and more than 25% located in Canada. As recently as the 1995-1996
119
season, only 19 of the NHLs 26 teams73%were located within the United States.

115
Constitution and By-Laws of the United States Baseball Federation, Inc.; (bit.ly/2h4D7dw); accessed
September 14, 2017; pp. 2-3.
116
Constitution of USA Basketball, June 12, 2017; (bit.ly/2wjO6Fj), p. 3.
117
About USA Football; USA Football (usafootball.com); (bit.ly/2xm6NMZ); accessed September 14,
2009; p. 4.
118
2017-18 Annual Guide, USA Hockey; (bit.ly/2xYMHpD), p. 79.
119
1995-1996 Standings; NHL (nhl.com); (atnhl.com/2x5zrlq); accessed September 16, 2017.

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123. One can contrast divisional status in soccer and in organized baseball, where league status below

the majors is characterized in descending tiers: AAA, AA and A. The origins of baseballs system lie in the
120
National Agreement of baseball clubs, which defined the relationship between major and minor league

clubs. First, note that unlike soccer, the National Agreement did not involve a governing body claiming

jurisdiction over all leagues. Second, the designation did not impose conditions about markets, capital, back-

office staffing, etc., but focused simply on the terms on which teams could trade players across different

leagues. Third, this system of organized baseball survived thanks to the antitrust exemption granted by the

Supreme Court.
124. Nowadays, some Minor League Baseball (MiLB) leagues are regulated by Major League Baseball

(MLB), but USA Baseball does not regulate professional baseball leagues in the United States to any
121
degree. MLB only regulates affiliated MiLB leagues subject to the Professional Baseball Agreement

between MLB and MiLB. While this agreement is not public, it is understood that MLB enforces some

regulation of MiLB teams and/or leagues. Beginning in 1990, MLB began stricter stadium regulations,
122
requiring modern amenities and facilities. As stated above, these regulations are completely different from

those of the USSF because (a) MLB is not a governing body, (b) MLB enjoys an antitrust exemption and (c)

MLB does not stratify unaffiliated MiLB leagues and teams, but rather leaves them to their own devices.
123
Currently there are six independent minor leagues featuring more than 50 minor league teams.

125. There are examples of successful, high level, minor leagues that would not meet USSFs standards

for DII league classification. The International League is one of two AAA baseball leagues, operating at the

120
National Agreement For The Government of Professional Base Ball Clubs; (bit.ly/2xrbMMc); accessed
September 17, 2017.
121
Constitution and By-Laws of the United States Baseball Federation, Inc.; (bit.ly/2h4D7dw); accessed
September 14, 2017; pp. 2-3.
122
Cramer, Jerome; So, you want to own a minor league baseball team; September 15, 2003; Forbes
(forbes.com); (bit.ly/2x42K7n).
123
Zimmerman, Jeff; Independent league to affiliated baseball: Who makes the move?; February 12,
2016; Fangraphs (fangraphs.com); (bit.ly/2f85Il7).

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highest level of MiLB, one level below MLB. All of the teams in the International League are located in the
124
Eastern Time Zone.

126. In contrast to professional sports, the primary American sport system in which divisions are

designated by a governing body is the NCAA (an organization that has been found to have violated the
125
antitrust laws at least three times ). For example, the NCAA imposes rules requiring DI teams to sponsor
126
14 sports including mens and womens basketball. However, unlike the US professional soccer leagues,

the NCAA is generally open to schools choosing to self-select their division, with an objective approval

process by which a team can move itself up or down the hierarchy. For example, seven schools joined
Division II in 2015, and California Baptist University and University of North Alabama recently entered
127
Division I.

7. THE ANTICOMPETITIVE HARMS OF THE RESTRAINTS AT ISSUE OUTWEIGH ANY


POTENTIAL ASSERTED PROCOMPETITIVE BENEFITS, AND THESE POTENTIAL

124
2017 International League Final Standings; Minor League Baseball (milb.com);
(atmilb.com/2x8Nsg0); accessed September 16, 2017.
125
NCAA v. Board of Regents of the University of Oklahoma, 1984; Law v. NCAA, 1998; OBannon v.
NCAA, 2015.
126
Technically a team can be a Division I member in just a single sport, however to form a member
Division I League (i.e., a conference), the schools that comprise that league must: sponsor a
minimum of six mens sports, one of which shall be mens basketball. In addition to mens basketball,
the conference shall sponsor football or two other mens team sports. A minimum of seven members
shall sponsor mens basketball. A minimum of six members shall sponsor five other sports, including
football or two additional mens team sports; and sponsor a minimum of six womens sports, one of
which shall be womens basketball. In addition to womens basketball, the conference shall sponsor
two other womens team sports. A minimum of seven members shall sponsor womens basketball. A
minimum of six members shall sponsor five other sports, including two additional womens team
sports (or a minimum of five members for an emerging sport for women). See 2017-18 NCAA
Division I Manual, effective August 1, 2017, Section 20.02.5.2 Sports Sponsorship, pp. 351-2.
127
Stark, Rachel; Seven schools to join Division II: The division will grow to 307 members this fall; July
17, 2015; NCAA (ncaa.org); (on ncaa.com/2w2VVjw). Wellman, Sammi; CBU Announces D1,
WAC move; January 13, 2017; California Baptist University Athletics (cbulancers.com);
(bit.ly/2haZnWP). UNA Accepts ASUN Division I Invitation; December 6, 2016; University of
North Alabama Athletics (roarlions.com); (bit.ly/2jD7wnC). The exception to this free movement is
that for six years across the 2000s (2001-02 and 2002-03 and then 2007-2011), the NCAA imposed a
moratorium on entry in Division I, on the theory that too many teams were choosing to move up. That
moratorium was lifted in July 2011. Copeland, Jack; Moratorium lets Division I pause to ponder
growth; August 27, 2007; NCAA (ncaa.org); (1527).

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BENEFITS, IF ANY, COULD BE ACHIEVED WITH NO RESTRICTIONS AT ALL OR FAR


LESS RESTRICTIVE ALTERNATIVES

127. To summarize, the USSF has used its monopoly powers to sanction a league structure that protects

MLS from competition and, in the process, has prevented NASL from competing effectively, either in the

market for DI mens professional soccer, and, now in the market for DII mens professional soccer. Given

that MLS and USSF are joined at the hip, the federation stands to gain financially by promoting an MLS

monopoly.

128. Three main harms are identified in this report. First, the use of artificial distinctions creates

confusion in downstream markets whether these relate to selling tickets, broadcast or sponsorship, or
obtaining support for stadium investment from city authorities the unwarranted impression that DII

means inferior has served to reduce output in the market. Absent this meaningless labelling, NASL would

have been able to mount a more credible competitive threat to MLS.

129. Second, the exclusion of NASL from DII status has excluded NASL teams from access to certain

competitions and thereby reduced their ability to develop their businesses and create a more competitive

environment in North American soccer markets.

130. Third, the refusal of USSF initially to grant NASL DI status, followed by the decision to withdraw

NASLs DII status, has undermined the capacity of NASL to compete, first with MLS, and then with MLS

minor league the USL. At either level the USSFs decisions have restricted competition, reduced output,
and harmed quality.

131. I have been unable to identify any pro-competitive benefit that might hypothetically offset the

competitive harm caused by the USSF standards. I considered the possibility that the standards might be

designed to address market failure, the threat of ruinous competition, or to promote competitive balance, but

I was unable to identify any practical benefit and I am unaware of any benefits claimed by USSF.

132. In the absence of any such divisional requirements, a more competitive outcome would emerge, in

which US-based club soccer would become more vibrant and of higher quality than today. Even if something

like a financial requirement to qualify as a club that may participate in competition were deemed necessary,

these regulations are appropriately established by the leagues themselves, not the federation as a whole. The

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Appendix A

List of Materials

Legal Filings
Fraser v. MLS, 2002.
Law v. NCAA, 1998.
NCAA v. Board of Regents of the University of Oklahoma, 1984.
OBannon v. NCAA, 2015.
Sullivan v. NFL, 1994.

Articles
"125 years of the Football League and the top flight which team comes top?"; April 17, 2013; The
Guardian (theguardian.com); (bit.ly/2xcTeiF).
"England: Dean Court to grow, but still Premier League's smallest"; March 24, 2016; Stadium Database
(stadiumdb.com); (bit.ly/2wA53eJ).
"Football With the Feet: The Kicking Game that is Fast Becoming Popular"; October 7, 1894; New
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"Green Bay Packers Ownership Structure Remains the Ideal"; April 6, 2012,
League of Fans (leagueoffans.org); (bit.ly/2j7evzH).
"Italy: Here's Cagliari's temporary stadium in more detail"; March 15, 2017; Stadium
Database (stadiumdb.com); (bit.ly/2w24Od6).
"LA Galaxy announce USL PRO team LA Galaxy II"; January 29, 2014; Los Angeles Galaxy
(lagalaxy.com); (bit.ly/2fqgsbh).
"MLS and USL Pro announce partnership"; January 23, 2013; San Jose Earthquakes
(sjearthquakes.com); (bit.ly/2yg6Mbg).

"MLS expansion team fees to rise, could reach $200 million"; August 1, 2016; Sports Illustrated
(SI.com); (on.si.com/2h83uCI).
"MLS provides update on future expansion fees"; August 1, 2016; MLS (mlssoccer.com);
(bit.ly/2jo9Dvc).
"MLS provides update on future expansion fees"; August 1, 2016; MLS (mlssoccer.com);
(bit.ly/2jo9Dvc).

"New census data: Edmonton-area population surges past national growth rate"; February 8, 2017; CBS
News (cbc.ca); (bit.ly/2lq6bg2).
"The complete list of MLS-USL affiliations, partnerships for 2017"; March 23, 2017; MLS
(mlssoccer.com); (bit.ly/2frZ9qv).
"The Football League Disbands"; October 21, 1894; Washington Post (washingtonpost.com);
(bit.ly/2yefyXt).
Case 1:17-cv-05495-MKB-ST Document 3-3 Filed 09/20/17 Page 55 of 80 PageID #: 173

"The MLS CBA: Unpacking Don Garbers recent comments on single-entity"; September 24,
2014; Brotherly Game (brotherlygame.com); (bit.ly/2fedD0a).
"The sale of professional sports franchises"; October 29, 2014; Edgeworth Economics
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Athletics (roarlions.com); (bit.ly/2jD7wnC).
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30, 2015; ESPN (espn.com); (es.pn/2eUJClQ).
Associated Press; "MLS to expand to 28 teams with huge jump in fees for new entrants"; December
16, 2016; USA Today (usatoday.com); (usat.ly/2fhdMwI).
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(espn.com); (es.pn/2wr8IeQ).
Badenhausen, Kurt; "Full list: The worlds 50 most valuable sports teams 2017"; July 12, 2017; Forbes
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Baxter, Kevin; "Expansion could backfire on MLS"; April 23, 2016; Los Angeles Times
(latimes.com); (lat.ms/2eUxgXc).
Baxter, Kevin; "Mexico's national soccer team finds a great home venue -- in the US";
March 28, 2015, LA Times (latimes.com); (lat.ms/2y4TVIe).
Baxter, Kevin; "USLs ambitious efforts paying off with rapid growth, great ownership"; May 20,
2017; Los Angeles Times (latimes.com); (lat.ms/2rQXvCH).
Biglin, Kevin; "Detroit City FC 2017 Season Review"; Detroit City FC (detcityfc.com);
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Boniface, Daniel; "MLS player salaries 2015 released by Major League Soccer Players Union";
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July 31, 2017; ESPN (espn.com); (es.pn/2h1s3Bb).
Copeland, Jack; "Moratorium lets Division I pause to ponder growth"; August 27, 2007;
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Couch, Ben; "MLS announces expansion process and timeline"; December 15, 2016; MLS
(mlssoccer.com); (bit.ly/2wUwUZ0).
Courtemanche, Dan; "MLS unveils expansion process, timeline and fee"; December 15, 2016;
MLS (mlssoccer.com); (bit.ly/2w6BsOE).
Cramer, Jerome; "So, you want to own a minor league baseball team"; September 15, 2003;
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DelGallo, Alicia; "Orlando, Miami, and Tampa in different stages of MLS expansion"; January 28,
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Case 1:17-cv-05495-MKB-ST Document 3-3 Filed 09/20/17 Page 56 of 80 PageID #: 174

Gonzalez, Roger; "MLS Expansion: Heres what to know about the 12 cities to submit franchise bids";
February 1, 2017; CBS Sports (cbssports.com); (cbsprt.co/2vN02jk).

Ilyas, Adnan; "How MLS makes money for its owners"; August 29, 2017; SB Nation
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Kaufman, Michelle; "FIU stadium gets facelift, new name after Miami FC owner gives record $3.76
million donation"; April 3, 2017; Miami Herald (miamiherald.com); (hrld.us/2haoKYs).
Kunz, Matthias; "265 million playing football"; July, 2007; FIFA Magazine (fifa.com); (bit.ly/2xdnmdC).

McIntyre, Doug; "All-Access Atlanta: How United are on track to be the most successful expansion
team in MLS history"; February 8, 2017; ESPN (espn.com); (es.pn/2oB0bHb).
Moreno, Angel; "Fresno will have pro soccer team starting in 2018"; May 4, 2017; Fresno Bee
(fresnobee.com); (bit.ly/2wr9N6t).
Ozanian, Mike; "David Beckham to Earn Huge Windfall From New York's MLS Expansion"; May 21,
2013; Forbes (forbes.com); (bit.ly/2wwasU9).
Ozanian, Mike; "The next three NFL teams that might be sold"; July 26, 2016; Forbes (forbes.com);
(bit.ly/2xr0nfg).
Pendleton, Mike; "US Open Cup interleague play: How do they fare head to head?"; May 31, 2016; Fifty
Five One (fiftyfive.one); (bit.ly/2eXo3NW).
Pielke Jr., Roger; "US Soccer and Conflicts of Interest"; May 12, 2016; Soccernomics
(soccernomics-agency.com); (bit.ly/2wRgbG2).
Redford, Patrick; "The best fake soccer in the world is played right here in the USA"; July 30,
2014; Deadspin (deadspin.com); (bit.ly/2x9XNZ9).

Smith, Chris; "Major League Soccers most valuable teams"; August 16, 2017; Forbes
(forbes.com); (bit.ly/2vVsq78).
Soshnick, Scott, and Porter, Kiel; "Providence sells share of soccer marketing business back to MLS";
June 19, 2017; Bloomberg (Bloomberg.com); (bloom.bg/2sOc0LL).
Stark, Rachel; "Seven schools to join Division II: The division will grow to 307 members this fall";
July 17, 2015; NCAA (ncaa.org); (on.ncaa.com/2w2VVjw).
Straus, Brian; "USA, Mexico, Canada bid unveils preliminary city host candidates for 2026 World
Cup"; August 15, 2017; Sports Illustrated (si.com); (on.si.com/2i2x4K5).
Szymanski, Stefan; "MLS and the market for TV soccer in the US"; July 1, 2017;
Soccernomics (soccernomics.com); (bit.ly/2wjZsch).

Tannenwald, Jonathan; "MLS, U.S. Soccer Officially announce new TV deal with ESPN, FOX,
Univision"; December 13, 2015; The Philadelphia Inquirer (philly.com); (bit.ly/RHipSo).
Tannenwald, Jonathan; "The most-watched soccer games in U.S. television and online streaming
history"; June 9, 2017; The Inquirer (philly.com); (bit.ly/2fdbzm6).
Thomas, Ian; "CONCACAF Gold Cup leads summer soccer lineup for SUM"; May 8, 2017;
Street & Smith's Sports Business (sportsbusinessdaily.com); (bit.ly/2x2d5S2).
Case 1:17-cv-05495-MKB-ST Document 3-3 Filed 09/20/17 Page 57 of 80 PageID #: 175

Wahl, Grant; "15 years of The Don: Under Garber, MLS stayed afloat, has taken strides";
December 3, 2014; Sports Illustrated (si.com); (on.si.com/2xmlDDY).
Waldron, Travis; "There are signs that a U.S. womens soccer league is finally working"; January 21, 2016;
Huffington Post (huffingtonpost.com); (bit.ly/1nq348X).
Wellman, Sammi; "CBU Announces D1, WAC move"; January 13, 2017; California Baptist
University Athletics (cbulancers.com); (bit.ly/2haZnWP).
Williams, Bob; "John Pugh: USL can make sure Ottawa has a pro soccer team for many years to come";
October 27, 2016; Telegraph (telegraph.co.uk); (bit.ly/2h4Fm3S).
Williams, Jack; "NASL loses two teamsbut gains Paolo Maldini and Carmelo Anthony"; February 10,
2016; The Guardian (theguardian.com); (bit.ly/2h31VWP).
Wogan, J.B.; "A new playoff is coming"; June 27, 2012; Politifact (politifact.com); (bit.ly/2w21iiN)
Zeigler, Mark; "NASL confirms expansion to San Diego soccer 'hotbed'"; June 26, 2017; San Diego
Union-Tribune (sandiegouniontribune.com); (bit.ly/2sid0U1).
Zimmerman, Jeff; "Independent league to affiliated baseball: Who makes the move?"; February
12, 2016; Fangraphs (fangraphs.com); (bit.ly/2f85Il7).

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Economic
Inquiry

Annals of Biomedical Engineering,

Scottish Journal of Political Economy

Journal of Sports Economics

Theoretical
Economics Letters 6

International
Journal of Sport Finance

Research in
Economics

Asian Economic Policy Review

The International Journal of the History of Sport

Journal of Competition Law and Economics

Scottish Journal of Political Economy

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Economic Policy

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Review

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3
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Journal of Sport History

International Journal of Sport


Finance

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Finance Journal of Japan Society
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Review
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Journal of Sport History

Revue d'Economie Politique

Urban
Studies

Contemporary Economic
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Scottish Journal of Political Economy

Australian Economic Review

Journal of Sports Economics

Journal of Sports Economics

Journal
of Sports Economics

Marquette Sports Law Review

Journal of Industrial Economics

Rivista di Politica Economica

Economic Policy

European Journal of Political Economy

4
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Review
of Industrial Organization

Journal of Sports Economics

Journal of Industrial
Economics

European Competition Law Review, 2, 114-119

Oxford Review of Economic Policy

Oxford Review of Economic Policy

Journal of Industry, Competition and Trade

Journal of Economic Literature

European Sport Management Quarterly

Zeitschrift fuer Betriebswirtschaft

Wisconsin Law Review

Journal of Sports Economics

Review of Industrial Organization

Economic Journal,

Economic Journal,

Scottish Journal of Political Economy,

Journal of Political
Economy

Regional Science and Urban Economics

Economic Policy

International
Review of Applied Economics

5
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Economics Letters

Utilities Policy,

Journal of Industrial Economics

Fiscal Studies

Journal of Business
Finance and Accounting

Transport Policy

International Journal of the Economics of Business

International Journal of Industrial Organization

Fiscal Studies

British Journal of Industrial Relations

Economica

Journal of Transport Economics and Policy

Economic
Policy

6
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International Sports Economics

7
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Public Policy Research

European Sport Management


Quarterly

World Economics,

International Sports Law Review

World Economics

World Economics,

International Sports
Law Review,

World Economics

Reflets & Perspectives de la vie


Economique

The Economic Review,

World Economics

Business Strategy Review

8
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Business Strategy Review


Vezetstudomny,

New Economy

New Economy

The Economic Review

Annals of Public and Cooperative


Economics

Business Strategy Review

The Treasurer, European Special Issue

Consumer Policy Review,

Business Strategy Review

Employment Institute Economic Report

The Treasurer, 13

1992: Myths and Realities

Finance and Development

Harvard International Review

La Revue Internationale et Stratgique

9
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10
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11
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12
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Appendix C
USSF Business Transactions Involving Interested Persons

Year Name of Relationship Amount of Description of Transaction Sharing of the


Interested Between Transaction Organization's
Person Interested Revenues?
Person and the
Organization
2010 Don President of $4,664,171 Soccer United Marketing Yes
Garber Soccer United handles all of US Soccer
Marketing/MLS Federation's sponsorship
and Board agreements except with Nike.
Member of Any amounts collected over
Organization $4,500,000 was subject to a
70/30 split in the
organization's benefit. Board
member is recused from any
decision making regarding
this arrangement.
2011 Don President of $8,504,767 Soccer United Marketing Yes
Garber Soccer United handles all of US Soccer
Marketing/MLS Federation's sponsorship
and Board agreements except with Nike.
Member of Any amounts collected over
Organization $8,250,000 was subject to a
70/30 split in the
organization's benefit. Board
member is recused from any
decision making regarding
this arrangement.
2013 Don President of $15,433,754 Soccer United Marketing Yes
Garber Soccer United handles all of US Soccer
Marketing/MLS Federation's sponsorship
and Board agreements except with Nike.
Member of Any amounts collected over
Organization $8,250,000 was subject to a
70/30 split in the
organization's benefit. Board
member is recused from any
decision making regarding
this arrangement.
2014 Don President of $18,305,172 Soccer United Marketing Yes
Garber Soccer United handles all of US Soccer
Marketing/MLS Federation's sponsorship
and Board agreements except with Nike.
Member of Any amounts collected over
Organization $8,250,000 was subject to a
70/30 split in the
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Year Name of Relationship Amount of Description of Transaction Sharing of the


Interested Between Transaction Organization's
Person Interested Revenues?
Person and the
Organization
organization's benefit. Board
member is recused from any
decision making regarding
this arrangement.
2015 Don President of $25,429,998 Marketing Partner Yes
Garber Soccer United
Marketing/MLS
and Board
Member of
Organization

Source:
USSF 990s
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Appendix D

NASL Team Metropolitan Area Populations, 2016


US Census Metropolitan Statistical
Team City Population
Area
Miami-Fort Lauderdale-West Palm
Boca Raton FC Boca Raton 6,066,387
Beach
Boston City FC Boston Boston-Cambridge-Newton 4,794,447

California United Rancho Santa Margarita Los Angeles-Long Beach-Anaheim 13,310,447

Detroit City FC Detroit Detroit-Warren-Dearborn 4,297,617

FC Arizona Mesa Phoenix-Mesa-Scottsdale 4,661,537

FC Edmonton Edmonton N/A 1,321,426


Hartford-West Hartford-East
Hartford City FC Hartford 1,206,836
Hartford
Indy Eleven Indianapolis Indianapolis-Carmel-Anderson 2,004,230

Jacksonville Armada Jacksonville Jacksonville 1,478,212


Miami-Fort Lauderdale-West Palm
Miami FC Miami 6,066,387
Beach
New Orleans Jesters New Orleans New Orleans-Metairie 1,268,883

New York Cosmos New York City New York-Newark-Jersey City 20,153,634

North Carolina FC Cary Raleigh 1,302,946

Puerto Rico FC Bayamon San Juan-Carolina-Caguas 2,157,729

San Diego San Diego San Diego-Carlsbad 3,317,749

San Francisco Deltas San Francisco San Francisco-Oakland-Hayward 4,679,166


Virginia Beach-Norfolk-Newport
Virginia Beach City FC Virginia Beach 1,726,907
News

Sources
[1] US Census Bureau
[2] "New census data: Edmonton-area population surges past national growth rate"; February 8, 2017; CBC
News (cbc.ca); (bit.ly/2lq6bg2).
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Appendix E

NASL Team Stadia Capacities, 2017


Team Stadium Capacity Source
Boca Raton FC TBD TBD N/A
Boston City FC TBD TBD N/A
California United Titan Stadium 10,000 Cal State Fullerton
Detroit City FC TBD TBD N/A
FC Arizona TBD TBD N/A
FC Edmonton Clarke Stadium 5,000 City of Edmonton
Hartford City FC TBD TBD N/A
Indy Eleven Carroll Stadium 9,563 Team Website
Jacksonville Armada Hodges Stadium 9,400 Team Website
Miami FC Riccardo Silva Stadium 20,000 Miami Herald
New Orleans Jesters TBD TBD N/A
New York Cosmos MCU Park 7,500 NYC Tourism
North Carolina FC WakeMed Soccer Park 10,000 Team Website
Puerto Rico FC Juan Ramon Loubriel Stadium 22,000 Team Website
San Diego TBD TBD Team Website
San Francisco Deltas Kezar Stadium 10,000 SF Recreation and Parks
Virginia Beach City FC TBD TBD N/A
Average 11,496
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Appendix F
NASL Team Front Office Positions by USSF Required Category, 2017

Team General Marketing Communications/Media Promotions Game


Manager /Sales Relations /Community Operations
Relations
Boca Raton TBD TBD TBD TBD TBD
FC
Boston City TBD TBD TBD TBD TBD
FC
California TBD TBD TBD TBD TBD
United
Detroit City TBD TBD TBD TBD TBD
FC
FC Arizona TBD TBD TBD TBD TBD
FC General Community Team Communications Fan Team and Manager,
Edmonton Manager and Corporate and Media Relations Community Match
Partnerships Relations Operations
Hartford TBD TBD TBD TBD TBD
City FC
Indy Eleven President Director of Director of Marketing Game Day Director of
Corporate and Communications Operations Operations
Partnerships Manager and
Community
Relations
Coordinator
Jacksonville COO Marketing PR and Communications N/A Team
Armada and manager Operations
Operations and
Manager Equipment
Manager
Miami FC CEO VP of Associate Director of Director of Director of
Marketing Public Relations (Media Marketing and Venue
Contact) Corporate Operations
Social
Responsibility
New TBD TBD TBD TBD TBD
Orleans
Jesters
New York COO Manager, Senior Manager, Fan Services Director of
Cosmos Sponsorship Marketing and Executive Team
Sales, and Communications Operations
Business
Development
North President Vice Director of Director of Director of
Carolina FC and President of Communications Broadcasting Team
General Marketing and Hispanic Operations
Manager and Corporate Outreach
Partnerships
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Team General Marketing Communications/Media Promotions Game


Manager /Sales Relations /Community Operations
Relations
Puerto Rico President Manager, Manager, Manager, Director,
FC Corporate Communications Community Club
Partnership Relations Operations
San Diego TBD TBD TBD TBD TBD
San CEO Director of Director of Director of Game
Francisco Marketing Communications Community Operations
Deltas Relations
Virginia TBD TBD TBD TBD TBD
Beach City
FC

Team Head Assistant Coach Trainer Tickets Finance


Coach
Boca Raton TBD TBD TBD TBD TBD
FC
Boston City TBD TBD TBD TBD TBD
FC
California TBD TBD TBD TBD TBD
United
Detroit City TBD TBD TBD TBD TBD
FC
FC Arizona TBD TBD TBD TBD TBD
FC Head Assistant Coach Team Coordinator, N/A
Edmonton Coach Physician Ticketing and
Guest Services
Hartford City TBD TBD TBD TBD TBD
FC
Indy Eleven Head Assistant Coach Head Director of Financial
Coach Athletic Ticket Sales Controller
Trainer
Jacksonville Head Head Goalkeeper Head Director of Senior VP
Armada Coach Coach Athletic Ticket Sales Business
Trainer Operations
Miami FC Head Assistant Coach Head VP of Ticket CFO
Coach Athletic Sales
Trainer
New Orleans TBD TBD TBD TBD TBD
Jesters
New York Head First Assistant Coach Team Senior Director, Vice
Cosmos Coach and Physician Ticket Sales President of
Sporting Finance
Director
North Head Assistant Coach Head Vice President, Finance
Carolina FC Coach Athletic Ticket and Manager
Trainer Premium Sales
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Team Head Assistant Coach Trainer Tickets Finance


Coach
Puerto Rico Head First Athletic Director, Ticket N/A
FC Coach Assistant/Goalkeepers Trainer Sales
Coach
San Diego TBD TBD TBD TBD TBD
San Head Goalkeeper Coach Head N/A Chief
Francisco Coach Athletic Revenue
Deltas Trainer Officer
Virginia TBD TBD TBD TBD TBD
Beach City
FC

Source:
Team Websites