MLS salary cap rules: to pay the stars or not to pay the stars?

The North-American Major League Soccer (MLS) has recently overtaken the NBA and NHL as the third most popular professional sports league in the US in terms of total attendance and its attendance figures are passing 4 million for this year. Despite these facts, MLS clubs struggle to attract football starts at their peak to the league. Of course, aging starts, like Thierry Henry or David Beckham, are still able to do some magic.

This problem of MLS, among others, may root in its ‘salary cap’ rule. In general salary cap is a limit on the amount of money a team can spend on its player salaries. The salary cap aims at keeping overall costs down and ensuring parity between teams, so that wealthy teams cannot entrench dominance by signing more top players than their rivals (like they tend to do in Europe).

In the MLS the limit exists as a per-player limit and as a total limit for the team’s roster. Pursuant to the 2012 MLS Roster Rules a team roster is comprised of up to 30 players. Players occupying roster spots 1-20 count against the club’s 2012 salary budget of $2,810,000 (a slight increase of $135,000 compared to 2011) and are referred to collectively as the club’s Salary Budget Players. There are some specific rules for roster spots 19-30. Players occupying roster spots 1-24 earn at least $44,000 and players occupying roster spots 25-30 earn at least $33,750 in 2012. The maximum budget charge for a single player is $350,000. The current limit was negotiated as part of the 2010 Collective Bargaining Agreement between MLS and the MLS Players’ Union. In 2012 the salary cap is $2,810,000 for each club with an automatic five percent increase each year until the end of the 2014 season.

Although parity is ensured among MLS teams inter alia due to the above salary cap rules, it is obvious that MLS clubs cannot compete with leading European clubs when it comes to signing real stars. Additionally, promising youngsters continue to leave for Europe, as they are tempted through the money offered by wealthier European clubs.

In order to mitigate the abovementioned effects of the salary cap rules, the designated player rule was adopted as part of the salary cap regulations as of the 2007 season. This rule allows each club to freely sign two players that would be considered outside of the team’s salary cap. Moreover clubs are allowed to purchase a third designated player slot for a one-time fee of $250,000 that will be dispersed in the form of allocation money to all clubs that do not have three designated players. In 2012 a designated player’s salary budget charge is $335,000, unless the player joins his club in the middle of the season, in which case his budget charge is $175,000. However, taking a look at the current list of designated players, it can be concluded that no real star at his peak is plying his trade in the MLS.

In the light of the above, MLS should decide whether it continues to go down the American way of developing sports leagues or it tries to approximate its rules to that of European football. So MLS may reconsider its salary cap rules in the near future in order to attract star players at their peak. A future amendment (or more radically an abolishment) of the rule, however, may raise serious legal consequences and compromise the MLS more or less acknowledged ‘single entity’ status, which could serve as a reason for opening investigations into the remaining anticompetitive measures employed by the league (further on these issues see this article). Besides, the MLS season could be adjusted to the European calendar. This change cloud make easier to sign excellent players, since the MLS season was kicked off in autumn as it happens in most European leagues. Maybe, MLS should recognize that, in contrast to its counterparts NFL, NHL, NBA and MLB, it is not the best league in its sport in the world. Summarized, the salary cap rule in this form seems to hinder MLS’s further expansion and the attraction of soccer stars.

However, taking a look at the other side of the coin, there might be no need for extensive amendment of the MLS salary cap rules as a kind of salary cap is going to be introduced in the English Premier League… (On the most important legal issues see this article.)

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