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Governance and Vertical Integration in Team Sports

11 Pages Posted: 4 Nov 2007  

Stefan Szymanski

Imperial College London - Imperial College of Science, Technology and Medicine

Stephen F. Ross

Pennsylvania State University, Penn State Law

Abstract

Antitrust law distinguishes vertical and horizontal restraints. A horizontal restraint is one which exists between competing firms supplying rival products in a market, and a vertical restraint is one which exists between firms that jointly contribute to supplying a particular product in a market. Horizontal agreements receive much closer antitrust scrutiny because they often enable firms to limit competition at the expense of consumers, while vertical restraints may be legal or illegal depending on whether they tend to enhance or reduce competition or the exploitation of market power. This paper argues that there are important vertical restraints that operate in sports leagues which have been mostly neglected in the literature but have a significant impact. We focus on intraleague restraints, where member clubs of a league agree to control the organization of league competition, and interleague restraints, where horizontal agreement such as the Reserve Clause relies on agreements not to compete for players competing in senior or junior leagues.

Suggested Citation

Szymanski, Stefan and Ross, Stephen F., Governance and Vertical Integration in Team Sports. Contemporary Economic Policy, Vol. 25, No. 4, pp. 616-626, October 2007. Available at SSRN: https://ssrn.com/abstract=1026123 or http://dx.doi.org/10.1111/j.1465-7287.2007.00081.x

Stefan Szymanski (Contact Author)

Imperial College London - Imperial College of Science, Technology and Medicine ( email )

Exhibition Road
London, SW7 2AZ
United Kingdom
+44 20 7594 9107 (Phone)
+44 20 7823 7685 (Fax)

Stephen F. Ross

Pennsylvania State University, Penn State Law ( email )

Lewis Katz Building
University Park, PA 16802
United States

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