Wednesday, June 23, 1999

Salary Caps and the AFL

The Melbourne based consultancy, Affairs of State has recently published the football club affiliation of all Victorian MPs.  The most popular club, Collingwood, also has the biggest supporter base but was at the bottom of the ladder as at the end of April.  Neither Collingwood or the other giant Carlton has topped the ladder for eight seasons.

There is no other sports competition in which the two best supported clubs are performing so dismally.  And the reason for this?  The regulations of player salaries implicit in the policy of equalisation which the AFL Commission adopted in 1986.  This was borrowed from American Football.  It is designed to prevent, wealthy clubs from using "chequebook power to recruit the best players" and keep "player costs within the reach of most clubs".

The issue of salary caps in AFL has recently assumed great topicality.  AFL Commissioner David Shaw is under extreme pressure to resign after breeches of the salary cap during his tenure as President of Essendon.  All clubs go to the limit in seeking to offer adequate remuneration to their best players but the AFL thoroughly scrutinises packages to ensure that supplements for training, representation etc. are within bounds it considers acceptable.

As far as the players are concerned, the salary caps mean a reduction in income and a corresponding reduction in the attraction of a sporting career that is inevitably short compared with other sports or vocations.  In this respect it is akin to a wage ceiling.  Imagine the reaction if a Paul Anderson, a Pavarotti or a Mick Jagger were to be limited in earnings by some sort of salary cap.  How would their talents be allocated among the many seekers of their services?  Supposing a Paul Anderson were to be told that he could not go to work for BHP for more money than Duke energy were prepared to pay him, even though he was more valuable at BHP?  Supposing a middle ranking executive at NAB could not be recruited by Westpac because it would break some form of wage cap that the banking industry itself had set?

Salary caps have adverse effects on the ability of AFL to compete and provide the services supporters wish to see in a number of ways.  Importantly, these include denying supporters the capacity to have their support reflected in the calibre of players their club can attract.  That apart, they may even be illegally anti-competitive, if the AFL Commissioner Graeme Samuel were to be wearing his National Competition Council hat.  Although nobody has mounted a restraint of trade assault on the AFL regulation, the policy must surely be an impediment to competition.

Other mass spectator team sports reward their main employees according to the market demand for their skills.  Soccer, baseball, ice hockey and even cricket are among the sports that have flourished as a result of open access and no effective restraint on player payment.  The different levels of club wealth, while facilitating on-going success of clubs like Manchester United, Real Madrid or the San Francisco 49ers, has not prevented the rise and fall of other clubs, (and it was less than 25 years ago that even the might Manchester United was relegated to the English Second Division).

A footnote on the Affairs of State data.  The team with the largest politician support is Collingwood, the team which for so long was the favourite of the True Believers and which co-opted Paul Keating as its Number 1 supporter.  Times change.  Collingwood now has fewer Labor Party than Liberal/ National party MPs as supporters.


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