Professional baseball players are protected by labor and antitrust laws in the United States. In contrast, in Japan, professional baseball players were recognized as employees under labor law, and the Professional Baseball Players ‘Association of Japan (“Players’ Association”), organized by professional baseball players in Japan, was established as a union under the Labor Union Act of September 1985 To date, however, the Players’ Association has not been able to sign a collective agreement with the Nippon Professional Baseball League (“NPB”), which consists of all 12 professional baseball teams in Japan (“12 Teams”). In addition, the Players’ Association strike in 2004 led to the establishment of the Professional Baseball Structural Reform Council (“Council”) with the main aim of discussing issues between the Players Association and the NPB, and the council has implemented various systemic reforms.
On the other hand, the Fair Trade Commission, which enforces the Law Prohibiting Private Monopoly and Maintenance of Fair Trade (name of the Antitrust Act in Japan), has long treated contracts between professional baseball players and baseball teams as non-antitrust regarding the antitrust law , based on the interpretation that contracts between professional baseball players and baseball teams correspond to contracts similar to employment contracts, and employment contracts do not constitute “business” within the meaning of antitrust law.
In the case of Junichi Tazawa (currently with the Wei Chuan Dragons (Chinese Taipei)), who had played for the Boston Red Sox and other teams in the United States, a cartel issue was raised. Tazawa was eligible for the 2008 NPB draft but advised all Japanese teams that he would not convene it because of his intention to play in MLB and signed a contract with an MLB team instead of joining one of the Japanese teams. His action caused a stir in the NPB design system. Immediately after this problem occurred, the NPB established the following rule. In particular, if a rookie player refuses to be selected by one of the 12 teams before the NPB draft or to join a team that has negotiating rights in the NPB draft and signs a contract with a foreign team, the 12 teams will become one Do not select players in the draw for three years for high school graduates, two years for university graduates and adult players after the end of the contract with the foreign team. This rule is known as the “Tazawa Rule”. The purpose of this rule was to prevent the loss of talented Japanese players from the NPB.
The Players’ Association has claimed since its inception that the “Tazawa Rule” was antitrust law, but the NPB did not withdraw the rule and the Fair Trade Commission took no action.
In recent years, however, the Fair Trade Commission’s stance has changed dramatically. The trigger was the following incident. In the Japanese entertainment industry, a number of top idols have been transferred from one management office to another, and the former management office put pressure on television stations to prevent such idols from appearing on television. The Japan Fair Trade Commission investigated the case and cautioned one such former management bureau on suspicion of violating antitrust laws. This case prompted the Fair Trade Commission to set up a Study Group on Human Resources and Competition Policy to investigate the actual situation of transfer restrictions in the Japanese entertainment and sports industries. For this reason, the Fair Trade Commission developed and published the “Antitrust perspective on transfer restriction rules in the sports business” in 2019.
It indicates four points as follows.
- Teams compete with each other as companies in antitrust law because they pursue an economic activity (business activity) through their sporting activities.
- In general, it is against antitrust law if two or more entrepreneurs in a competitive relationship mutually agree to restrict or limit the transfer or change of personnel. The same applies to cases in which a trade association makes such agreements.
- Two main purposes for establishing transfer restriction rules in the sports business arena.
- Improve player development incentives by ensuring the collectibility of player development costs.
- to maintain and improve the appeal of sport (sports leagues, competitions, etc.) by balancing the strengths of the teams.
- A large number of regulations that restrict transfers in the sports business area and whether they are problematic under antitrust law must be determined in each individual case in accordance with the content of the respective regulations and the current situation.
The Fair Trade Commission has examined and checked the “Tazawa Rule” from the above perspective and in November 2020 told the NPB that the “Tazawa Rule” is suspected of violating antitrust law because the “Tazawa Rule” one the concerted refusal to trade by the 12 teams. However, in September 2020 the NPB abolished the “Tazawa rule”.
The reason the Japan Fair Trade Commission, reluctant to apply antitrust law to the labor market, drastically changed its stance and became proactive was because the study group pointed out that, given the changes in lifetime employment and ease with which companies and human resources can be compared on the Internet, forms of employment such as freelancers and part-time jobs are diversifying and other forms of contract than employment contracts are increasing and there is scope for applying antitrust law to the employment relationship market.
The Japanese sports industry in particular has introduced a system that severely restricts the transfer of players for no particular rational reason. In the NPB, for example, there is the Free Agent System (“FA”) based on the reserve clause, but if a player of a certain level moves through the FA, the team the player is being transferred from may request a substitute or money from the team to which the player is being transferred to compensate for the transfer of the FA. This system discourages FA transfers. In other sports the irrational rule still applies that if a player changes from one team to another without an agreement between the two teams, the transferred player will be suspended for one year.
In the near future, such unreasonable transfer restrictions in sport in Japan will be able to be dealt with under antitrust law. The players’ association will be able to use antitrust law as a protective shield to conduct business negotiations more aggressively than in the past. Similar to the US professional sports leagues, there is also the option of concluding a legally binding collective agreement between the Players’ Association and the NPB. If Japanese professional baseball takes the initiative in this area, I think its influence will expand into other professional sports in Japan.