Antitrust laws exist to prevent businesses from conspiring to artificially limit demand, set prices, or restrict pay. Earlier this year, a U.S. District Court forced Apple, Google, Intel and Adobe to pay $325 million in a class action lawsuit for agreeing not to poach each other’s employees. There is one industry, though, where wide-scale collusion is not only legal, but universal: professional sports. Salary caps, which exist in most leagues, are one of several mechanisms that allow a club of billionaire sports team owners to collectively control and suppress the wages of millionaire young athletes. How did this come about, and are they effective? Could leagues function without them? And under what pretenses can billionaire owners argue that they need to collectively suppress wages?
The key difference between sports and other industries is that competition is the product that leagues sell. If teams could purchase victories or if the Vegas odds always favored the same teams, then the value of that competition would decline. In other words, New York Yankees tickets would not be nearly as valuable if they played against Little League teams. (Although the first game would be entertaining.)
For this reason, leagues argue that they must sustain some degree of parity between their teams, and they claim to accomplish this through revenue sharing, entry-level player drafts, and, most of all, salary caps — limits on the amount of money teams can spend on players.