The XFL: A Single Entity on its Second Life

Posted on by Marques Winick

In January, Vince McMahon, Chairman and CEO of the popular World Wrestling Entertainment, announced that he would be recreating the XFL, a professional football league that will begin competing during the offseason of the National Football League (NFL) in 2020.1 This will be McMahon’s second crack at the XFL; his first attempt, in 2001, collapsed after only one season due to a poor on-field product, with McMahon deeming it a “[C]olossal failure.”2 McMahon hopes that his second effort will be different, largely by providing for an extra year for players to train.3 In addition, while the original XFL was marketed as a more violent and more risqué version of the NFL, McMahon has vowed that this iteration will present a more family-friendly, safety-oriented game, compared to both the previous XFL and the NFL.4 For example, McMahon wants the average game to take about two hours – much shorter than the average NFL game.5 Furthermore, the XFL will not allow anybody with a criminal record to play in the league, nor will it allow players to take political stances during games, restrictions that the NFL does not currently impose.6

The XFL’s differences from the NFL, however, will stretch far beyond its player restrictions or average game time. Most notably, it will be organized as a single entity, a fundamentally different structure than the NFL and most other professional American sports leagues.7 Rather than having each team owned by a separate individual or entity, the entire league and all of its teams will be owned by Alpha Entertainment, a company founded by McMahon for that purpose.8 This will potentially allow the XFL to function much more efficiently than the NFL, as McMahon/Alpha Entertainment will be able to implement league-wide policies unilaterally, without the possibility of an owner objecting for self-interested reasons.9 This structure will also allow the league to keep operational costs down, because the teams will not have to employ their own expensive staffs.10 McMahon surely considered these advantages in reviving the XFL.

The single entity structure will also carry deep ramifications for how the league is treated by antitrust law, as it will mean that the league will not be liable under Section One of the Sherman Antitrust Act.11 Section One of the Sherman Act prohibits any “[C]ontract, combination . . . or conspiracy, in restraint of trade . . . .”12 If the XFL is a single entity, rather than a combination of entities that compete with each other, it is incapable of combining or conspiring with itself to restrain trade, and thus cannot be challenged under Section One.13 Thus, if players or third parties believe that the XFL is engaging in anticompetitive behavior, it could only be challenged under Section Two of the Sherman Act, which prohibits monopolies.14 This distinction is not just semantics; it can have a significant impact on an entity’s potential antitrust liability. Many United States sports leagues have faced Section One lawsuits over issues like salary limits, eligibility rules, and free agency restrictions.15 These lawsuits can be costly and time-consuming, with resolutions sometimes taking years.16 In contrast, Section Two claims are “[R]elatively rare and comparatively easy to defend,” making the prospect of section one immunity very attractive for someone in McMahon’s position.17 Immunity from section one lawsuits would thus allow the XFL to unilaterally impose rules or policies that would spark outrage in other leagues.18

The risk of antitrust liability is mitigated in most other professional sports leagues due to the injection of labor law, which exempts a league from antitrust liability in the presence of a collectively-bargained agreement between the league and a players’ union.19 This so-called “labor exemption” presumably will not protect the XFL, unless the players decide to unionize at some point, a process that can take a significant amount of time.20 The XFL’s strategy, therefore, will be to rely on its structure as a single entity for antitrust purposes. This may not end the inquiry, however.

The XFL would not be the only professional sports team in the United States to be organized as a single entity. Major League Soccer (MLS) was also structured as a single entity, in part because one of its creators, sports attorney Alan Rothenberg, wanted to avoid antitrust liability.21 But Rothenberg’s plan has not worked as smoothly as he likely anticipated. In 2002, the U.S. Court of Appeals for the First Circuit entertained serious doubts about whether the MLS’ self-imposed classification as a single entity was accurate. In Fraser v. Major League Soccer, 282 F.3d 47 (1st Cir. 2002), the court stated that the case for applying the single entity label to MLS was “[D]ebatable.”22 Though that case did not ultimately require the court to definitively decide if the label was appropriate, the court was very concerned about the MLS’ unique structure. Even though power was located centrally with the league, nine independent investors also “owned” teams, and were able to manage narrow aspects of their operations.23 In evaluating the MLS’ structure, with its “owner/investors,” the court stated that these stockholders were potential competitors with each other, and thus exhibited a diversity of entrepreneurial interests that went beyond those of a typical single entity.24 As such, the court concluded that the MLS and its owner/investors comprised “[A] hybrid arrangement, somewhere between a single company . . . and a cooperative arrangement between existing competitors.”25

If McMahon wants to avoid this same potential pitfall regarding antitrust liability, he will have to be careful to ensure that his single-entity vision for the league truly remains that way if third party investors are introduced. This is merely one issue that he will have to navigate if he wants his second shot at the XFL to be more successful than his first. It remains to be seen if the revamped league can survive on its second life. But if it does, and if outside investors get involved, some of the league’s closest followers might be antitrust lawyers.

  1. Darren Rovell, Vince McMahon: XFL to return in 2020 without gimmicks, ESPN (Jan. 26, 2018), http://www.espn.com/nfl/story/_/id/22213241/vince-mcmahon-gimmick-free-xfl-return-2020. ↩

  2. Teddy Cutler, XFL: Should Roger Goodell and the NFL Worry About Vince McMahon This Time Around?, Newsweek (Jan. 26, 2018), http://www.newsweek.com/xfl-should-roger-goodell-and-nfl-worry-about-vince-mcmahon-time-around-791639. ↩

  3. Rovell, supra note 1. ↩

  4. David Fucillo, The Return of XFL Means, Well, Something, SBNation (Jan. 25, 2018), https://www.ninersnation.com/2018/1/25/16934220/the-return-of-xfl-2020-rules-players. ↩

  5. Rovell, supra note 1. ↩

  6. Rovell, supra note 1. ↩

  7. See Michael McCann, Advantages and Drawbacks of the XFL Operating as a Single Entity Sports League, Sports Illustrated (Jan. 26, 2018), https://www.si.com/nfl/2018/01/26/xfl-single-entity-sports-leagues-advantages-drawbacks. ↩

  8. See id. ↩

  9. Id. ↩

  10. Id. ↩

  11. Id. ↩

  12. 15 U.S.C. § 1 (1890). ↩

  13. McCann, supra note 7. ↩

  14. See generally 15 U.S.C. § 2 (1890). ↩

  15. Michael McCann, In Pursuit of Free Agency, Players Could Challenge MLS as Single Entity, Sports Illustrated (Jan. 26, 2015), https://www.si.com/planet-futbol/2015/01/26/mls-cba-players-union-free-agency-single-entity-lawsuit. ↩

  16. Id. ↩

  17. See Nathaniel Grow, There’s No “I” in “League,” 105 Mich. L. Rev. 183, 185 (2006). ↩

  18. McCann, supra note 7. ↩

  19. McCann, supra note 15. ↩

  20. McCann, supra note 7. ↩

  21. McCann, supra note 15. ↩

  22. Fraser v. Major League Soccer, 282 F.3d 47, 59 (1st Cir. 2002. ↩

  23. See id. at 53-54. ↩

  24. See id. at 57. ↩

  25. Id. at 58. ↩

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