Breaking News: Sterling's wife tells Barbara Walters she will fight any attempt

[saltlover]

I do a lot of anti-trust work.  I would be surprised if anything anti-trust resulted from this.  Courts and federal regulators are both giving a lot of leeway on those rules right now.  I know this is a slightly different situation, but I'm hard-pressed to see how a good claim can be made under the Sherman or Clayton Acts.

I have no legal background whatsoever.  But I do have a business background. Wouldn't forcing someone to divest an asset that could be worth upwards of $1 billion -- and subjecting them to the tax liability- due to something they simply said - be in violation of those acts?

I'm also not a lawyer, but an economist who works in the anti-trust sector (which is pretty vibrant these days -- I've worked on about a half-dozen mergers in the last year.)  I don't know much about law in general, but I'm familiar with the anti-trust laws, because you have to be (the economists at my job get sent to legal seminars just about the Sherman and Clayton Acts).  So I'm a relative expert when it comes to this.

Essentially, if the Sterlings want to claim it is unlawful, on anti-trust grounds, and therefore that these laws should prevent the NBA from forcing the sale of the Clippers, they will need to convince a judge (or, frankly, many judges, since there would certainly be an appeal if they convinced judge #1) that the NBA has a monopoly.  When we're evaluating whether or not something is a monopoly, we need to consider what its "product market" is -- essentially, what is the NBA competing against.  I'll list, from narrowest to broadest, some of the product markets you could argue that the NBA is in (each subsequent category includes the prior categories):

1) Professional basketball
2) Professional sports leagues (MLB, NFL, NHL, MLL, etc.)
3) Professional sports entertainment (NASCAR, Boxing, Wrestling, PGA, Pro Tennis, PBA, Professional Rodeos)
4) Sports entertainment (NCAA)
5) Entertainment in general (movies, tv, music, etc.)

The Sterlings will need to convince a judge that the proper product market is the first.  They will argue that the NBA is 30 businesses colluding together and monopolizing, or exhibiting too much control, over the professional basketball market.  The NBA will argue that it is a joint venture of professional basketball teams, that collectively helps the teams better compete in the entertainment market.  Even if the judge doesn't agree that the NBA should be in the entertainment product market (although I think a strong case could be made that it should), it's highly unlikely that the judge will say that the NBA is not competing  with the NFL, NHL, MLB, Nascar, Golf, Tennis, etc.  Joint ventures are very much allowed under anti-trust law, as long as they do not excessively harm competition.  Indeed, an argument could be made that prices of MLB, NHL, NFL, etc. might rise if the NBA did not exist.  In fact, I'd be surprised if a good argument could be made that prices of those leagues would not rise if the NBA didn't exist.  That fact is why the product market will at a minimum be pro sports.

If the NBA is a legal joint venture (which it is by anti-trust standards), then the Sterlings will not be able to use Sherman or Clayton to get out of the contracts they've agreed to.  Whether or not the NBA is interpreting those contracts correctly is a completely different matter, and will certainly be litigated, and that's something I'm not remotely qualified to opine on.  But an anti-trust argument seems incredibly weak to me, and I'd highly doubt, even if they miraculously found one judge who'd buy it, that the Appellate or Supreme Courts would go along with it.  It would just be way too strict in terms of defining product markets -- and would be economically disprovable.

[kraidstar]

this issue isn't really all that complex. nba teams are franchises - the league can strip franchises from individual "owners." sterling's losing his right to own an NBA franchise, much as a mcdonald's restaurant owner could be stripped of his right to own a mcdonalds if he brke franchise rules. it's clear that sterling has negatively impacted the league, and if the other owners really want him out, they'll get it done.
as for shelly, she's still married to donald, so isn't their stake just a single stake, and not two?   

[paidthecost2betheboss]

At some point the crime (a.k.a, the violation of policy) is going to have to be made clear and on it's face...a secretly recorded audio when taken in it's entirety amounts to a old man responding to repeated questions about his hating black people. It seemed to be more about Magic Johnson and his image among friends. So a covertly recorded phone call where the other person is repeating a phrase until the desired response was given.

When Sterling went to court for discriminatory housing claims he wasn't threatened with stripped ownership but this does it? It make very little sense and should make all the owners wary of saying anything offensive to anyone ever.

As to Lebron injecting himself into this I think that will backfire. He is a player. If the players try to hold the owners hostage it is a defacto lock-out/walk-out

so..

A. Discriminatory housing practices
B. Discrimination lawsuit by N.B.A Player
C. Racist remarks in a private conversation

That "C" was the straw that broke that Camels back is not in the N.B.A's favor. It actually makes them look like a slave to intense media cycles. And now players and coaches are chiming in when it might be best for them to st_u. 
Where was the NBA 8,9,10 years ago?? That's gonna come up more and more.
Rightfully so.

[saltlover]

this issue isn't really all that complex. nba teams are franchises - the league can strip franchises from individual "owners." sterling's losing his right to own an NBA franchise, much as a mcdonald's restaurant owner could be stripped of his right to own a mcdonalds if he brke franchise rules. it's clear that sterling has negatively impacted the league, and if the other owners really want him out, they'll get it done.
as for shelly, she's still married to donald, so isn't their stake just a single stake, and not two?

They're actually not the same thing as a restaurant franchise.  The word is the same, but the set-up is very different.  The 30 basketball teams essentially control the NBA.  They've agreed to cede some of their individual control of their teams to the collective body of the NBA, but they can exert control upwards.  If you're a McDonald's franchisee, you have no stake in McDonald's.

[colincb]

The NBA is claiming that if Sterling is thrown out as the "controlling" owner, then all lesser owners, including Mrs Sterling are out also.  She's never been approved as an NBA owner.

I'd bet on the NBA's interpretation.

[Ogaju]

actually it is  not the forced sale that violates the Clayton Act.

[saltlover]

actually it is  not the forced sale that violates the Clayton Act.

Are you suggesting that it is something else that violates the Clayton Act?  If so, what?

If not, then I agree.

[Ogaju]

I do a lot of anti-trust work.  I would be surprised if anything anti-trust resulted from this.  Courts and federal regulators are both giving a lot of leeway on those rules right now.  I know this is a slightly different situation, but I'm hard-pressed to see how a good claim can be made under the Sherman or Clayton Acts.

I have no legal background whatsoever.  But I do have a business background. Wouldn't forcing someone to divest an asset that could be worth upwards of $1 billion -- and subjecting them to the tax liability- due to something they simply said - be in violation of those acts?

Actually the forced sale is not a per se violation of anti-trust rules. What violates the Clayton Act is the entire arrangement called the NBA. The players are going to have to dial down the rhetoric because if they flex their muscles the government will have to look into the monopolistic features of the NBA. What the Clippers debacle shows us is the following.

1. There is a multi-billion dollar business of professional basketball in the USA.

2. There is no competition in this business because only one company provides the service and that company is the NBA.

3. Entry into and exit from the business is controlled by the NBA.

4. You cannot form a basketball team and enter the NBA, no matter how much money you have or how good a plan you have.

5. The fa?ade that the NBA is a business made of independent teams representing municipalities after which they are named has been debunked. The league is one corporation with by-laws and a constitution with 30 partners or shareholders that restricts competition.

6.The league also colludes to fix prices and restrict player movement.

YEAH the forced sale is not the disease it is a mere symptom.

[saltlover]

I do a lot of anti-trust work.  I would be surprised if anything anti-trust resulted from this.  Courts and federal regulators are both giving a lot of leeway on those rules right now.  I know this is a slightly different situation, but I'm hard-pressed to see how a good claim can be made under the Sherman or Clayton Acts.

I have no legal background whatsoever.  But I do have a business background. Wouldn't forcing someone to divest an asset that could be worth upwards of $1 billion -- and subjecting them to the tax liability- due to something they simply said - be in violation of those acts?

Actually the forced sale is not a per se violation of anti-trust rules. What violates the Clayton Act is the entire arrangement called the NBA. The players are going to have to dial down the rhetoric because if they flex their muscles the government will have to look into the monopolistic features of the NBA. What the Clippers debacle shows us is the following.

1. There is a multi-billion dollar business of professional basketball in the USA.

2. There is no competition in this business because only one company provides the service and that company is the NBA.

3. Entry into and exit from the business is controlled by the NBA.

4. You cannot form a basketball team and enter the NBA, no matter how much money you have or how good a plan you have.

5. The fa?ade that the NBA is a business made of independent teams representing municipalities after which they are named has been debunked. The league is one corporation with by-laws and a constitution with 30 partners or shareholders that restricts competition.

6.The league also colludes to fix prices and restrict player movement.

YEAH the forced sale is not the disease it is a mere symptom.

I cover this above, but I really don't buy the NBA is a monopoly, or has too much control of the market, at all.  The NBA is clearly competing with the other sports leagues, as well as other forms of entertainment, for advertising dollars, customer dollars, and media dollars.  The fact that they control their product by saying who can and can't be a part of the NBA is a sign of the fierce competition they face in the entertainment industry, and not at all something collusive or violating Clayton.

[hwangjini_1]

I do a lot of anti-trust work.  I would be surprised if anything anti-trust resulted from this.  Courts and federal regulators are both giving a lot of leeway on those rules right now.  I know this is a slightly different situation, but I'm hard-pressed to see how a good claim can be made under the Sherman or Clayton Acts.

I have no legal background whatsoever.  But I do have a business background. Wouldn't forcing someone to divest an asset that could be worth upwards of $1 billion -- and subjecting them to the tax liability- due to something they simply said - be in violation of those acts?

Actually the forced sale is not a per se violation of anti-trust rules. What violates the Clayton Act is the entire arrangement called the NBA. The players are going to have to dial down the rhetoric because if they flex their muscles the government will have to look into the monopolistic features of the NBA. What the Clippers debacle shows us is the following.

1. There is a multi-billion dollar business of professional basketball in the USA.

2. There is no competition in this business because only one company provides the service and that company is the NBA.

3. Entry into and exit from the business is controlled by the NBA.

4. You cannot form a basketball team and enter the NBA, no matter how much money you have or how good a plan you have.

5. The fa?ade that the NBA is a business made of independent teams representing municipalities after which they are named has been debunked. The league is one corporation with by-laws and a constitution with 30 partners or shareholders that restricts competition.

6.The league also colludes to fix prices and restrict player movement.

YEAH the forced sale is not the disease it is a mere symptom.

I cover this above, but I really don't buy the NBA is a monopoly, or has too much control of the market, at all.  The NBA is clearly competing with the other sports leagues, as well as other forms of entertainment, for advertising dollars, customer dollars, and media dollars.  The fact that they control their product by saying who can and can't be a part of the NBA is a sign of the fierce competition they face in the entertainment industry, and not at all something collusive or violating Clayton.

I have enjoyed the debate, and SL has raised great points. But I have a real question about the above...

Why is it that a small group of like minded businessmen working together to control access and limit membership, as well as the rules governing membership, in a small market place not collusion?

I await the usual insightful explanation. 

[Kuberski33]

The Anti Trust Issue aside (and thanks guys, love the fact that I'm learning something here..lol) just the fact that the NBA wants to strip ownership and force a sale because of something someone said....just strikes me as not right.

Personally the whole politically correct thing I think has just has gone way too far.  And while I understand that Sterling was being racist and/or delusional - it's still words.  His comments haven't broken any law. 

Yes, they were incredibly stupid, yes they have probably harmed the business of the NBA in terms of lost sponsorships and PR damage.  Yes if he continues to own the team the league is going to have big problems - but we still have a right to free speech in this country. 

The minute opening your mouth can cause you to have personal property taken away, we've lost it.  Keeping in mind this is a country where a musical artist can talk about killing cops and that's ok.

[CoachBo]

I do a lot of anti-trust work.  I would be surprised if anything anti-trust resulted from this.  Courts and federal regulators are both giving a lot of leeway on those rules right now.  I know this is a slightly different situation, but I'm hard-pressed to see how a good claim can be made under the Sherman or Clayton Acts.

I have no legal background whatsoever.  But I do have a business background. Wouldn't forcing someone to divest an asset that could be worth upwards of $1 billion -- and subjecting them to the tax liability- due to something they simply said - be in violation of those acts?

I'm also not a lawyer, but an economist who works in the anti-trust sector (which is pretty vibrant these days -- I've worked on about a half-dozen mergers in the last year.)  I don't know much about law in general, but I'm familiar with the anti-trust laws, because you have to be (the economists at my job get sent to legal seminars just about the Sherman and Clayton Acts).  So I'm a relative expert when it comes to this.

Essentially, if the Sterlings want to claim it is unlawful, on anti-trust grounds, and therefore that these laws should prevent the NBA from forcing the sale of the Clippers, they will need to convince a judge (or, frankly, many judges, since there would certainly be an appeal if they convinced judge #1) that the NBA has a monopoly.  When we're evaluating whether or not something is a monopoly, we need to consider what its "product market" is -- essentially, what is the NBA competing against.  I'll list, from narrowest to broadest, some of the product markets you could argue that the NBA is in (each subsequent category includes the prior categories):

1) Professional basketball
2) Professional sports leagues (MLB, NFL, NHL, MLL, etc.)
3) Professional sports entertainment (NASCAR, Boxing, Wrestling, PGA, Pro Tennis, PBA, Professional Rodeos)
4) Sports entertainment (NCAA)
5) Entertainment in general (movies, tv, music, etc.)

The Sterlings will need to convince a judge that the proper product market is the first.  They will argue that the NBA is 30 businesses colluding together and monopolizing, or exhibiting too much control, over the professional basketball market.  The NBA will argue that it is a joint venture of professional basketball teams, that collectively helps the teams better compete in the entertainment market.  Even if the judge doesn't agree that the NBA should be in the entertainment product market (although I think a strong case could be made that it should), it's highly unlikely that the judge will say that the NBA is not competing  with the NFL, NHL, MLB, Nascar, Golf, Tennis, etc.  Joint ventures are very much allowed under anti-trust law, as long as they do not excessively harm competition.  Indeed, an argument could be made that prices of MLB, NHL, NFL, etc. might rise if the NBA did not exist.  In fact, I'd be surprised if a good argument could be made that prices of those leagues would not rise if the NBA didn't exist.  That fact is why the product market will at a minimum be pro sports.

If the NBA is a legal joint venture (which it is by anti-trust standards), then the Sterlings will not be able to use Sherman or Clayton to get out of the contracts they've agreed to.  Whether or not the NBA is interpreting those contracts correctly is a completely different matter, and will certainly be litigated, and that's something I'm not remotely qualified to opine on.  But an anti-trust argument seems incredibly weak to me, and I'd highly doubt, even if they miraculously found one judge who'd buy it, that the Appellate or Supreme Courts would go along with it.  It would just be way too strict in terms of defining product markets -- and would be economically disprovable.

Appears Don told CNN that he doesn't intend to fight the NBA's decision. I hate to see that, because I'm looking forward to the Clippers being broken up on the floor.

They can litigate it all they want, but legal precedent indicates they don't have a snowball's chance in Hades of prevailing, since they've agreed by their participation to the rules of a legal joint venture.

Still hoping the Sterlings are stupid enough to litigate the beejezus out of this so their franchise falls apart.

[nickagneta]

Does it matter whether the Sterlings have a leg to stand on to win any type of legal fight? Isn't it more important to the Sterlings to have enough of a case to get an injunction and stall the process in the courts endlessly. If they do that and in the meantime, Sterling dies, couldn't Shelly and anyone else that inherits Donald Sterling's portion now argue that Sterling is gone and the matter resolved? Wouldn't the league now look at his death as his removal and have a desire to stop spending millions on litigation and just accept the owners that Sterling's death puts in place?

Perhaps the best Sterling strategy is attrition?

[Fafnir]

Does it matter whether the Sterlings have a leg to stand on to win any type of legal fight? Isn't it more important to the Sterlings to have enough of a case to get an injunction and stall the process in the courts endlessly. If they do that and in the meantime, Sterling dies, couldn't Shelly and anyone else that inherits Donald Sterling's portion now argue that Sterling is gone and the matter resolved? Wouldn't the league now look at his death as his removal and have a desire to stop spending millions on litigation and just accept the owners that Sterling's death puts in place?

Perhaps the best Sterling strategy is attrition?

Players and NBA have been pretty clear that they want them both gone. I don't think dragging out that process would change anything with regards to that.

[Fafnir]

The Anti Trust Issue aside (and thanks guys, love the fact that I'm learning something here..lol) just the fact that the NBA wants to strip ownership and force a sale because of something someone said....just strikes me as not right.

Personally the whole politically correct thing I think has just has gone way too far.  And while I understand that Sterling was being racist and/or delusional - it's still words.  His comments haven't broken any law. 

Yes, they were incredibly stupid, yes they have probably harmed the business of the NBA in terms of lost sponsorships and PR damage.  Yes if he continues to own the team the league is going to have big problems - but we still have a right to free speech in this country. 

The minute opening your mouth can cause you to have personal property taken away, we've lost it.  Keeping in mind this is a country where a musical artist can talk about killing cops and that's ok.

Free speech doesn't mean freedom from business consequences. Saying such awful things about your employees is always going to be a quick ticket to the exit, especially when your employees are both unionized and powerful (due to their scarce nature, can't hire replacement players without the viewing public turning away)