NFL’s new equity rule could be a clear collusion/antirust violation

[jtomm]

NFL’s new equity rule could be a clear collusion/antirust violation

By Mike Florio - Published August 4, 2023 

 

On the surface, the NFL’s new ban on owners giving equity to players and employees falls within the broad range of things the league can do, if it wants. Whether this specific exercise of oligarch prerogative complies with all applicable laws remains to be seen.

The no-equity rule could invite two specific types of legal challenge. The NFL Players Association could argue that the rule amounts to collusion per se. Any non-players (or teams) separately could argue that the rule violates the antitrust laws.The rule was created to protect owners from themselves, and then to protect other owners. As explained by Ben Fischer of Sports Business Journal, “the finance committee and NFL lawyers were moved by an expectation that employees and candidates -- including players -- will soon start to ask for equity more often, particularly in light of the practice emerging in other leagues.” By crafting a rule preventing any owner from giving equity to players or other employees, the league avoids “an arms race.”

As to the NFLPA, the rights and obligations of the parties appear in the Collective Bargaining Agreement. Nothing in the CBA prohibits a team from giving equity to a player, as long as the value of the equity is properly reflected within the salary cap. (Indeed, there would be no need for a rule preventing players from receiving equity if the CBA already prevented it.)By unilaterally taking the equity option off the table at a time when Aaron Rodgers was trying to get equity from the Jets and USC quarterback Caleb Williams had been making noise about wanting a piece of the team that drafts him, the NFL has changed the rules without bargaining with the union. Also, this 32-team agreement to prevent equity transfers to players in defiance of the CBA becomes collusion.Last week, we asked the NFLPA for its reaction to this rule. The union, which has basically slipped into a P.R. coma since the election of new executive director Lloyd Howell, has not responded.

As to non-players, the antitrust laws become relevant. The NFL consists of 32 independent businesses. Why should some of them be able to tell others how to run their businesses? This includes telling them how to distribute ownership in their businesses. It might be a bad business decision to, for example, give a coach one percent of the team in order to hire him, but that’s a business decision each owner should be allowed to make.There is no salary cap for coaches. Absent a union, a cap would be a clear and obvious antitrust violation. The no-equity rule is a less obvious antitrust violation, but it seems to be an antitrust violation nonetheless.The league apparently is willing to take its chances in court. There’s too much at stake, given the dramatic ongoing increases in the values of teams. Once the equity bridge is crossed, players and other employees have a chance to truly level the playing field with owners, participating in the generational appreciation of the franchise asset that continues long after a playing or coaching career ends.

Will someone sue? It’s in the DNA of Raiders owner Mark Davis, whose plan to both hire and to give equity to Tom Brady has been stymied by this new rule.Decades ago, Al Davis sued the league for antitrust regarding the team’s move to L.A. Maybe Mark, just maybe, will take a page from his father’s legal playbook.

 >>  https://www.nbcsports.com/nfl/profootballtalk/rumor-mill/las-vegas-raiders

[chirorob]

How would that work if a player got equity in a team, and then changed teams?

Would they have to sell that equity before signing a contract with a new team?  What if they are traded?

[Warfish]

Players being compensated via equity in the teams they play for's ownership is perhaps the dumbest thing I've ever heard.  

Unless the team's ownership structure is literally a corporate-entity-with-publicly-traded-stock situation, in which case, have at it if you like.

With that said, I look forward to a certain someone's inevitable post about how this concept is an amazing idea full of potential to screw the vulture capitalist pig-dog owners and empower the honorable proletariat players as they unite in glorious collective ownership of the league they and they alone drive.

[freestater]

5 minutes ago, Warfish said:

With that said, I look forward to a certain someone's inevitable post about how this concept is an amazing idea full of potential to screw the vulture capitalist pig-dog owners and empower the honorable proletariat players as they unite in glorious collective ownership of the league they and they alone drive.

[jtomm]

10 minutes ago, Warfish said:

***   With that said, I look forward to a certain someone's inevitable post about how this concept is an amazing idea full of potential to screw the vulture capitalist pig-dog owners and empower the honorable proletariat players as they unite in glorious collective ownership of the league they and they alone drive.

[jeremy2020]

It's written by a clickbait author. Why people post clickbait articles? Who knows.

[k-met57]

13 minutes ago, jeremy2020 said:

It's written by a clickbait author. Why people post clickbait articles? Who knows.

Floria is a good listen, but he is also like a union leader sometimes. 

[Green DNA]

1 hour ago, Warfish said:

Players being compensated via equity in the teams they play for's ownership is perhaps the dumbest thing I've ever heard.  

Unless the team's ownership structure is literally a corporate-entity-with-publicly-traded-stock situation, in which case, have at it if you like.

With that said, I look forward to a certain someone's inevitable post about how this concept is an amazing idea full of potential to screw the vulture capitalist pig-dog owners and empower the honorable proletariat players as they unite in glorious collective ownership of the league they and they alone drive.

This concept is an amazing idea full of potential to screw the vulture capitalist pig-dog owners and empower the honorable proletariat players as they unite in glorious collective ownership of the league they and they alone drive.

[jgb]

Honestly probably for the best. Imagine the shenanigans that can be done with the cap with side equity deals.

[rex-n-effect]

1 hour ago, Warfish said:

Players being compensated via equity in the teams they play for's ownership is perhaps the dumbest thing I've ever heard.  

Unless the team's ownership structure is literally a corporate-entity-with-publicly-traded-stock situation, in which case, have at it if you like.

With that said, I look forward to a certain someone's inevitable post about how this concept is an amazing idea full of potential to screw the vulture capitalist pig-dog owners and empower the honorable proletariat players as they unite in glorious collective ownership of the league they and they alone drive.

How is it any different from any other privately held business paying employees in equity positions for valuable contributions to the organization?

[jtomm]

20 minutes ago, jgb said:

Honestly probably for the best. Imagine the shenanigans that can be done with the cap with side equity deals.

^^  this   😉

[Beerfish]

2 hours ago, Warfish said:

Players being compensated via equity in the teams they play for's ownership is perhaps the dumbest thing I've ever heard.  

Unless the team's ownership structure is literally a corporate-entity-with-publicly-traded-stock situation, in which case, have at it if you like.

With that said, I look forward to a certain someone's inevitable post about how this concept is an amazing idea full of potential to screw the vulture capitalist pig-dog owners and empower the honorable proletariat players as they unite in glorious collective ownership of the league they and they alone drive.

Almost all pro sports are pig dogs to me.

Owners?  Pig Dogs

Players?  Pig Dogs

TV and streaming networks?  Pig dogs.

[Warfish]

1 minute ago, Beerfish said:

Almost all pro sports are pig dogs to me.

Owners?  Pig Dogs

Players?  Pig Dogs

TV and streaming networks?  Pig dogs.

[jtomm]

9 minutes ago, Beerfish said:

Almost all pro sports are pig dogs to me.

Owners?  Pig Dogs

Players?  Pig Dogs

TV and streaming networks?  Pig dogs.

[freestater]

1 hour ago, Warfish said:

 

 

[Lupz27]

4 hours ago, Warfish said:

Players being compensated via equity in the teams they play for's ownership is perhaps the dumbest thing I've ever heard.  

Unless the team's ownership structure is literally a corporate-entity-with-publicly-traded-stock situation, in which case, have at it if you like.

With that said, I look forward to a certain someone's inevitable post about how this concept is an amazing idea full of potential to screw the vulture capitalist pig-dog owners and empower the honorable proletariat players as they unite in glorious collective ownership of the league they and they alone drive.

This isn’t new it almost happened in the NHL back in the 60’s or 70’s.

Bobby Orr I believe was the player.

Story goes the owner of the head of the front office came into the locker room and asked if he could talk with Bobby about his new contract.  Bobby basically said **** off talk to my agent.

So they did **** off and gave the agent their proposal, it was a small yearly salary but with I believe 18% ownership in the Bruins.

His agent never told him about the offer, why because he would not make any commission on that 18% stake.

Cost the Orr family about a Billion dollars.

[Scott Dierking]

5 hours ago, Warfish said:

Players being compensated via equity in the teams they play for's ownership is perhaps the dumbest thing I've ever heard.  

Unless the team's ownership structure is literally a corporate-entity-with-publicly-traded-stock situation, in which case, have at it if you like.

With that said, I look forward to a certain someone's inevitable post about how this concept is an amazing idea full of potential to screw the vulture capitalist pig-dog owners and empower the honorable proletariat players as they unite in glorious collective ownership of the league they and they alone drive.

I was involved in something very similar to this concept. It does not have to be a publicly traded company in order to do such. 

My company converted to an ESOP (Employee Stock Option Program). Very lucrative for the employees, allows a continuity of ownership, allows the company to pay near zero taxes and drives incentive for success.

Now, there is not an owner in the world that is going to do this, unless he was very magnanimous and did not care to reap the high multiples that an NFL sale would generate (yeah, right). 

Many winners in this type of arrangement.

[The Crusher]

5 hours ago, Warfish said:

Players being compensated via equity in the teams they play for's ownership is perhaps the dumbest thing I've ever heard.  

Unless the team's ownership structure is literally a corporate-entity-with-publicly-traded-stock situation, in which case, have at it if you like.

With that said, I look forward to a certain someone's inevitable post about how this concept is an amazing idea full of potential to screw the vulture capitalist pig-dog owners and empower the honorable proletariat players as they unite in glorious collective ownership of the league they and they alone drive.

Sounds like Goodell is trying to figure out a way for Tom Brady to own part of and play for the Raiders. 

[jtomm]

3 hours ago, The Crusher said:

Sounds like Goodell is trying to figure out a way for Tom Brady to own part of and play for the Raiders. 

 

[Jetsfan80]

10 hours ago, Beerfish said:

Almost all pro sports are pig dogs to me.

Owners?  Pig Dogs

Players?  Pig Dogs

TV and streaming networks?  Pig dogs.

 

10 hours ago, Warfish said:

 

8 hours ago, freestater said:

 

 

[thebuzzardman]

11 hours ago, jgb said:

Honestly probably for the best. Imagine the shenanigans that can be done with the cap with side equity deals.

Tom Brady would un-retire in a heartbeat

[20andOut]

9 hours ago, Lupz27 said:

This isn’t new it almost happened in the NHL back in the 60’s or 70’s.

Bobby Orr I believe was the player.

Story goes the owner of the head of the front office came into the locker room and asked if he could talk with Bobby about his new contract.  Bobby basically said **** off talk to my agent.

So they did **** off and gave the agent their proposal, it was a small yearly salary but with I believe 18% ownership in the Bruins.

His agent never told him about the offer, why because he would not make any commission on that 18% stake.

Cost the Orr family about a Billion dollars.

Mario Lemieux basiclly took over ownership of the Pittsburgh Penguins in the late 90s in lieu of money owed him.

[20andOut]

Florio is pretty much a PR guy for NFLPA

[Lupz27]

6 hours ago, 20andOut said:

Mario Lemieux basiclly took over ownership of the Pittsburgh Penguins in the late 90s in lieu of money owed him.

Yes but that was a little different they still almost folded and Mario would have been left without on that deal.  But then Sid the kid happened (fixed) which saved the franchise.

[Sperm Edwards]

19 hours ago, Scott Dierking said:

I was involved in something very similar to this concept. It does not have to be a publicly traded company in order to do such. 

My company converted to an ESOP (Employee Stock Option Program). Very lucrative for the employees, allows a continuity of ownership, allows the company to pay near zero taxes and drives incentive for success.

Now, there is not an owner in the world that is going to do this, unless he was very magnanimous and did not care to reap the high multiples that an NFL sale would generate (yeah, right). 

Many winners in this type of arrangement.

A big difference is those winner companies aren't all required to equally limit their salary spending ceiling to the same amount as each of their competitors, and the cumulative talent pool of potential employees isn't anywhere near as small. So I don't know that this is directly analogous to a team with a fixed salary cap, in a veteran QB talent pool that doesn't even include 1 person for every 3 US states.

The truth is in a situation like this the proposal - and more - should be the deal: there's only 1 financial arrangement allowed between player and team. No ownership points (nor vitamin water side deals) to pay a player off the salary cap. Whatever one thinks of the merits or demerits of the cap itself, it isn't going away anytime soon, and until it does they all have to play by the same rules (not "here are the 2 NFL players that have enough cash to buy shares of a team, so those 2 QBs can play for $1MM/year and make it back in ownership dividends"). There can't be one player on this one team, and maybe one other on another team, who gets paid off the books while everyone else is abiding by the rules that apply to 99.9% of players. 

It's too involved to determine - in advance of a season, no less - how much a player is going to actually get paid as his share of not just the shared tv/ticket revenue but also naming rights, PSLs, luxury boxes, parking & concessions, and more (particularly as stadium or vendor/sponsor deals may change dramatically from one year to the next). How would you even assess how much a player is really getting paid? Or is the idea that this one player gets to have most of his income off the salary cap? What's to stop the next step from being a team that shifts one player's high salary to a phony board-member salary without equity?

So long as there's a salary cap in place, all player income from their respective teams should come from playing contracts. That's the deal. 

The only area this gets sticky imo is if there's ever a situation where an owner's son is talented enough to play in the NFL (particularly at a level where he'd legitimately earn a big veteran contract a GM must actually manage). Even if such a player is not specifically listed as an equity owner on paper, everyone knows that's just not-yet & there's a trust set up so that's a formality & effectively a distinction without a difference once mom/dad pass on or even just flat-out sell the team. The easy answer is he can't play. However would that be a violation, or is the distinction chicken & egg (he was an owner or owner via his trust before he became an NFL player), and does that distinction even pass the smell test anyway? But imo deal with that if/when it comes up, seeing how unlikely it is anyway.

 

[jgb]

41 minutes ago, Sperm Edwards said:

A big difference is those winner companies aren't all required to equally limit their salary spending ceiling to the same amount as each of their competitors, and the cumulative talent pool of potential employees isn't anywhere near as small. So I don't know that this is directly analogous to a team with a fixed salary cap, in a veteran talent pool that doesn't even include 1 person for every 3 US states.

The truth is in a situation like this the proposal - and more - should be the deal: there's only 1 financial arrangement allowed between player and team. No ownership points (nor vitamin water side deals) to pay a player off the salary cap. Whatever one thinks of the merits or demerits of the cap itself, it isn't going away anytime soon, and until it does they all have to play by the same rules (not "here are the 2 NFL players that have enough cash to buy shares of a team, so those 2 QBs can play for $1MM/year and make it back in ownership dividends"). There can't be one player on this one team, and maybe one other on another team, who gets paid off the books while everyone else is abiding by the rules that apply to 99.9% of players. 

It's too involved to determine - in advance of a season, no less - how much a player is going to actually get paid as his share of not just the shared tv/ticket revenue but also naming rights, PSLs, luxury boxes, parking & concessions, and more (particularly as stadium or vendor/sponsor deals may change dramatically from one year to the next). How would you even assess how much a player is really getting paid? Or is the idea that this one player gets to have most of his income off the salary cap? What's to stop the next step from being a team that shifts one player's high salary to a phony board-member salary without equity?

So long as there's a salary cap in place, all player income from their respective teams should come from playing contracts. That's the deal. 

The only area this gets sticky imo is if there's ever a situation where an owner's son is talented enough to play in the NFL (particularly at a level where he'd legitimately earn a big veteran contract a GM must actually manage). Even if such a player is not specifically listed as an equity owner on paper, everyone knows that's just not-yet & there's a trust set up so that's a formality & effectively a distinction without a difference once mom/dad pass on or even just flat-out sell the team. The easy answer is he can't play. However would that be a violation, or is the distinction chicken & egg (he was an owner or owner via his trust before he became an NFL player), and does that distinction even pass the smell test anyway? But imo deal with that if/when it comes up, seeing how unlikely it is anyway.

 

Not much more to add here. Just two points /- could also get sticky if a retired player buys shares then un-retires. Regarding the owner’s son… at least he would be subjected to the draft/rookie wage scale so the league would have time to act and pass a relevant rule before the player’s next contract.

[jgb]

3 minutes ago, jgb said:

Not much more to add here. Just two points /- could also get sticky if a retired player buys shares then un-retires. Regarding the owner’s son… at least he would be subjected to the draft/rookie wage scale so the league would have time to act and pass a relevant rule before the player’s next contract.

I was just thinking… didn’t Brady flirt with the Raiders before going to Tampa? Maybe that’s their true QB2 when Jimmy G’s femur turns to bone meal.

[nycdan]

1 minute ago, jgb said:

I was just thinking… didn’t Brady flirt with the Raiders before going to Tampa? Maybe that’s their true QB2 when Jimmy G’s femur turns to bone meal.

[Sperm Edwards]

2 minutes ago, jgb said:

Not much more to add here. Just two points /- could also get sticky if a retired player buys shares then un-retires. Regarding the owner’s son… at least he would be subjected to the draft/rookie wage scale so the league would have time to act and pass a relevant rule before the player’s next contract.

I think the first point is the very situation they're trying to deal with. 

As an ancillary benefit to the owners, by removing that ability it eliminates in advance any new player contract negotiation demand of equity. It's turned down ahead of time because it means you're forbidden from playing.

For me that's not the reason at all (people with $100MM+ in assets in a negotiation with someone with another zero added to the end of that). It's more that the playing field should be leveled.

It's bad enough that, as the cap rises more and more, the state income tax disparities are becoming more of a factor with each passing season. Every year's compensation coming as signing or roster or option bonus with no state taxes attached to it is a lot of cabbage to turn down, especially for people whose premiere earning years typically end in their 20s or 30s.

[jgb]

7 minutes ago, Sperm Edwards said:

I think the first point is the very situation they're trying to deal with. 

As an ancillary benefit to the owners, by removing that ability it eliminates in advance any new player contract negotiation demand of equity. It's turned down ahead of time because it means you're forbidden from playing.

For me that's not the reason at all (people with $100MM+ in assets in a negotiation with someone with another zero added to the end of that). It's more that the playing field should be leveled.

It's bad enough that, as the cap rises more and more, the state income tax disparities are becoming more of a factor with each passing season. Every year's compensation coming as signing or roster or option bonus with no state taxes attached to it is a lot of cabbage to turn down, especially for people whose premiere earning years typically end in their 20s or 30s.

Yep. If a superstar wants to play for his hometown team for the vet minimum, you can’t really stop that. But there shouldn’t be other value transfers off-contract.

I’m not a conspiracy guy but it wouldn’t surprise me if Kraft waits a year or two and hires Brady on a personal services/team ambassador contract to make up for the 20 years of below market pay. 

[PFSIKH]

On 8/7/2023 at 10:33 AM, jgb said:

Honestly probably for the best. Imagine the shenanigans that can be done with the cap with side equity deals.

I am sure there are 100K posts on this board intimating this very thing between Brady and Kraft.  🤣

[Warfish]

3 hours ago, Sperm Edwards said:

I think the first point is the very situation they're trying to deal with. 

As an ancillary benefit to the owners, by removing that ability it eliminates in advance any new player contract negotiation demand of equity. It's turned down ahead of time because it means you're forbidden from playing.

For me that's not the reason at all (people with $100MM+ in assets in a negotiation with someone with another zero added to the end of that). It's more that the playing field should be leveled.

It's bad enough that, as the cap rises more and more, the state income tax disparities are becoming more of a factor with each passing season. Every year's compensation coming as signing or roster or option bonus with no state taxes attached to it is a lot of cabbage to turn down, especially for people whose premiere earning years typically end in their 20s or 30s.

Easy solution to the variable state tax issue:  Have the cap be net of taxation effects.

i.e. Player 1 is State A (0% State Tax) can get paid $10 million and counts to the cap for $10 million.

Player 2 in State T (10% State Tax) can get paid up to $11 million and counts to the cap for $10 million.

Super (overly) simplistic example, of course, but something akin to this would provide competitive balance parity eliminating the effect (for players) of picking team A or team B based on State Income Tax.

The Owners of course still pay for it, after all they chose to own a team in that state and to keep it there after all, but it levels the cap impact playing field.

All said, a pretty minor change that helps players, helps teams and helps competitiveness, at the cost to owners (if they choose to accept it).  It would be up to the owner/team if they want to take advantage of it or not.

[jgb]

10 minutes ago, PFSIKH said:

I am sure there are 100K posts on this board intimating this very thing between Brady and Kraft.  🤣

Could very well be that everything was above board there and Brady just took less to help the team win. I mean, Rodgers did just that for the Jets.

But that's not a fun story for rival fans. I'm no expert on the nutrition company thing -- logic says it's definitely overblown considering my source (fellow Jets fans). But we know that (and I respect him for) Belichick will push any line he can to the max and perhaps even step over it. 

[Scott Dierking]

4 hours ago, Sperm Edwards said:

A big difference is those winner companies aren't all required to equally limit their salary spending ceiling to the same amount as each of their competitors, and the cumulative talent pool of potential employees isn't anywhere near as small. So I don't know that this is directly analogous to a team with a fixed salary cap, in a veteran QB talent pool that doesn't even include 1 person for every 3 US states.

The truth is in a situation like this the proposal - and more - should be the deal: there's only 1 financial arrangement allowed between player and team. No ownership points (nor vitamin water side deals) to pay a player off the salary cap. Whatever one thinks of the merits or demerits of the cap itself, it isn't going away anytime soon, and until it does they all have to play by the same rules (not "here are the 2 NFL players that have enough cash to buy shares of a team, so those 2 QBs can play for $1MM/year and make it back in ownership dividends"). There can't be one player on this one team, and maybe one other on another team, who gets paid off the books while everyone else is abiding by the rules that apply to 99.9% of players. 

It's too involved to determine - in advance of a season, no less - how much a player is going to actually get paid as his share of not just the shared tv/ticket revenue but also naming rights, PSLs, luxury boxes, parking & concessions, and more (particularly as stadium or vendor/sponsor deals may change dramatically from one year to the next). How would you even assess how much a player is really getting paid? Or is the idea that this one player gets to have most of his income off the salary cap? What's to stop the next step from being a team that shifts one player's high salary to a phony board-member salary without equity?

So long as there's a salary cap in place, all player income from their respective teams should come from playing contracts. That's the deal. 

The only area this gets sticky imo is if there's ever a situation where an owner's son is talented enough to play in the NFL (particularly at a level where he'd legitimately earn a big veteran contract a GM must actually manage). Even if such a player is not specifically listed as an equity owner on paper, everyone knows that's just not-yet & there's a trust set up so that's a formality & effectively a distinction without a difference once mom/dad pass on or even just flat-out sell the team. The easy answer is he can't play. However would that be a violation, or is the distinction chicken & egg (he was an owner or owner via his trust before he became an NFL player), and does that distinction even pass the smell test anyway? But imo deal with that if/when it comes up, seeing how unlikely it is anyway.

 

Everything you say is true, but there still would be a way to work it with a cap component. 

There could be an independent arbiter that places a value of each NFL team each season. Would this be a very subjective valuation? Of course, but most of them are.

If you  have a valuation, then a percentage of stake is easily able to be chunked out as to what the value is in terms of dollars. Of course that then relates directly to cap spend. So instead of dollars, they are getting a percentage of the team in equity.

Like I said in my original post, I don't think any owner would do this, unless they were cash strapped. And even then there are other ways around this. And, you have the whole conundrum of how do you treat the Green Bay Packers. They are a whole other ownership level.  

 

[PFSIKH]

2 hours ago, jgb said:

Could very well be that everything was above board there and Brady just took less to help the team win. I mean, Rodgers did just that for the Jets.

But that's not a fun story for rival fans. I'm no expert on the nutrition company thing -- logic says it's definitely overblown considering my source (fellow Jets fans). But we know that (and I respect him for) Belichick will push any line he can to the max and perhaps even step over it. 

No doubt.

Despite all of Kraft's success, my SWAG is nothing usurps being the Patriots' Owner and all that comes with it (e.g. fan adulation, taking a trash professional football team to being tied with the most Superbowl titles, etc.).  With Spygate and Deflategate,  Kraft can claim ignorance.  I do not think he knew. 

In order to 'cook the books' to keep Brady, Kraft would be complicit.  I do not know if they would take the team away, but it would probably be on the table.  Then the NFL would absolutely eviscerate the team.  Goodell, "It is going to hurt.  You can sell the team and it will hurt less..."