Free Agency for the Front Office: How Data Analytics and Non-Compete Agreements Threaten to Disrupt Competitive Balance in U.S. Professional Sports Leagues

Abstract

U.S. professional sports teams are increasingly relying on sophisticated forms of data analysis to identify potential areas of competitive advantage over their league rivals. Indeed, emerging evidence suggests that the most sophisticated teams in this area are using the insights that they derive from data analytics to establish durable and significant gains over their competition on the playing field. At the same time, sports franchises frequently utilize non-compete agreements to protect the resulting, proprietary information that their data analysis yields.

Unfortunately, recent academic research suggests that this reliance on covenants not to compete can decrease the rate of knowledge diffusion within an industry, making it more difficult for teams to catch up to early adopters of data analytics. Thus, teams’ growing reliance on data analytics — and their use of non-compete agreements to protect it — could have significant, but heretofore unrecognized, ramifications for league efforts to maintain an adequate level of competitive balance amongst their franchises. This article explores this state of affairs, as well as the implications it presents for the governance of U.S. professional sports leagues.

Keywords: non-compete, sports, data analytics, competitive balance