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What is an antitrust exemption?

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2008-02-02 01:26:34

The antitrust laws prohibit agreements by two or more that

"restrain trade in interstate commerce." Labor unions, by their

nature, may engage in such activities when they present demands for

better wages, hours and working conditions. When act as

representatives of a group of employees and serve as agents for

them. So when an agreement between the union and management is

concluded, the working must abide under the conditions agreed to.

To prevent unions from antitrust liability, a "labor exemption" was

created under the Clayton Act of 1914. It has two components. The

so-called "statutory" labor exemption allows unions to enter into

agreements which may create a monopolistic practice regarding the

working conditions of the employees it represents. The

"Non-Statutory Labor Exemption" -- the more applicable concept in

sports law -- is a judicially-derived expansion of the labor

exemption that protects union activity from antitrust scrutiny. It

has been the crux of nearly all antitrust actions in professional

sports (with the exception of baseball, which had an blanket

exemption from antitrust laws until late in 1998). The

non-statutory labor exemption is based on the policy that favors

collective bargaining and gives it preference over the antitrust

laws. Basically, any union-management agreement that was a product

of good faith negotiation will receive protection from the

antitrust laws. That means that the provisions of the agreement

cannot be attacked as collusive or anti-competitive. Say that a

salary cap is agreed to by a union and management. In pure

antitrust terms, a cap can be a violation of the antitrust law. But

since the cap was part of the collective bargaining agreement

negotiatedin good faith and agreed-to by the union and management,

the cap cannot attacked in court as a violation of antitrust. The

statutory and non-statutory exemptions were intended to help unions

from the threat of antitrust suits. But in sports, the tables have

been turned. In the past, the exemptions have been used by

management to enforce agreements that were "forced" on a weaker

union (yes, there have been weak unions in sports!). The NFL

players union learned this the hard way, when, after a series of

cases in the late 1980s and early 1990s, it was ruled that the

exemption applied throughout the negotiation process, even after a

labor contract expired. This interpretation of the non-statutory

exemption was upheld by the U.S. Supreme Court in 1997. During the

recent NBA lockout, there was talk of decertifying the union by

certain agents representing star players. Without a union, any

imposition of a salary cap could likely violate antitrust laws --

and their top players could then have no constraints in negotiating

even higher salaries.

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