Slam Dunk or Foul Play? NBA Faces Antitrust Heat from Big3
In January of 2023, representatives from the Big3 basketball league convened with officials from the Department of Justice (“DOJ”) in Washington, aiming to argue their stance: the National Basketball Association (“NBA”) is in breach of federal antitrust regulations.
Founded in 2017 by rapper/actor Ice Cube and entertainment executive Jeff Kwatinetz, the Big3 league offers an opportunity for former NBA players to showcase their sustained abilities in the later years of their careers. The league runs during the summer, after the NBA playoffs have concluded, and the games played are strictly 3v3. Today, the Big3 boasts talented rosters filled with former NBA and international talent and has grown significantly since its conception. However, Ice Cube and other Big3 executives have openly criticized the NBA and Commissioner Adam Silver for purported attempts to stunt the league’s growth in different areas. This alleged anticompetitive behavior sparked the DOJ’s antitrust division to launch an investigation into these accusations.
The Big3’s model centers around former NBA players demonstrating their immense athletic abilities and basketball talent compared to the average individual. For this reason, one could logically expect the NBA to get behind the Big3 due to the natural entwinement from shared personnel and branding. However, the DOJ investigation suggests the exact opposite.
According to insiders familiar with the investigation, the DOJ is currently investigating whether the NBA exerted influence and discouraged advertisers and television partners from associating with Big3. The inquiry also delves into whether the NBA imposed restrictions on its current players, who often take part in various summer leagues like the Drew League in Los Angeles, from joining the Big3. Only one active NBA player, Jaylen Brown of the Boston Celtics, has appeared in a Big3 event to date, playing in the summer 2023 Big3 All-Star game. In addition, even NBA referees are not allowed to officiate any games for the Big3, even though they may work for other companies outside of the NBA.
The investigation also focuses on whether the NBA has prevented its team owners from making investments in the Big3. The NBA's constitution prohibits team owners from holding any form of financial stake, whether direct or indirect, in any other basketball league or non-NBA team, unless such participation is approved by a three-fourths vote from fellow owners.
From an NBA team owner's perspective, it makes sense why they would not want their players participating in off-season leagues. The NBA maintains the highest average salary per athlete of any professional sports league in the world, and the owners make substantial investments in these players through lengthy and lucrative contracts that understandably should be honored.
However, the confusion comes into play when dozens of players from around the league play in numerous other off-season leagues every summer. Why is the Big3, a league based in principle on its “ex-NBA” branding, not one of them? Ice Cube alleges the NBA has actively tried to shun the Big3 specifically, even though he has made numerous attempts to work with them. According to the report, current NBA players have expressed their desire to participate in the Big3 league, but the NBA has implemented restrictive regulations designed to hinder their involvement. The NBA's reasoning behind its unwillingness to collaborate remains to be discovered.
The most concrete evidence of anticompetitive behavior in support of the Big3’s position would be if the investigation reveals that the NBA dissuaded television partners and advertisers from doing business with the Big3. According to Section 5 of the Federal Trade Commission Act ("Act"), “unfair methods of competition” and “unfair or deceptive acts or practices” should be pursued.
The Act separates anticompetitive practices into two groups: Horizontal Conduct and Single Firm Conduct. Horizonal Conduct refers to agreements between competitors to limit competition by hindering other businesses from entering the market. Single Firm conduct refers to the monopolization of an industry through unreasonable methods. If it proves true that the NBA encouraged advertisers and television partners to not do business with the Big3, while simultaneously preventing top talent from participating in the league, they most certainly could be in violation of a combination of these two groups of behavior.
This investigation marks another significant point in an important trend in federal regulation of professional sports leagues. Since the Supreme Court ruled the NCAA violated the Sherman Act in the now infamous NCAA v. Alston case, the floodgates on antitrust investigation into sports entities have opened. The underlying idea is that athletes, whether they are minor league baseball players, non-NBA level basketball players, college athletes, or well-off golfers, all experience advantages when there is competition for their talents. The lack of viable competing leagues not only adversely affects them, but competing leagues also lead to lower wages.
Moreover, it's not just about labor. Antitrust division lawyers also argue that fans can reap the rewards when leagues are compelled to compete in aspects ranging from the quality of their offerings to ticket prices. Accordingly, the antitrust division cares a lot about how well-established leagues respond to rival upstarts, such as the Big3, trying to get off the ground, looking at everything from league behavior to league bylaws.
While the average consumer may find it difficult to sympathize with athletes who are already making millions to play sports professionally, the legal implications of anticompetitive behavior within professional sports are undeniably intriguing. Should it be proven that the league did commit antitrust violations, reports reveal that the NBA could receive a significant fine. According to spokespeople for the NBA, all the allegations regarding sponsorship and TV exposure are untrue. However, only time will tell if the DOJ finds evidence to refute this assertion. The investigation will continue to take place over the coming months.
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