Tuesday, 4 December 2012

The NHL Labor Lockout: How Did We Get to Day 80

Today is Day 80 of the NHL lockout, and it is beginning to feel as if the entire 2012-13 hockey season could get cancelled, much like it was in 2004-05.

Michael McCann recently blogged about all of the NHL game cancellations.  But, how did things get this bad?

Here are my thoughts on why the NHL and the NHLPA have struggled to come to an agreement.  (For more Sports Law Blog commentary on the NHL labor situation, see here, here, here, and here).

1.  The NHL is trying to bargain like it's a monopoly, but it isn't.  Players can go overseas.
The NHL's lawyers seem to be taking the same hard-line bargaining position in their labor negotiations as the NFL did in 2011 -- hoping that the union will eventually break and accept a large salary reduction.  However, various aspects of the leagues' bargaining situation are different -- making similar results unrealistic.

Most notably, the NFL is a near monopoly, meaning that during a work stoppage NFL players have no other traditional source of employment.  By contrast, the NHL players have a bona fide opportunity to find similar work overseas -- especially in Eastern Europe.  These international opportunities are not lost on NHL players, with more than 150 players currently competing in leagues across the Atlantic.  Many of these players are even competing on teams based in their home countries.

As more NHL players recognize the opportunity to command salaries in foreign leagues, the players overall become increasingly suited to withstand a long lockout without needing to dip into personal savings and loans.  Thus, as more NHL players accept employment overseas, it becomes less realistic for the NHL owners to refuse to make meaningful bargaining concessions.

2.  Hockey players remember taking a huge pay cut in 2004-05.  And they are still resentful.

In addition to more alternative employment opportunities than in football, many veteran NHL players may also feel as if they've already made a major sacrifice -- having previously accepted a 24% pay cut to settle the 2004-05 lockout.  Thus, from an emotional perspective, they are less likely to cave again.

One sign that the NHL players were unhappy with the 2004-05 collective bargaining results was the naming of Donald Fehr as their labor leader just a few years back.  Before joining the NHLPA, Fehr was the head of the Major League Baseball Players Association. Fehr has a track record for enduring long labor stoppages to get his desired result.  Indeed, he was head of baseball's players association during the strike-shortened 1994 season that included the cancelling of that year's World Series.

3. NHL owners may not entirely fear decertification due to potential lack of "market power"

Moreover, unlike the NFL owners, NHL owners may be less fearful of the players pursuing a decertification strategy -- thus almost baiting the players' association to go that route.  This is based on questions surrounding the likelihood of a decertified NHLPA ultimately prevailing on an antitrust suit against the league.

As antitrust scholars can explain, for professional athletes to win an antitrust challenge against their league, one of the elements they will likely need to show is "market power." This is "the power to control prices or exclude competition" within any relevant market.

It is well established that the NFL has market power over its labor force -- making this element easy for a decertified NFLPA to meet.  However, there is at least one court decision, Fraser v. Major League Soccer, that leaves open the possibility that if an American sports league competes in a global market for players, it might be found to lack market power.  With more than 150 NHL players currently competing overseas, the NHL's lawyers may indeed believe the league lacks adequate market power for players to win an antitrust lawsuit under Section 1 of the Sherman Act.

 4.  Owners and players don't fear the 'gamer'.  The NHL gaming market is substantially smaller than that of other sports leagues.

Finally, albeit perhaps least significantly, the NFL likely received strong pressure to settle its labor dispute from their business partners affiliated with the rapidly growing fantasy sports gaming market, such as ESPN and CBS.  However, whereas there are currently more than 20 million Americans playing fantasy football, there are less than 2 million that play fantasy hockey.  Thus, the fantasy sports lobby is likely placing little, if any, pressure on the NHL to reach a settlement.

(For more on the issue of 'market power' in labor-side antitrust, see here.  You can also follow me on Twitter here.)

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