USSF: Playing Monopoly or Soccer?

Written By Nick Constantino

 

The North American Soccer League (NASL) announced that it has canceled its 2018 season after it failed to receive a preliminary injunction, which would have prevented the U.S. Soccer Federation (USSF) from revoking NASL’s Division II status.

Background

USSF is the official governing body of soccer in the United States. The U.S. professional soccer structure, organized by USSF, is split into three different divisions (I, II, and III), with I being at the top of the pyramid, and III at the bottom. Similar to the structure of the National Collegiate Athletic Association (“NCAA”), Division I status is the most desirable. NASL’s Division I status signifies the highest level of competition and overall status, with several competitive and financial benefits, including better positioning in international competitions and higher-quality sponsorships and television deals. Those benefits decrease along with the division level.

To meet Division I standards, USSF requires a league to have at least 16 teams, stadiums with a capacity of more than 15,000, and that a certain number of those teams be located in cities that have a population of at least 2 million people. Currently, and likely for the foreseeable future, Major League Soccer (MLS) is the only sanctioned USSF Division I league in the United States.

In contrast, to meet Division II standards, USSF requires leagues to have at least 12 teams, in addition to having teams located in the Eastern, Central, and Pacific time zones. As of this year, the United Soccer League (USL) is the only sanctioned Division II league, which is the reason for NASL bringing a lawsuit.

There are currently no Division III leagues recognized by USSF. However, two leagues are reportedly eying Division III status by 2020.

NASL Fights Back

NASL is a professional men’s soccer league with five teams headquartered in New York City. A group of teams founded NASL in late 2009. From its inaugural season in 2011, it was sanctioned by USSF as a Division II league. However, in August of 2017, USSF revoked NASL’s Division II status because the league fell short of the two requirements, as NASL prepared to host only 8 teams for the 2018 season, none of which were located in the Central time zone.

In response, NASL filed suit in the U.S. District Court for the Eastern District of New York. NASL also requested a preliminary injunction to preserve its Division II status while the court considered the underlying claims.

NASL argues that USSF’s joint financial ties to MLS represent a fundamental conflict of interest, resulting in an antitrust violation that interferes with U.S. Soccer’s independence in setting and applying their standards to NASL and other Division II sanctioning. This is because MLS and USSF are partners in Soccer United Marketing, a company with an estimated value of $2 billion. NASL argues that being corporate partners is motivation for USSF to deny NASL Division II status because USSF is protecting their corporate partner’s interests by not allowing a potential competitor to the MLS. Although NASL and MLS would not be direct competitors if USSF granted the NASL Division II status, the next ‘step up’ for NASL would be Division I status, consequently placing NASL in direct competition with MLS.

Hearing the Injunction

During the preliminary injunction hearing, NASL did not challenge the authority of USSF to establish divisional tiers or even promulgate standards for professional leagues, both issues potentially subject to antitrust regulation. Instead, NASL attempted to eliminate the standards it did not meet, arguing a concerted effort between USSF, MLS, and USL to effectively ‘crowd’ NASL out of the soccer market.

Under federal antitrust laws, a court may issue a preliminary injunction where a party shows (1) irreparable harm; (2) a likelihood of success on the merits of the original claim; (3) a balance of the hardships tipping decidedly in favor of the moving party; and (4) that a preliminary injunction is in the public interest. However, the court will only grant an injunction in a situation altering a result already decided (in this case, USSF revoking NASL’s division II status) “upon a clear showing that the moving party is entitled to the relief requested.”

Here, Judge Margo K. Brodia found that NASL would suffer “irreparable harm” upon losing its Division II status. She determined that NASL might even fold as a league or lose valuable investors if USSF revoked their Division II status. Both of those factors, she concluded, constitute “irreparable harm.”

She then found that the hardship NASL would suffer “tips slightly” more in favor of NASL, in comparison to the harm USSF would sustain by disrupting its regulatory authority, and that granting the injunction would not harm the public interest.

Despite all of this, Judge Brodia found that NASL failed to prove they were clearly entitled to the relief requested. She determined that, “despite the ample evidence of a conflict of interest between [USSF] and MLS, [NASL] fails to present sufficient evidence of undue influence in the actual standard-setting process.” Judge Brodia did not think that the conflict of interest between USSF and MLS influenced the decision to deny NASL’s status, rather, she found that NASL failed to meet Division II requirements due to their own fault.  Consequently, Judge Brodia denied NASL’s claim.

NASL appealed the ruling to the Second Circuit on December 15, 2017. In their appeal, NASL argued that the District Court abused its discretion in applying the preliminary injunction standard.

On February 23, 2018, the Second Circuit affirmed Judge Brodia’s decision.

What’s Next?

On February 27, 2018, NASL’s Interim Commissioner, Rishi Sehgal, announced that the league was cancelling its 2018 season and would be shifting its focus “to securing the longer-term advancement of soccer in this country, not only for the NASL, but for all soccer fans, clubs, and communities impacted by the USSF’s restrictions on competition.”

Just one week after the decision to cancel the upcoming season, NASL dropped down to just three teams. The New York Cosmos, Miami FC, and Jacksonville Armada will instead play this year in the National Premier Soccer League, a semi-professional competition not sanctioned by the USSF.

 

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Sources Cited

NASL Staff, North American Soccer League Announces Cancellation of 2018 Season, NASL (Feb. 27, 2018).

Injunctive Relief for Private Parties, 15 U.S.C. § 26 (1914).

Otoe-Missouria Tribe of Indians v. N.Y. State Dep’t of Fin. Servs., 769 F.3d 105, 110 (2d Cir. 2014).

Anthony Gruppuso, NASL Cancels Complete 2018 Season After Court Ruling, ESPN (Feb. 27, 2018).

Jeff Carlisle, NASL Sues U.S. Soccer Directors Over Acting to Protect Interests, ESPN (Feb. 6, 2018).

Photo courtesy of NASL.com.

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