Could competition courts net Canada new NHL teams?
Changes to anti-monopoly laws have opened the door to challenging sports leagues' gate-keeping on where franchises are allowed to exist
Professional sports are a unique beast when it comes to industry concentration. The big leagues – the NFL, NBA, MLB and NHL – effectively operate as monopolies, with baseball in particular benefiting from U.S. laws that enshrine its position.
Aside from governing their own affairs, which range from player salaries to what fans pay for beer and hot dogs at games, the most obvious result of this arrangement is that the leagues – and only the leagues – decide where franchises get to exist.
This doesn’t always jibe with market conditions and fan desires, or independent efforts to address them. Perhaps the best example is Jim Balsillie’s repeated attempts to establish a new NHL franchise in Ontario – an issue we touch on in an interview with the former BlackBerry co-chief executive on this week’s Do Not Pass Go podcast.
However, recent updates to Canada’s Competition Act could change the situation. Taking effect last June, the new laws allow private individuals and organizations to challenge anti-competitive conduct by businesses.
We’ve covered this change in-depth here at Do Not Pass Go, looking at the three challenges filed so far. The first, filed by an independent game developer in Toronto against Google’s search dominance, was rejected by the Competition Tribunal last month.
The other two – against Apple’s app store and one seeking the break-up of Live Nation-Ticketmaster – are awaiting word on whether they’ll go ahead.
In a recent opinion piece for the Sports Business Journal, David Sterns of class-action firm Sotos – which is representing the Consumers Council of Canada in the Live Nation case – argues that the game has changed, and that competition courts here could indeed force the leagues to accept new franchises.
It’s especially poignant given that telecommunications giant Rogers has established a total monopoly over major sports in Toronto, as we’ve also covered here.
We chatted with Sterns about how competition courts might force the leagues into allowing new sports franchises. Here’s the edited version of that conversation.
Sports leagues generally decide where and when teams get to exist. You argue that this new law could change that. Can you explain how?
Up until right now, major sports leagues have always had the predominant say in where teams can go. In the United States, there’s a famous [antitrust] exemption called the Baseball Exemption, which no one actually knows why or where it came from, just [that] the Supreme Court basically declared one day that the law doesn’t apply to Major League Baseball.
But there’s no NHL exception, so now that we have this new process that allows for private applicants to go to the Competition Tribunal and challenge a dominant business, one that is acting in a way that is anti-competitive, I started looking at whether or not that could apply to a major sports franchise like the NHL. I think it’s open to a number of different public interest groups if they wanted to take a run at some of these anti-competitive practices, which as I say in my article, have really radically limited the options for viewers and fans in Canada.
I use the example of the Greater Toronto Area, which has about 8 million inhabitants, and there is one team. And every attempt to start another franchise has been squelched by the NHL. There’s been no openness to that discussion.
The market is there. There was a study done about 15 years ago by the University of Toronto that shows that the GTA could easily support another franchise. There’s an economic case to be made there, there’s a fan case to be made there and there’s a competitive case to be made there because we have a team in this market that hasn’t won the Stanley Cups since 1967. So, a little bit of competition might not be a bad thing, even for them.
If a case were brought forth and the Tribunal agreed with this premise, do you think that the NHL and other leagues could actually be forced to accept a new franchise? How would that work?
The NHL was originally and really still is in many parts a Canadian league, but the thing that prevents a new franchise from going in is this exclusivity. We got a bit of a sense of what types of forces were at work when the Balsillie bid was made.
It looks as though you either need unanimous consent of all owners or you least need the consent of the neighbouring teams, which in this case would be at least Toronto, possibly Buffalo and Detroit, depending on where it is. And we say that you shouldn’t allow incumbents to decide whether or not there’s going to be competition.
For example, if you’re talking about a cement-manufacturing facility, you could see a situation where the Competition Tribunal would say, ‘Look, we’ve got one facility for 8 million people, you got to have another one.’ There’s really no argument against it.
Here, you would hear things about the integrity of the league and the scarcity of the elite players. There’s some validity to these arguments, but we say that the overwhelming case is one of anti-competitive conduct by a league that has been using Canadian fans, Canadian broadcasting and Canadian dollars to bolster a league that has largely shut them out for the last 30 years.
Have you been approached by anybody to start a case on this?
We wanted to get the conversation started. We were looking at the cases coming out of Europe and it’s probably worth going back to about 15 years ago when the Balsillie bid happened. The Canadian Competition Bureau at the time did an internal report, [which] hasn’t been released, but their finding was that there’s nothing to see here. The NHL is is doing nothing wrong. They’re allowed to decide who goes where and there’s no abuse of dominance.
At the time, it was only the Competition Bureau that was able to prosecute an abuse of dominance case, so their word was the be all and end all.
Two things have changed. One, the test for abuse of dominance has actually been made more favourable to consumers so as to be able to challenge them. And secondly, there’s now a private access as of June, 2025, which you’ve been covering, and I thank you for that, which would allow interested parties and public interest groups to come forward.
So we’re just doing it to advance the dialogue to get people thinking that this omnipotent world that is controlled by the board of governors of the NHL, by the owners, it may be a thing of the past. It’s helpful for people, fans, consumers, municipalities to start thinking, well wait a second, who are these people in Toronto to decide whether or not Hamilton should have a franchise? These are billion-dollar franchises and so far their concerns are largely around protectionism.
I would love it if somebody were to challenge the league. I think the Toronto market is the one that is the most right for disruption. Look at the New York market, for example, in hockey. They have the Rangers, the Devils and the Islanders. Why is it that the largest hockey market in the world is limited to just one? Frankly, you could probably make the same argument for Montreal.
How much of a long shot do you think this is?
If you look at the test for abuse of dominance, they basically check all the boxes in terms of what they’re doing. They’re preventing new entrants. They’re using it to avoid price competition. It’s detrimental to the consumer, resulting in inflated ticket prices.
I don’t think it’s a long shot at all. It’s actually the perfect testing ground for the abuse of dominance regime for private access. Potential investors, municipalities should all be considering the possibility of challenging the league.
When it comes to the NHL and hockey, who better to challenge this? The NHL started in Canada, it is largely driven by Canadian revenue and for reasons of southern expansion that we’ve heard about for how many decades now, we’ve been put on the shelf and told we’re going to have to wait.
In terms of the new laws, your firm has filed two of the three cases so far, while the third was by Berger Montague. Why have all three of these been brought by firms that specialize in class actions?
There’s a class-action element to the private access because, not only are you seeking conduct remedies that will prevent the continuation of this conduct, there’s a phase two, which is basically the payment of compensation to people – consumers who’ve been injured, competitors who’ve been injured – and that’s our bread and butter. That is what we do.
A not-for-profit group is not going to have enough money to go and challenge Live Nation. It has to be challenged by a law firm with significant resources and that expects to get paid on a contingency basis from the damages that are recovered for the class. Without that, the system just is just going to grind to a halt. We’re going to go back to a situation like we had before where it’s just the Competition Commissioner bringing cases, who lacks resources and who can only take on so many fights.
It’s an important development in Canada. I think we’ve been very complacent as Canadians in terms of allowing monopolies. Right now we’re living within a world where we’re increasingly controlled by large data companies that are extracting data from us at every turn. This is one tool that we can use to push that back and to level things out a little bit.
What have you learned about this process so far, given the Tribunal’s rejection of the Google case?
We have a clear road map for how to bring [these cases]. There was a little bit of uncertainty in terms of what the Tribunal would look for in order to grant leave to allow one of these cases to move forward, so we now have more clarity.
There’ll be a lot more clarity to come, but it’s going to come at the cost of some losses and we’re just going to have to work our way through it.