US Soccer and MLS are preparing for an antitrust lawsuit in the NASL lawsuit

A long-running antitrust dispute involving top-flight soccer in the United States will go to trial this September – a legal proceeding that could reshape the professional game in the U.S. and Canada.

The dispute pits the North American Soccer League (NASL), a men’s league that operated from 2011 to 2017, against US Soccer and Major League Soccer (MLS).

More on Sportico.com

On Wednesday, an Eastern District of New York judge rejected motions for summary judgment in the seven-year-old case.

A large part of this case concerns U.S. Soccer’s standards for penalizing Division I, II and III professional soccer leagues and how those standards are applied. Minimum stadium capacity and minimum number of teams are among the factors considered by US Soccer. Sanctions are crucial to the league’s ability to gain legitimacy among fans, sports and broadcasters. It also allows the league to charge expansion teams higher entry fees and recruit better talent. For players, employment with a sanctioned team entitles them to play on U.S. national teams and in FIFA-sanctioned matches and tournaments.

The NASL claims that US Soccer and MLS illegally conspired to exclude the NASL from competing with MLS. The NASL was formed in 2009 after teams from the USL, a minor league affiliate of MLS, broke away in hopes of forming a league that could compete with MLS. US Soccer recognized the NASL as a D2 league, but when it sought D1 status, US Soccer rejected the application. US Soccer also declined to recognize the NASL as a D2 league for 2018, awarding that status to USL. The NASL subsequently suspended operations.

On the other hand, US Soccer granted MLS waivers to maintain D1 status even if MLS was not in compliance. For example, D1 standards require that a team’s home stadium have a capacity of at least 15,000 spectators. Not all MLS stadiums met this requirement, but U.S. Soccer granted waivers for the construction of new MLS stadiums. The NASL highlights U.S. Soccer’s willingness to allow MLS to operate without meeting the requirements, while simultaneously denying NASL waiver requests and (likely) subjecting the NASL to more stringent scrutiny.

When the NASL sued US Soccer in 2017, it sought a preliminary injunction that would force US Soccer to recognize the NASL as a D2 league. A federal judge denied NASL’s request. However, the case dragged on for years and continued to evolve as additional claims were raised and MLS was named as the next defendant.

U.S. District Judge Brian Cogan’s order this week addresses the parties’ motions for summary judgment and the NASL’s claim that U.S. Soccer’s standards – and the manner in which they are applied – violate antitrust law.

Cogan found that NASL’s claim that the standards themselves violated antitrust law was unlawful. It argued that the NASL’s claims are based on “real-world application” and “enforcement” of standards, including U.S. Soccer’s denial of status and waiver requests. The compliance of the standards themselves with antitrust law does not require further analysis.

But Cogan decided a jury should decide whether app these standards are consistent with antitrust law. He justified that the evidence and testimony submitted during pre-trial findings left much to be desired.

On the one hand, NASL “provides no direct evidence of an agreement or conspiracy,” which arguably undermines its claim. In the same vein, US Soccer and MLS insist that there are no documents or witnesses indicating that US Soccer has agreed to exempt MLS from US Soccer’s standards.

But Cogan emphasized the NASL has introduced “circumstantial evidence of parallel behavior” by US Soccer and MLS teams. He also noted that the lack of direct evidence “is the whole point of circumstantial evidence, because lawless conspirators rarely write down their plan.”

To that end, Cogan pointed out that MLS “enjoys D1 league status” without having to meet D1 standards. He added that former US Soccer president Sunil Gulati and MLS commissioner Don Garber “have repeatedly encouraged the (US Soccer) Board of Directors to grant any D1 waiver request submitted by MLS.”

Cogan emphasized that the stadium capacity requirement was considered a disqualifying factor for the NASL, but not MLS.

The judge also highlighted evidence suggesting that American soccer only began formally enforcing the standards when the NASL “emerged as a potential competitor to MLS.” Cogan argued that such a change could be considered circumstantial evidence that US Soccer and MLS agreed to limit competition. Cogan also referred to the testimony of former US soccer president Robert Contigugli, who admitted there was less of a “formal oversight” before 2009.

However, US Soccer and MLS vehemently deny any insinuations of conspiracy. They maintain that the standards were developed before the NASL existed, which undermines any theory that the standards were intended to harm the NASL. Cogan reasoned that the timing and factual disputes between the parties could not be resolved at the summary judgment stage.

Cogan also noted interpretation disputes regarding MLS owners forming a licensing and marketing entity called “Soccer United Marketing.” NASL highlights how the entity entered into agreements with US Soccer to sell both US Soccer and MLS, resulting in US Soccer receiving “hundreds of millions of dollars in revenue.”

According to NASL, these agreements constitute evidence of concerted action. However, US Soccer and MLS insist that these agreements are unrelated to the standards, which, unlike those agreements, are at issue in this case. Cogan wrote that this disagreement “is another issue of material fact” that must be examined at trial.

Cogan also detailed the parties’ conflicting positions regarding the high degree of control MLS allegedly exercises over U.S. Soccer’s management. The NASL emphasizes that “when Gulati worked for the MLS team, he carefully selected the U.S. Soccer Board members who voted to adopt and apply the Standards.”

In this context, the board members’ statements referenced in the Cogan ruling include: “It is unclear whether Sunil (Gulati) needs the Board. Some decisions are made entirely outside the Council; and “We go to meetings to get stamps.”

But U.S. Soccer and MLS maintain that the alleged control argument is yet another fallacy in this dispute, which is about the application of rules, not management control. They emphasize that board members associated with MLS did not vote on the motions to impose sanctions. “I agree with defendants,” Cogan wrote, “that the abstinence of these leaders from voting casts significant doubt on whether the U.S. Soccer Board was in fact dominated by MLS.”

Cogan further found that the parties inconsistently presented the anti-competitive and pro-competitive effects resulting from US Soccer’s management of professional soccer, precluding him from granting summary judgment.

NASL makes the logical argument that because U.S. Soccer’s adoption of the standards has made MLS and USL the only D1 and D2 leagues, respectively, consumers have less choice in which leagues they want to emulate. The NASL also presented evidence, Cogan wrote, “that MLS and USL were able to charge higher prices to expansion teams because their league memberships are the only products available to purchasers of memberships in the D1 and D2 leagues.”

However, U.S. Soccer and MLS teams logically argue that these alleged anti-competitive effects are not due to the standards. The defendants maintain that there is “no documented evidence of any decline in the quality of football leagues or competitions or of harm to fans” and attribute the NASL’s woes to “its own mismanagement.”

The trial is scheduled to start on September 9. If the NASL wins and prevails in its appeals, U.S. Soccer could be forced to restructure how it oversees professional soccer. Theoretically, a win could spur new leagues. But the flip side of the victory may be true: The MLS league – which metrics show is growing in popularity and value – is being hurt in a way that is disappointing to fans and players. It is also possible that the parties will reach an agreement.

The best on Sportico.com