$1,252 million; and in 2012 the National Rugby League (NRL) announced a
$1,025 million TV deal. The rents are distributed to owners, administrators,
players, and others, although some rents might be dissipated if clubs spend on
providing better facilities for players or spectators. The distribution of rents
will be changed in the players’favour if clubs bid up wages to attract better
players, and clubs may collude to limit such‘arms races’. Greater rents have
led to increased competition between league administrators, individual clubs,
and players for a greater share, and have encouraged non-transparency with
respect to the size and distribution of rents.^6
Professional sport is a peculiar industry, with many inherent distortions of
competitive markets that are addressed differently in different countries.
Monopoly power is pervasive, due to the demand for an undisputed cham-
pion and to the need for a central body that organizes schedules, sets rules,
and resolves on-field disputes. The universal desire to know which team is the
best cannot be satisfied if there are several parallel leagues whose teams never
meet. However, that does not mean that the league must necessarily be a
closed cartel of clubs, as in the major professional sports leagues in Australia
and North America. In European soccer, a system of promotion and relegation
enables clubs to move in and out of the top league based on playing perform-
ance (Szymanski and Zimbalist 2005). At the same time, as clubs compete to
be champions they need worthy opponents. In a closed cartel some clubs may
be weaker, for example, due to a poorer catchment area; without threat of
relegation from the league, there may be collusion to establish and maintain
‘competitive balance’. Moreover, the quality of output in terms of individual
games and interest in the league overall may be a function of the competitive
balance. Hence, a case may be made for exemption from competition policy
both due to the natural monopoly of national leagues and to the desirability of
ensuring that affluent clubs do not dominate.
The regulatory environment in which major sports operate is unique to
the sector, but varies considerably from country to country. In the closed
cartels characterizing Australian professional team sports, leagues restrict
entry of new clubs, engage in price-fixing, and impose restrictions on the
labour market that are anti-competitive and would be illegal in other sectors.
In Australia, competitive balance has been the most often cited reason for
regulatory exemptions, although there is some dispute about exactly what
competitive balance entails (Lenten 2009b) and about the impact of competi-
tive balance on attendance.^7 The competitive balance argument is used to
(^6) For example, AFL clubs’and league management’s accounts are not publicly available, and
players 7 ’wages are only known from rumours in the media.
While some Australian authors have found a strong positive correlation between competitive
balance and attendance (Borland and Lye 1992; Lenten 2009a), studies of other leagues have found
less support, e.g. Donihue et al. (2007) on US baseball, and Czarnitzki and Stadtmann (2002) on
Australia’s Economic Mores