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U.S. Soccer, MLS Brace for Antitrust Trial in NASL Lawsuit

michael mccann
·7 min read
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The longstanding antitrust feud involving the top level of soccer in the United States is headed for a jury trial this September—litigation that could reshape the pro game in the U.S. and Canada.

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

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

Much of the case concerns U.S. Soccer’s standards for sanctioning Divisions I, II and III pro soccer leagues and how those standards have been applied. Minimum stadium seating capacity and minimum number of teams are among factors considered by U.S. Soccer. Sanctioning is crucial for a league’s ability to gain legitimacy with fans, sports and broadcasters. It also enables a league to charge expansion teams higher entry fees and recruit better talent. For players, employment on a sanctioned team makes them eligible to play on the U.S. National Teams and in FIFA-sanctioned games and tournaments.

NASL contends U.S. Soccer and MLS illegally conspired to exclude NASL from competing against MLS. NASL was formed in 2009 after teams in the USL, a minor league affiliated with MLS, broke away in hopes of creating a league that could compete against MLS. U.S. Soccer recognized NASL as a D2 league, but when it sought D1 status, U.S. Soccer rejected the application. U.S. Soccer also denied NASL’s recognition as a D2 league for 2018 when it granted that status to USL. NASL then suspended operations.

Contrastingly, U.S. Soccer granted MLS waivers to keep its D1 status even when MLS was out of compliance. For example, D1 standards require that a team’s home stadium feature a seating capacity of at least 15,000. Not all MLS stadiums met that requirement, but U.S. Soccer granted waivers as new MLS stadia were built. NASL highlights the willingness of U.S. Soccer to allow MLS to operate without meeting requirements while denying NASL’s waiver requests and (arguably) scrutinizing NASL more stringently.

When NASL sued U.S. Soccer in 2017, it sought a preliminary injunction that would have compelled U.S. Soccer to recognize NASL as a D2 league. A federal judge denied NASL’s motion. However, the case would continue for years and also expand, with additional claims raised and with MLS named as another defendant.

U.S. District Judge Brian Cogan’s order this week addresses the parties’ motions for summary judgment, and NASL’s assertion that U.S. Soccer’s standards—and how they are applied—violate antitrust law.

Cogan found NASL’s claim the standards themselves violate antitrust law fails as a matter of law. He reasoned that NASL’s claims are based on the “real-world application” and “enforcement” of the standards, including U.S. Soccer’s denial of status and waiver requests. The compatibility of the standards themselves with antitrust law does not warrant further analysis.

But Cogan determined that a jury should decide whether the application of those standards complies with antitrust law. He reasoned that evidence and testimony produced during pretrial discovery leave a mixed bag.

On one hand, NASL “does not offer any direct evidence of an agreement or conspiracy,” which arguably undermines its claim. In that same vein, U.S. Soccer and MLS insist that there are no documents or witnesses showing that U.S. Soccer agreed to exempt MLS from U.S. Soccer’s standards.

But Cogan underscored NASL has introduced “circumstantial evidence of parallel conduct” by U.S. Soccer and MLS. He also noted the absence of direct evidence “is the whole point of circumstantial evidence, as unlawful conspirators rarely commit their plan to writing.”

To that end, Cogan drew attention to MLS “enjoy[ing] status as a D1 league” without having to comply with D1 standards. He added that former U.S. Soccer president Sunil Gulati and MLS commissioner Don Garber “repeatedly encouraged the [U.S. Soccer] Board to grant every D1 waiver request made by MLS.”

The stadium capacity requirement, Cogan stressed, was deemed a disqualifying factor for NASL yet not for MLS.

The judge also highlighted evidence suggesting U.S. Soccer only began to formally enforce standards once NASL “emerged as a potential competitor to MLS.” Cogan reasoned that such a change could be deemed circumstantial evidence of U.S. Soccer and MLS agreeing to restrain competition. Cogan further noted testimony from former U.S. Soccer president Robert Contiguglia, who acknowledged there was less “formal oversight” prior to 2009.

But U.S. Soccer and MLS flatly reject any insinuation of a conspiracy. They maintain the standards were developed prior to NASL’s existence, which undermines any theory the standards were intended to harm NASL. This parties’ timeline and factual disagreement can’t be resolved at the summary judgment phase, Cogan reasoned.

Cogan further noted interpretative disputes over MLS owners forming an entity called “Soccer United Marketing” to handle licensing and marketing. NASL highlights how that entity entered into agreements with U.S. Soccer to market both U.S. Soccer and MLS, with U.S. Soccer netting “hundreds of millions of dollars in revenue” as a result.

As NASL tells it, those agreements comprise evidence of concerted action. But U.S. Soccer and MLS insist those agreements are unrelated to the standards, which, unlike those agreements, are at issue in the case. This disagreement “is another issue of material fact” that should be examined at trial, Cogan wrote.

Cogan also detailed the parties’ conflicting takes on the high degree of control MLS allegedly held over U.S. Soccer’s Board. NASL emphasizes that “while Gulati was working for an MLS team, he handpicked members of the U.S. Soccer Board who voted on adopting and applying the Standards.”

Along those lines, board members’ statements referenced in Cogan’s ruling include: “It’s not clear Sunil [Gulati] needs the Board. Some decisions are made outside the Board entirely”; and “We go to meetings to rubber stamp things.”

Yet U.S. Soccer and MLS maintain the alleged control argument is another red herring in this litigation, which is about application of rules, not board control. They stress that MLS-affiliated board members didn’t vote on sanctioning applications. “I agree with defendants,” Cogan wrote, “that these leaders’ abstinence from the vote calls into question the material fact of whether the U.S. Soccer Board was actually dominated by MLS.”

Cogan further found the parties’ conflicting depictions of anticompetitive and procompetitive effects stemming from U.S. Soccer’s management of pro soccer to preclude him from granting summary judgment.

NASL makes a logical argument that because U.S. Soccer’s application of standards has made MLS and USL the only D1 and D2 leagues, respectively, consumers have fewer choices on leagues to follow. NASL also presented evidence, Cogan wrote, “that MLS and USL have been able to charge higher expansion team prices because their league memberships are the only products available for purchasers of D1 and D2 league memberships.”

But U.S. Soccer and MLS make a logical argument that these alleged anticompetitive effects don’t stem from application of the standards. The defendants maintain “there is no record evidence of a decrease in the quality of soccer leagues or play, nor of harm to fans,” and they attribute NASL’s woes to “its own mismanagement.”

The trial is set to begin Sept. 9. If NASL wins and prevails in appeals, U.S. Soccer could be forced to restructure how pro soccer is overseen. In theory, a win might spur new leagues. But the flip side of a win might instead prove true, with MLS—which metrics indicate is gaining popularity and value—harmed in ways that disappoint fans and players. It’s also possible the parties reach a settlement.

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