NFL Draft Reveals Folly of Antitrust

Antitrust laws seek to maintain a competitive playing field in the private marketplace. Implicit in those rules is the assumption that if any one commercial entity gets too strong, there exists the potential for that firm to abuse its position in the marketplace without competitive response.

Fortunately, the fatal conceit underpinning this kind of lawmaking is revealed pretty quickly in private markets. It’s very difficult for anyone to know what the markets will value in the future, not to mention what talent will or will not be suited for an ever changing competitive landscape. In that sense, antitrust officials are frequently found prosecuting yesterday’s winners as was the case with IBM and Microsoft.

To show how difficult it is to predict what’s ahead, the world of sports offers easy to understand examples. In particular, last month’s National Football League draft illustrated yet again how hard it is to project which players will eventually dominate.

To show why that’s the case, it’s essential to look at the origins of the NFL draftees taken in the first round. Thanks to college football’s rabid following, recruiting of the players that fill out college rosters has generated a great deal of fan interest. Rivals.com, generally considered the #1 recruiting website, revealed last year how eagerly this process is followed when it was bought by Yahoo for a reported $100 million.

Each year, Rivals ranks what it deems the top high-school players, and fans pour over the rankings on a daily basis leading up to National Signing Day each February. Top-ranked players are given four and five star rankings, and it’s the four and five star players whose college choices alternately excite or depress fans around the country.

But are those rankings realistic? To some degree, yes. Of the 31 players drafted in the first round, 15 arrived at college with the coveted four or five star label. On the other hand, 16 first round draftees were given three-star rankings or lower, and as such, were likely ignored when they made their college choices.

When the top recruiting schools are considered, the University of Southern California has more often than not been crowned by Rivals as the top recruiting school going back to 2002. What’s odd, however, is that USC’s two national championship teams in this decade were largely stocked with players that filled out less-than-stellar recruiting classes. The best player among them, if performance in the NFL is a worthy benchmark, is Seattle Seahawks linebacker Lofa Tatupu, who arrived at USC as an unheralded transfer from Division I-AA University of Maine. Though Reggie Bush was heavily recruited out of high school, Rivals ranked him behind fellow ‘SC recruit Whitney Lewis. Bush won the Heisman trophy, while the last word heard on Lewis was that he transferred from USC to Northern Iowa.

If antitrust rules applied to recruiting, Southern Cal might have found itself defending its recruiting practices in court in recent years, but absent those kinds of rules, the inexact nature of recruiting revealed itself on the football field. USC lost its bid for a third straight title in the dying moments of the 2006 Rose Bowl, and in the past two seasons has lost two games each; including one to Stanford. And when the loss to Stanford is considered, it should be said that in last month’s draft USC had 10 players taken (the most of any school), including seven in the first two rounds. Among draft-eligible Stanford players, none were picked at all.

Yahoo Sports analyst and former Auburn head coach Terry Bowden actually ranked college teams based on their latest draft performance, and while college success doesn’t always translate to NFL riches, he noted that among the most drafted schools last month, four (Cal, Arkansas, Louisville, and Notre Dame) finished the season unranked. The Georgia Bulldogs ended last season ranked #2, but according to Bowden had only four players selected in the draft; none of them taken in the first four rounds.

When the draft’s predictive nature is considered, NFL fans have had their hearts broken regularly with high draft picks that proved to be busts, and low-round players their teams passed on. Indeed, Hall of Fame quarterback Joe Montana lasted until the third round back in the late 70s, while in the weeks leading up to the 1998 draft, the majority of scouts in the Indianapolis Colts’ front office preferred Ryan Leaf over future Hall of Famer Peyton Manning. Tom Brady is likely teased by teammates to this day for being selected behind Giovanni Carmazzi, and even though Dan Marino reached the Super Bowl first among quarterbacks selected in the first round of 1983’s draft, he was the sixth qb taken in that same first round. Tony Mandarich was drafted #2 overall in 1988, and came into the NFL with hype suggesting he would be the greatest left tackle ever. It is said that on the first day of mini-camp Green Bay coaches sensed from his footwork alone that he would never pan out. And he didn’t.

To show that evaluation mistakes apply to all sports, budget issues forced Oakland A’s general manager Billy Beane to shed star pitchers Tim Hudson, Barry Zito and Mark Mulder in recent years. The three combined to lead a staff that boasted a 3.63 ERA. Rather than imploding due to those substantial losses, the A’s presently lead the American League West behind no-name pitchers Greg Smith, Dana Eveland and Chad Gaudin; the three leading the league with a 3.26 ERA. Zito? After signing a $126 million dollar contract with the San Francisco Giants he went 11-13 last year, and is winless this season.

In 1976, two American Motors executives said if GM’s growth weren’t halted, “they might find themselves selling the whole market,” and that if “they wanted to wipe out everybody by 1980, the only one who could stop them is the government.” Nearly thirty years later GM chief executive Rick Wagoner was reduced to explaining away his company’s failures in a Wall Street Journal editorial, all while making a veiled plea for a taxpayer bailout. Before the stock market imploded at the beginning of this decade, former Tyco CEO Dennis Kozlowski made the cover of Barron's owing to the broadly held view that his executive talents put him in the league of Jack Welch. Right or wrong (this writer says wrong), Kozlowski is now serving time in prison. What these examples tell us is that corporate success, much like that enjoyed on the playing field, is charitably uncertain.

If coaches, general managers and corporate rivals frequently can’t successfully predict what’s ahead despite jobs and billions of dollars at stake, how can civil servants at the Justice Department? The world of sports reveals that what the DOJ attempts is very difficult at best, so the best economic solution when it comes to antitrust would be to scrap the concept altogether.