The NFL is Not for Libertarians

Tonight marks one of the more bizarre annual rites in the American worship of state power—the NFL Draft. I realize I may be alone in this characterization. Just this morning, Mises Institute president Doug French wrote a lengthy editorial celebrating the Draft. But I don’t share the public’s love of the fraudulent, anti-libertarian monstrosity that is the National Football League. As I see it, you can support liberty or the NFL, but not both.

The NFL is not a private enterprise in any free-market sense. It was at one time, but since the 1960s, it has steadily morphed into a subsidiary of the state. Admittedly, this process did not begin at the NFL’s insistence. In the 1950s, the Justice Department’s Antitrust Division decided to interfere with the rights of NFL franchise operators to make rules regarding the presentation of their games on the new medium of television. By 1961, the NFL was forced to lobby Congress for a special antitrust exemption just so it could sign its first national television contract. A few years later, a similar exemption was secured to permit the NFL’s merger with the American Football League.

In the decades following the merger, the NFL embraced its special status and started demanding municipal governments, rather than franchise owners, assume the financial risks of constructing new stadiums. Today, 23 of the 32 clubs have stadiums built no earlier than 1992. Most are financed primarily through taxes or government-backed bonds. Generally, NFL owners contribute only about one-third of the cost.

In Cleveland, for example, the city used bonds to pay for 75% of the cost of the Browns’ stadium, which opened in 1999. The team only pays $250,000 per year in rent to the city. Keep in mind, the new stadium was only built after the first Cleveland Browns franchise moved to Baltimore in 1995. Why did they move? Because then-Browns owner Art Modell, after financially mismanaging the team for years, needed a government bailout, which he received from the state-run Maryland Stadium Authority in the form of M&T Bank Stadium. And to get one step further back, the Maryland Stadium Authority came into existence only after Baltimore’s previous NFL team, the Colts, moved to Indianapolis when the latter city—through the Marion County Capital Improvement Board—offered the club’s owners a brand new stadium.

Even when owners pay for a share of construction costs, it usually comes in the form of long-term debt. Franchise sales in recent years have also been heavily leveraged. When Daniel M. Snyder purchased the Washington Redskins from the estate of Jack Kent Cooke in 1999, he paid a then-record $800 million, which included assumption of $155 million in debt on the stadium Cooke built just before his death and another $340 million Snyder borrowed from a European bank.

Without direct government financing in the form of taxes and municipal bonds, and indirect financing in the form of interest rates artificially manipulated by central banks, most of the NFL stadiums erected over the past 20 years would not exist, at least in their present forms. Nor would debt-fueled sales like Snyder’s been possible.

And the NFL will continue to gorge itself on taxes and cheap debt. Just today, political officials in Atlanta proposed spending at least $300 million in taxes—which means the actual number will be much higher—to build a new stadium for the Falcons. Which is overdue, of course, because the team’s present home was built all the way back in 1992. NFL officials also openly threatened Minnesota officials of “serious consequences” if they didn’t foot the majority of bill for a new Vikings stadium (at an estimated cost of over $1 billion). One state legislator told the press, “It’s disappointing to think the NFL or the Vikings are driving policy for Minnesota government,” adding, “The Vikings and NFL are in a much better financial position than our state.”

Of course the NFL is in a better position. It has all the benefits of being a government enterprise without any of the legal accountability. It doesn’t even have to pretend to obey laws. Consider the recent action by NFL Commissioner Roger Goodell to punish the Washington Redskins and Dallas Cowboys for alleged violations of the league’s salary cap. Under the contract between the NFL franchise operators and its players union, there is a cap on the maximum salaries each team can spend on player salaries each year. Except the cap did not apply for the 2010 season, the last year under the previous contract. There was nothing ambiguous. The contract expressly said there was no cap of any kind.

The Redskins and Cowboys took advantage of this “uncapped” season to rework some contracts, shifting payments for certain players so that they would count in 2010 rather than future seasons when, everyone assumed, a new cap would be in place. It was perfectly legal. Except that Goodell retroactively decided it wasn’t based on what he claimed was an implied understanding among the owners not to do what the Redskins and Cowboys did.

Not only was this “understanding” a breach of contract, it was a felony under federal law. It’s price-fixing of the most blatant sort. Now, I don’t endorse any form of antitrust law, but it’s worth noting that in any other industry, Goodell’s actions would have earned him a prison sentence and a massive fine. I’ve seen people to go to jail simply for being in the room when price-fixing is discussed. Goodell publicly admitted to price-fixing and nobody seemed to think it was a problem.

More to the point, Goodell committed fraud. He changed the terms of an agreement after-the-fact without the consent of two parties to that agreement. And he relied on the state to do so. In addition to the special antitrust privileges the league enjoys, Goodell leaned on the players union to grant him blanket immunity from his act of fraud. According to federal law, you see, almost anything is allowed when there’s collusion between an employer and a government-sanctioned monopoly union.

Of course, one couldn’t expect union officials to stand up for a couple of owners when they won’t even protect their own members from Goodell’s fraud. After Goodell became commissioner in 2006, he decided to unilaterally re-interpret a clause in the NFL’s constitution that granted him vague authority to fine and suspend anyone employed by a member club for “conduct detrimental” to the league. There is no contractual definition of what constitutes “detrimental” conduct. When a player signs a contract, he has no way of knowing in advance what conduct might be deemed detrimental by Goodell. Nor is Goodell required to be consistent in his application of the term. That makes just about any exercise of the “conduct detrimental” clause an act of fraud.

It would be different if all NFL employees were hired at-will. Then it wouldn’t matter why anyone gets disciplined or fired. But the very point of employment contracts is to establish the terms of exchange in advance. Furthermore, Goodell himself doesn’t actually hire or fire players. As commissioner, he’s the head of a trade association. He claims, as a third party, the unrestricted right to interfere with contracts between players and clubs and impose new terms at any time without any judicial review. This type of authority cannot exist—or certainly be sustained for any length of time—without the backing of the state.

As noted earlier, the NFL’s government-dictated relationship with its union immunizes almost all of Goodell’s conduct from legal challenge. When Goodell colludes with union leaders, individual players are powerless to assert their contractual rights. This even extends to players who aren’t under contract. Let’s revisit the NFL Draft. Doug French described tonight’s event in the following terms:

NFL teams don’t bid against each other monetarily to draft individual players. What sets the value of the player is where he is drafted. Using a first-round selection to pick untested college talent is riskier and more “expensive” than using a second-round pick, and so on.

French glosses over a lot here. First, the Draft only exists because of the labor agreement, which none of the players selected tonight were ever a party to. The government directed that current players have the right to “collectively bargain” on behalf of all future employees for the term of the agreement—which in this case is ten years. Second, French overlooks the fact that the Draft is simply a price control scheme. “Drafted” players can only negotiate with one team, and under the new labor agreement, there are further limits on rookie compensation.

Most egregiously, the Draft deliberately rewards poor management. The top selections go to the teams with the worst records from the previous season. The expected No. 1 overall pick tonight, Andrew Luck, is likely heading to the Indianapolis Colts, a team that collapsed after years of poor personnel decisions coupled with a catastrophic injury to the team’s starting quarterback. Rather than pay for their mismanagement, the NFL will reward the Colts with the exclusive right to Luck’s services at a below-market price. In effect, the Draft is a player form of government stadium subsidies.

Even the term “Draft” invokes a statist institution—government military conscription—just like title “commissioner” applied to Goodell. Name one private business that calls its CEO a “commissioner.”

Granted, that’s window dressing. So let’s turn to other aspects of the NFL-state axis. A lingering issue from the last labor contract is mandatory testing for human growth hormone. Goodell has consistently demanded an unqualified right to seize players’ blood for HGH testing. Why? Goodell says it’s to protect the integrity of the game. But this isn’t baseball, where statistics are almost a religion. In football, the customers have never shown any particular sensitivity to any sort of drug or HGH use by players, nor is there any demonstrable correlation between the use of such substances and the outcome of games.

The only reason Goodell wants HGH testing is to appease the federal government, which has long viewed professional sports as a key source of propaganda for its Drug War. When famous football players are routinely subject to drug testing, opens the door for expanding such testing to other parts of the population—particularly high school and college students. It reinforces the message that a person’s body is ultimately the property of the state. To that end, Goodell and the NFL recently announced “enhanced” security procedures where all fans attending games are subject to ankles-up “pat-downs,” a clear extension of TSA-style terrorism. And it’s hard to argue when the stadiums themselves are largely funded and operated by government authorities.

Finally, there’s the exclusive source of the NFL’s product—the players—which is government-funded colleges and universities. The NFL is unique among the four major North American sports leagues in that it has no developmental system or international network as alternative sources of talent. The NFL acknowledges this dependence by effectively requiring all potential players to spend at least three years playing for college teams—a rule no other professional league has—and even, under Goodell’s leadership, enforcing penalties against employees for alleged transgressions that took place in college.

There are other statist aspects of the NFL, notably its addiction to intellectual property, that I have not detailed here. But what I outlined above strong supports the notion that we shouldn’t look at the NFL as some wonderful example of free markets, but rather a cancer on society that, in every meaningful aspect, reinforces the central role of the state.

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  • I’m a fan of Oliva’s writing, but when I saw this subject, I expected the worst. Fortunately, the item I feared he marginalizes as “window dressing,” and the rest is excellent and spot-on. (What remains is a rant against that “window dressing.”)

    I detest when people call this sport or that un-libertarian, and point to anything that looks like subsidies to weaker teams. I understand that there is superficial resemblance, but sports leagues are not merely selling the product of superior sport. They ALSO sell competition. That requires some form of “playing-field leveling,” to keep the fans of losing franchises.

    In the market, if Apple does something well, they make money, which they can invest into new products which will hopefully make more money, and so forth. While we all want the opportunity for competition, if Apple’s superiority incidentally allows them to dominate the market by merely producing the greatest products, so much the better for all of us. (This is theoretical: I’m not even attempting to argue that Apple is innocent of any and all government-aided extra-market coercion.)

    In contrast, if the New England Patriots play well, and make money which they can invest in ever-greater talent, THEY can dominate THEIR field, just like Apple. While it (might) be good for the Patriots, and it might even help to create the greatest American-football product ever (in New England), it would be bad news for the league as a whole, because interest would wane badly in this new, non-competitive league. So while the franchises have every incentive to continuously improve their product (their execution of the sport), they need to be reined in by the league, while the league seeks to maintain its own product (competition). Even if that means letting the Colts have exclusive negotiating rights to Andrew Luck.

    Besides THAT, an excellent article.

  • Great stuff, Skip. As usual, spot-on. As I said over on G+, I’m in a pickle, because I *love* NFL football. I wish–hoping against hope really–that it wasn’t the statist cesspool it is, particularly in terms of the stuff you mention, like stadium financing. …and don’t get me started on Goodell, ’cause this is a family site.

  • Doug French, you got served, yo!

  • Great points, overall, but I think the main point of Doug’s article was about how one Joel B. was able to leverage his talents, make money, and gain some recognition in the process. It wasn’t a rah rah rah of the NFL. To SM’s article, this is why I appreciate local talent, grassroots sports so much more. There comes a point, and almost right away, where statism’s and corporatism’s footprints are all over professional sports.