Many people are familiar with some version of the story “David and Goliath”. Goliath, a monstrous warrior of great size and strength was defeated in battle by a much smaller man named David. In what appeared like a seemingly impossible challenge, David did not defeat Goliath by using physical strength, rather David used his intelligence and strategy to achieve victory. One of the reasons “David and Goliath” is still discussed is because it provides the reader with a true underdog story. David and Goliath is a story that has been applied to many areas outside of its original purpose.
In Professional Sporting Leagues across America, there are smaller market teams and larger market teams. The smaller market teams tend generate less revenue, which allows them to spend less on player salaries.1 This cycle deems these teams “Davids” in the professional sports arena. The larger market teams, or the “Goliaths”, generate much more revenue, thus are able to spend more than the smaller market teams.” In attempt to equalize the amount of money “David” and “Goliath” teams spend on contracts, leagues implement some form of spending restrictions on total team salaries. Specifically, leagues do this to ensure that the smaller market teams are not being outspent by larger market teams. It is the belief that this would enable more parity between smaller and larger market franchises.
In this article, the topic of whether, if any, type of spending restrictions help increase parity in sports. To do this, the National Football League (“NFL”) and Major League Baseball (“MLB”) methods of spending restrictions will be discussed. Specifically, the relevant sections of each Leagues’ Collective Bargaining Agreement (“CBA”) will be analyzed and compared. After doing this, it will be argued that while the NFL’s system should provide more parity due to stricter spending limitations, it is the MLB that appears to have developed a system that has achieved better results. From this conclusion, it will be further argued that like “David and Goliath”, teams might not need to be forced on equal playing fields to be competitive. Rather, it is up to the teams making strategic decisions with the money that is being spent and having the proper plan in place to achieve franchise success.
The NFL Collective Bargaining Agreement (“NFL CBA”) explains what is referred to a Salary Cap. Article 12 and 13 of the NFL CBA discusses how the NFL salary cap is calculated. Specifically, Article 12 Section 6 subsection (v) states that the “Salary Cap for a League Year shall be the Player Cost Amount for that League Year Less Projected Benefits for that League Year, divided by the number of Clubs in that League Year, adjusted by any applicable True Up, provided further that there shall be no True-Up related to the 2011 League Year, and there shall be no “negative” True Up related to either the 2012 or 2013 League Year.”2 Put simply, the players union and owners agreed to implement what is known as a “hard cap”. This means that no team is permitted to exceed the designated salary cap for any reason.3
The MLB on the other hand, does not follow a salary cap per se. Rather, the MLB Collective Bargaining Agreement (“MLB CBA”) implements a Competitive Balance Tax. Specifically, Article XXIII(B) states that “A Club with a final Actual Club Payroll tax that exceeds the Tax Threshold applicable in that Contract Year (“Tax Threshold”) shall be assessed a Competitive Balance Tax on the difference between its final Actual Club Payroll and the Tax Threshold. A Club with a final Actual Club Payroll at or below the Tax Threshold shall incur no Competitive Balance Tax for that Contract Year.”4 Essentially, a team salary is set for each year and if a team goes over that salary, they are forced to pay a Competitive Balance Tax. Further, a team is forced to pay a higher Competitive Balance Tax rate for every season the teams’ salary is over the given salary for that season. This money is then disbursed to teams that do not go over the tax threshold.5
As previously discussed, one of the goals of spending restrictions on team salaries is to increase parity in professional sports. The question that arises after analyzing these two vastly different forms of team spending restrictions, is do either actually increase parity? The main difference between the NFL and MLB spending restrictions is that the NFL essentially has a zero-tolerance policy on spending over the allotted cap, while the MLB imposes a harsh tax on teams that go over the set amount. In theory, the NFL should have more parity among its teams since there is a “hard cap” and teams a forced to not spend over a certain amount. However, this has not been the case in the NFL. Since the 1998 season, the New England Patriots, Denver Broncos, Indianapolis Colts, Pittsburgh Steelers and Baltimore Ravens have accounted for 18 American Football Conference Championships. An argument can be made that there has been more parity in the NFC during that time frame (12 different NFC Champions). However, the same spending cap is implemented for both the AFC and NFC. Therefore, this only demonstrates that the hard cap may not have as much impact on parity in the NFL as intended.
Interestingly, the MLB seems to have much more parity by implementing the Competitive Balance Tax on teams that exceed a certain monetary threshold. Since the 1998 season, there have been 11 different teams to represent the American League in the World Series. Further, the National League has had 12 different champions go on to the World Series. An example of this parity was recently seen in the 2015 season, where two of the bottom half teams in spending (New York Mets and Kansas City Royals) made it to the World Series.
Parity in sports is an issue that each professional league has been attempting to achieve. It is evident that this is a concern for leagues after looking at each leagues CBA. It is interesting how the NFL and MLB have such different approaches to how they restrict teams spending in their respective CBA’s. At first blush, one would think that the NFL’s hard cap would increase parity compared to the MLB’s tax system. However, after looking at the past champions in each league, an argument can be made that there is more parity in the MLB. I believe one of these reasons is that the smaller market teams, or the “Davids”, are becoming much more strategic and smart with how they are spending their money. In a time where small market teams are becoming savvier, it might be time to have faith in the “Davids” of professional sports to defeat the “Goliaths” without the harsh salary cap of the NFL.
(1) See generally, John P. Gillard, Jr., Article: An Analysis of Salary Arbitration in Baseball: Could a Failure to Change the System Be Strike Three For Small-Market Franchises?, 3 Sports Law. J. 125 (Spring 1996).
(2) See National Football League Collective Bargaining Agreement, 2011-2020, art. XII-XIII.
(3) See Vittorio Vella, Comment: Swing and a Foul Tip: What Major League Baseball Needs to do to Keep its Small Market Franchises Alive at the Arbitration Plate, 16 Seton Hall J. Sports & Ent. L. 317 at 333 (2006).
(4)See Major League Baseball Collective Bargaining Agreement, 2012-2016
(5) See Matthew Ryan McCarthy, Sports: Revenue Sharing in Major League Baseball: Are Cuba's Political Managers on Their Way over Too?, 7 Vand. J. Ent. L. & Prac. 555 at 567 (2005).