By Jeffrey K.S. Hung and Pei-Yuan Wei, Partner and Legal Consultant of Formosan Brothers, Attorneys-at-Law

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At the end of last year, the P+ League held a grand opening which again attracted the attention of many fans. But its recruitment of many professional players and UBA college players to join their league has directly or indirectly caused the Super Basketball League (“SBL”) to announce its “Defector Clause” (Non-compete clause): If any SBL player joins any other league without being drafted and without the consent of SBL, such player will be banned from SBL for three years.

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This SBL clause reminds us of the “Tazawa rule” of Nippon Professional Baseball (NPB). Such a clause provided that if a high school, college, or amateur player signed a contract with a Major League Baseball (MLB) team directly without first being drafted by an NPB team, such a player would be prohibited to joined the NPB right after returning to Japan. A high school player would be banned for three years, and a college or an amateur player would be two years. With respect to this clause, the Japan Fair Trade Commission (“JFTC”) started an investigation in July of 2020. On November 5 of the same year, they ruled that the Tazawa rule used an unwritten rule to limit young players’ right to freely choose whether to work overseas and hence it violated the anti-trust laws of Japan. But since the NPB had officially revoked such a clause in September 2020, the JFTC did not issue any administrative disposition on the twelve professional baseball teams of NPB.  

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In the U.S., where the professional sports industry is even more developed overall as compared to Taiwan and Japan, such non-competition clauses are basically products of the last century. In the 19th century when MLB was first founded, it had a “Reserve Clause” to restrict players from signing with another team or playing for another league. At that time, the only way for the players to use their leverage for negotiation was through strikes. Around 1975 to 1976, MLB revoked the Reserve Clause and replaced it with the “free agency” system. As a result, players were entitled to the right to sign with any team or league.  

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As to the development of U.S. professional basketball leagues, before ABA and NBA merged, ABA also had similar clauses which restricted its players from signing with the then newly founded NBA. In 1970, the president of the NBA players union also filed a lawsuit on the ground of anti-competition due to the restrictions placed on players for moving between leagues. Later, after NBA acquired ABA in 1976, NBA followed MLB in implementing a “free agency” system, and the case was finally settled.

Whereas in Europe, there are various soccer leagues in different countries. They do not restrict their adult players (age 18 and above) from signing with leagues in other countries. The main reason is that they believe this kind of restrictive clauses will only lower the quality of their players and make the leagues less competitive, also hinder the raise of the player salary and the improvement of the working conditions.

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Judging by the development of professional sports leagues outside of Taiwan, abandon restrictions such as SBL’s “defector clause” would, in fact, enhance the players’ competitiveness and their negotiation power, which would likely benefit the overall development of professional sports. Although the defector clause can protect a team from losing its heavily invested players, wouldn’t it affect their competitiveness if players are restricted from free movement?  

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From a long-term perspective, competition among various sports teams and leagues is likely an opportunity to enhance compensation and career guarantee for athletes. When we have more athletes who can input their best effort without worrying about their contracts, we will have even better entertainments and exciting games. In turn, it will attract more audience and attention. In the future, we hope the two leagues can bring us even more exciting basketball games through constructive competition and cooperation.

(This article was published in the Expert’s Commentary Column of the Commercial Times.  https://view.ctee.com.tw/legal/28357.html)

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