Most professional sports leagues organize themselves as cartels. The word “cartel” carries a negative inference in that it’s tied to notions of monopoly and antitrust. But a cartel simply refers to a partial merger of independent firms, like a confederation of independent states.
Actually, most modern cartels lack formal structure, owing to federal antitrust prohibitions. The cartel has evolved into more of an information-sharing mechanism. To borrow from a real example, let’s say you have three companies that specialize in operating large tankers. The firms compete with one another for shipping routes. The managers at the firms may form an informal cartel to share information on what routes each is likely to bid on, thereby ensuring scarce resources are not wasted on fruitless bids.
There’s no enforcement mechanism for this sort of cartel. Any of the participants may withdraw without penalty. The cartel only continues as long as it’s profitable for each member to participate. Any benefit is likely to be short-term. If it becomes apparent that further coordination is justified, the firms will merge outright.
Sports cartels offer a third option. Rather than merge into a single entity under common ownership, member clubs create enforcement mechanisms–commissioners–to maintain the cartel in perpetuity. This is reflected in baseball, where the legal mechanism is actually called “Office of the Commissioner of Baseball.” It’s a separate entity with jurisdiction to force compliance by cartel members.
Sports commissioners are thus an example of private regulators. The title “commissioner” itself evokes that of a government official rather than a trade association president or corporate CEO. The commissioner is said to “act in the best interest of the sport,” which parallels the government regulator’s claim to “act in the public interest.” Neither is true, of course. Regulators always act primarily in their own self-interest, which means acquiring more power for themselves at the expense of member clubs and, ultimately, labor.
Permanent cartels are inevitably a function of government. The most notable cartel in the United States is the banking cartel administered by the Federal Reserve. And while ostensibly private, sports cartels rely heavily on government intervention. There’s the obvious example of stadium subsidies. But the biggest subsidy is the federal labor system, which enables the sports cartels to use collective bargaining–with a subsidiary cartel, the players union–to impose and maintain restrictions that would be impossible in a free labor market.
The commissioner’s presence creates an inherent conflict. His power is greatest when there’s labor conflict, not peace. This is why commissioners like Roger Goodell, David Stern and Gary Bettman have survived–indeed thrived–despite multiple work stoppages. Every battle increases his perceived value as a necessary regulator over a chaotic “free” market that is really nothing of the sort.
In government, we’ve seen time and again how regulators respond to their own failures by demanding even more power. No crisis has ever resulted in the abolition of an agency. The sports commissioners understand this lesson all too well.