The Globetrotters and Competition for Contract

Josh Wright —  5 March 2006

Microsoft, AT&T, Standard Oil, and …. the Globetrotters? The Globetrotters just might join this list of well known antitrust defendants. The Harlem Ambassadors, a rival exhibition basketball squad, have filed a complaint with the FTC concerning the Globetrotters’ use of “exclusivity windows” in leases with local arenas, which effectively prevent competitors from playing in the same arena around the same time as the Globetrotters. CNN Money has the story here.

Professor McCann (Mississippi College of Law) at Sports Law Blog is quoted in the article as saying that “The FTC may look at this and say the exclusivity agreements are used by circuses and other forms of entertainment, so what’s the problem.” McCann also warns that the use of these clauses may be attracting antitrust exposure unnecessarily for the Globetrotters:

“There’s a real risk when you create your own David vs. Goliath story when you’re the Goliath. I think the clauses are unnecessary and they would continue to do well without them . . .. It could be the best thing for them to have a little competition.”

At Sports Law Blog, McCann elaborates a bit, suggesting that Ambassadors’ President Dale Moss’ public statement that he is not interested in treble damages, but only a “fair shot” to compete against the Globetrotters, lends “credibility” to the complaint.

I am a big fan of the Sports Law Blog, but there is an economic fallacy underlying this logic that I cannot resist pointing out. The claim is that competition is not present where we observe these exclusivity clauses, or at least that there should be more competition, and that therefore antitrust law might improve consumer welfare eliminating the clauses. This is wrong. There is competition for the contract.

Competition for contract is an important element of the competitive process in many markets. This competition occurs prior to the familiar source of ex post retail price competition that consumers observe. For example, product manufacturers compete for access to shelf space with slotting allowances, Coke and Pepsi battle for exclusive access to restaurant chains, record labels pay for radio airplay, etc. Harold Demsetz referred to this type of activity as “competition for the field” rather than “between the field.” Antitrust law generally, and correctly, recognizes that competition for contract is an important element of the competitive process. This form of competition can provide substantial benefits to consumers and should not be chilled by overaggressive antitrust policy.

The appropriate antitrust question is to identify the competition the Globetrotters face in obtaining these exclusive windows? Presumably, at least all of the other exhibition basketball firms can compete for these exclusive windows, including the would-be plaintiffs here. Well, then why do the Globetrotters always receive the window (presumably, this is the reason for the complaint)? The arena stands to make more money with the Globetrotters than rivals because they offer a superior product or better contract terms.
Of course, it is possible that the competitive process for contract can injure consumers under some conditions. But even ignoring the obvious pro-competitive justification for the exclusive window, a necessary condition of such an anticompetitive theory is that the Globetrotters have monopoly power. In the competitive market for consumers’ entertainment dollars, I am highly skeptical that the Globetrotters even come close to satisfying this condition.

The importance of competition for contract is often overlooked in antitrust analysis. Private plaintiffs, regulators, and sometimes judges tend to focus on the dimensions of competition that are more easily observable, i.e. retail price competition, while ignoring dimensions that are less obvious. Without a proper understanding of competition for contract, regulators might mistakenly infer from the presence of exclusive dealing or a shelf space containing Coke but not Pepsi, that there is a competitive problem that needs solving. A sensible approach to competition for contract in antitrust is essential to avoiding intervention that would commit the first order error of protecting competitors rather than competition. I discuss some of these issues in my forthcoming paper, Antitrust Law and Competition for Distribution.

6 responses to The Globetrotters and Competition for Contract


    Very interesting Josh–and also fun!

    One point: there’s a colorable antitrust issue here at all only because we’re assuming that there can’t be trademark protection for the word “Harlem” used in connection with a basketball team. Which is probably right. Cf. the case of the Marx Brothers efforts to make a movie with the word Casablanca in it (on the theory that you can’t trademark a geographic name) and the owner of the Bogart film trying to stop them. A fascinating article about this will appear in the forthcoming issue of the Green Bag. Turns out that Groucho Marx’s motive for using the term Casablanca was to generate a dispute that help market the film. The Harlem Ambassadors may be doing the same thing as Groucho, and this suit may be about marketing more than anything else.


    As the saying goes: “If it takes more than 10 words to describe the relevant market, then it’s not a relevant market.” So Geoff you are safe with 5 words only.

    William Goodwin 5 March 2006 at 1:45 pm

    It’s so refreshing to read G. Manne’s posts and comments, because I never know in advance what his perspective will be. Thank God he’s not a reflexive “market automatically good, any interference with it automatically bad” thinker. That would be really dull.


    C’mon, Josh — If the Globetrotters don’t have monopoly power in the well-established comedic, traveling, staged, exhibition basketball market, then what meaning does “market” possbily have?

Trackbacks and Pingbacks:

  1. TRUTH ON THE MARKET » Globetrotters Update - March 19, 2006

    […] Sports Law Blog’s Michael McCann updates our recent discussion (me: here and here; and Professor McCann here) of the Harlem Ambassadors’ complaint to the FTC regarding the Globetrotters’ use of exclusivity windows in sports arena leases. In response to our debate, the Harlem Ambassadors’ founder and president Dale Moss emailed us some very interesting comments. Here is an excerpt (Sports Law Blog has the whole thing) summarizing the key points of the Ambassadors’ complaint: 1.) HGI unreasonably restrains the business activities of the Harlem Ambassadors through the implementation of a specific “Use of Arena” restriction contained in a standard lease addendum applied to all of HGI’s arena lease and/or co-promotion contracts. 2.) This “Use of Arena” restriction blocks the Harlem Ambassadors out of the affected arenas for a period of eight weeks prior and six weeks following the HGI event. 3.) In these situations, based upon HGI’s own pre-event marketing patterns, this 14 week black out period is excessive. 4.) In total, the Harlem Ambassadors are blocked from over 20,000 potential performance nights in these arenas, even though the Globetrotters are only performing on about 210 of these nights. 5.) These restrictions impact over 200 arenas over a 46 state area (in 2003-2004 HGI season, the period used for the examples in the complaint). 6.) Virtually all of the facilities impacted are publicly-owned arenas, auditoriums, gymnasiums, and convention centers. These are facilities that have been built and are operated with municipal, county, and state funding. 7.) The “Use of Arena” restriction also limits the access to these major public arenas by the featured women performers of the Harlem Ambassadors. HGI employs no women performers and hasn’t in over 13 years. […]

  2. TRUTH ON THE MARKET » A Reply to McCann on the Globetrotters - March 6, 2006

    […] Keith on The Globetrotters and Competition for Contract.Ideoblog on Can the SEC Exempt Small Companies from Sarbanes-Oxley 404? (Part 2).Lasik Eye Surgery on Will SCOTUS Tame the Exotic Beast?.Hanno Kaiser on The Globetrotters and Competition for Contract.William Goodwin on The Globetrotters and Competition for Contract.Geoffrey Manne on The Globetrotters and Competition for Contract.Ideoblog on Universities redux: The anti-market folks begin to crow.TRUTH ON THE MARKET » Universities redux: The anti-market folks begin to crow on Whose university is it?.Steven Donegal on Survey on Majority Voting for the Election of Directors.Bill Sjostrom on Survey on Majority Voting for the Election of Directors. […]