Most people have heard the term “antitrust.” One generally thinks of huge corporations when antitrust is bandied. Many associate the word with Microsoft because of its long running antitrust battle with the government. But the antitrust laws apply to any organization, big or small, that attempts to use its monopoly or dominant market position to restrain trade. Antitrust laws are quite complex, but they can be summarized as a collection of laws that are supposed to promote fair competition that benefits consumers. The best known aspect of the antitrust laws is to prevent or limit monopolies. A monopoly can, and will, abuse its market position by charging outrageous prices or force undesirable choices simply because there is no alternative. (Remember British philosopher Lord Acton: “Absolute power corrupts absolutely.”) The penalties for violating antitrust laws can be severe, including criminal charges.
Few know it, but an antitrust investigation was launched here in Scotts Valley and San Lorenzo Valley. If you or your children played soccer in the SV/SLV Soccer Club, you were the targets of antitrust activities a few years back.
For many years, outside of school competition, the California Youth Soccer Association enjoyed a monopoly on competitive youth soccer in Santa Cruz County. (A few competitors have emerged in recent years.) The county CYSA affiliate is the Santa Cruz County Youth Soccer League. There are five geographic clubs within the league: SV/SLV, Aptos, Pajaro, Mid-County and Santa Cruz. Each of these five clubs field recreational and competitive teams. The competitive teams were known as D3 and played in CYSA’s D3 leagues throughout the Bay Area and Monterey Bay. (There is a sixth countywide club called Breakers that only fields competitive teams.)
By far, the largest number of players competed in recreational leagues. And, of course, the fees from recreational players were the lion’s share of SCCYSL’s and CYSA’s budget.
A few years ago, some geographic clubs, including SV/SLV and Aptos, began questioning the fees being charged and how they were spent. For example, a fair amount of local fees were being funneled for a large soccer complex out of county. The local clubs questioned why fees paid by recreational players were being used for a complex that only competitive teams would use while recreational teams struggled to find adequate fields here in Santa Cruz County. So, SV/SLV announced it was going to run its own recreational leagues independently of SCCYSL and CYSA to keep costs down and keep fees local. The SCCYSL board, which controlled registration of D3 teams into CYSA’s D3 leagues, then blocked SV/SLV from registering their D3 teams. At the time, there was no alternative to CYSA leagues for D3 teams.
Blocking D3 teams from playing was a strategy CYSA had employed in clubs north of San Francisco to keep recreational players in CYSA. Similar to SV/SLV, a few clubs up north decided that they could find a better deal for their recreational players outside of CYSA. A short time before D3 league play began, CYSA announced it would not allow the northern clubs to play in the D3 leagues unless they registered their recreational players with CYSA. To prevent many disappointed kids and parents, the clubs capitulated and paid the registration fees to CYSA. The clubs still played in their own recreational leagues, but CYSA got their registration fees. CYSA’s strategy, however, violated the antitrust laws.
CYSA’s tactic is called a tying arrangement. A tying arrangement typically involves a seller with monopoly power in a given product who refuses to sell that product unless the buyer buys, or agrees not to buy from the seller's competitor, a separate product over which the seller does not have extensive independent market power. In the case of CYSA, of course, the monopoly product is the D3 league and tournaments, while the separate product where CYSA doesn’t enjoy monopoly power is the recreational leagues.
When the SCCYSL board blocked the D3 registration, SV/SLV registered a complaint with the state’s attorney general that the SCCYSL and CYSA were violating the antitrust laws. An investigator for the attorney general contacted the SV/SLV board and gathered facts and names. About a week later, the registration program was suddenly made available to SV/SLV’s D3 teams. Shortly after that, a call was received from the state’s investigator. He was mum on what he discovered, what he decided or what he or the attorney general said to anyone. He only said that SV/SLV should not experience any more troubles registering their D3 teams.
Stories about adults who ruin youth sports by berating coaches, beating referees, changing the dates on birth certificates, etc., abound. Add antitrust violations to the list.
- Gary Redenbacher of Scotts Valley is an attorney in private practice. E-mail him at email@example.com