A High Wire Act by US Soccer

Yesterday the Financial Times reported that the North American Soccer League (NASL), a second tier US professional league, has sent a letter to US Soccer complaining that it was engaging in anti-trust violations that placed obstacles before the NASL moving up to first tier professional soccer.

The New York Daily News explains:

The allegations come from the North American Soccer League, a smaller rival to MLS that consists of 11 teams, including the New York Cosmos.

Noted sports attorney Jeffrey Kessler, who represents the NASL, aired his concerns in a July 23 letter obtained by the Daily News. The 13-page letter is addressed to U.S. Soccer Federation leaders Sunil Gulati and Daniel Flynn.

Kessler says in the letter that the USSF creates unlawful hurdles to ensure that MLS soccer remains America’s only “Division I” league.

“It is only through the removal of these anticompetitive requirements that the USSF can come into compliance with the law,” writes Kessler.

Yes, this is the same Kessler who is representing Tom Brady in the ongoing 'Deflategate" saga involving the NFL. Here are some of the relevant details of the NASL letter.

The NASL wants to be a top tier US league, as defined by US Soccer, the governing body for the sport in the United States. The MLS is the only league that meets those criteria. You can see the criteria for what is called "Division I" status here in PDF. It is pretty turgid stuff, focused on things like entry fees and stadium sizes and so on.

The issue, according to Kessler, is that US Soccer is proposing to change its criteria for attaining Division I status in a way that would leave the NASL on the outside looking in:

The letter complains of several proposed changes the USSF has made to its standards for recognizing professional soccer leagues. To qualify as a top division, a league would need 16 teams, 75% of them based in cities with more than two million people.

“Doubling the population criteria now is an anticompetitive bait and switch, with the purpose of entrenching MLS’s monopoly position at the very time when the NASL is threatening to become a serious competitor,” Kessler writes, noting that the requirement regarding the population of markets where teams are located is “so unreasonably high that even the National Hockey League could not satisfy it.”

The use of the the word "anticompetitive" is a not-so-subtle signal that a lawsuit is probably in the works if US Soccer does in fact make the proposals into policy.

So far, this is just a normal sort of dispute about policies and procedures. What makes it less normal is the fact that US Soccer appears to be doing its business in the absence of an conflict of interest policies. You can check for yourself: Here are the US Soccer Bylaws in PDF. A search of the US Soccer website finds nothing. If US Soccer has such a policy, it is well hidden. I would love to be corrected on this.

It is remarkable that US Soccer appears to operate without the benefit or protection of COI policies. Such policies are standard in modern organizations. The NFL has a COI policy. So too does the NBA. As does the USOC. In fact, you'd be hard pressed to find any big business or sports organization that operates without COI. Its like walking a high wire with no net. Sure you can do it, but at some point there are consequences.

Disregard for basic principles of corporate governance is exactly the sort of behavior that has FIFA and CONCACAF in hot water with the Feds, and US Soccer is tempting fate by apparently following these same practices.

So, why might this matter?

US Soccer has long faced allegations of deep COI with MLS. For instance, Sunil Gulati, president of US Soccer, was a long time employee of Robert Kraft, a MLS owner and beneficiary of many US Soccer decisions (like the hosting US national team games in his stadiums). Gulati's academic CV still lists him as being on the Kraft payroll (here in PDF), but according to Grant Wahl of Sports Illustrated that may have ended late last year.

Now back to the NASL vs. MLS.

US Soccer has a committee called the "Professional League Standards Committee" which is responsible for the criteria which determine league designation (details here in PDF). Presumably this committee is the source of the proposed changes to US Soccer rules for Division I designation that motivated Kessler's letter on behalf on the NASL.

That committee has four members. One member is Alan Rothenberg, a giant in the business of US professional soccer, who helped start the MLS. That alone might suggest a strong bias in favor of MLS.But far more troubling that Rothenberg chairs a company that is working on MLS expansion (in Atlanta) among many other financial ties to the MLS.

Thus, a US Soccer official is involved in proposing rules that, allegedly, hinder the expansion of the NASL to the benefit of the MLS which just so happens to have a significant financial stake in the MLS. In short, Rothenberg looks to benefit financially from his decision making for US Soccer. Boy, that sure doesn't look good.  If US Soccer had COI policies in place, this sort of unseemly thing probably would be untenable and would have saved everyone from what might be an ugly legal fight between NASL and MLS. The set up is probably not great for US professional soccer either.

NASL has its own governance problems, of course, and for all I know they too may lack COI policies. However, that does not excuse US Soccer from what looks from the outside to be the practice of boys-club-style-pocket-lining. While we've been distracted by the remarkable goings on at FIFA, it turns out the US Soccer also desperately needs to get its house in order. Putting in place and then enforcing basic policies for managing actual and perceived conflicts of interest would be a good place to start.