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Understanding America’s anti-market soccer system

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The United States is globally known as the “father” of free enterprise. Even though the United States does not follow the same classical liberal principles implemented in its foundation, it still serves as a role model of a successful capitalist nation for many countries around the world . However, when it comes to men’s soccer — the world’s most popular sport — the United States faces difficulties adopting a liberal economic model.

The U.S. Soccer Federation adopts numerous anti-market strategies, such as quotas on the number of international players per team, which is also implemented in other countries. Yet, there is one element that makes U.S. soccer clearly distinct: the lack of a relegation/promotion system. Alongside Australia and India, the United States is one of the few countries in the world where leagues are not connected, and teams cannot be relegated to a lower division or promoted to a higher division. 

The American soccer pyramid has a confusing composition. There are three professional divisions: the MLS (Major Soccer League) operating as the 1st division, the USL Championship (United Soccer League) as the 2nd division and both newly announced NISA (National Independent Soccer Association) and USL League One with Division 3 status. The rest of the lower leagues function under amateur status. The leagues cited above operate independently, in a close model based on licensing and franchising, showing the U.S. Soccer Federation failure in promoting a common system. This independent system contrasts with most countries around the world, where all the divisions are connected, allowing promotion and relegation based on performance. British soccer — often considered the most competitive in the world — has eight professional divisions directly connected. Theoretically, a small town team located in the 8th division can work its way up and eventually win the desired Premier League (English first division). 

Such system adopted in the United States prevents the main characteristic of a free enterprise model: competition. Teams on the top of the table in lower divisions have less incentives to invest and perform at the best of their capability, since they will never be promoted based on their performance. Similarly, teams on the bottle of the table — especially in the MLS — have less incentive to improve their game, since there is no fear of relegation. In a system of relegation and promotion, teams are always motivated to perform at the best of their ability, increasing the level of play and making the game more entertaining for fans. In fact, the most dramatic games in world soccer are the ones in which teams are fighting against relegation — popularly known as “relegation battle.” These games generate an unbelievable mobilization by clubs and fans, and small local clubs celebrate as a title their stay in top divisions. 

In a global analysis, it is clear that a system with promotion and relegation boosts competition and increases the quality of the game. The incentives of such a system make sense. Nonetheless, U.S. Soccer Federation is hesitant to adopt such measure because of a main financial obstacle: MLS. The league charges absurdly high fees of $150 million per team’s entrance, generating profits for both MLS and U.S. Soccer Federation and encouraging them to keep the current model. In reality, the fees charged by the MLS are barriers to enter the market, avoiding genuine competition and generating a discriminatory market, where teams are placed in divisions based on capital invested, not performance. The current U.S. soccer system is a clear example of crony capitalism, where the big authority (U.S. Soccer Federation) colludes with the big business (MLS) by giving them exclusive benefits — division 1 status without relegation — in exchange for increased profits.

Fortunately, this discussion has gained increased popularity in the past years. In 2017, Miami FC and Kingston Stockade (NY) — two lower division clubs — filled a claim at the Court of Arbitration for Sport (CAS) requiring a promotion/relegation system. They argue that FIFA (International Federation of Football) requires the implementation of such a system in countries affiliated to them. In fact, Article Nine of the FIFA Regulations for the Applications of Statutes says:

A club’s entitlement to take part in a domestic league championship shall depend principally on sporting merit. A club shall qualify for a domestic league championship by remaining in a certain division or by being promoted or relegated to another at the end of a season.

The case is still being processed at CAS at the present moment. In the meanwhile, U.S. Soccer Federation President Carlos Cordeiro refuses to make any comment about this issue when asked, which generated a letter signed by over 100 lower division clubs requiring an open discussion about U.S. Soccer closed leagues system. However, these clubs have no bargaining power and the U.S. Soccer Federation has not demonstrated interest in having any kind of debate. 

The United States is internationally known for its success in sports — by far the country with the most Olympic medals in history. However, in the world’s most popular sport it has not many things to be proud of. Without the same cultural prestige of American football, baseball and basketball, men’s soccer has been slowly growing in the country, but never had a significant accomplishment to boost popularity. The United States has never been in a World Cup Final — Uruguay with a population of 3.5 million has won it twice — and has not even qualified to the last World Cup played in 2018. 

Of course, the adoption of the relegation/promotion system is not the only transformation needed and will not solve all the problems faced by American soccer. Nonetheless, it will create a more competitive environment, increasing the quality of the game and making the sport more attractive to Americans. It is time for the U.S. Soccer Federation to take the lead and decide if it wants to continue pursuing a system that only seeks profit, or if it wants to develop the sport, transitioning to a world-wide model that promotes real competition in the market. If the chosen answer is the first one, I am afraid that the “beautiful game” has lost its essence.  

 

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Rafael Junqueira Rafael Junqueira is a intern at the Acton Institute. A native of São Paulo, Brazil, he is a senior at Northwest Nazarene University (ID), where he studies Economics and Political Sciences.

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