What are the implications of NASL's antitrust lawsuit against the USSF?
The North American Soccer League's lawsuit against the U.S. Soccer Federation looks set to go forward with the first hearings to take place in October.
Here's a breakdown of what's at stake.
What actions has the NASL taken so far?
The NASL is suing the USSF on antitrust grounds. The USSF has standards -- drawn up by its Pro Council -- which determine what constitutes a Division 1, Division 2, and Division 3 league. The suit alleges that these standards are anticompetitive and create a barrier to competition and thereby prevent the NASL from competing directly with MLS. The suit also alleges that with the help of the standards, the USSF, MLS, the second-tier United Soccer League, and Soccer United Marketing (the marketing arm of MLS) have engaged in a conspiracy to drive the NASL out of business by illegally stripping it of its Division 2 status so that the United Soccer League will be the only Division 2 league while MLS will maintain its monopoly status as the only Division 1 league in the U.S.
What criteria are spelled out by the league standards?
The standards in question establish minimum criteria needed for a league to attain a certain designation, such as the minimum number of teams in a league, size of the teams' stadiums, market size of the cities, and the financial resources of team owners, among others. At present, MLS is the lone men's league operating in the U.S. that has Division 1 status. Earlier this year, the USSF granted both the NASL and the USL provisional Division 2 status for 2017
So why is the NASL doing this?
For the NASL, it's about survival. Last month, the USSF decided to reject the league's application to remain a Division 2 league in 2018. Several of the league's owners have no interest in operating at Division 3 level, and for good reason. Items such as sponsorship dollars and broadcast rights decrease the further you go down the U.S. soccer pyramid. Dropping down would also make it more difficult to attract new ownership groups. At the moment, it's Division 2 or bust. The league also wants the courts to open up the entire U.S. soccer pyramid so that it can compete head-to-head with MLS.
Didn't the USSF grant waivers to the standards in the past? Why not continue that?
Indeed it did, and it granted the NASL provisional Division 2 status in the hope that the NASL would get its house in order. It hasn't happened. (To be clear, the USL has been granted waivers as well, and is waiting to see if it will keep its Division 2 status through 2018.)
The NASL has been bleeding teams for a variety of reasons. Some moved to MLS, others to the USL, and some went out of business. The league lost five teams after the 2016 season, and only the 11th-hour purchase of the New York Cosmos by cable television magnate Rocco Commisso kept the league afloat.
The league fielded eight teams in 2017, but could see three more sides leave after this season. FC Edmonton could join the nascent Canadian Premier League. North Carolina FC is rumored to be considering a move to the USL, while the San Francisco Deltas may close up shop after existing for just one season. The announced additions of teams in Orange County and San Diego as well as potential additions Detroit, New Orleans and Atlanta will not be enough to offset those losses and get to the USSF mandated minimum of 12 teams for a Division 2 league.
What's wrong with this set of standards? Are there any positives to them?
The USSF will certainly contend that the standards have helped provide stability to the marketplace, and point to how MLS has survived longer as a fully professional top-flight U.S. league longer than any other in the modern era. The standards are intended to help ensure that teams don't fold in the middle of the season, providing a level of comfort to sponsors and broadcasters.
But the NASL's attorney, Jeffrey Kessler, contends that longevity has nothing to do with standards and that there are no pro-competitive benefits to the standards. In particular, the requirement that a Division 1 league have teams operating in three different time zones in the continental U.S. rankles, since the NASL had teams in Edmonton and Puerto Rico which didn't apply to the standard. The USSF's Pro Council -- in which 57.1 percent of the votes are controlled by MLS -- has increased the thresholds over time, which the NASL contends has kept Division 1 status just beyond its reach.
Kessler will argue that the business relationship between MLS, SUM, and the USSF has given the league a protected status with the standards providing cover, a dynamic that the NASL can't equal.
"[The standards] are irrational, anticompetitive, and the reason they're applied this way is because the USSF has basically joined itself with MLS through SUM," said Kessler, in an exclusive interview with ESPN FC. "They all share in their joint revenues. Therefore, the whole interest of the USSF economically is to favor MLS, which has been the story of these rules which is why we don't think they can stand."
Other leagues around the world have minimum standards as well, especially in terms of financial resources required by ownership, but the suit insists that this particular set of standards is a barrier to competition.
What else does the NASL have to prove?
That the USSF and its alleged co-conspirators control the relevant market. This of course depends on the definition of market. The suit contends that other sports in the U.S. aren't a substitute for soccer, and that lower league soccer isn't a substitute either.
The USSF will contend that the market is much broader and includes other sports and other soccer leagues around the world, and therefore its rules aren't harmful.
What are the NASL's goals here?
Short term, the NASL seeks an injunction to allow it to continue operating with the Division 2 designation as the case goes to trial. That will allow the league to make plans with sponsors, players, and coaches for 2018.
Long term, the goal is much more ambitious. The suit wants the current set of standards to be thrown out and allow leagues to compete directly against one another.
"The goal here is to create an open market where the NASL is free to compete," said Kessler. "It's not just about keeping the Division 2 status for right now. That's just to enable us to survive. The case is about the long-term issue as to whether this is going to be a competitive market or not."
It's also about which entity, if any, controls it. In the current round of MLS expansion, entry fees are expected to be around $150 million. In the absence of a system of promotion/relegation, getting rid of division designations would hypothetically allow NASL teams to claim top-tier status without having to pay MLS prices to do so.
Hasn't the NASL made plenty of mistakes on its own to put itself in its current predicament?
The NASL has certainly not helped itself over the years in terms of some business decisions it made, a point the USSF will no doubt bring up as the reason for the NASL's woes. Traffic Sports, which at one point owned several teams, was caught up in the FIFA corruption scandal. The NASL's inability to properly vet owners willing to stick with the league for the long haul has been problematic as well. But according to Kessler, none of that matters. The only question is whether the standards are anticompetitive and thus violate antitrust law.
"Our case doesn't seek damages, so we're not trying determine to what degree the standards in the past of this case have caused damages to the NASL, though they clearly have," said Kessler. "But what we are very focused on, is how these standards going forward block this competition and once the barriers are removed the NASL will succeed or fail; become No. 1 or not become No. 1 just like MLS should. And no one should have unfair barriers to prevent that from happening.
"So I don't think anyone has been perfect. Certainly MLS has a track record of doing a variety of things that have hindered the growth of MLS. But what they've had is the advantage of being protected in competing at that level. No one is going to say that there are things that each league couldn't have done better or worse, but that's not really the issue of our lawsuit. The issue of our lawsuit is: Are these fair rules to restrict or help competition?"
How does promotion/relegation fit into this? Didn't an NASL owner file a case with the CAS to get promotion/relegation implemented?
Yes. Miami FC owner Riccardo Silva, along with Dennis Crowley, owner of the Kingston Stockade of the NPSL, filed a claim with the Court of Arbitration for Sport to force the USSF to implement a system of promotion/relegation. But that is a separate issue from this suit. Besides, if the NASL prevails in court, the need for a system of promotion/relegation won't be as acute since the NASL will then be able to call itself a Division 1 league.
Wouldn't an NASL victory call into question the authority of the USSF?
Absolutely. One aspect that is clear is that the USSF will find no relief from the Ted Stevens Olympic and Amateur Sports Act. That piece of legislation gives governing bodies authority over amateur and Olympic sports. U.S. district court Judge Harry D. Leinenweber ruled back in 2010 that the Stevens Act gives the USSF "no more of an antitrust exemption or authority over professional soccer than necessary for it to oversee Olympic and related events." Leinenweber affirmed that ruling in 2012 during an antitrust suit involving ChampionsWorld LLC against the USSF and MLS. Given that the USSF and MLS prevailed in that suit, the USSF didn't seem too troubled, since if felt that its authority over the pro game is granted by FIFA. Kessler feels that is anticompetitive as well given that FIFA is a private organization.
"[The USSF has] no government granted authority, and they have no exemption from the antitrust laws," he said. "Therefore, anytime any private group tries to set standards, if they have any anticompetitive effects, without any offsetting pro-competitive virtues, they're going to be held illegal."
Can the NASL win?
It depends on how narrow or broadly one views the scope of the case. If the NASL can convince the court to focus only on the standards, it may prevail. But the USSF will no doubt attempt to show that it had nothing to do with the NASL's woes, and did plenty to keep it in business by repeatedly granting waivers over the years.
There is also the chance that the case could be settled, but the opportunity to open up the entire U.S. soccer pyramid may be one that the NASL doesn't want to pass up.
What's the timeline?
A hearing is scheduled for late October to determine if the injunction will be granted. Kessler estimates that if that occurs, it will be 12-18 months before the trial begins.
Jeff Carlisle covers MLS and the U.S. national team for ESPN FC. Follow him on Twitter @JeffreyCarlisle.