[Senate Hearing 107-427]
[From the U.S. Government Publishing Office]
S. Hrg. 107-427
THE APPLICATION OF FEDERAL ANTITRUST LAWS TO MAJOR LEAGUE BASEBALL
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 13, 2002
__________
Serial No. J-107-59
__________
Printed for the use of the Committee on the Judiciary
U.S. GOVERNMENT PRINTING OFFICE
79-393 WASHINGTON : 2002
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts ORRIN G. HATCH, Utah
JOSEPH R. BIDEN, Jr., Delaware STROM THURMOND, South Carolina
HERBERT KOHL, Wisconsin CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California ARLEN SPECTER, Pennsylvania
RUSSELL D. FEINGOLD, Wisconsin JON KYL, Arizona
CHARLES E. SCHUMER, New York MIKE DeWINE, Ohio
RICHARD J. DURBIN, Illinois JEFF SESSIONS, Alabama
MARIA CANTWELL, Washington SAM BROWNBACK, Kansas
JOHN EDWARDS, North Carolina MITCH McCONNELL, Kentucky
Bruce A. Cohen, Majority Chief Counsel and Staff Director
Sharon Prost, Minority Chief Counsel
Makan Delrahim, Minority Staff Director
C O N T E N T S
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STATEMENTS OF COMMITTEE MEMBERS
Page
DeWine, Hon. Mike, a U.S. Senator from the State of Ohio......... 33
Feingold, Hon. Russell D., a U.S. Senator from the State of
Wisconsin...................................................... 28
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah...... 22
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 1
Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama.... 86
Thurmond, Hon. Strom, a U.S. Senator from the State of South
Carolina....................................................... 88
WITNESSES
Brand, Stanley M., Vice President, Minor League Baseball,
Washington, D.C................................................ 35
Butterworth, Hon. Robert A., Attorney General of Florida,
Tallahassee,
Florida........................................................ 4
Dayton, Hon. Mark, a U.S. Senator from the State of Minnesota.... 18
DuPuy, Robert A., Executive Vice President and Chief Legal
Officer, Office of the Commissioner of Major League Baseball,
New York, New York............................................. 23
Fehr, Donald M., Executive Director and General Counsel, Major
League Baseball Players Association, New York, New York........ 29
Nelson, Hon. Bill, a U.S. Senator from the State of Florida...... 20
Swanson, Lori R., Deputy Attorney General of Minnesota, St. Paul,
Minnesota...................................................... 9
Wellstone, Hon. Paul D., a U.S. Senator from the State of
Minnesota...................................................... 14
QUESTIONS AND ANSWERS
Responses of Stanley M. Brand to questions submitted by Senator
Leahy.......................................................... 67
Responses of Stanley M. Brand to questions submitted by Senator
Hatch.......................................................... 70
Responses of Robert A. Butterworth to questions submitted by
Senator Leahy.................................................. 73
Responses of Robert A. Butterworth to questions submitted by
Senator Hatch.................................................. 74
Responses of Robert A. DuPuy to questions submitted by Senator
Leahy.......................................................... 76
Responses of Robert A. DuPuy to questions submitted by Senator
Hatch.......................................................... 78
Responses of Robert A. DuPuy to questions submitted by Senator
Sessions....................................................... 83
Responses of Lori R. Swanson to questions submitted by Senator
Leahy.......................................................... 85
Responses of Lori R. Swanson to questions submitted by Senator
Hatch.......................................................... 84
SUBMISSION FOR THE RECORD
Wolff, Miles, Commissioner of Northern League Baseball........... 89
THE APPLICATION OF FEDERAL ANTITRUST LAWS TO MAJOR LEAGUE BASEBALL
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WEDNESDAY, FEBRUARY 13, 2002
U.S. Senate,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:12 a.m., in
room SD-226, Dirksen Senate Office Building, Hon. Patrick J.
Leahy, Chairman of the Committee, presiding.
Present: Senators Leahy, Feinstein, Hatch, Specter, DeWine,
Sessions, and Brownback.
OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM
THE STATE OF VERMONT
Chairman Leahy. The Judiciary Committee is starting a
little late, and I do not know if they have explained why all
the lights are going on. There is a series of roll call votes,
and it is going to require a rotating panel up here, but we
will try to do it in a way that accommodates the witnesses as
well as possible.
I see Mrs. Kaludi in the audience, and she is more aware of
how these lights work than anybody else here and can explain it
to anybody who needs an explanation.
Senator Hatch is on his way, and he suggested that we
begin, so I will.
This week, spring training begins for the major league
baseball teams. This winter, besides the usual discussion about
players' trades and signings and team prospects for the coming
season, baseball fans in Minnesota, Florida, Montreal, and many
other communities have been on a rollercoaster ride that began
with the baseball commissioner's November 6 announcement that
two unnamed teams would not be playing this year.
In 1998, Congress culminated decades of hearing on labor
strife and other problems in major league baseball when we
enacted the Curt Flood Act. Senator Hatch was the lead sponsor
of that measure, and I was the principal cosponsor. It was a
bipartisan effort to clarify the law. The principal purpose of
the law was to make sure that Federal antitrust laws apply to
the relationships between major league baseball owners, teams,
and players.
Clarifying the law was intended to contribute to an
atmosphere in which team owners and players would resolve their
differences through collective bargaining. Whether the parties
are successful in reaching a negotiated agreement remains an
open question as we meet today.
In 1997 and 1998, I observed that the stops and starts of
the legislative journey toward passage of the Curt Flood Act
would have tried the patience of Job, and I complimented the
then Chairman for staying the course and getting the job done.
The statute, the Curt Flood Act, uses language suggested,
as I recall, by the major league team owners to make clear that
the Act did not ``change the application of the antitrust
laws'' to any other aspect of major league baseball. I thought
then and I think now that it was appropriate to adopt that
provision and begin with the assumption that no industry, no
company, and no person is above the law.
The Curt Flood Act did not create or confirm any Federal
antitrust immunity but was written in terms of Federal
antitrust laws in fact applying to major league baseball.
Major league baseball's claim to a unique antitrust
exemption arose not from an act of Congress but from a decision
by the United States Supreme Court 80 years ago that has since
been discredited. In the subsequent case of Flood versus Kuhn,
the Supreme Court explicitly limited its holding to the reserve
system and reserved an antitrust law exemption for that reserve
system relying as justification on the judicial doctrine of
stare decisis, the principle that judicial decisions once made
should be respected and upheld.
Justice Blackmun noted that the Supreme Court had invited
Congress to pass a statute to change the law if it chose, that
Congress had not acted and that Congress had, by its ``positive
inaction,'' acquiesced in what he described as a legal anomaly
and aberration.
It was against this judicial backdrop that in 1998 Congress
finally did act and eliminated the judicially created exception
preserved in limited form by Justice Blackmun in the Flood
case. It was appropriate that we did it in a law named for the
player who sacrificed his career to raise the issue.
Our bill did not question that the antitrust laws apply to
major league baseball just as they apply to professional
football, basketball, ice hockey, soccer, and all professional
sports. Professional sports are a business, and the laws that
apply to other businesses apply to them. There is no longer any
basis in the law for some general, free-floating baseball
antitrust exemption, nor has such a special antitrust exemption
been justified.
When the Committee was engaged in hearings in 1995 that led
to passage of the Curt Flood Act, after the work stoppage in
1994 and the lamentable and historic cancellation of the World
Series, David Cone, an outstanding major league pitcher,
testified and asked this question: If baseball were coming to
Congress today to ask us to provide a statutory antitrust
exemption, would we?
That is the question I repeat today. Does anybody anywhere
in this country think that if baseball was coming in and
raising for the first time an antitrust exemption that this
Congress or any Congress would grant it for them? Of course
not.
What about major league baseball, as distinct from other
professional sports and businesses, entitles it to special
rules of law? I cannot think of it.
In my view, the heavy burden of justifying any exception
from the rule of law is and should be squarely on the
proponents of any antitrust exemption. I will ask the
representative of major league baseball who are with us today,
their general counsel, to explain precisely what such an
exemption would permit and precisely why it is necessary.
There has been a fair amount of public outcry over the
actions of the owners in unilaterally announcing the end of
baseball in at least two cities within 2 days of the end of the
World Series, and less than 2 months after the tragic attacks
of September 11. More recently, they have suggested four teams,
not just two, need to be eliminated.
In the meantime, we have seen owners approve a merry-go-
round of ownership swaps, with the owner of the Montreal Expos
being approved to buy the Florida Marlins, while the owner of
the Marlins and a former owner of the Padres were approved to
buy the Boston Red Sox, and the other owners joining together
to buy and operate the Expos and prepared to pay the owner of
the Minnesota Twins a hefty fee to kill that team's existence.
To an outsider, it seems that the major league baseball team
owners take care of each other pretty well.
We will hear today how major league baseball owners
continue to ask courts to create special legal exceptions and
immunities for them and how they hold themselves above not only
Federal antitrust law, but also the power of State law
enforcement officers. Once having been a State law enforcement
officer, I always worry when some suggest that there are areas
where the Federal law supersedes, and we will talk about that.
We will also hear some discussion of pending legislative
proposals by Senator Wellstone and Representative Conyers,
which would codify the ruling in some decisions by expressly
providing in law that the Federal antitrust laws apply to major
league baseball franchise relocation.
So I think this hearing will give us the opportunity to
explore these issues of law and the State of the law as they
apply to major league baseball.
I thank each of our witnesses for being with us today.
Another vote has begun, and I am going to go to this vote
and come back, and we will start with the first witness.
[Recess.]
Senator Feinstein. [Presiding.] The Chairman will be
returning to the Committee forthwith. As he may well have said,
we have a number of votes, and he has asked me to begin this
hearing, so we will begin with the public witnesses. And as
they are taking their seats, I will begin the introductions.
First is the honorable Bob Butterworth, Attorney General of
Florida. Mr. Butterworth has served as Attorney General of
Florida since 1986. He has previously held positions within the
Broward County judicial system and served as Broward County
sheriff.
We will begin our testimony with you, General Butterworth.
Welcome and thank you for being here. Sorry for the delay.
STATEMENT OF HON. ROBERT A. BUTTERWORTH, ATTORNEY GENERAL OF
FLORIDA, TALLAHASSEE, FLORIDA
Mr. Butterworth. Senator, thank you so very much for this
opportunity.
Baseball began as a simple game played by amateurs in
pastures of rural America. Today it is a major commercial
enterprise conducted in big city board rooms and multi-million-
dollar stadiums. I believe the time has come to treat baseball
as the very big business it has evolved into.
The time may have also come to recognize a sad irony,
namely, that while baseball remains America's pastime, its big
league version is acting in a very un-American manner.
In the 1990's, my State became the home of two major league
teams. Today, less than a decade since the first team arrived,
there is a strong possibility that Florida could lose one or
both of our teams. Obviously, such a move would mean the loss
of millions of dollars for communities where those teams are
located.
But beyond dollars, there is the emotional impact.
Countless fans have welcomed these teams into their hearts. Fan
loyalty is not as easily quantified as team profit but it every
bit as worthy of consideration.
If Florida loses one or both of its teams, it will not be
because of the fans. It will be because the powers that be, the
major league team owners and their commissioner, have deemed it
the financially prudent move to make in order to increase their
profits. And when they make that decision, it will be made
behind closed doors. That was made clear last November 6, when
major league owners met behind closed doors and voted to reduce
the number of teams by two.
We are led to believe that the two teams on the chopping
block are the Twins and the Expos, but Commissioner Bud Selig
has done everything humanly possible to dodge questions about
the future of specific teams.
He was not so reluctant, though, to talk last year, when he
entered the fray over a proposal before the Florida legislature
to authorize funding for a new stadium in downtown Miami. In a
letter to a State Senator which is being put up on the board,
Commissioner Selig said that unless funding was secured, the
Marlins would be a prime candidate for contraction or
relocation. The letter goes further. This statement could be
viewed in only one way--that is, as a threat. And rest assured,
that threat was still in our minds when the owners voted to
contract on November 6.
It was within this atmosphere that I moved to protect the
interests of the people of the State of Florida. I issued
investigatory subpoenas. I did so under the authority of
Florida's antitrust law, bolstered by a Florida Supreme Court
decision. That ruling made it clear that the baseball exemption
applies only to the reserve system and does not extend to team
relocation matters.
Major league baseball successfully, unfortunately, urged a
Federal district judge to block my investigation, rejecting the
Florida Supreme Court ruling. The Federal judge said the
exemption applied to all--all--all aspects of business of
baseball.
The bottom line of that ruling was to prevent me as
attorney general from carrying out my Constitutional
responsibilities.
Whatever Florida antitrust law was actually violated during
that meeting, I have no idea. That remains totally, totally
unknown. As State Attorney General, however, I must have the
authority to find out. Toward that end, we of course have
appealed.
There is, of course, another forum in which this matter can
be resolved--namely, right here in the U.S. Congress. You have
it within your power to clearly delineate those areas in which
major league baseball is exempt from antitrust law and those in
which it is not. And certainly one area in which it should not
be exempt is in how it determines the fate of team franchises
and the communities that support them.
I for one believe that it is time for the big leagues to
play by the same rules as other multi-billion-dollar industries
and other professional sports, and it just may be that the only
way it will happen is through firm and decisive action on your
part.
Thank you very much, Madam Chair.
Senator Feinstein. Thanks very much, General Butterworth.
[The prepared statement of Mr. Butterworth follows:]
Statement of Hon. Robert A. Butterworth, Attorney General of Florida,
Tallahassee, Florida
Chairman Leahy and Senators, thank you for this opportunity.
I am here today at your invitation and because of a federal
district court's interpretation of baseball's antitrust exemption which
prevents me from carrying out my responsibilities to the people of
Florida as their Attorney General.
Specifically, the district court has barred the State of Florida
from conducting an antitrust investigation into Major League Baseball's
handling of matters that could severely impact Florida's status in the
major leagues and cause untold economic harm.
I believe it is incumbent upon this Congress to exercise its
authority and make it clear that Major League Baseball must abide by
the same rules of fair play as any other multi-billion dollar industry
operating in America.
Were he alive today, Abner Doubleday would likely be astonished at
how drastically the sport he is largely credited with inventing has
been transformed.
What began as a simple game played in the pastures of rural America
has become a major commercial enterprise conducted in big city
boardrooms and multi-million dollar stadiums.
As much as we would like to cling to an idealized, ``Field of
Dreams'' vision of baseball, it is time to face facts.
Baseball, at least as it pertains to the major leagues, is more
than just a game...
...it is a very, very big business.
The time has come to treat it as such.
The time also may have come to recognize a sad irony about the
nature of the game. a
Namely, that while baseball remains America's pastime, its big
league version is acting in a very un-American manner.
In the 1990s, my state became the proud home of two major league
baseball teams, the Florida Marlins and the Tampa Bay Devil Rays.
Today, less than a decade since the first team arrived, there is
the possibility that Florida could lose one or both of those teams in
the not-too-distant future.
Such a move would of course have a significant, negative impact on
the economies of the communities those teams represent and Florida as a
whole.
For instance, our own internal estimates based upon publicly
available information show that the annual economic impact of the
Florida Marlins on the South Florida economy is approximately $193
million.
For Tampa Bay/St. Petersburg, which also has a 27-year lease
arrangement with the Devil Rays, the estimated annual economic impact
of the club is approximately $178 million.
As the nation's premier spring training site, our state could also
suffer from the elimination of non-Florida teams that train here and
generate millions of dollars in revenues.
Not to mention the financial harm that could come from the
elimination of minor league squads in Florida.
If we do lose such valuable assets, it will not be because the
people have decided they no longer want major league baseball in their
state.
It will be because the powers that be--the major league team owners
and their commissioner--have deemed it the financially prudent move to
make.
And when and if they make that decision, it will almost certainly
be made behind closed doors.
While the game of major league baseball is a spectator sport, the
business of major league baseball is anything but.
Recent meetings of major league owners made that fact abundantly
clear.
Last November 6th, a closed-door meeting resulted in a vote to
reduce the number of major league teams from 30 to 28.
We are led to believe the two teams on the chopping block are the
Minnesota Twins and the Montreal Expos, but Major League Baseball
continues to hold its cards close to the vest.
Commissioner Bud Selig in particular has done everything humanly
possible to dodge questions about the future of specific teams.
He was not so reluctant to talk last year, however, when he entered
the fray over a proposal before the Florida Legislature to authorize
funding for a new stadium in downtown Miami.
In a letter to Senator J. Alex Villalobos dated April 25, 2001,
Commissioner Selig said that unless funding was secured, the Marlins
would be a prime candidate for contraction or relocation.
That letter said in part: ``Relocation of Clubs and contraction of
the number of Clubs in Major League Baseball are two options that are
in fact being actively reviewed as part of a global plan of economic
reorganization.
In the event the Marlins and the local community do not succeed in
securing the necessary funding sources the Marlins will be a very
likely candidate for each of those options.
We recognize that relocation and contraction are very significant
actions.
Should the Marlins fail to secure legislation necessary to
implement its funding plan, however, we believe such steps will be
warranted.
Bluntly, the Marlins cannot and will not survive in South Florida
without a new stadium.''
This statement could only be viewed as a threat.
And rest assured, that threat was still in our minds when the
owners voted on November 6th to contract.
It was within this atmosphere that I asserted my powers as
Florida's attorney general.
About a week after the November 6th meeting, my office issued
investigative subpoenas to the league, Commissioner Selig and Florida's
two teams.
We did so armed with a Florida Supreme Court decision giving us
clear authority to investigative potential antitrust violations by
baseball under state antitrust law, Butterworth vs. National League of
Professional Baseball Clubs.
In its ruling, the court made it clear that Major League Baseball's
exemption is limited to the reserve system and does not extend to team
relocation matters.
The goal of our proposed investigation was to obtain the answers to
some fairly simple questions.
They included whether the Marlins or Devil Rays were to be
eliminated and what the financial condition of each team actually was.
Three days before their response was due, the league filed an
action in Tallahassee federal district court to block our
investigation.
The judge granted the league's request to quash our antitrust
subpoenas.
In his ruling, he cited the baseball antitrust exemption, a
judicial anomaly created in 1922 by the U.S. Supreme Court.
Rejecting the Florida Supreme Court decision, the district court
judge said that exemption applied to all aspects of the business of
baseball, including team location.
That view, however, is not universally held within the federal
judiciary.
Most notably, a Pennsylvania federal court in Piazza vs. Major
League Baseball ruled that the application of the baseball exemption is
more narrowly limited to the league's player reserve system.
In other words, it exempts the league from antitrust law in its
dealings with team members, but not in its dealings with the
communities where those team members play.
We believe that well-reasoned decision is correct, and it is our
hope that the U.S. Supreme Court will settle this matter once and for
all by confirming it.
Toward that end, we have appealed the Florida federal district
court ruling to the circuit court in Atlanta.
There is, of course, another forum in which this matter can be
resolved.
Namely, right here in the United State Congress.
You have it within your power to clearly delineate those areas in
which Major League Baseball is exempt from antitrust law and those in
which it is not.
And certainly, one area in which it should not be exempt is in how
it determines the fate of team franchises and the communities that
support them.
Congress took a step in the right direction with the Curt Flood Act
of 1998 with members of this committee even confirming that the passage
of the act had no effect on the authority of state attorneys general to
investigate baseball under state antitrust laws.
That point was made clear in the following exchange between
Senators Wellstone, Hatch and Leahy:
Mr. Wellstone. Mr. President, late last night (July 30, 1998), the
Senate passed by unanimous consent S. 53. I have been contacted by the
Attorney General of my State, Hubert H. Humphrey III, and asked to try
to clarify a technical legal point about the effect of this
legislation.
The State of Minnesota, through the office of Attorney General, and
the Minnesota Twins are currently involved in an antitrust related
investigation. It is my understanding that S. 53 will have no impact on
this investigation or any litigation arising out of the investigation.
Mr. Hatch. That is correct. The bill simply makes it clear that
major league baseball players have the same rights under the antitrust
laws as do other professional athletes. The bill does not change
current law in any other context or with respect to any other person or
entity.
Mr. Wellstone. Thank you for that clarification. I also note that
several lower courts have recently found that baseball currently enjoys
only a narrow exemption from antitrust laws and that this exemption
applies only to the reserve system.
For example, the Florida Supreme Court in Butterworth v. National
League, 644 So.2d 1021 (Fla. 1994), the U.S. District Court in
Pennsylvania in Piazza v. Major League Baseball, 831 F. Supp. 420 (E.D.
Pa. 1993) and a Minnesota State court in a case involving the Twins
have all held the baseball exemption from antitrust laws is now limited
only to the reserve system.
It is my understanding that S. 53 will have no effect on the
courts' ultimate resolution of the scope of the antitrust exemption on
matters beyond those related to owner-player relations at the major
league level.
Mr. Hatch. That is correct. S. 53 is intended to have no effect
other than to clarify the status of major league players under the
antitrust laws.
With regard to all other context or other persons or entities, the
law will be the same after passage of the Act as it is today.
Mr. Leahy. I concur with the satement [sic] of the Chairman of the
Committee.
The bill affects no pending or decided cases except to the extent
that courts have exempted major league baseball clubs from the
antitrust laws in their dealings with major league players.
In fact, Section 3 of the legislation makes clear that the law is
unchanged with regard to issues such as relocation.
The bill has no impact on the recent decisions in federal andstate
courts in Florida, Pennsylvania and Minnesota concerningbaseball's
status under the antitrust laws.
Mr. Wellstone. I thank the Senator. I call to my colleagues
attention the decision in Minnesota Twins v. State by Humphrey, No. 62-
CX-98-568 (Minn. dist. Court, 2d Judicial dist., Ramsey County April
20, 1998) reprinted in 1998-1 Trade Cases (CCH) 72,136.
Cong. Rec. H9945 (daily ed. Oct. 7, 1998) (statement of Senators
Hatch, Leahy, and Wellstone).
The consequences of decisions to contract the major leagues or
relocate teams are too important to the people of Florida for them to
be made without proper checks that protect their interests.
The same can be said in relation to the people of any state where
Major League Baseball is a vital part of the local economy.
For example, such has already been the case in Massachusetts, where
the state attorney general was forced to intervene in the sale of the
Boston Red Sox.
In that case, Major League Baseball was poised to accept a lower
offer of $700 million for the purchase of the team despite two other
higher bids.
The impact of that action would have been the deprivation of tens
of millions of dollars for charities which would have benefitted from
the trust that holds a majority share of the team.
Fortunately, the Massachusetts attorney general's action resulted
in $30 million more for the charities.
In Florida, Major League Baseball came to us full of promises,
including to directly or indirectly infuse millions of dollars into the
surrounding economies.
In the process, it took advantage of remarkable tax benefits and
local financial support from the host cities.
That same pattern has been followed throughout the country.
It is nothing less than a betrayal of the public trust to now
conspire behind closed doors about the future of baseball in those
communities that welcomed the major leagues.
The November 6 vote was akin to General Motors, Ford and every
other car maker in America meeting to vote to shut down all Daimler-
Chrysler factories so that they could sell more cars and make more
profit.
This typically would be characterized as a concerted agreement to
restrict output, which would be illegal in just about any other
circumstance but baseball.
I for one believe it is time for the big leagues to play by the
same rules as other multi-billion dollar industries.
And it just may be that the only way that will happen is through
firm and decisive action on your part.
Unfortunately, the only game the major leagues seem to understand
is hardball.
Finally, it bears repeating that every other professional sport in
this country has done quite well without an antitrust exemption and on
revenues that are far less than that of Major League Baseball.
Indeed, none of these sports suffer from Baseball's woes.
While the antitrust laws apply to these sports, the reality is that
established antitrust analysis will require a balancing test of the
pro-competitive versus anti-competitive effects of the conduct before
it can be determined if that conduct violates the antitrust laws.
This analysis is known as the ``rule of reason'' analysis.
Even the Reagan Administration, which was not known for its
antitrust activism, concluded that the ``rule of reason'' analysis
required in most cases to determine whether the antitrust laws have
been violated was sufficient protection for Major League Baseball to
justify doing away with the exemption.
In a 1982 Congressional hearing, Deputy Assistant Attorney General
Abbott B. Lipsky, Jr. of the Reagan Justice Department testified:
``It has been the position of the Antitrust Division for some time
that baseball's exemption is an anachronism and should be eliminated.
I know of no economic data or other persuasive justification for
continuing to treat baseball differently from the other professional
team sports, all of which are now clearly subject to the antitrust
laws.
As I stated earlier, antitrust courts have sufficient flexibility
in the rule of reason analysis to take into account any special
considerations that may be found to exist in baseball.''
H.R. Rep. No. 103-871 (1994).
President Reagan's Justice Department was right.
Today, Congress has the opportunity to affirm that position and
undo the travesty that is the baseball antitrust exemption.
Once again, I want to express my appreciation for allowing me to
speak with you today.
I hope my comments have been helpful.
I also hope you will call on me or my staff for any further
information you may need.
We stand ready to assist, and look forward to working with you any
way we can to protect the people's interests.
Thank you.
Senator Feinstein. The next witness is Lori Swanson. She is
Deputy Attorney General in the office of Minnesota Attorney
General Mike Hatch and has been there since January 1999. She
oversees the civil enforcement work of Minnesota's Attorney
General's office and has handled antitrust, consumer, commerce,
and charities matters.
Welcome, Ms. Swanson.
STATEMENT OF LORI R. SWANSON, DEPUTY ATTORNEY GENERAL OF
MINNESOTA, ST. PAUL, MINNESOTA
Ms. Swanson. Madam Chair, thank you for the introduction.
I have been asked by Attorney General Mike Hatch of our
State of Minnesota to come before the Committee today and
represent the views of the Minnesota Attorney General's office
and represent the people of Minnesota as it relates to these
issues of baseball and antitrust. It is a privilege to appear
before you today to talk about these issues.
As we have heard, the Minnesota Twins have been the focus
of a lot of attention this off-season. Last November multi-
millionaire owners of 30 independent businesses brazenly and
openly got together in Chicago and voted to, through concerted
action, eliminate two of their own in order to benefit the
remaining teams.
It is hard to imagine, frankly, any other industry in
America where all of the competitors could get together behind
closed doors, away from public view, away from public scrutiny,
and collectively decide that two of them should go out of
business, reducing supply, so that the others could make more
money and remain more profitable.
This is not the first time this issue of contraction of
teams has been an issue before the people of Minnesota or that
the people of Minnesota have been threatened on these issues,
or frankly, people around other parts of the country as well.
In 1997, the Minnesota Twins signed a letter of intent to
sell their team to investors in North Carolina if the Minnesota
legislature did not publicly finance a new stadium, and major
league baseball, similar to Florida's instance, indicated that
they would approve that sale if the Minnesota legislature did
not publicly finance the stadium. They also said that if the
Minnesota legislature did not do so, no other team would be
allowed to play in the Metrodome stadium, which is our local
baseball stadium in Minnesota. Again, this was concerted
activity, a boycott situation that frankly would be hard to
imagine any other industry doing.
And the transaction made no economic sense. At the time,
the Minnesota media market was the 14th largest in the country,
and North Carolina was 47th, and North Carolina had no stadium,
either. So it did not seem to make a lot of economic sense.
Our office served the request for information on baseball,
attempting to investigate whether this could be a concerted
illegal boycott and, frankly, a pretext to hold the people of
Minnesota hostage, and we ran smack dab into the so-called
antitrust exemption.
The others of major league baseball believe that unlike
these other businesses, including other professional sports
leagues, they are not subject to the antitrust laws. We
disagree with major league baseball. We think that some of
those cases took place in an era where both baseball and
antitrust were different, and in fact, the exemption has been
narrowed by the Court so that this type of contraction would
not necessarily be immune to challenge.
However, there is obviously disagreement among the courts,
and we think it is appropriate--the Attorney General's office
in Minnesota--that these issues be clarified by Congress.
It is interesting--the league contends that contraction is
necessary because certain so-called small market teams like the
Twins do not generate enough revenue to satisfy the league,
even though public reports show that the Twins in fact made a
profit last year when other teams did not.
What is very interesting is that looking at baseball's
rationale over the last 15 years for keeping the exemption, it
seems to be in extreme contrast with their public statements
today.
In the past, Commissioner Selig of major league baseball
has made certain representations to Congress about what major
league baseball would do if the so-called exemption were
allowed to remain in place. For instance, in 1993, Commissioner
Selig testified before Congress that ``Congress has often
looked at baseball's position with respect to the antitrust
laws, and it has always reaffirmed baseball's antitrust status,
because baseball's conduct has always been consistent with the
public interest.'' He said it has always been consistent with
the public interest.
He went on to say that ``Baseball has continued to uphold
its unique covenant with its fans and it deserves to retain its
current status under the antitrust laws.'' Why? Because he said
baseball has upheld its unique status and has kept its
commitment to the public.
Similarly in a 1993 appearance before a Subcommittee of the
House Judiciary Committee, Commissioner Selig asserted that:
``The most immediate consequence of the elimination of
baseball's antitrust exemption would be that a number of teams
in small markets would attempt to abandon some of baseball's
existing cities for what they think are better economic
conditions elsewhere.''
Again in 1993, when Commissioner Selig invoked baseball's
antitrust exemption to prevent the San Francisco Giants from
moving to Florida, he testified that: ``The national league's
decision to keep the Giants in San Francisco where they have
successfully operated with loyal support from millions of fans
for the past 35 years was simply a reaffirmation of baseball's
longstanding policy against the relocation of franchises that
have not been abandoned by their local communities.''
Now, though, the league seems to be doing something
different. The league would use its supposed exemption to
eliminate a franchise, the Minnesota Twins, that has enjoyed
support from the people of Minnesota for over 40 years. The
Twins were the first American League team to draw more than 3
million fans in a single season. To say that the community, the
people of Minnesota, have abandoned the Twins ignores the fact
that the team drew over 1.75 million fans last season.
Commissioner Selig himself recognizes the trauma that can
be caused communities when teams are relocated in this way. He
talks about how he was ``personally heartbroken'' when the
Graves left Milwaukee after the 1965 season. He said: ``The
city of Milwaukee and the State of Wisconsin were traumatized
by the loss of that franchise. The people in my home State felt
hostility, bitterness, and a deep sense of betrayal toward
major league baseball for allowing the Braves to abandon us.''
I am running out of time, but we would support any efforts.
We think that the claims in the past on the antitrust exemption
have not been followed.
[The prepared statement of Ms. Swanson follows:]
Statement of Lori R. Swanson, Deputy Attorney General of the State of
Minnesota
I. Introduction
Mr. Chairman, members of the committee, it is a privilege to be
asked to appear before you to discuss baseball and antitrust. As you
know, the Minnesota Twins have been the focus of a lot of attention
this offseason, and it has not been because of the team's young talent
that some predict could win the American League Central Division this
year. Rather, ever since Major League Baseball's owners gathered
together in Chicago last November and decided to eliminate two of their
own, the future existence of this team--along with that of the Montreal
Expos--has been in doubt. While the League says in public that it has
not settled on which teams would be targeted for contraction under its
plan, recent media stories indicate that in fact consideration has not
been given to contracting any team other than the Twins or Expos. And
from day one, the Twins and Major League Baseball have been fighting
tooth and nail to get out of the team's lease in the Metrodome for the
2002 season. That is not the conduct one would expect from a team
planning on being around much longer.
After a series of battles in the Minnesota state courts, the Twins
will continue to play through the 2002 season. But after that, the
team's continued existence remains up in the air.
How is it that multi-millionaire owners of thirty independent
businesses--and mind you, these are big businesses--could so brazenly
and openly get together and eliminate two of their own in order to
benefit the remaining teams? How can they threaten the existence of a
franchise that has a forty-plus year history in Minnesota (and a one-
hundred year history overall) and deprive millions of fans in Minnesota
of their toeam, just for their own profit? The answer is that the
owners believe that unlike other businesses--including all of the other
professional sports leagues--they are not subject to the antitrust
laws.
We disagree with Major League Baseball and believe that the
baseball antitrust exemption, created by the U.S. Supreme Court back in
a different era--both of baseball and of antitrust law--has since been
narrowed by the courts so that the owners' contraction ploy is not
immune from challenge under the antitrust laws. That said, there is
some disagreement among courts as to whether that is in fact the case.
Just recently, for example, a federal court in Florida agreed with the
League that contraction fell within the scope of the antitrust
exemption. But Major League Baseball's recent contraction plans
demonstrate that, if the League does in fact have an exemption, it no
longer can be entrusted with that privilege. If Major League Baseball
wants to conduct itself as just another for-profit business, in total
disregard for the game and its fans, then it should not be treated
differently under the antitrust laws than any other private business.
Therefore, I would support legislation clarifying that issues such as
franchise contraction are subject to scrutiny under the Sherman Act.
II. Major League Baseball's Narrow Antitrust Exemption Post-Flood v.
Kuhn.
Major League Baseball's antitrust exemption originates in the so-
called ``baseball trilogy,'' three U.S. Supreme Court decisions dating
back to 1922. In Federal Baseball,\1\ the first of these cases, the
Supreme Court decided that the business of giving exhibitions of
baseball did not amount to interstate commerce. Rather, the Court said,
baseball was a purely state affair, notwithstanding the fact that in
order to put on these exhibitions teams regularly crossed states lines.
Because baseball was not interstate commerce, the Sherman Act did not
apply to the sport.
---------------------------------------------------------------------------
\1\ Federal Baseball Club of Baltimore v. National League, 259 U.S.
200 (1922).
---------------------------------------------------------------------------
By the time the Supreme Court last considered Major League
Baseball's antitrust exemption, in the 1972 Flood v. Kuhn \2\ case, the
Court's take on interstate commerce had changed significantly,
expanding to encompass a much broader range of economic activities.
Furthermore, the game of baseball itself had changed, becoming less a
pastime and more a business. The Supreme Court at last recognized the
obvious in Flood--that baseball by the early 1970's was engaged in
interstate commerce.
---------------------------------------------------------------------------
\2\ Flood v. Kuhn, 407 U.S. 258 (1972).
---------------------------------------------------------------------------
What was left of Major League Baseball's antitrust exemption after
Flood v. Kuhn? Not much, we believe. And at least one federal district
court agrees with this position. In a case known as Piazza v. Major
League Baseball League Baseball,\3\ an investment group challenged
Major League Baseball's refusal to allow it to buy the San Francisco
Giants and move the team to Florida. The League argued that decisions
concerning franchise relocations were exempt from the antitrust laws.
The district court conducted an extremely thorough analysis of the
origins and evolution of the antitrust exemption and concluded that the
Supreme Court's decision in Flood effectively limited the exemption to
the so-called reserve clause. The district court reasoned--correctly we
believe--that because Flood rejected Federal Baseball's rationale that
Major League Baseball was not engaged in interstate commerce, the
proper application of stare decisis meant that the only aspect of
Federal Baseball that remained to be followed was its result, which was
the exemption of the reserve system from the antitrust laws.
---------------------------------------------------------------------------
\3\ Piazza v. Major League Baseball League Baseball, 831 F. Supp.
420 (E.D. Pa. 1993).
---------------------------------------------------------------------------
Obviously, Major League Baseball disagrees with us as to the scope
of the antitrust exemption. If the League didn't, I doubt the owners
would be engaging in coordinated conduct that, in almost any other
industry, would at least raise some eyebrows. And unfortunately, a
federal judge in Florida recently agreed with Major League Baseball
that contraction falls within the scope of their antitrust exemption.
Given these different interpretations about the scope of the exemption,
particularly concerning contraction, clarification by Congress is in
order.
III. Major League Baseball does not Deserve any Exemption from the
Antitrust Laws
Whatever the present scope of the exemption, Major League Baseball
has proven that it is undeserving of any privileged status under the
antitrust laws. If the League wants to conduct itself simply as a for-
profit business in disregard for the game and its fans, then it should
not be treated any differently under the antitrust laws than any other
private enterprise.
The League isn't shy about acknowledging the reasons motivating its
push for contraction. It openly contends that contraction is necessary
because certain ``small market'' teams like the Twins do not generate
enough revenue to satisfy the League. And Major League Baseball is now
using its antitrust exemption as a shield to accomplish the elimination
of franchises with impunity. This is quite a turnaround from the past,
when Major League Baseball has come before Congress to state its case
for retaining whatever exemption it might have from the antitrust laws
and argued that the exemption allows the League to protect small market
franchises.
In a 1993 appearance before a subcommittee of the House Judiciary
Committee, Commissioner Selig asserted that ``the most immediate
consequence of the elimination of Baseball's antitrust exemption would
be that a number of teams in small markets would attempt to abandon
some of Baseball's existing cities for what they think are better
economic conditions elsewhere.'' \4\ But now Major League Baseball
would use it supposed antitrust exemption (as the League would have it)
to abandon at least two cities. Commissioner Selig, in announcing the
postponement of contraction until the 2003 season, reiterated that as
many as four cities might be abandoned as a result of the League's
contraction plans.
---------------------------------------------------------------------------
\4\ Hearing Before the Subcommittee on Economic and Commercial law
of the House Comm. on the Judiciary, 103rd Cong. 57-58 (1993)
(statement of Allan H. Selig, President of the Milwaukee Brewers
Baseball Club).
---------------------------------------------------------------------------
When Commissioner Selig invoked Baseball's antitrust exemption to
prevent the San Francisco Giants from moving to Florida, he testified
that ``the National League's decision to keep the Giants in San
Francisco, where they have successfully operated with loyal support
from millions of fans for the past 35 years, was simply a reaffirmation
of Baseball's longstanding policy against the relocation of franschises
that have not been abandoned by their local communities.\5\ Now,
though, the the League would use its supposed exemption to teliminate a
franchise that has enjoyed loyal support from the people of Minnesota
for over forty years. In fact, the Twins were the first American League
team to drawmore than 3 millions fans in a single season. And to say
that the community has abandoned the team ignores the fact that the
team drew over 1.7 million fans last season. And to say that the
community has abandoned the team ignores the fact that the team drew
over 1.7 million fans last season, more than attended home games for
five other teams.
---------------------------------------------------------------------------
\5\ Id. at.51.
---------------------------------------------------------------------------
During the 2001 World Series, Commissioner Selig declared in a
message to fans: ``[B]aseball is an important social institution and a
part of our national fabric. Baseball has a responsibility to those who
look to the game not only for fun and entertainment, but also for a
responsibility to those who look to the game not only for fun and
entertainment, but also for a sense of stability and unification.'' \6\
Major League Baseball has used this imagery to justify whatever
antitrust execption it might have. The Commissioner, for example, has
testified: ``Congress has often looked at Basall's position with
respect to the antitrust laws and it has always reaffirmed Baseball's
antitrust status because Baseball's conduct has always been consistent
with the public interest.'' \7\ He went on to say: ``Baseball has
continued to uphold its unique covenant with its fans and it deserves
to retain its current status under the antitrust laws.\8\ Contraction,
however, has nothing to do with the public interest; rather, it has
only to do with the owners' bottom lines.
---------------------------------------------------------------------------
\6\ ``From the Commissioner,'' World Series 2001 Program, p.8
(Exhibit A).
\7\ Statement of Allan H. Selig, supra note 4, at 58.
\8\ Id. at 59.
---------------------------------------------------------------------------
I cannot conceive of any greater breach of Baseball's ``unique
covenant with its fans,'' as the Commissioner put it, than to forsake
the people of Minnesota, who have supported their team for so long.
Commissioner Selig himself has eloquently described the blow a
community feels when it is abandoned and how he was ``personally
heartbroken'' when the Braves left Milwaukee after the 1965 season. As
the Commissioner recalls: ``The city of Milwaukee and the state of
Wisconsin were traumatized by the loss of that franchise. The people in
my home town felt hostility, bitterness and a deep sense of betrayal
towards Major League Baseball for allowing the Braves to abandon us.
The years of drawing more than 2 million fans per season were
forgotten.'' \9\ Commissioner Selig referred to there being a ``void''
in the community after the Braves' departure. And I am certain that the
same void and sense of betrayal would be felt in Minnesota and any
other community Major League Baseball targets for contraction. If Major
League Baseball can so callously abandon communities in the name of
profits--and do so just days after piously proclaiming Baseball's role
``in the recovery of our nation'' \10\--then there is no longer any
``unique covenant'' to justify a privileged status under the antitrust
laws.
---------------------------------------------------------------------------
\9\ Id. at 53.
\10\ ``From the Commissioner,'' supra note 6.
---------------------------------------------------------------------------
According Major League Baseball favored treatment under the
antitrust laws also means entrusting the League with a weighty
responsibility to make certain that its privileged status is not
abused. Revelations that have occurred since contraction was announced
last November, though, raise serious doubts as to whether Major League
Baseball is deserving of that trust. As many of you are probably aware,
it came to light recently that Commissioner Selig had arranged a $3
million loan for the Milwaukee Brewers from a financial institution
controlled by Carl Pohlad, the owner of the Minnesota Twins. In
addition to the Brewers loan, there have been reports of a Pohlad loan
to Colorado Rockies owner Jerry McMorris. Major League Rule 20 (c)
prohibits loans made directly or indirectly between owners without the
approval of other owners, and according to press reports neither loan
was approved by the other owners. Mr. Selig's reported response to a
question as to why the possible violation of League rules was not
discussed at a recent owners' meeting: ``We decided it was an
antiquated rule.'' Well, the baseball antitrust exemption is also an
``antiquated rule'' from a time when Major League Baseball was more a
pastime, not just a business. If the owners are willing to ignore their
own internal governance structure when an ``antiquated'' rule gets in
the way of doing business, that certainly calls into question whether
Major League Baseball can be trusted to conduct itself in a responsible
manner with an antiquated antitrust exemption (if such an exemption
exists).
IV. Conclusion
The baseball antitrust exemption has been described as ``a derelict
in the stream of the law.'' \11\ The Supreme Court itself has
acknowledged that the exemption is ``unrealistic, inconsistent and
illogical.'' \12\ It is, to borrow Commissioner Selig's words,
antiquated. Modern antitrust doctrine can deal with issues like
contraction without throwing professional sports leagues into chaos,
contrary to what Major League Baseball suggests would happen if it lost
whatever antitrust exemption it might currently have. And given that
the League, through its contraction scheme, has broken whatever
``covenant'' it may have had with its fans, there is certainly no basis
to allow it to enjoy a privileged status under the antitrust laws. The
notion that the Major League Baseball is deserving of any exemption is
far more antiquated than any of the League's own rules that the owners
refuse to follow.
---------------------------------------------------------------------------
\11\ Flood, 407 U.S. at 286 (Douglas, J., dissenting).
\12\ Radovich v. National Football League, 352 U.S. 445, 452
(1957).
---------------------------------------------------------------------------
I thank you for the opportunity to appear before you today.
Senator Feinstein. Very good. Thanks very much, Ms.
Swanson.
We were going to spell each other, and I know that Senator
Leahy was on his way back, but I am going to have to recess
now, because we are down to about 1 minute, so I am going to
race to do the vote and then come right back.
Thank you.
[Recess.]
Senator Feinstein. I am going to call the hearing to order
and ask the panel of witnesses to please take their seats.
Because we have two colleagues that I know of who have come
back and forth from votes now three times, I am going to ask
the witnesses' patience and allow the Senators to make their
statements at this time.
So we will begin with Senator Wellstone and go right down
the line.
Senator?
STATEMENT OF HON. PAUL D. WELLSTONE, A U.S. SENATOR FROM THE
STATE OF MINNESOTA
Senator Wellstone. Thank you, Madam Chair, and let me
apologize to the panelists. This is an unusual situation where
we have the votes scheduled at the same time.
I would like to thank all of you for being here, and I want
to thank Lori Swanson for her superb testimony. I am sorry that
I was not here to hear you directly, Lori, but thank you for
representing Minnesota so well.
I am honored to be here with my colleagues, Senator Dayton
from Minnesota and Senator Nelson.
Madam Chair, I want to thank you and Senator Leahy and the
Committee for holding these hearings on S. 1704, which is the
Fairness in Antitrust in National Sports (FANS) Act of 2001,
which I introduced at the end of last session with Senators
Dayton and Harkin.
The goal of the legislation is to limit major league
baseball's antitrust exemption as it relates to decisions to
eliminate or relocate a major league baseball team. This is an
important bill, made necessary by major league baseball owners'
unfortunate decision last fall to eliminate two teams.
As you know, the Minnesota Twins were prominently mentioned
as one of the two teams, along with the Montreal Expos, to be
eliminated.
Thankfully, team elimination will not happen this season.
Frankly, I think the major league baseball owners did not
anticipate the hailstorm of criticism they received for the so-
called ``contraction'' decision. The owners failed to perceive
the public sense of betrayal at the hands of owners willing to
put their own profits before loyalty to fans and their
communities. The decision to abandon contraction at least for
now was good news for the Minnesota Twins fans and anyone who
believes in this great American pastime.
But unfortunately, the battle is not over. The owners have
made it eminently clear that they intend to pursue team
elimination and/or relocation next year. So Mr. Chairman, while
we may have stepped back from the brink, it is only temporary.
We must remain vigilant, and we need the full protection of the
antitrust laws in doing so.
Mr. Chairman and Senator Feinstein--I will abbreviate
this--let me just tell you a little bit, although I could tell
you a lot, about the Minnesota Twins team and the community
that has been threatened by the owners' apparent desire to
eliminate some of their competitors.
The Minnesota Twins are a vibrant, vital team, a team that
strikes incredible loyalty in the hearts of Minnesota fans--
indeed, of fans all over the Upper Midwest.
To be sure, Minnesota is a so-called ``smart market'' team,
but nonetheless it is a team that has thrived and is thriving
now. Since 1961, they have played in three World Series and won
two. Three Minnesota players have been inducted into the Hall
of Fame--Harmon Killebrew, Rod Carew, and Kirby Puckett.
Minnesota was the first American League team to draw 3 million
in attendance over a season; that happened in 1988. Last
season, we fielded a team that finished second in their
division and drew 1.8 million fans.
The 2001 season that just ended was a phenomenal one for
the Minnesota Twins. And the list goes on and on, but just
quickly, they had 46 crowds of 20,000-plus in 2001; they had 15
crowds of 30,000-plus in 2001; they had increased attendance of
723,211, which ranked first in the American League and second
only to the Milwaukee Brewers in major league baseball; they
finished the season with an average attendance of 22,287, the
team's highest average attendance figure since 1994. The list
goes on.
This is a team that the owners want to eliminate? I think
not.
Mr. Chairman and members of the committee, our country has
a lot of urgent priorities, and you have a lot of urgent
priorities--the war against terrorism, economic security in our
own country--there are many pressing priorities. We should not
in the midst of these urgent priorities have to be concerned
about protecting our fans and communities from unilateral,
self-serving decisions by major league baseball owners.
Unfortunately, however, in light of the owners' announced
intentions to pursue team elimination next season, we have no
choice but to urge quick consideration of this legislation. We
must act as soon as possible to hold major league baseball
owners accountable for their decisions.
Last fall, Senator Dayton and I wrote to the President,
asking for his help. I think it is terribly important that he
weigh in, and we certainly will need his support.
There are two specific issues that I want to conclude with
in respect to S. 1704, since I have authored this bill, that I
would like to discuss.
First, we have heard concerns that despite clear language
to the contrary, the bill would be interpreted as applying to
minor league baseball teams. That was not our intent in
drafting S. 1704, and I would be more than happy to work with
the minor league baseball owners on specific language to
clarify this point and would urge members of the Committee to
join me in this effort as well.
Second, major league owners and their economists will tell
you that lifting major league baseball owners' antitrust
exemption will promote league instability by fostering team
relocation. I challenge such a conclusion. The National
Football League--fully subject to the antitrust laws--was able
to negotiate guidelines with the Conference of Mayors providing
for community input on relocation decisions. I think this is
the operative language of the final point I want to make, Mr.
Chairman and members of the committee.
The application of the antitrust laws does not prevent a
league from working to keep a team in a city, but insulating
that league from the antitrust laws absolutely prevents cities,
fans, and other interested parties from challenging a league
decision to move a team. I think that is really the crucial
point.
Again, Mr. Chairman, I want to emphasize to you that I
think relying on the ``good will'' of major league baseball to
protect Minnesota's interests with respect to relocation would
be foolhardy. I think that our State, our communities, fans
across the country need to have the right to challenge these
decisions. They ought to be able to challenge anticompetitive
practices when it looks like it is just a cartel that has
gotten together.
Mr. Chairman, members of the committee, I want to thank you
for holding these hearings so promptly. I look forward to
working with you and the Committee on this important
legislation. Initially, when I introduced this legislation, I
thought it was a shot across the bow, but I actually believe
there is growing disillusionment with the owners and the high-
handedness and the way in which they have approached these
decisions, and I think there is more support than there has
been before for ending this antitrust exemption, and I am
committed to this fight.
Thank you, Mr. Chairman.
[The prepared statement of Senator Wellstone follows:]
Statement of Hon. Paul D. Wellstone, a U.S. Senator from the State of
Minnesota
``Fairness in Antitrust in National Sports (FANS) Act of 2001''
Mr. Chairman and Members of the Committee, I want to thank you for
so promptly holding hearings on S. 1704, the ``Fairness in Antitrust in
National Sports (FANS) Act of 2001, `` which I introduced at the end of
last session along with Senators Dayton and Harkin.
The goal of this legislation is to limit major league baseball's
antitrust exemption as it relates to decisions to eliminate or relocate
a major league baseball team. This is an important bill, made necessary
by major league baseball owners' unfortunate decision last fall to
eliminate two teams. As you know, the Minnesota Twins were prominently
mentioned as one of the two teams, along with the Montreal Expos, to be
eliminated.
Thankfully, team elimination will not happen this season. Frankly,
I think major league baseball did not anticipate the hailstorm of
criticism it received for its so-called ``contraction'' decision. The
owners failed to perceive the public sense of betrayal at the hands of
owners willing to put their own profits before loyalty to fans and
their communities. The decision to abandon contraction at least for now
was good news for the Minnesota Twins' fans and anyone who believes in
the great American pastime.
But unfortunately the battle is not over. The owners have made
eminently clear that they intend to pursue team elimination and/or
relocation next year. So, Mr. Chairman, while we may have stepped back
from the brink, it is only temporary. We must remain vigilant. And we
need the full protection of the antitrust laws in doing so.
Mr. Chairman, let me tell you a little about the team and the
community that had been threatened by the owners' apparent desire to
eliminate some of their competitors. The Minnesota Twins are a vibrant,
vital team a team that strikes incredible loyalty in the hearts of
Minnesota fans--indeed of fans all over the Upper Midwest.
To be sure, Minnesota is a so-called ``small market'' team. But
nonetheless it is a team that has thrived and is thriving now:
Since 1961, the Minnesota Twins have played in 3 world series
and won two
Three Minnesota players have been inducted into the Hall of
Fame: Harmon Killebrew, Rod Carew, and Kirby Puckett
Minnesota was the first American League team to draw 3 million
in attendance over a season that happened in 1988
Last season we fielded a team that finished second in their
division and drew 1.8 million fans
The 2001 season that just ended was a phenomenal one for the Twins.
This past year we:
Won 85 games, holding or sharing a portion of first place
in the American League Central division from opening day until mid-
August. Indeed, this upstart team could not be beat right up to the All
Star Game.
Finished in the top seven in the American League in all
major team statistical categories [batting (4th), pitching (7th), and
fielding (5th)]
Showed the fifth largest increase in Major League Baseball
in victories (69 in 2000 to 85 in 2001) while maintaining the league's
lowest payroll and Major League Baseball's lowest average ticket price
heading into the 2002 season
Had 46 crowds of 20,000-plus in 2001 compared with 10 in
2000
Had 15 crowds of 30,000-plus in 2001 compared with 5 in
2000
Had increased attendance of 723,211 which ranked first in
the American League and second only to the Milwaukee Brewers in Major
League Baseball
Finished the season with an average attendance of 22,287,
the team's highest average attendance figure since 1994
Increased cable television ratings by 161%, the largest
yearly gain of any major league baseball team the highest in team
history on its licensed regional sports network carrier
Increased over-the-air television ratings by 105%--our
highest over-the-air ratings since 1996
This is a team the owners want to eliminate? I think not.
Mr. Chairman and Members of the Committee, our country has
tremendously urgent priorities. We have the war against terrorism, our
struggle to help working families in the midst of a severe economic
down turn, and other pressing domestic priorities providing adequate
resources to educate our children, adequate health care for working
families, prescription drug benefits, particularly for the elderly. We
should not in the midst of these urgent priorities have to be concerned
about protecting our fans and communities from unilateral, self-serving
decisions by major league baseball owners.
Unfortunately, however, in light of the owners' announced
intentions to pursue team elimination next season, we have no choice
but to urge quick consideration of this legislation. We must act as
soon as possible to hold major league baseball owners accountable for
their decisions.
Last fall Senator Dayton and I wrote to the President asking for
his help. We noted that achieving Congressional action on this
legislation will be exceedingly difficult in view of other urgent
legislative issues facing Congress and the Administration. We urged
him, therefore, to weigh in on this. With the help of the
Administration, I trust we can push this measure forward and give the
owners some pause about what they are doing.
Mr. Chairman there are two specific issues with respect to S. 1704
that I would like to address. First, we have heard concerns that,
despite clear language to the contrary, the bill could be interpreted
as applying to minor league baseball teams. That was not our intent in
drafting S. 1704. I would me more than happy to work with the minor
league baseball owners on specific language to clarify this point and
would urge members of the Committee to join us in that effort as well.
Second, major league owners and their economists will tell you that
lifting major league baseball owners' antitrust exemption will promote
league instability by fostering team relocation. I challenge such a
conclusion. The National Football League fully subject to the antitrust
laws was able to negotiate guidelines with the Conference of Mayors
providing for community input on relocation decisions. The application
of the antitrust laws does not prevent a league from working to keep a
team in a city. But insulating that league from the antitrust laws
absolutely prevents cities, fans, and other interested parties from
challenging a league decision to move a team. And Mr. Chairman, when it
comes to the interests of Minnesota fans there's not a whole lot of
difference between contraction and relocation. The team would still be
gone--and the fans and communities of our state would still be harmed.
Frankly, relying on the ``good will'' of Major League Baseball to
protect Minnesota's interests with respect to relocation would be
foolhardy.
Again, Mr. Chairman. I want to thank you again for holding these
hearings so promptly. I look forward to working with you and the
Committee on this important legislation.
Chairman Leahy. Thank you.
I want to thank Senator Feinstein for coming over and
filling in. As I mentioned earlier to the panel, we did not
anticipate a whole series of fairly close roll call votes,
which held up a number of us, and I apologize for that. It is
one of the reasons why we are running so far behind.
I see Senator Dayton and Senator Nelson here, who also wish
to make statements.
Senator Dayton?
STATEMENT OF HON. MARK DAYTON, A U.S. SENATOR FROM THE STATE OF
MINNESOTA
Senator Dayton. Thank you, Mr. Chairman, and thank you very
much, Mr. Chairman, for arranging this hearing to swiftly in
the midst of all the other demands on this committee. And I
want to thank Senator Feinstein for accommodating our insertion
into the middle of the first panel, and I want to apologize to
the panel for the interruption. Thank you very much for your
forbearance.
Mr. Chairman and members, it is no coincidence that both of
Minnesota's Senators are testifying on behalf of this
legislation today, Senator Wellstone as its author and I as an
original cosponsor.
Like thousands of Minnesota Twins fans throughout not only
Minnesota but the entire Upper Midwest region, we were stunned
last November when major league baseball suddenly announced
plans to ``contract,'' that is, to eliminate two teams before
the start of the 2002 season. One of those teams was widely
rumored to be our Minnesota Twins.
Fortunately for us, a Minnesota judge ruled that the Twins
are contractually obligated by a 1-year least that the team
signed only last October to play this season in Minnesota, and
the Minnesota Court of Appeals has upheld that decision.
Commissioner Selig has now announced that major league baseball
will not eliminate any teams for this 2002 season, so Minnesota
Twins fans and their elected leaders have a brief reprieve.
I am cosponsor this legislation because it would
importantly clarify that major league baseball does not enjoy a
status different from any other sports league relating to the
elimination or relocation of a team franchise.
Nevertheless, as Senator Wellstone pointed out, in past
year, numerous teams in the NFL, NBA and NHL have been moved by
their owners to different cities. Federal courts have upheld
owners' rights to do so, and they have rejected league attempts
to prevent these moves as violations of the Sherman Antitrust
Act--for example, Los Angeles Memorial Coliseum Commission
versus the National Football League in 1984.
So even if this legislation is passed by Congress and then
signed into law by a former baseball team owner, or even if it
were law today, it would not--it could not--prevent a Minnesota
Twins owner from moving that team out of our State.
What the Wellstone bill would do, however, is to prevent a
scheme such as major league baseball recently concocted for its
so-called ``contraction.'' Without claiming an antitrust
exemption, major league baseball could not have planned and
then proclaimed that two teams would be eliminated by the
league and taken away from their cities and their fans. Without
such an exemption, the owners of 28 baseball businesses could
not act in concert to buy out the owners of the other two
franchises for their expected future financial gains.
The league-coordinated ``contraction'' is very different
from an individual owner's decision to sell or move a single
franchise. In that situation, while one city and its citizens
lose their team--and I deplore when those occasions occur--at
least another city and its citizens gain it. With contraction,
only the owners gain. Fifty players lose jobs, and their
association loses financial leverage. Two cities lose their
teams; two other cities lose their chances to gain teams.
Baseball's claimed antitrust exemption also allows the
owner of an existing team to prevent another team from being
moved to a nearby city where it might ``compete in its
market.'' One owner wins while depriving, for example,
thousands of fans in a city like Washington who want a team and
have a willing buyer.
This restraint of competition is precisely the abuse which
antitrust legislation is meant to stop. Major league baseball's
``contraction'' demonstrates clearly the tight control which
the league exercises over the actions of the businesses which
comprise it.
Please remember that in its landmark decision, Curt Flood
versus Kuhn, in 1972, the U.S. Supreme Court stated
unequivocally that ``professional baseball is a business
engaged in interstate commerce.'' Senator Wellstone's bill
applies to those businesses the same rules which apply to other
pro sports businesses.
Let me conclude by saying again to my constituents in
Minnesota: Congress cannot save the Twins for Minnesota. Only
Minnesota can save the Twins for Minnesota. As much as I detest
the financial excesses in pro sports today, I believe that the
Twins need revenues from a new baseball stadium to be viable
financially. More importantly for Twins fans, they need those
new stadium revenues to field winning teams, with marquee
players who can win league pennants and World Series. In both
1987 and 1991, we in Minnesota found out how exciting and fun
that can be.
Like the Metrodome, this new stadium can be built without
costing a single taxpayer dollar. However, if the Minnesota
legislature fails to approve the project this year, they may
not get another chance.
So I urge the Committee to move forward the Wellstone
legislation which is important to the Nation, and I urge the
Minnesota legislature to act in ways that are so important to
Minnesota.
Thank you, Mr. Chairman.
[The prepared statement of Senator Dayton follows:]
Statement of Hon. Mark Dayton, a U.S. Senator from the State of
Minnesota
It is no coincidence that both Minnesota Senators are testifying on
behalf of this legislation today, Senator Wellstone as its author, and
I as an original cosponsor. We, like thousands of Minnesota Twins fans
throughout not only Minnesota but also the entire Upper Midwest region,
were stunned last November, when Major League Baseball suddenly
announced plans to ``contract'': to eliminate two teams before the
start of the 2002 season. One of those teams was widely rumored to be
our Minnesota Twins.
Fortunately for us, a Minnesota judge ruled that the Twins are
contractually obligated by a one-year lease the team signed only last
October to play this season in Minnesota; and the Minnesota Court of
Appeals has upheld that decision. Commissioner Selig has now announced
that Major League Baseball will not eliminate any teams for this 2002
season. So, Minnesota Twins fans and their elected leaders have a brief
reprieve.
I am cosponsoring this legislation, because it would importantly
clarify that Major League Baseball does not enjoy a status different
from any other sports league, relating to the elimination or relocation
of a team franchise.
Nevertheless, in past years, numerous teams in the NFL, NBA, and
NHL have been moved by their owners to different cities. Federal courts
have upheld owners' rights to do so, and they have rejected league
attempts to prevent these moves as violations of the Sherman Anti-
Trust Act (eq. Los Angeles Memorial Coliseum Commission vs. the
National Football League in 1984).
So even if this legislation is passed by Congress and signed into
law by a former baseball owner, or even if it were law today, it would
not it could not prevent a Minnesota Twins owner from moving the team
out of our state.
What the Wellstone Bill would do, however, is prevent a scheme such
as Major League Baseball recently concocted for its ``contraction.''
Without claiming an antitrust exemption, Major League Baseball could
not have planned, then proclaimed, that two teams would be eliminated
by the League from their cities and from their fans. Without such an
exemption, the owners of 28 baseball businesses could not act in
concert to buy out the owners of the other two franchises, for their
expected future financial benefits.
This league-coordinated ``contraction'' is very different from an
individual owner's decision to sell or move a single franchise. In that
situation, while one city and its citizens lose their team, another
city and its citizens gain it. With contraction, only the owners gain.
Fifty players lose jobs, and their Association loses financial
leverage. Two cities lose their teams; two other cities lose their
chances to gain teams.
Baseball's claimed antitrust exemption also allows the owner of an
existing team to prevent another team from being moved to a nearby
city, where it might ``compete in its market.'' One owner wins while
depriving thousands of fans in a city like Washington, who want a team
and have a willing buyer. This restraint of competition is precisely
the abuse which antitrust legislation is meant to stop. Major League
Baseball's ``contraction'' demonstrates clearly the tight control which
the League exercises over the actions of the 30 businesses which
comprise it. Please remember that in its landmark decision, Curt Flood
vs. Kuhn, 1972, the U.S. Supreme Court stated unequivocally that
``professional baseball is a business engaged in interstate commerce.''
Senator Wellstone's bill applies to those businesses the same rules
which apply to other pro sports businesses.
Let me conclude by saying again, to my constituents: Congress
cannot save the Twins for Minnesota. Only Minnesota can save the Twins
for Minnesota. Much as I detest the financial excesses in pro sports
today, I believe that the Twins need revenues from a new baseball
stadium to be viable financially. More importantly for Twins fans, they
need those new stadium revenues to field winning teams, with marquee
players, who can win league pennants and World Series. In both 1987 and
1991, we found out how exciting and fun that can be.
Like the Metrodome, this new stadium can be built without costing a
single taxpayer dollar. However, if the Minnesota Legislature fails to
approve the project this year, they may not get another chance.
Chairman Leahy. Thank you.
Normally, we go to the ranking member, but he has asked me
to recognize Senator Nelson next, so I will call on Senator
Nelson, and then we will go to the ranking member.
STATEMENT OF HON. BILL NELSON, A U.S. SENATOR FROM THE STATE OF
FLORIDA
Senator Nelson. Thank you, Mr. Chairman.
Mr. Chairman, I am here to shake things up. I am joining
with my attorney general from Florida because we see eye-to-eye
on this situation. He of course has one of the greatest
reputations and is one of the longest-standing attorneys
general in the country.
But I want to approach this from a different perspective. I
want to give you two examples of why the issue before us is
very important to us in Florida.
I believe that Commissioner Selig tried to do the right
thing in recognizing that a number of the old Negro League
players had not been properly treated or adequately
compensated. So a few years ago, an effort was made to give
some compensation in the form of a pension to some of the Negro
League players, and it was a good step in the right direction,
but it stopped way short of the fair compensation that those
Negro League players should have had.
The criterion that was used by major league baseball said
in essence that the major leagues were integrated in 1947 when
the color barrier was broken. The color barrier was broken in
1947, but they were not integrated until late in the decade of
the 1950's. As a matter of fact, I think the last team was in
about 1959, and it was the Boston Red Sox before they were
integrated.
So there was a fiction that major league baseball was
integrated, and on the basis of that fiction, players who
remained in the Negro Leagues were not eligible, then, for the
pension that had been set down.
That is wrong, and I think that that should be corrected,
and I want to commend Commissioner Selig for his first step. I
have been trying to have a meeting with him since early
December, when I met with a number of these Negro League
players in Florida who are now retired, and I am still waiting
to have my meeting, so when this hearing came up, I chose to go
ahead and make this a public statement and would urge upon the
commissioner to please follow through. I think he is stepping
in the right direction.
But when you look back, baseball used its antitrust
exemption to unfairly compete against the Negro Leagues and
then systematically discriminated against most of those Negro
League players for many years after 1947. That is one thing I
wanted to get across.
The second concern that I have about the antitrust
exemption is based on the owners' decisions that they are going
to contract the league, constrict, lower. And of the four teams
that they are looking at, two of them are in Florida. Well, of
course, that would be devastating to us. We have a whole
infrastructure in Florida--in Miami, the Florida Marlins; in
Tampa Bay, the Devil Rays.
But even if it were Minnesota and Montreal, that has an
effect upon us, because we have something known as minor
leagues in the State of Florida and also the wonderful renewal
of the year each year with spring training, which is just about
to occur. And both of those teams, Montreal and Minnesota, have
spring training facilities, and all the host of economic
activities that accrue therefrom would be severely affected.
So Mr. Chairman, I wanted to add my two bits, and I will
continue to speak out both publicly and privately on behalf of
these old Negro Leaguers--and by the way, in meeting with a
number of them, now in their eighties, I said, ``Now, tell me
what it was really like--what was your talent back in those
days?''
And they said, ``We could pitch and win games, and we would
pitch all nine innings.''
Thank you, Mr. Chairman.
Chairman Leahy. Thank you.
I would love to hear some of those stories, and I
appreciate what you said about Attorney General Butterworth. I
think we are very fortunate to have both attorneys general
here, both Attorney General Butterworth and Deputy Attorney
General Swanson. I am sure members of this Committee are well
aware of their accomplishments and activities.
Thank you.
Senator Hatch, who, as I said in my earlier statement, was
the chief sponsor of the Curt Flood Act, has joined us, and I
will now yield to Senator Hatch.
STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE
OF UTAH
Senator Hatch. Thank you, Mr. Chairman. I will not take too
long, but for quite some time now, I have been concerned about
the health of baseball, both in its role as our National
pastime with millions of fans and as a multi-billion-dollar
industry that in one way or anther affects financially hundreds
of thousands, if not millions, of Americans.
I am pleased that the Committee has decided to continue to
examine whether and how the Federal antitrust laws may be
contributing to baseball's problems, as well as how the
antitrust laws might be used to fix some of these problems.
Having sponsored and cosponsored, as the distinguished Chairman
has said, legislation to limit baseball's antitrust exemption,
I have a particular interest in today's hearing and welcome the
testimony and opinions that will be offered by our
distinguished witnesses.
As many of those participating today may recall, I
sponsored legislation in the 103d Congress that would have made
clear that antitrust laws apply to major league baseball with
regard to labor relations.
I the 105th Congress, I again along with several others,
including Senators Leahy and Thurmond, introduced legislation
to clarify how and to what extent the Federal antitrust laws
apply to baseball. This legislation, enacted as the Curt Flood
Act of 1998, made clear that major league baseball, like all
other professional sports, is subject to our Nation's antitrust
laws except with regard to a few areas such as team relocation,
the minor leagues, and sports broadcasting.
Major league baseball continues to face serious and
controversial problems and issues, including the alleged need
for contraction, the potential relocations advocated by some,
substantial increases in player salaries coupled with reported
operating losses, and finally, the systemic competitive
imbalance that practically ensures that only the teams which
can affords to spend significantly more on payrolls than their
competitors have any realistic chance of reaching, let alone
winning, the World Series.
As demonstrated by my past support for narrowing the
exemption, I am not opposed to redefining or even repealing
baseball's exemption if the arguments and evidence presented
indicate the need for such action. At this time, however, I
personally am not convinced that the limited antitrust
exemption is, as some claim, the root cause of the problems
identified by opponents of the exemption. In this vein, I think
it is advisable for this Committee to work to compile a factual
record sufficient to support a reasoned and fully supported
decision on what, if anything, to do with the antitrust
exemption.
In the hopes of encouraging the kind of testimony and
debate that I believe will be most valuable for the compilation
of such a record, I suggest that two basic questions need to be
addressed at this hearing, and I would ask each of today's
witnesses to comment on them with as much specificity as
possible.
First, in what specific ways do the antitrust laws and
baseball's limited exemption from these laws actually affect or
contribute to the problems that have been repeatedly identified
by industry participants and commentators?
Second, how would legislative action modifying or
clarifying baseball's exemption ameliorate or even eliminate
some of these problems?
In conclusion, I want to restate that I come to this
hearing with an open mind. I look forward to the testimony that
will be offered here today, and I sincerely hope that this
hearing will hope to elucidate with some specificity how the
current application of the antitrust laws affects baseball,
both as a sport and as an industry, and what further action, if
any, is warranted with respect to major league baseball's
antitrust exemption.
So I look forward to the hearing. I can only be here for
part of the time, but I appreciate your holding it, Mr.
Chairman, and thank you for allowing me to say these few words.
Chairman Leahy. Thank you very much, Senator Hatch.
Mr. DuPuy has been Executive Vice President and Chief Legal
Officer of the Major League Baseball Players Association since
1998. He also serves as Chairman of the board of Central
Baseball, which oversees all of major league baseball's
interactive media and internet rights.
Mr. DuPuy, you have been very patient, and we are pleased
that you could be here with us.
Please go ahead.
Senator Wellstone. Mr. Chairman, can I thank you again, and
I thank the panelists for your forbearance. I appreciate it.
STATEMENT OF ROBERT A. DUPUY, EXECUTIVE VICE PRESIDENT AND
CHIEF LEGAL OFFICER, OFFICE OF THE COMMISSIONER OF MAJOR LEAGUE
BASEBALL, NEW YORK, NEW YORK
Mr. DuPuy. Mr. Chairman and members of the committee, thank
you.
I appreciate the opportunity to testify before the
Committee today on the bill introduced by Senator Wellstone.
Baseball's exemption has been of great importance to the growth
and stability of all of professional baseball for 80 years. It
has not created problems; it has helped to solve them.
Major league baseball has not abused its exemption but
instead has used it to benefit the sport and its fans. One of
the most important of those benefits is the ability to promote
franchise stability.
The last time a major league franchise relocated was prior
to the 1972 season. That record over the last 30 years most
certainly would not have been possible without the antitrust
exemption. Indeed, during that same period of time, the other
three major sports have had a total of 22 relocations. Again,
baseball has had zero, and it is not a coincidence that
baseball is the only sport with an exemption.
With due respect to the testimony of Senator Wellstone,
Minnesota has a baseball team today because of the antitrust
exemption. Minnesota, a hockey hotbed, lots its hockey team to
a Southern city because the NHL did not have an exemption and
stands at risk of losing its football team because the NFL does
not have an exemption.
Baseball has used the exemption to promote franchise
stability and to keep the Twins in Minnesota to date.
The exemption also protects and supports baseball's
extensive minor league system, which provides professional
baseball to 160 small and medium-sized communities throughout
the country. Major league baseball invests $150 million per
year in the minor leagues.
Without the protections afforded us by the exemption, a
less costly yet certainly less accessible system would no doubt
be developed.
We understand that the current bill was introduced by
Senator Wellstone in response to baseball's vote to reduce the
number of major league teams by two. Let me be clear. No one
desires contraction. No one wants to deprive even a single fan
of major league baseball. Commissioner Selig was one of the
last to be convinced of contraction's necessity.
But given the current economic structure of baseball, there
are markets which have demonstrated over time that they cannot
support a major league baseball team, let along a competitive
major league team.
Contraction is an attempt to face up to the economic
realities of the industry so as to deliver a competitively
balanced product at the highest level to as many fans as
possible.
Commissioner Selig and the owners are compelled to confront
the current imbalance in the game. Without a competitive
product on the field, interest in the game will erode. With
more and more entertainment options available, fans will turn
to other more competitive sports. It is far preferable that
baseball attempt to solve its problems in a coordinated,
limited, and carefully managed process than to have a number of
teams file bankruptcy, perhaps even in the middle of the
season, with the resultant chaos that would inevitably ensue.
Contraction is not intended to be punitive. It is clearly
heart-rending for those fans and club employees who might lose
their team, but it is intended to advance consumer welfare in
the end, to protect competition, not competitors, and to allow
28 teams to improve their competitive posture and economic
stability and allow major league baseball to be affordable to
the fans--all objectives consistent with the tenets of the
antitrust laws.
For example, in one instance, a contraction candidate
receives 80 percent of its revenues from Central Baseball;
another receives more than 55 percent. That almost $100 million
a year subsidy borne by the other 28 clubs at some point must
inevitably lead to higher ticket prices across the entire
industry.
The industry's financial results that led the clubs to the
decision to contract have been widely reported. The blue ribbon
panel consisting of Paul Volcker, George Mitchell, Richard
Levin, and George Will issued their report in July of 2000 and
made several recommendations for dealing with the issue of
competitive imbalance. The 2001 update to that report clearly
demonstrates that since the first report, both the economics of
the game and the competitive balance of the game have further
deteriorated. Additionally, not a single recommendation of the
panel has been achieved at the bargaining table.
The competitive imbalance problem is apparent even to the
most casual fan who watches only the playoffs and sees the same
teams win year in and year out. Since 1995, no World Series
game has been won by a team outside the top quartile of teams,
and only 5 of 224 playoff games have been won by teams from the
bottom half--a mere 2 percent.
Returning to the current bill, in 1997 and 1998, the
commissioner's office and the players worked very closely with
this Committee to craft a carefully worded change to our
exemption. That legislation, the Curt Flood Act, provides major
league players with the same rights under the antitrust laws in
the area of labor relations as all professional athletes have.
We continue to stand by that agreement and believe that no
further changes are necessary or appropriate.
S. 1704 would open baseball to attack in areas in which
baseball has worked hardest and achieved the most for the
benefit of fans at all levels. For that reason, we oppose the
passage of S. 1704.
Thank you, Mr. Chairman, for the opportunity to testify,
and I ask that my full remarks be made a part of the record of
this committee.
[The prepared statement of Mr. DuPuy follows:]
[Additional material is being retained in the Committee
files.]
Statement of Robert A. DuPuy, Executive Vice President and Chief Legal
Officer, Office of the Commissioner of Major League Baseball, New York,
New York
Mr. Chairman, my name is Robert A. DuPuy. I serve as Executive Vice
President, Administration, and Chief Legal Officer for Major League
Baseball. I have held this position since 1998, and prior to that
served as outside counsel to the Commissioner and the Major League
Executive Council. I appreciate the opportunity to testify before the
Committee today on S.1704, introduced by Senator Wellstone, and more
generally about baseball's antitrust exemption.
Let me first address baseball's exemption. That exemption has been
of great importance to all of professional baseball for 80 years. As
the Committee knows, the United States Supreme Court found the business
of baseball to be exempt from the antitrust laws in 1922. That finding
was reaffirmed in 1953 and then again in 1972, and over the years it
has been applied by numerous federal district courts and circuit
courts, including only a few weeks ago by the federal district court in
Tallahassee, Florida.
Major League Baseball has not abused its exemption, but instead has
used it to benefit the sport and its fans. One of the most important of
those benefits is the ability to control franchise movement. Baseball
has long had a policy of franchise stability, and we have made great
efforts over the last several decades to prevent teams from abandoning
their communities. Those efforts have been an unqualified success. The
last time a franchise relocated was prior to the 1972 season. That
record over the last 30 years most certainly would not have been
possible without our antitrust exemption. Indeed, during that same
period of time the National Football League has had seven franchise
relocations, the National Basketball Association eleven and the
National Hockey League eight, a total of 26 in the other major sports.
Again, baseball has had zero, and it is not a coincidence that baseball
is the only sport with an exemption.
The exemption also protects and supports baseball's extensive minor
league system, which provides for the training and development of
future major league players and also provides professional baseball to
160 small and medium-size communities throughout the country. A number
of aspects of that extensive system would be exposed to attack under
the antitrust laws without the exemption, thereby greatly increasing
the likelihood of a different type of player development system with
fewer players, fewer teams and fewer locations for fans to watch
professional baseball. Major League Baseball invests $150 million per
year in the minor leagues. Without the protections afforded us by the
exemption, a less costly yet less accessible system would no doubt be
developed and perhaps millions of the 35 million fans who attended
games this past year could lose the opportunity.
Many other matters in baseball would be subject to challenge
without the exemption, such as regulation of certain ownership
requirements, the Commissioner's disciplinary authority over clubs,
equipment standards and others. If the exemption were removed, based on
the experiences of other sports, baseball would almost certainly have
to defend a large number of antitrust lawsuits. But unlike the
experiences of other sports, we would have to defend these suits after
being allowed for 80 years to develop with our exemption in place. With
the possibility of treble damages in every case, no one could predict
with any degree of certainty what baseball would be like after that
onslaught of litigation.
We understand that S. 1704 was introduced by Senator Wellstone in
response to baseball's vote to reduce the number of major league teams
by two for the 2002 season. Let me be clear: no one desires
contraction, no one wants to deprive even a single fan of Major League
Baseball. Commissioner Selig was one of the last to be convinced of
contraction's necessity. But the unassailable truth is that given the
current economic structure of baseball, there are markets which have
demonstrated over time that they cannot support a major league team,
let alone a competitive major league team. Contraction is an attempt to
face up to the economic realities facing the industry, so as to deliver
a competitive product at the highest level to as many fans as possible.
Contraction is not intended to be punitive. It is clearly
heartrending for those fans and clubemployees who might lose their
teams. But it is intended to advance consumer welfare in the end, to
protect competition (not competitors) and to allow twenty-eight teams
to improve their competitive posture and economic stability and to
allow Major League Baseball to be affordable to the fans, all
objectives consistent with the tenets of antitrust law. For example, in
one instance, a contraction candidate receives 80% of its total
revenues from central baseball, while another receives in excess of
50%. That $100 million a year subsidy borne by the other twenty-eight
clubs at some point must inevitably lead to higher ticket prices across
the entire industry, while the communities at issue continue not to
support their teams.
No legitimate public policy is served by legislation that would
force baseball to constantly defend before antitrust juries the
reasonableness of its efforts to promote franchise stability and
competitive balance.
I understand that the Committee has requested testimony on the role
that baseball's antitrust exemption has played in the recent litigation
in Minnesota and Florida. The exemption played no role in the Minnesota
litigation. That case concerned only the Minnesota Twins' Metrodome
lease for the 2002 season. In Florida, Attorney General Butterworth
issued civil investigative demands against baseball, seeking to
investigate possible antitrust violations in the state of Florida.
Judge Robert Hinkle of the United States District Court for the
Northern District of Florida, Tallahassee Division, applied baseball's
exemption to prohibit that investigation. The case is on appeal to the
Eleventh Circuit Court of Appeals, which has had occasion to uphold
baseball's exemption in the past. Although we expect the preliminary
injunction to be affirmed and made permanent, the case provides a vivid
example of an attempt by a local official to use the antitrust laws to
advance local interests in a way that might be in direct conflict with
the interests of fans in one or more other states.
Ironically, the presence of Attorney General Butterworth from
Florida underscores this very issue. In 1992, the Florida Attorney
General sued baseball to try to force the relocation of the San
Francisco Giants to Tampa. Baseball resisted moving the Giants and then
Chairman of the Executive Council Selig came before Congress for three
hearings, including one in St. Petersburg, Florida before a very
hostile gallery. Baseball stayed in San Francisco, although the owner
was forced to take $15 million less than Tampa was prepared to pay for
the franchise, because now-Commissioner Selig and members of the
Executive Council believed San Francisco deserved to keep its team.
Today the Giants play before sellouts in one of baseball's premiere
facilities and the fans of San Francisco had the thrill of watching
Barry Bonds set the home run record this past season.
Since then, Florida has gotten two teams, and Attorney General
Butterworth is attempting to invoke the same principles he used to try
to force the Giants to Tampa to prevent the Marlins or Devil Rays from
relocating or being contracted. Imagine if the Twins had in fact
pursued relocation to Orlando as was discussed at one point. The
Florida Attorney General and the Minnesota Attorney General would be
here on opposite sides of the same issue.
Federal Judge Hinkle recently wrote ``It is difficult to conceive
of a decision more integral to the business of Major League Baseball
than the number of clubs that will be allowed to compete.''\1\ Baseball
has not abused its exemption, it has acted in the fans' best interests,
it deserves to retain the exemption. In some respects, contraction is
less subject to review than relocation. Relocation often involves an
owner choosing to leave one market for perceived greener pastures.
Baseball has not allowed that in more than thirty years. Contraction is
a decision that one or more markets cannot be viable. While the impact
on the fans in thatlocation is the same, the element of economic
instability on the part of the club is even more compelling.
---------------------------------------------------------------------------
\1\ Major League Baseball v. Butterworth, No. 4:Olcv-RH, 2001,--
F.Supp--, 2001 WL 1690202 at *13 (N.D. Fla. Dec 27, 2001)
---------------------------------------------------------------------------
The industry's financial results that led the clubs to the decision
to contract have been widely reported. The independent Blue Ribbon
Panel, consisting of former Federal Reserve Chairman Paul Volcker,
former Senate Majority Leader George Mitchell, Yale President Richard
Levin and noted commentator George Will, issued their report in July
2000, and made several recommendations for dealing with the issue of
competitive imbalance. The report and an update to that report have
been provided to the Committee and will be available again at the time
of the hearing. The update clearly demonstrates that since the first
report was issued, both the economics of the game and the competitive
balance of the game have further deteriorated. None of the
recommendations of the Panel has been achieved at the bargaining table.
Instead the union has, as it did in 1996 with highly-respected mediator
Bill Usery, chosen instead to attack the credibility of the report and
the members of the Panel.
The losses of the industry are real; the competitive imbalance
problem is apparent even to the most casual fan who watches only the
playoffs and sees the same teams win year in and year out. Those who
would put up obstacles to the legitimate attempts to deal with
baseball's core economic issues, whether by legislation, litigation or
grievance, are only forestalling and perhaps exacerbating the
inevitable correction which will have to occur if fans are to have
faith and hope that their teams can compete. The status quo is not
working and is not acceptable.
In 1997-98, the Commissioner's Office and the union worked closely
with this Committee to craft a carefully worded change to our
exemption. After much discussion, all parties agreed to the wording of
legislation that was signed into law by the President in October 1998.
That legislation, the Curt Flood Act, provides Major League players the
same rights under the antitrust laws in the area of labor relations as
other professional athletes have. All parties at the time believed the
change created the right balance for the exemption. We continue to
stand by the agreement and believe that no further changes are
necessary or appropriate.
S.1704, introduced by Senator Wellstone, would open baseball to
attack in areas in which baseball has worked hardest and achieved the
most for the benefit of fans at all levels. In particular, baseball's
admirable record of franchise stability would be threatened, creating
the distinct possibility of teams moving, uncontrolled, from city to
city. Our extensive minor league system would be in jeopardy, and any
player development system taking its place would undoubtedly be
consolidated and involve fewer communities. The legislation would spawn
many lawsuits in local courts with conflicting objectives and
inconsistent rulings, all of which would change the face of baseball
unpredictably and damage the sport irreparably. Such results cannot be
in the best interests of baseball or its millions of fans.
For all of the above reasons, we urge in the strongest terms that
S.1704 not be enacted.
Thank you, again, Mr. Chairman, for the opportunity to testify
before you today, and I ask that my full statement be made part of the
record of this proceeding.
Chairman Leahy. Thank you very much.
I have a statement by the Senator from Wisconsin, Senator
Feingold, and that will be placed in the record at the
appropriate place.
[The statement of Senator Feingold follows:]
Statement of Hon. Russell D. Feingold, a U.S. Senator from the State of
Wisconsin
Mr. Chairman, I want to thank you for scheduling this hearing.
Everyone in this room is concerned about the operation of baseball and
how best to maintain its existence through changing financial and
organizational circumstances. Thank you to the witnesses for appearing
today.
Baseball has provided us with decades of entertainment, diversion,
and history. As Americans struggled with the concept of integrating
schools and communities, Jackie Robinson in 1947 broke color barriers
by becoming the first African American to play major league baseball in
the 20th century. We've watched unbreakable records break, and teams go
from worst to first. We've seen perfect games and no-hitters, 23-inning
marathons, and, most recently, a thrilling 7-game World Series.
I recognize that baseball, like all long-running businesses, must
evolve as circumstances dictate. I also acknowledge the argument that
the antitrust exemption has helped maintain the unique nature of minor
league baseball. There are many towns and communities across the
country that benefit economically and otherwise through the existence
of minor league franchises. I am certainly a supporter of these clubs,
and I know that Wisconsinites have long enjoyed watching the Wisconsin
Timber Rattlers and the Beloit Snappers.
I have some concerns, however, about Major League Baseball's recent
proposal to contract two teams as a right of baseball's long-enjoyed
antitrust exemption. I wonder, as I'm sure many of us have, if
contraction is the best solution to baseball's financial problems. I
don't necessarily think that a franchise's inability to generate local
revenue for a stadium should justify folding a team, nor do I think
such a momentus decision should be undertaken by team owners alone.
Baseball's antitrust exemption is a privilege unknown to all other
American businesses. The exemption allows team owners to make decisions
collectively regarding the sport's economic operation without the input
of the players or other interested parties. The original purposes of
the antitrust laws are sound and have proven to be good for the economy
of this nation over a very long period of time. I hesitate to extend
unrestricted power to any business or industry through an exemption to
these laws.
I am not wholly convinced that team contraction falls within the
range of the baseball's antitrust exemption. I am eager to hear the
testimony of today's witnesses as to the legality of contraction in
light of the narrowing of the antitrust immunity caused by past
legislation such as the Curt Flood Act of 1998. It is, of course, of
concern when the owners of several independent businesses collectively
elect to eliminate two of their own for the betterment of the remaining
businesses. If the antitrust immunity allows this action as an industry
practice, it should be closely reexamined.
Furthermore, while as I said before, there is a plausible argument
that minor league baseball has flourished as a result of the exemption,
I am concerned about the minor league affiliates of the Montreal Expos
and the Minnesota Twins, should these teams be contracted. Several
minor league teams in Connecticut, Florida, Iowa, Tennessee,
Pennsylvania and Vermont face an uncertain future as a result of
contraction. I look forward to hearing from today's witnesses what
plan, if any, Major League Baseball and Minor League Baseball have in
place for these teams and their communities.
Abuse of baseball's antitrust immunity is what puts its maintenance
in the most danger. Contraction must not simply be a quick fix to a
complex problem, and then justified by an eighty year old antitrust
exemption granted in a Supreme Court decision that most scholars
believe was wrong.
Finally, I want to recognize the strong feelings of baseball fans,
who loyally follow their teams through good times and bad. No
discussion of baseball would be complete without acknowledging their
important role.
Again, I thank the Chairman for scheduling today's hearing, and
thank you to the witnesses for appearing today before the Committee to
help shed some light on this important issue.
Chairman Leahy. Donald Fehr is Executive Director and
General Counsel for the Major League Baseball Players
Association. He joined the Major League Baseball Players
Association as General Counsel in 1977, if I am correct, and
was named Executive Director in 1985.
Mr. Fehr, we are glad to have you. You are no stranger to
this Committee room. Please go ahead.
STATEMENT OF DONALD M. FEHR, EXECUTIVE DIRECTOR AND GENERAL
COUNSEL, MAJOR LEAGUE BASEBALL PLAYERS ASSOCIATION, NEW YORK,
NEW YORK
Mr. Fehr. Thank you, Mr. Chairman.
I appreciate the committee's invitation to appear here
today and was happy to respond to it. I am glad to convey my
views on the status of the law in the industry as relevant to
the pending situation.
Before beginning, I also want to thank the other Senators
who are here and have been here and will be coming in and out
for their courtesy, and most specifically Senator Hatch, for
the work that he put in along with the Chairman in connection
with the Curt Flood Act 4 years ago.
First of all, Mr. Chairman, my views on the baseball
antitrust exemption as it relates to matters concerning the
number and location of franchises are well-known. I have
testified before this Committee any number of times going back,
I believe, over a period of 20 years, and I do not want to
repeat that now.
I will simply make the point that where you have a
circumstance in which you have cities competing for teams
rather than two or more entities of teams competing for cities,
you have stress, and the power is with those who control access
to the teams; it is not with the cities. And that is a
difficult issue. It is not the kind of issue which is foreign
to garden-variety antitrust considerations. Those kinds of
market power and control issues are the reasons why we have the
antitrust laws.
Secondly, there is no doubt why we are here today. We are
not here because the Players Association stirred up the pot; we
are not here because the Committee felt on its own that the
Curt Flood Act was a needed revision. We are here because a
contraction announcement was made. We are here because an
announcement was made to reduce the number of teams--something
which before the last 12 months would not have even been
conceived of, much less taken seriously.
In that regard, what we had, of course, was a decision
which was made by the 30 owners acting together, privately,
without input from the outside, without standards imposed by
law or, so far as I know, imposed by their own internal rules,
with no possibility if the exemption exists--there is some
question about that--but no possibility of even having the
matter investigated to find out what the motives were, how the
decisions were made and all the rest of it, and with no forum
under which that decision can be reviewed for compliance with
any set of standards.
I think that if you gauge the reaction of major league
baseball to the various matters which have been initiated, one
of the things which strikes me is that they seem to be offended
that questions are asked or the suggestion that there be some
standard that their conduct can be reviewed against, even
though the antitrust standard, of course, is the basic standard
against which concerted activity by all businesses is reviewed
in the United States.
In connection with the number and location of franchises,
it is certainly accurate that no team has been relocated since
1972. That was not the case previously, as people know,
beginning with the fabled move of the Dodgers and the Giants to
the West Coast.
But I suggest that that is not really the issue. The issue
is a more fundamental one, and that is, is there an exemption,
what is the basis for it, and what does it mean. And I want to
further suggest that this is a matter of significantly broader
public interest than as relates to players. Players believe
that the subject of contraction is a mandatory subject of
bargaining; the clubs do not. If there is going to be
contraction pursued, that issue will b resolved in one fashion
or another. But the point I want to make is that if the clubs
are right, then antitrust issues to the side, whether there
will be contraction is not an issue of bargaining, only the
effect.
If the players are right, then it would be a matter of
collective bargaining, but we would be compelled and would
bargain in good faith about that issue.
We do not, however, represent the broader community
interest. The Players Association of course represents and is
authorized to represent only its own membership.
The practical effect of having no standards is what I would
ask the members of the Committee to focus on. It means that the
question of whether the major league owners are acting in what
would otherwise be considered an unreasonably anticompetitive
manner may not even be asked. The inquiry cannot be made. There
is no standard against which the conduct is weighed, no forum
in which the facts can be ascertained, no judge or jury before
whom a complaint can be heard.
Moreover, if there is an exemption, and if it is undefined
or blanket--except in the area with respect to players or as
governed by the Sports Broadcasting Act--what that means is
that any conduct is exempt from the antitrust laws, regardless
of its effect, regardless of its purpose, regardless of its
motive.
We do not know what the scope of the exemption is, and
that, I suggest, is an odd basis upon which public policy ought
to be formulated. If there is going to be an exemption, we
ought to know what it is.
I will make just one other comment--I know my time is
running out--and would then be pleased to respond to questions
when the opportunity presents itself.
Mr. DuPuy makes a compelling case--although without
examination of it--that baseball needs to do what it is doing.
With all due respect, that is exactly what everyone about whose
conduct questions are raised under the antitrust laws does. It
says ``My conduct is reasonable. It is not unreasonably
anticompetitive.'' That is not a reason not to have the
antitrust laws. That is a defense.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Fehr follows:]
Statement of Donald M. Fehr, Executive Director, Major League Baseball
Players Association, New York, New York
Mr. Chairman, Senator Hatch and Members of the Committee:
My name is Donald Fehr, and I serve as the Executive Director of
the Major League Baseball Players Association (MLBPA), a position I
have been privileged to hold for more than a decade and a half. Quite
frankly, given the passage of the Curt Flood Act of 1 998--for which I
again thank the Committee for its considerable time and effort--I did
not expect to be invited again to testify on the subject of the
antitrust exemption allegedly enjoyed by Major League Baseball (MLB)
this soon, if at all. Nevertheless, since the Committee is once more
hearing testimony on this issue, I thank you for permitting me to
express the views of the MLBPA. I appreciate the opportunity to be
here.
As I understand it, the question under consideration is whether, as
a matter of sound public policy, it is appropriate for Major League
Baseball to enjoy an exemption from the antitrust laws for any purposes
other than those served by the Sports Broadcasting Act, 15 U.S.C. Sec
1291. My views on the appropriateness of any antitrust exemption for
Major League Baseball have been set forth many times in prior testimony
before this and other Committees, and need no extensive review here.
Accordingly, I will make only a few brief comments, respond to any
questions put by members of the Committee at the hearing, and then
supplement the record following the hearing to the extent appropriate
and desired by members of the Committee.
As set forth in my written testimony to the House Judiciary
Committee on 6 December 2001 (copy attached), in 1979 the National
Commission for the Review of Antitrust Laws and Procedures made the
following recommendations with respect to antitrust immunities:
1. Free market competition, protected by the antitrust laws,
should continue to be the general organizing principle for our
economy.
2. Exceptions from this general principle should only be made
when there is compelling evidence of the unworkability of
competition or a clearly paramount social purpose.
3. Where such an exception is required, the least
anticompetitive method of achieving the regulatory objective
should be employed.
4. Existing antitrust immunities should be reexamined.
Moreover, the Commission went on to make clear that those seeking
to create or maintain an antitrust exemption have the burden of proof
``to show a convincing public interest rationale'' for the exemption,
and that ``[T]he defects in the marketplace necessary to justify an
antitrust exemption must be substantial and clear''. (Emphasis
supplied.)
Simply put, I know of no compelling evidence which demonstrates the
unworkability of competition in MLB, much less a clearly paramount
social purpose to be served by an antitrust exemption; nor am I aware
that any defects in the marketplace sufficient to warrant an exemption
have been demonstrated by substantial and clear evidence. Absent such
evidence and such a demonstration, it is difficult to see how granting
an exemption in favor of baseball's owners--for that is whom the
exemption runs to--represents sound public policy. This conclusion is
buttressed by the experience of the other professional team sports,
most notably the National Football League (NFL) and the National
Basketball Association (NBA), both of which operate successfully, but
operate subject to the antitrust laws.
The so-called baseball exemption did not come about because the
Congress concluded that an exemption should be granted. Rather, the
exemption came about because the Supreme Court in Federal Baseball, in
1922, found the exhibitions of baseball games to be ``purely state
affairs''. Had the case been heard a few years later, that same finding
would clearly have been inconsistent with the emerging concept of
interstate commerce, and we would likely not be here today. This is not
a case in which a public policy rationale for an antitrust exemption
has been articulated.
Obviously, there is no remaining question about professional
baseball's status with respect to interstate commerce. The fact that it
is in interstate commerce is undeniable; the Supreme Court in Flood so
held, and the industry itself admits it. MLB has gone so far as to
invoke the Constitution's Commerce Clause for protection against state
enforcement actions! \1\
---------------------------------------------------------------------------
\1\ As indicated in papers filed by appellants in the recent
Minnesota Sports Facilities case.
---------------------------------------------------------------------------
So what precisely is it about the organization or operation of
Major League Baseball that justifies its belief that its conduct, even
if conceded to be unreasonably anticompetitive, should nonetheless be
shielded from judicial review under the antitrust laws? Surely, if MLB
is to enjoy special status under the antitrust laws, its current
owners, which include some of the largest and most successful
corporations in the world, should be able to specifically articulate
those practices in which they engage or may wish to engage which would
otherwise violate the antitrust laws. But it is not enough to simply
articulate what practices would constitute an antitrust violation in
order to make the case for an exemption; more is required. It is up to
MLB to demonstrate in a compelling way why it is in the public interest
for the practices it feels would be unreasonably anticompetitive to
nevertheless be permitted. Remember that a showing that certain conduct
is, in fact, reasonable (e.g., that ``contraction'' under the current
facts is not unreasonably anticompetitive) does not justify an
exemption from the antitrust laws; rather, such a showing would
demonstrate that the conduct was not violative of the antitrust laws in
the first place, and would therefore not support the case for damages.
This goes to the very heart of the matter. In practical effect, an
exemption means that the question of whether MLB is acting in an
unreasonably anticompetitive manner may not be asked; the inquiry may
not be made. There is no standard against which the conduct may be
weighed; there is no forum in which the facts can be ascertained; there
is no judge or jury before whom a complaint may be heard. Moreover, if
there is to be an exemption, an undefined or blanket exemption means
that any conduct not specifically covered by the antitrust laws,
whether or not foreseeable, may be claimed to be exempt; one does not
know what the extent of the exemption is or might be. The question
which then arises is whether this is a sound basis upon which to
formulate public policy.
What, then, should our public policy be? Should baseball be treated
differently than other businesses, than other sports? For what
purposes? To what extent? It is apparently the position of baseball's
owners that, with the exception of the Curt Flood Act, the holding in
Federal Baseball means that any and all of its other actions are immune
from antitrust scrutiny. Thus, in their view, no one in Minnesota may
even ask if the actions or motives of the decision to contract the
Twins were in furtherance of an objective forbidden by the antitrust
laws, nor may the Attorney General of Florida even investigate the
facts with respect to the Florida teams. What public policy underlies
this result? Is the doctrine of stare decisis being served at the
expense of sound policy and equal justice?
In my view, the reading of the cases that makes the most sense in
the context of public policy is the opinion of Judge Padova in Piazza
(a copy of which is attached), which was endorsed by the Florida
Supreme Court. When the ``Curt Flood Act of 1998'' (CFA) was enacted,
it was my view that the combination of Piazza and the CFA would
virtually eliminate any special immunity for MLB, leaving it with only
those statutory immunities Congress has or will deem appropriate for
major league sports, such as the non-statutory exemption provided by
labor law. (See the ``Sports Broadcasting Act of 1961'' \2\, which
expressly grants immunity to Baseball and the other professional team
sports for its collective actions in selling national broadcasting
rights.) However, subsequently, the Minnesota Supreme Court, and,
recently, a federal district court in Florida have gone the other way.
Thus, it is unclear what the status of the law is. I expect that
uncertainty to remain until the Supreme Court again considers the
question for the first time in a case not about the reserve system--or
until the Congress clarifies the law.
---------------------------------------------------------------------------
\2\ 15 U.S.C. 1291, et seq.
---------------------------------------------------------------------------
Everyone understands that this Committee is holding this hearing,
as the House Judiciary Committee did two months ago, because of the
decision by MLB's owners to eliminate, or ``contract'' two franchises,
rather than attempt to sell or relocate them. The question then becomes
whether the Congress should consider legislation to clarify the law, so
as to make it clear that such decisions either must comply with the
antitrust laws, or that the owners have an exemption in this respect.
While there is no doubt of my position, given my testimony in hearings
before this Committee and others over nearly two decades, I believe
that it is in the public interest to clarify the law, even if that
clarification is that there is, in fact, a compelling public policy
interest such that baseball's owners should enjoy an exemption from the
antitrust laws. And the case is there to be argued. On the one hand,
MLB can be asked to demonstrate why it is in the public interest for an
exemption to be had; alternatively, the people of Minnesota and
elsewhere should have the opportunity to demonstrate why it is in the
public interest for unreasonably anticompetitive actions with respect
to the number and location of franchises to be subject to appropriate
sanction (and at the very least, investigation) under the antitrust
laws.
In a very real sense, the entire debate about the number and
location of franchises simply comes down to whether such decisions
should be made by owners free from the public policy standard
established by the antitrust laws or some other standard established by
the Congress, or whether the owners of major league teams should be
required to conform their actions to conduct not unreasonably
anticompetitive. Should the public policy of the United States be that
that the owners have unlimited discretion--regardless of the action
taken or the motive behind it--or should such decisions be made against
the backdrop of the antitrust laws, with the courts able to ascertain
the facts and determine whether the conduct passes muster?
I thank the Committee for the opportunity to submit my views, and I
will be happy to answer any questions.
Chairman Leahy. Thank you.
Senator DeWine is a former Chairman and currently the
ranking Republican on the Antitrust Subcommittee, so I am going
to go somewhat out of our procedure now that he is here and
recognize him, and then we will go next to Mr. Brand.
STATEMENT OF HON. MIKE DEWINE, A U.S. SENATOR FROM THE STATE OF
OHIO
Senator DeWine. I thank the Chairman for your courtesy.
Let me thank you, Mr. Chairman, for holding this timely
hearing on the application of our Federal antitrust laws to
major league baseball. The Judiciary Committee has maintained
historically a longstanding interest in this area, so this is
one in a long line of hearings on this particular issue.
Now is a critical time for major league baseball. There is
no long-term labor agreement. Controversy is raging about
potential contraction. And baseball today, quite simply, is a
sport of haves and have-nots, a game where the teams with the
biggest bucks can buy the best players.
The simple fact is this. There is a direct relationship
between the levels of revenue that teams bring in and their
ability to compete on the field. If you want to win
consistently, you have to spend a lot of money, year after year
after year. Most teams simply cannot afford to do that, and
therefore, most teams simply cannot in reality compete.
This is an issue that I raised well over a year ago when I
chaired an Antitrust Subcommittee hearing to examine and
highlight revenue imbalance. Since that hearing, have things
improved? The answer we all know: Not at all. In fact, things
just keep getting worse.
The revenue gap between the richest and the poorest clubs
has expanded from $130 million in 1999 to $152 million in
2001--and heaven knows what it will be in 2002. As a direct
result, the payroll gap is of course exploding. Every year, the
top few teams spend more and more money on premium players, and
every year it becomes harder and harder for other franchises to
compete. Last year, the Yankee payroll was $121 million; this
year, it is estimated that it will be $130 million, maybe even
higher than that.
In contrast to the Yankees' $130 million, last year, the
Cincinnati Reds spend about $42.5 million on players, and the
Pittsburgh Pirates spent about $41.5 million on players. And we
do not expect that either one will go up very much this year.
These are two great, traditional baseball franchises with
long histories and a very solid fan base. Pittsburgh has a
beautiful, brand new ballpark to generate extra revenue, and
the Reds will have a new ballpark in the year 2003. But even
when you combine these two teams' payrolls, they are not even
close to the Yankees'. That is why it is crucial that we
examine once again how baseball is managing itself and whether
it is time for baseball to operate under the same laws
currently applied to other sports leagues.
Accordingly, we must focus on whether the antitrust
exemption helps or hurts baseball--not whether the exemption
helps the players, and not whether it helps the owners, but
whether it helps the sport itself, and ultimately, therefore,
the fans.
Realistically, how can teams compete year after year when
they cannot afford to pay for the best players? The answer is
simple: They cannot. Everybody understands it. Everybody gets
it. The fans get it. They complain to me whenever I am back in
Ohio and we talk about baseball.
The owners get it. In 2000, the Commissioner's Blue Ribbon
Panel report called for measures to solve baseball's revenue
disparity problems.
And the players get it. Baseball Weekly published a survey
of major league baseball players in May 2000. In response to
questions about the biggest problem facing the game of
baseball, the players--the players--said it was competitive
balance.
So everyone agrees. But here is what bothers me. If
everyone understands that there is a significant revenue
imbalance, why can't the players and the owners just sit down
and fix it? As I said already, I chaired a hearing specifically
on this subject a year ago. We discussed a lot; a lot of
important issues were raised. But the problem is still not
fixed, and quite candidly, I do not see any indication that
anyone is serious about getting it fixed. It is getting worse.
The way I see it, today we have another opportunity to look
at this problem in the context today of the antitrust
exemption.
The blue ribbon panel suggested a number of measures
including enhanced revenue-sharing, enhanced competitive
balance taxes, minimum payrolls, and many others, up to and
including contraction and franchise relocation. There has been
a great deal of dispute about a number of these
recommendations, so today, I think we need to examine the
impact of these possible actions and whether the antitrust
exemption affects the ability of the league to implement these
measures.
And I would like to find out specifically from our
witnesses on the panel today what impact baseball's antitrust
exemption is having on efforts to decrease the revenue
disparity. In other words, to put it bluntly, does having the
antitrust exemption help or hurt? To me, the biggest question
that is facing major league baseball and the thing that I think
fans are the most concerned about is the terrible disparity in
income.
As a Senator, a member of the Judiciary Committee, and the
Ranking Member of the Antitrust Subcommittee, I want to know
what the owners and the players are doing to fix this problem.
As a fan, I want a solution to this problem so that every year,
I can look forward to spring training with a realistic hope
that the Indians and the Reds both have a shot at winning the
pennant.
Senator Feinstein. I would like to recognize Mr. Brand. Mr.
Brand is the Vice President of Minor League Baseball. We want
to welcome you here. Please proceed.
STATEMENT OF STANLEY M. BRAND, VICE PRESIDENT, MINOR LEAGUE
BASEBALL, WASHINGTON, D.C.
Mr. Brand. Madam Chair, Senator Hatch, members of the
committee, thank you. I appreciate the invitation to be here
today.
Minor league baseball is comprised of is comprised of 206
teams and 18 leagues playing professional baseball in the
United States, Canada, and Mexico at the AAA, AA, A, and rookie
levels. Last year, minor league baseball drew almost 39 million
fans.
Repeal or alteration of the exemption is a serious threat
to the survival of minor league baseball, particularly at the A
and rookie levels. Last year, MLB spent over $130 million on
direct player development costs, including minor league
salaries, and another $90 million on signing bonuses and
scouting.
This subsidy underwrites the presence of minor league
baseball in over 100 small markets. Repeal or alteration of the
exemption would inevitably affect the incentive that MLB has to
continue its investment in minor league player development.
At the core of the incentive is the minor league player
draft and reserve clause which permits MLB to retain the
services of minor league players long enough to bring them to
the major leagues. If MLB determines that the antitrust laws
make it too risky to draft and then reserve players for 6
years, they can expect to spend money on many fewer players.
Subjecting the minor league draft and reserve class to
challenge as illegal restraints of trade under the antitrust
law not only affects the major league's incentive to invest,
but the cost of facing these challenges could overwhelm us in
the minor leagues.
We do not have any TV revenue, and ticket sales and fence
sign advertising would not allow us to mount a successful
defense to these suits.
That is why we and the Members of Congress representing the
communities that we play in fought hard to include a clear and
comprehensive carve-out for the minors during enactment of the
Curt Flood Act.
When we examined S. 1704, the bill introduced by Senator
Wellstone, and its companion in the House, we were alarmed to
find that it deleted key provisions of the Curt Flood Act,
including the section protecting the core incentive for major
league baseball organizations to pay for minor league players,
the minor league player draft and reserve clause.
This was particularly puzzling since the only stated
purpose of the bill was to remove the antitrust protection for
decisions to eliminate or relocate major league clubs.
The potential for using the absence of all the language
contained in the Curt Flood Act to imply that the antitrust
immunity no longer applies to minor league player/umpire/
franchise issues is not insubstantial, and it would certainly
encourage potential plaintiffs to file lawsuits that might
raise this question, cause us crippling expense, and possibly
produce holdings that would be very damaging to our long-term
interests.
It is particularly troubling that this language is omitted
given the long and arduous efforts we made to have it included
in the final version of the Curt Flood Act--language, I would
add, that was facilitated by the efforts of then Chairman Hatch
and Ranking Member Leahy to obtain agreement among the parties
on this issue.
Why the bill so glaringly omits the agreed-upon Curt Flood
language is a mystery to us. I can tell you this. On April 10,
1994, Mr. Fehr was quoted in The Los Angeles Times as stating:
``Too much money is being wasted in the minor leagues.''
Since that time, the Players Association has been the
principal proponent of total and outright repeal of the
antitrust exemption. During consideration of the Curt Flood
Act, the players' representatives resisted adding language to
this legislation, making clear to the protection to the minor
leagues. I can only conclude that the Players Association seeks
repeal in order to diminish minor league baseball so that they
can lay claim to the money they say is wasted on the minors and
divert it to major league players.
Beyond the deletion of specific protections for the Minor
Leagues in the Curt Flood Act--and I appreciate Senator
Wellstone's comments about not intending to harm the minor
leagues--the erosion of the immunity for yet another aspect of
the business of baseball represents a troubling precedent. It
accelerates what we believe is an unjustified momentum begun
with the Curt Flood Act, of piecemeal repeals of aspects of the
immunity whenever MLB makes a difficult or unpopular business
decision.
Finally, I have been asked to address the impact of
contraction at the major league level upon minor league
baseball. As I look up on the dais I see minor league baseball
represented in each and every one of your States, in some
places more than one place.
As the president of minor league baseball, Mike Moore,
stated on November 6 last year: ``We plan on baseball being
played by all of our franchises next season. Commissioner Selig
has indicated to me that following any definitive decisions on
contraction, we will work closely on formulating solutions
pertaining to the minor leagues. The commissioner has been a
strong supporter and ally of minor league baseball, and we will
continue to work together toward our common goals.''
Indeed, Commissioner Selig, testifying last December before
the House Judiciary Committee, stated that it was not
necessarily the case that the minor league clubs would be
contracted even if their affiliated major league clubs cease to
exist.
There are a number of ways that this can be addressed,
including pooled arrangements under so-called cooperatively run
minor leagues, or assumption by major league affiliates of
additional minor league clubs.
Suffice it to say we will be working very diligently to
preserve viable minor league clubs in the event of major league
contractions.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Brand follows:]
Statement of Stanley M. Brand, Vice President, Minor League Baseball
Mr. Chairman and Members of the Judiciary Committee, I appreciate
the invitation you have extended to me as Vice President of Minor
League Baseball TM to participate in the hearing today on
the application of federal antitrust laws to baseball. In the almost 10
years that I have served as Vice-President of Minor League Baseball
TM, this is the first opportunity I have had to directly
address this Committee on this important subject even though the issue
of baseball's antitrust exemption has been actively debated in and
acted upon by Congress during that time period.
The recent interest in Congress in baseball's antitrust exemption
was generated by the decision by Major League Baseball (``MLB'')
announced by Commissioner Selig on November 6, 2001 to eliminate two
major league clubs for the 2002 season. Discussions to shrink baseball
at the Major League level had been previously reported, but the
official announcement predictably triggered a host of congressional
reactions, including introduction of a bill by Senator Wellstone, (D-
MN), the purpose of which was stated to be repeal of baseball's
immunity with respect to the elimination or relocation of Major League
teams.
This bill produced considerable, and in our view, justifiable alarm
throughout Minor League Baseball TM which had worked
diligently in 1998 to insure that the Curt Flood Act of 1998 included
protection for the minor leagues. We believed then, and we still
believe today, that further attempts to limit or change baseball's
antitrust immunity represents a threat to Minor League Baseball
TM, is not justified by any compelling public policy and
will not achieve the goals for which it is proffered.
Minor League Baseball TM is comprised of 206 teams in 18
leagues playing professional baseball in the United States, Canada and
Mexico at the AAA, AA, A and rookie levels and consists of
approximately 5548 active players. Last year, Minor League Baseba
TM drew almost 39 million fans during the championship
season. Repeal of baseball's antitrust exemption would inevitably
affect one important incentive that MLB has to continue its investment
in minor league player development, which in turn could result in the
elimination of many minor league teams, particularly at the Rookie and
A levels.
Last year, MLB spent over $130 million on direct minor league
development costs (including minor league player salaries) and another
$90 million on player bonuses and scouting as a means of developing
talent for the Major Leagues. It is this subsidy that assists in
underwriting the presence of Minor League Baseball TM in
small towns and rural America.
In the event of repeal, the minor league player draft and reserve
clause might be challenged as illegal restraints of trade under Sec. 1
of the Sherman Act. Mackey v. NFL, 543 F.2d 606 (8th Cir.
1976); Smith v. Pro Football, Inc., 593 F.2d 1173 (D.C. Cir. 1977). In
addition, the Professional Baseball Agreement between the Majors and
Minors, which ensures competitive balance among MLB teams in player
acquisition and retention, also might be challenged as illegal under
Sec. Sec. 1 or 2 of the Sherman Act. Philadelphia World Hockey Club v.
Philadelphia Hockey Club, 351 F.Supp. 462 (E.D. Pa. 1972). NAPBL
leagues banding together to affiliate with MLB on uniform terms in the
absence of the PBA may likewise be challenged under Sec. 1 of the
Sherman Act. FTC v. Superior Court Trial Lawyers Association, 493 U.S.
411 (1990). Although we are hopeful that Minor League baseball would
prevail against such challenges, the cost of facing them would be
enormous and would itself threaten our survival. The upshot is that
minor league player development will be stripped of the stability
created by the player draft, reserve clause and the PBA. The Minors
have virtually no TV revenue, and their ticket sales and fence sign
advertising does not generate the kind of cash flow that can support a
legion of lawyers.
If MLB determines that the antitrust laws make it too risky to
draft and then reserve players for six years, the nature of MLB's
investment in minor league players could change dramatically. Without
the reserve clause, MLB can be expected to spend money on many fewer
minor league players. MLB will not spend money signing prospects in the
hope that they develop only to have them subject to being acquired by
other teams due to their short-term contracts. With the signing of few
minor league players overall, there will naturally be fewer minor
league teams. This loss of teams would adversely affect numerous player
development investments in facilities. The loss to consumers of
affordable, intimate and wholesome entertainment provided by minor
league clubs could be extensive, particularly in smaller communities
and markets.
Such reduced output is of course antithetical to the policy
underlying the antitrust laws to increase--rather than decrease--
product. One can speculate that even in the absence of an agreement to
sign players to uniform contracts with renewal options, major league
organizations individually have superior bargaining power that will
permit them to sign hundreds of lower level players to the same kind of
one-year agreements with successive yearly options that are now
required. If the antitrust laws are applicable, how will MLB clubs
assess the risk that such a pattern will be challenged as being
illegally collusive? Isn't it likely they will attempt to avoid that
risk (and reduce their expenses) by trying to shift the risk and burden
of employing the players to the minor league teams (which the minor
leagues can ill afford)?
A number of academics have suggested that the first year player
draft could be upheld under a ``rule of reason'' analysis. NCAA v. Bd.
of Regents of the University of Oklahoma, 468 U.S. 85 (1984). However,
the minor league draft certainly will be subject to challenge since
minor league players, unlike players in the NBA and NFL, are not part
of any collective bargaining unit and therefore the minor league player
draft is not covered by the labor antitrust exemption. This is an
important difference from other professional sports; unlike the NBA and
NFL, baseball's draft extends to players who will never be part of the
``major league'' team and the bargaining agent that represents them.
For all of the foregoing reasons, we, and the Members of Congress
representing our clubs and their communities, fought hard to include a
clear and comprehensive ``carve out'' for the minor leagues during
enactment of the Curt Flood Act of 1998. The ``carve out'' was hammered
out among representatives of Major League Baseball, the Players
Association and Minor League Baseball TM and incorporated as
agreed to by these entities into the final legislation. When we
examined closely the provisions of S. 1704, the bill introduced by
Senator Wellstone, we were surprised to find that while the bill was
purportedly drafted to parallel the language contained in the Curt
Flood Act of 1998, with only language changes to reflect that this bill
would lift baseball's antitrust immunity with respect to contraction
and franchise relocation rather than major league player matters (the
subject of the 1998 Act), the actual language of the current bill has
deleted some language from the Curt Flood Act that is unrelated to
contraction and franchise relocation. This puzzling deletion of
language from the Curt Flood Act has the potential to be argued to a
court as having some substantive significance, despite the limited
stated purpose of the bill, and thus might lead to unintended
consequences damaging to baseball and particularly Minor League
Baseball.
The most glaring example of this failure to track the language in
the Curt Flood Act is in the express list of matters not affected by
the bill in subsection 3(b). The Curt Flood Act had six items in its
list of unaffected matters. To accomplish the lifting of the antitrust
immunity only for Major League franchise contraction and relocation,
the only change in wording in this list should be the removal from item
#3 of the words ``franchise . . . relocation.'' However, S. 1704 omits
far more language than just these two words.
First, the bill omits entirely all of what were items #1 and #5 in
subsection 3(b) of the Curt Flood Act. Those two items stated:
(1) any conduct, acts, practices, or agreements of persons
engaging in, conducting or participating in the business of
organized professional baseball relating to or affecting
employment to play baseball at the minor league level, any
organized professional baseball amateur or first-year player
draft, or any reserve clause as applied to minor league
players;
(5) the relationship between persons in the business of
organized professional baseball and umpires or other
individuals who are employed in the business of organized
professional baseball by such persons;
In addition, the Curt Flood Act's item #3 in the list of unaffected
matters (which in the proposed bill is now item #2) has been edited in
the proposed bill by deleting the words ``franchise expansion,
location, and relocation,'' even though the stated purpose of the bill
is to lift the immunity only as to contraction and relocation and only
with respect to maior league franchises. If the bill's stated purpose
is accurate, issues of major league expansion or location that do not
involve relocation, and all franchise issues at the minor league level,
should still be covered by the immunity and thus specifically referred
to in item #3 (now #2).
These deletions in the proposed bill are very troubling and hold
enormous potential mischief for Minor League Baseball. This is
particularly so for the deletion of item #1 specifically identifying
employment matters at the minor league level, the amateur or first-year
player draft, or any reserve clause as applied to minor league players.
As stated earlier, together the first year player draft and minor
league reserve clause constitute the core incentive for Major League
organizations to pay for the development of these players and any
change in its foundation could wreak havoc on minor league economic
stability. Also, taking out the item referring to umpires has potential
implications for the minor leagues. And perhaps most troubling, the
deletion in item #3 (#2 in the proposed bill) of the reference to all
franchise expansion, location, or relocation matters removes from the
bill the express protection for the minor leagues with respect to these
types of franchising issues, putting at potential risk all of the minor
league rules dealing with territories and territorial rights that
protect the viability of all minor league teams, particularly at the
lower classification levels in many smaller and rural markets across
the country.
Furthermore, in subsection d(1) of the Curt Flood Act, it states in
the second sentence: ``As used in this section, the National
Association of Professional Baseball Leagues, its member leagues and
the clubs of those leagues, are not 'in the business of organized
professional major league baseball'.'' This language has been deleted
from the proposed bill. Again, the reason for the deletion is not at
all clear, but its absence when compared with the Curt Flood Act--is
striking and might well be misinterpreted by a court some day as a
deliberate statement of congressional purpose that could subject the
minor leagues to significant antitrust risk.
The potential for using the absence of all of the language
contained in the Curt Flood Act to imply that the antitrust immunity no
longer applies to minor league player, umpire, or franchise issues is
not insubstantial, and it would certainly encourage potential
plaintiffs to file lawsuits that might test this question, cause the
minor leagues crippling expense, and possibly produce holdings that
would be very damaging to Minor League Baseball. It is particularly
troubling that this language was omitted given the long and arduous
efforts we made to have it included in the final version of the Curt
Flood Act.
Beyond the impact of deleting these paragraphs from the Curt Flood
Act, there are two more indirect ways in which it might have serious
long term detrimental effects, especially to the extent the bill lifts
the immunity for major league franchise relocation instead of just
contraction.
First, the bill apparently would subject Major League Baseball to
potential treble damage antitrust liability for any action relating to
franchise relocation. As we have seen in other sports, particularly
football, this has caused such an in terrorem effect on leagues that
individual franchises are now essentially free to relocate without any
league oversight. In other sports, this has created the phenomenon of
teams essentially putting themselves up for auction to the highest
bidding community and forcing taxpayers in many communities to provide
hundreds of millions of dollars in direct and indirect subsidies to
teams in order to attract or avoid losing a team. It is puzzling why,
in response to Major League Baseball's announced efforts to contract by
two teams, Congress would want to pass legislation lifting the
antitrust immunity for both contraction and relocation. The historic
baseball antitrust immunity has had an obvious restraining effect on
relocations at the major league level and has served the public
interest well by reducing the ability of teams to force huge public
subsidies out of local communities. Denying immunity for relocation
decisions could also create disruption in certain AAA minor league
markets as well by subjecting those cities to uncertainties for the
future of their AAA clubs, and bidding wars to attract major league
clubs. Lifting the immunity with respect to contraction is one thing;
lifting it with respect to relocation is entirely another that is not
at all justified or even suggested by the current efforts of Major
League Baseball to eliminate two teams.
How did we get from the carefully crafted and agreed upon
provisions of the Curt Flood Act to the reduced and inadequate minor
league protections of S. 1704. Sponsors of this legislation--and the
Major League Players Association--have cavalierly and falsely asserted
that the minor league exemption on ``carve out'' remains intact. I
cannot explain why S. 1704 is drafted in this manner but I can tell you
this: On April 10, 1994, Don Fehr stated in the L.A. Times that ``[t]oo
much money is being wasted in the minor leagues.'' Since that time, the
MLBPA has been the principal and relentless proponent of total and
outright repeal of the antitrust exemption. During consideration of the
Curt Flood Act, the union steadfastly resisted adding language to the
legislation making clear the protection of the minor leagues, and only
relented under pressure from its own congressional allies when it
became apparent no legislation could be passed without such language
and the support of the minor leagues.
I can only conclude that the Players Association seeks total repeal
in order to destroy minor league baseball so that Mr. Fehr can lay
claim to the money ``wasted'' on the minors and divert it to his
players.
Beyond the deletion of key protections for the minor leagues, the
legislation would erode baseball's immunity for another aspect of its
business without any demonstration that it will solve the problems for
which it is advanced. It accelerates the unjustified momentum begun
with the Curt Flood Act of lifting aspects of the antitrust immunity on
a piecemeal basis whenever baseball makes a difficult or unpopular
decision. Rather than deal directly with the event that generated
concern (planned contraction), the bill, like the Curt Flood Act,
erodes a long-standing legal principle that has served the public well.
This in turn makes it politically easier to lift the immunity even
further when the next problem arises, a trend that will undoubtedly
have adverse affects on Minor League baseball. It's bad public policy
and could hasten the demise of grassroots baseball with no assurance
that it will achieve its desired result.
There has been much discussion concerning the lack of competitive
balance at the Major League level and the economic remedies available
to restore healthy on-field competition to baseball. What is seldom
discussed is the role of the exemption in buttressing competition at
the Major League level through minor league player development. In the
event of repeal, major and minor league teams will presumably be free
to compete openly for the signing of baseball player prospects. Players
signed by major league teams could presumably be placed either on the
major league roster (currently 40 players) or assigned to minor league
teams for further development. Free of standardized player contracts
with fixed salaries and reserve periods, major league teams would
compete for the top prospects. Minor League Baseball TM
believes this competition will upset the competitive balance that is
essential for Baseball's viability. The wealthier teams would be in a
position to outbid smaller market teams for available first year draft
talent. This can only exacerbate the competitive problems detailed in
the Report of the Independent Members of the Commissioner's Blue Ribbon
Panel on Baseball Economics (July, 2000).
If repeal triggers unbridled competition in the payment of salaries
for minor league players, Minor League Baseball TM believes
the rich will simply get richer at the expense of less prosperous
clubs. This scenario is identical to that of the 1940's-50's when
Branch Rickey of the St. Louis Cardinals purchased a large number of
minor league teams from which he could stock the major league
Cardinals. It was this very practice, which led to the player draft,
which was designed to ensure balance in the hiring of players.
While professional football and basketball look to college for
developing professional players, there exists grave doubt that colleges
could--or should--fill the void likely to be created by the reduction
in minor league clubs that will result from repeal of the baseball
antitrust exemption.
As colleges currently organize their baseball programs, there is
little prospect colleges could train baseball players as effectively as
do the minor leagues. Baseball is played primarily during the summer
when colleges are closed. The NCAA will not permit students to play in
the minor leagues without forfeiting their college baseball
eligibility. Some have argued that the ``summer leagues,'' such as the
Alaskan and the Cape Code leagues, may fill the gap during the summer
months when colleges are closed. However, in the view of baseball
experts, such leagues are simply not competitive enough and their
seasons not long enough to develop the talent as well as traditional
minor leagues. It's problematic too whether even their existing caliber
of play could be preserved if summer leagues were expanded as needed if
minor league teams fail.
In addition, as a general rule, minor league teams have better
coaches, facilities and competition than is found in college ranks.
Colleges are still not likely to develop players as effectively as do
the minor leagues. In college, students may play baseball at most 3 to
4 times per week for three months. And yet, baseball is an extremely
difficult sport requiring considerable skill and finesse. These skills
can best be developed only in the minor leagues where players play
every day, 6 to 7 months of the year. Only then can prospects advance
to the major leagues in, on average, 3 to 4 years' time. As it is,
college baseball players usually require 2 to 3 years' additional
development before they are prepared to play in the major leagues.
College AllAmericans frequently languish in Rookie League baseball
before quitting the game altogether.
We have serious doubts that the NCAA would permit MLB to invest in
college baseball programs on terms that are acceptable to MLB. Surely
the NCAA would require that all of the hundreds of NCAA baseball
programs be treated alike, all receiving the same level of financial
support from MLB teams. The logistics of financing such a system would
in our view be insurmountable, not to mention the chaos likely to be
created by mixing professional and amateur sports programs and their
respective purposes and goals.
Minor League Baseball TM believes it is inadvisable to
create an alternative player development system that merges, or at
least commingles, professionalism and education. We believe that our
colleges ought to concentrate on developing major league doctors,
scientists and educators, not major league ballplayers. We cannot
foresee how creating greater reliance on college baseball, as a player
development system will do anything but expose baseball to the scandals
that have blemished other college athletics.
Finally, I have been asked to address the impact of contraction at
the Major League level upon Minor League Baseball TM As the
President of Minor League Baseball TM, Mike Moore, stated on
November 6, 2001:
We plan on baseball being played by all of our franchises next
season. Commissioner Selig has indicated to me that following
any definitive decisions on contraction, we will work closely
in formulating solutions pertaining to the Minor Leagues. The
Commissioner has been a strong supporter and ally of Minor
League Baseball TM and we will continue to work
together toward our common goals.
Indeed, Commissioner Selig in testifying last December before the
House Judiciary Committee stated that it was not necessarily the case
that minor league clubs would be contracted if their affiliated Major
League club ceased to exist. There are a number of ways in which this
issue can be addressed, including: 1) assumption by other Major League
clubs of the contracted clubs minor league professional development
agreements; or 2) maintenance of the contracted minor league clubs
player development contract on a ``cooperative'' or shared basis among
several Major League clubs. Suffice it to say that we will be working
cooperatively to preserve our viable minor league clubs in the event of
Major League contraction.
Chairman Leahy. Thank you very much.
Mr. DuPuy, there was a report in The Washington Post by
Mark Asher which I am sure you have seen that says that major
league baseball wanted to keep its plans for contraction a
secret until after the World Series. And you are quoted as
explaining that major league baseball owners initially decided
not to identify the teams targeted for elimination because it
was a fluid situation--nobody wanted to jump the gun and cause
any more grief and heartbreak than was necessary.
In what way was the situation so fluid that baseball
decided to keep fans of more than two teams at risk and
guessing?
Mr. DuPuy. Senator, as the commissioner has repeatedly
stated, no final vote has been taken on the identification of
the two teams. Contraction was a process that was discussed
over the course of some--
Chairman Leahy. It was not a question of the vote. You were
quoted as saying that they decided not to identify the teams
because it was a fluid situation.
Mr. DuPuy. Well, Senator, given what was going on with
regard to the season, with regard to the World Series, and in
the aftermath of September 11, the commissioner and the owners
decided that they did not want to disrupt the season, they did
not want to disrupt the post-season. The commissioner indicated
that he would turn his attention to the economic ills of
baseball as soon as the season was over. The season ended on
November 4, and on November 6, he announced that the clubs had
voted to contract. It was an effort to protect the season,
Senator.
Chairman Leahy. At that time, was there any discussion--are
you aware, directly or indirectly, of any discussion among the
owners of trying to leverage the threat of contraction into
more public financing of stadium facilities?
Mr. DuPuy. Absolutely not. In fact, quite the opposite--
contraction is an acknowledgement that the owners have been
unable to succeed in those locations in getting venues
necessary to support the game in the current economic
environment. It is just quite the opposite.
Chairman Leahy. I am not sure that that is necessarily so.
Sometimes the threat of it might raise the possibility of more
public financing. But it is your testimony here before the
Senate that at no time whatsoever to your knowledge was there
any discussion among the owners that the threat of contraction
could possibly lever into financing more public facilities?
Mr. DuPuy. That is most certainly my testimony.
Chairman Leahy. Thank you.
Mr. DuPuy. Contraction was a decision made based on the
economics of the game. It was not a threat, it was a decision.
Chairman Leahy. If Governor Ventura and the people of
Minnesota had given in to the demands for a publicly financed
facility, was major league baseball set to make one of the
Florida teams a contraction candidate, as you refer to teams
slated for elimination?
Mr. DuPuy. Senator, we have a number of teams that are in
trouble. In Minnesota, there have been something like 40
different stadium initiatives. The last one, the owner agreed
to pay 83 percent of the cost of the stadium himself. So I
cannot speculate as to what might have happened, but--
Chairman Leahy. That was not precisely my question. Had he
gone along with the publicly financed facility--and there had
to be alternatives being discussed by you and the owners as you
went along--was a Florida team a contraction candidate at that
point?
Mr. DuPuy. There were a number of teams that were
contraction candidates, including teams from the State of
Florida, yes, sir.
Chairman Leahy. Thank you.
Mr. Brand, your testimony ends with a matter of great
interest to me--whether minor league clubs would be contracted
if their affiliated major league teams cease to exist. There
would never be the possibility of any parochialism to come out
of Members of the Senate--
Mr. Brand. We are in favor of parochialism, Senator.
Chairman Leahy. But we do have the Vermont Expos, a great
team. Do you consider the Vermont Expos ``a viable minor league
club,'' to use the words in your testimony? Is there any
assurance that the Vermont Expos will continue to exist within
the baseball minor leagues beyond 2 years?
Mr. Brand. Absolutely we consider it viable. That is why
that team was moved there several years ago.
From every perspective we have, that would be one of the
several locations that we would want to fight to preserve. In
fact, I cannot imagine--while I cannot speak for major league
baseball--I cannot imagine that that would be a market that
they would want to see dissolved. And as I said, there are a
number of ways to keep that club alive, including cooperative
arrangements or, again, additional clubs for other major league
affiliates. But certainly that would be our intention.
Chairman Leahy. I have other questions, but I have gone 8
seconds over, and I will stop at this point--and of course,
would greatly encourage everybody else to do the same.
Senator Hatch.
Senator Hatch. Let me just ask one question, and I will
submit other questions in writing. As you know, these are areas
that really do concern me, and I see answers on both sides, and
I just want to do what is right.
Mr. DuPuy, according to financial industry estimates, the
value of all baseball franchises increased from $3.1 billion in
1996 to over $7.9 billion, almost $8 billion, in 2001, or about
18 percent each year. According to these same estimates, each
of baseball's 28 franchises that existed in 1996 is worth more
today than in 1996--and that is good. But moreover, each of the
three franchises sold in recent weeks, Boston, Florida, and
Montreal, sold for at least 30 percent more than those
financial industry estimates as I understand it.
If baseball is losing as much money as you say, why do its
assets continue to appreciate so rapidly?
Mr. DuPuy. Senator, the numbers that you accurately state
were estimates. In fact, the Blue Ribbon Panel report which has
been provided to the Committee at Table 15 showed the rate of
return on the last 13 clubs that were sold, and in five
instances, those clubs had a negative rate of return based on
their operating losses. In four instances, they essentially
broke even, and in four instances, they did have a good rate of
return, but three of those four had new stadiums.
With respect to the clubs you just mentioned, there was one
buyer for Florida. Florida sold for exactly the same amount
that Mr. Henry purchased Florida for 3 years ago, and Mr. Henry
incurred approximately $40 million in losses over the 3 years,
so he had a negative rate of return.
The Boston Red Sox is one of our flagship franchises, but
as you also know, the sale of the Red Sox included 80 percent
of the New England Sports Network, which is an extraordinarily
valuable property; it included Fenway Park, which is an
extraordinarily valuable property; and it included adjacent
real estate. So that number, given that the franchise had been
held for so long by the Yockey Foundation is very hard to
estimate in terms of the rate of return there.
With regard to Montreal, Senator, we have no buyer. We had
no buyer, and we have no buyers. There was no one interested in
operating Montreal, there was no one interested in buying
Montreal, and we ended up having to buy the franchise.
Senator Hatch. Attorney General Butterworth, in your
testimony, you state that in the process of enacting the Curt
Flood Act, members of this Committee ``confirmed that the
passage of the Act had no effect on the authority of State
attorneys general to investigate baseball under State antitrust
laws.'' In fact, you quote a statement that I made in response
to the question from Senator Wellstone regarding whether the
Act would overturn the Piazza and Butterworth cases. I replied
that the Act would ``simply make clear that major league
baseball players have the same rights under the antitrust laws
as do other professional athletes'' and that the Act ``does not
change current law in any other context.''
Would you explain in detail if you would what relevance, if
any, you believe the Curt Flood Act and the statements you
quote have regarding the validity of the holdings of both
Piazza and the Butterworth decisions?
Mr. Butterworth. Yes, Senator. Thank you very much, and
thank you very much for sponsoring the Curt Flood Act with
Chairman Leahy.
Senator Wellstone put those comments into the record
because of the request of his attorney general, Skip Humphrey,
from the standpoint of not changing whatever the law was on
antitrust. It was our position that the Piazza case was correct
and that Butterworth versus National League was correct. And in
fact, in the chairman's initial comments that he made, his
comments were such that he believed that the only antitrust
exemption that was there with Supreme Court cases was with the
reserve clause. That was it, period.
And the Florida Supreme Court, when I filed antitrust
subpoenas against the National League for not allowing them to
come into Tampa, the Florida Supreme Court ruled that the
antitrust exemption only applies to the reserve clause. So the
particular comments that we have, we just wanted to make sure
that there was no change in the law pursuant to the Curt Flood
Act as it pertains to the Butterworth case or the Piazza case.
Senator Hatch. Mr. Brand, let me ask you a question. As I
understand it, the current contract between major league
baseball and minor league baseball will expire at the end of
2003, that season.
Mr. Brand. Yes, sir.
Senator Hatch. So far, as I understand it, Commissioner
Selig has refused to provide any guarantees of the current
number of minor league clubs after that time. So isn't it
possible that if a contraction at the major league level is
carried out, that at that time there will be a corresponding
contraction in the minor league world as well?
Mr. Brand. It is theoretically possible, but as I said, he
did state in the House Judiciary Committee that it was not
necessarily the case that that would be so.
The nature of our negotiations over the PBA over the last 9
years has been excellent, and we have been able to cooperate on
a number of issues and work them out, and I cannot imagine that
there would be an interest on the other side in doing anything
but maintaining through some mechanism the very few but viable
minor league clubs that would be affected by major league
contractions.
Senator Hatch. May I, Madam Chairwoman, just ask Mr. Fehr
one question?
Senator Feinstein. [Presiding.] Yes. Please go ahead.
Senator Hatch. Mr. Fehr, do you have any comment--I have
more questions, but I will have to submit them in writing--do
you have any comments you would care to make?
Mr. Fehr. Just a couple of brief comments. First of all, at
the time the Curt Flood Act was passed, the most recent
decision of law was in fact the Piazza case and the Butterworth
case. My recollection of the discussions to which Mr. Brand
referred was that the Committee wanted to make certain that the
Curt Flood Act was not deemed to change the law other than in
the areas in which it specifically addressed it, without
commenting on what that law was. But those were the last two
decisions.
There has subsequently been a decision of the Minnesota
Supreme Court and then, recently, of a Federal district court
in Florida, which have not adopted the rationale of those
cases, so there is uncertainty, and that may be part of the
desire to clarify the situation.
Secondly, with respect to the number of minor league teams,
I have not looked at the documents specifically, but I believe
that the guarantee of the number of minor league teams
contained in the professional baseball agreement is in fact
less than the number of minor league teams currently playing.
And while it is certainly conceivable, as Mr. Brand says, that
we could have a situation in which we have more AAA teams and
more AA teams than we have major league teams, that has never
happened before. They have always been the same.
Senator Hatch. Yes, I understand that.
Mr. Fehr. So I would expect that that would be an unlikely
result. For purposes of the legislation, however, for purposes
of public policy, the question would be not would it end up
that way, but perhaps however it ends up, can there be a
judgment made as to whether that was the result of unreasonably
anticompetitive activity. That seems to me to be the issue. We
cannot resolve that here; that takes a full investigation and a
proceeding.
Senator Hatch. Thank you.
My time is up. I appreciate all the testimony.
Senator Feinstein. Thanks very much, Senator Hatch.
Mr. DuPuy, I have always been a staunch supporter of the
antitrust exemption, and it really goes back to my days as
mayor, negotiating with Mr. Lurey and the Giants, and trying to
do a new stadium when the Giants were in play. It was really
the antitrust exemption that saved the Giants for San
Francisco, and I am acutely aware of that.
So I watched with some interest when Peter McGowan came
along and, instead of requesting public money, built a stadium
on his own. And I happen to think that that is the way to go
with respect to professional sports, that these are private
franchises, and why should the people pay.
I am really concerned about this one, because I think that
if you eliminate the smaller markets from having baseball
teams, you essentially end up destroying baseball as we know it
today as the national pastime. That is what I think this is
doing.
I think there is a very interesting paragraph on page 16 of
the report that goes on to say that eventually what we are
going to have is the larger markets prevailing because of all
the advantages of naming and all the accessories that come
along with a larger market as opposed to a smaller market. If
that happens, it will be tragic.
So as I see it, your league is in a pickle because you are
going to have to make some substantial changes. Revenues are
not declining, they are increasing. Yet we have these
exorbitant salaries to pay.
So if I am going to continue to support an antitrust
exemption, it cannot be at the risk of losing all smaller
market teams, which is the way I see this thing going.
Could you respond to that, please?
Mr. DuPuy. I would like to respond to that, Senator, and I
appreciate your comments about the efforts that we made to
protect the San Francisco Giants, who now play in one of our
premier facilities, and the fans of San Francisco had the
thrill of watching Barry Bond set the home run record this
year.
The irony of the panel today is that as you know, Attorney
General Butterworth in fact sued under the antitrust laws to
try to force the Giants to move to Tampa, and now he is here
today indicating that he wants to sue to prevent the teams from
moving out of Florida. And that in fact is one of the purposes
of--
Senator Feinstein. He has had a conversion.
Mr. DuPuy. He has had a conversion.
Mr. Butterworth. We will trade the Marlins for the San
Francisco Giants.
Mr. DuPuy. But Senator, you underscore something that is
very accurate. In certain indices, baseball actually is doing
well. As the Blue Ribbon Panel report indicates, revenues have
grown from $1.3 billion to $3.5 billion. We have 18 new or
under construction stadiums in which teams play that have
become destination points, as PACBEL has become. WE have 35
million fans attending minor league games. We had 70 million
fans in each of the last 3 years attending major league games.
The exemption in fact has served all of those purposes very
well. It has promoted franchise stability, and it has promoted
the minor leagues. But I would submit that the reason we are
here does not have to do with the exemption, and the reason why
we are not thriving economically like the other leagues has
nothing to do with the exemption, because in the areas covered
by the exemption we do do better than the other leagues. We
have not had relocations, where the other leagues have had 22
relocations.
Why we are here is an inability to get a labor deal that
works. The NFL has a salary cap. It works. The NBA has some
form of salary cap. It works. We have been unable to achieve a
labor deal, and that has nothing to do with the exemption,
because we repealed the labor protections in the exemption.
Senator Feinstein. That is correct.
Mr. DuPuy. So what it has to do with is an inability to
achieve a labor deal that has an appropriate blend of revenue
sharing and some form of salary restraint. And the commissioner
and the owners have indicated that they are ready to do
substantially more revenue sharing. The Players Association has
balked to that, in response to Senator DeWine's comments. The
owners are serious about doing revenue sharing. The owners are
serious about the recommendations made by some of the most
distinguished people in America, and we have been unable to
achieve that.
But I do not think that ties to the exemption. I agree--we
would like to have major league baseball in as many communities
as possible.
Senator Feinstein. Well, I have to agree with you.
Let me just take on Mr. Fehr for a moment on this subject.
Mr. Fehr, I remember Willie Mays in San Francisco. He lived in
the city, he put his divot back, he helped young people. It was
wonderful. Now there is talk of putting his memorabilia in a
museum in San Francisco.
But baseball has changed now. Most players do not live in
their communities; they do not do what they used to do. And
their salaries are exorbitant, particularly the big stars. I
adore Barry Bond because he hits a home run over into the water
in San Francisco Bay, and it is great. On the other hand, these
salaries are astronomical, and they are changing the nature of
baseball.
What do you have to say about that?
Mr. Fehr. Let me respond to both the question you asked me
and the question you asked Mr. DuPuy, and let me begin by
suggesting that one of the dangers that you get into in a
discussion is oversimplifying.
Let me begin with the question of the San Francisco Giants.
We were faced in bargaining in 1990 with the suggestion that
something had to be done because under no conditions could we
maintain two teams in the Bay area. At the same time, the State
of Florida was told, as it had been told for all of the last
century until 1993, that under no conditions could it have a
major league baseball team. It is sort of a class case of a
vacant market. And I understand that as Mayor of San Francisco,
dealing there, you do not want the team to leave. Certainly you
understand that someone in Florida would ask why is it that we
are faced with a monopoly that says no team may play here. You
cannot startup a business. The barriers to entry in major
league baseball are not high--they are absolute. You must be
voted in. So you have competing considerations which need to be
weighed.
Secondly, there is the suggestion that the number of teams
that have difficulties is static. In fact, if we had been
discussing contraction in 1990 or in 1989, what teams would
have been at the top of the list? Atlanta, Cleveland, Seattle,
and certainly San Francisco. Those teams are now regularly four
of the top six or seven revenue producers in America. Seattle
and San Francisco grossed, I believe, in local revenues the
second and third highest of anyone. Now, what does that
suggest?
Senator Feinstein. But they are not making money. Only
three teams, if I understand this report correctly, have made
money.
Mr. Fehr. Let me come to that, Senator. As I indicated,
this unfortunately takes a little explanation, so I hope you
will bear with me, and I will be glad to submit further answers
or to speak with you separate about that.
The point is how did that turn--what happened? Well, the
management of those clubs began doing things differently than
they had before.
Now, when we come to salary issues and whether salaries are
exorbitant, one of the things which perplexes me is that most
people would think the major league baseball players are
management's dream union. Why is that? We say that we do not
want to negotiate salaries. All we ask is that you do not
conspire about setting them. We want people to have reasonable
opportunities to seek work with other employers just like
everyone else does. It is a right that everyone else takes for
granted. And even with the free agency that we have, major
league baseball players still cannot pick up and move; they are
limited in matters that we have agreed to--and I do not suspect
they will be substantially different in the next agreement--to
wait until 6 years in the major leagues before they can become
a free agent, which is usually 10 or 12 years, that is to say,
the overwhelming majority of their career.
Why do players not live in their communities as much as
they used to? There is a very simple reason--because they now
work out year-around, and therefore they need to live in warm
weather climates. That is why fewer of them do.
In terms of salaries, we have been able now to track
aggregate salary levels as a percentage of revenues going back
over 20 years--
Senator Feinstein. Excuse me. Are you saying they do not
live there because of climate?
Mr. Fehr. What I am saying is that players tend more often
to want to work out in the winter time, and as a result of
that, they tend to want to live in more warm weather climates.
Senator Feinstein. I thought Florida had a pretty good warm
weather climate.
Mr. Fehr. I am not familiar with what the weather situation
is in San Francisco specifically. But the majority of players
in the off season live in California, Arizona, and Florida.
On salaries--and then I will conclude; I know time is
restricted here, and this will take substantially more
discussion--we have been able to track salaries. Aggregate
salary levels are more or less the same percentage of revenues
now that they were in 1980 or 1985 or 1990 or 1994. Salaries
increase because revenues have increased. As Mr. DuPuy quite
correctly indicated, baseball's revenues went from
approximately $1.3 billion in 1990 to approximately $3.5
billion or slightly more than that, as constantly reported in
2001.
You would expect, then, that salaries in terms of rate of
growth would more or less reflect the rate of revenue growth in
a free market, because the players' contribution to the
product, you would expect in economic terms to be more or less
the same. That has in fact happened. Players' salaries are a
product of the revenue they produce, just like a worker's
contribution is most places that that takes place.
I would be glad to have further discussions with you about
this or to respond in another forum. I know that time is
limited today, and I suspect there may be more questions.
Thank you.
Senator Feinstein. Thanks, Mr. Fehr.
I know that Senator DeWine has more questions, but I would
like to ask Mr. DuPuy if I may to respond to that, because this
is sort of the heart of the argument between the league and the
players.
How do you respond to that? It has been going on for years
now. How are you going to break through it? I do not want to
see these communities lose their teams.
Mr. DuPuy. Let me respond with the easiest example given
the time constraints. First of all, salaries grew from 50
percent of revenue to 60 percent of revenue since 1980, so
there has been a substantially larger portion of revenues
devoted to salaries. But I did not hear Mr. Fehr respond, in
response to your question, to the inquiry with regard to
revenue sharing--why the Players Association will not allow the
clubs to share more revenues so that the small markets can
compete, so that some small markets can get into the playoffs,
so that some small markets can occasionally get into the World
Series.
Senator Feinstein. Let us get an answer to that.
Mr. Fehr?
Mr. Fehr. Thank you.
In 1994, the proposal that produced the strike was
evaluated by the Congressional Research Service--I believe that
is the right name; it is the arm of the Library of Commerce.
They wrote a report on it, and they said that the revenue
sharing proposal there which was combined with a salary cap was
designed to benefit principally the largest-income clubs. It
had been effects on players, too, and we opposed it.
Coming out of that labor dispute, we ended up with an
agreement which provided for revenue sharing by agreement.
Although there was a lot of work done on it, it was done
pursuant to a conceptual framework that I think we had put
forward initially. And vastly more revenue is shared now than
was shared back in 1994 and certainly previous to that.
In these negotiations, we understand and expect that
revenue sharing--
Senator Feinstein. ``These'' being which?
Mr. Fehr. Current negotiations. I am sorry. I apologize. We
would expect that revenue sharing would be the single largest
issue that is on the table, and certainly the clubs have put it
on the table.
We had discussions that took place over a period of about
10 weeks in April, May, and June. Those discussions were
interrupted by the decision of the commissioner to do so, in
retrospect, it appears clear, because contraction was out
there. And one of the things that makes it difficult to discuss
revenue sharing is if you do not know how many teams you have
and who they are, it is pretty difficult to try to come to
concrete circumstances.
Senator Feinstein. Let me ask Mr. DuPuy this question,
then. In exchange for revenue sharing, would you forget
contraction?
Mr. DuPuy. Senator, I do not have a vote. The clubs vote on
contraction based on the recommendation of the commissioner and
his staff. But I will tell you--and you still did not hear an
answer--the commissioner recommended 50 percent local revenue
sharing. The players made a proposal in the summer that had $20
or $30 million more being shared. That is not nearly enough.
The problems are so pervasive that under this structure,
there are markets that cannot support major league teams. I
wish that were not the case. I wish I could tell you we could
have 50 teams. But we cannot have 50 teams. We cannot support
30. There is no magic to 30. Major league baseball expanded
from 16 to 30 over 35 years and now wants to contract back to
28--but it wants to do so in a viable, stable economic
environment where teams can compete.
In certain circumstances, could we avoid contraction?
Perhaps. But our 30 years of bargaining history suggest that we
are not going to get a salary cap. We are not going to get 50
percent revenue sharing. We are not going to get anywhere close
to that. And without that, it is impossible for me to sit here
and by Pollyanna-ish about the prospects of avoiding
contraction.
Mr. Fehr. Senator, if I could just fill in a gap, the
assumption I made--
Senator Feinstein. I think we have the nucleus of a
solution right here.
Mr. Fehr. The assumption that I made, Senator, given the
events, was that the clubs made a deliberate decision not to
have contraction be an issue that would be part of an overall
agreement, and it would be a matter that would be accomplished,
and we would bargain later. That is a matter of choice that
they engaged in.
I do not, however, want to leave the Committee with the
impression that I or Bob or I suspect any of us involved in the
process can be prepared to predict the results of bargaining.
We are just getting back to it. We all know there is going to
be more revenue sharing. We have some differences as to how and
when to do it and what the appropriate way is.
The only way we are going to solve that problem is to get
back and bargain it out. The season is going to start on time.
I assume we will be having meetings heating up on a much more
regular basis in the near future. But that is where the issue
is going to have to be resolved.
Senator Feinstein. Thank you both.
Senator DeWine?
Senator DeWine. Madam Chair, thank you very much.
Mr. DuPuy, you testified that there were no bids for the
Expos, but weren't there bids received from people who wanted
to move the Expos?
Mr. DuPuy. There have been inquiries received from
individuals or groups who are interested in buying and
relocating the Expos, yes, sir.
Senator DeWine. I have been told--and this may not be
right--that both the Virginia and D.C. organizations that want
to bring a ball club to this part of the country, the Nation's
Capital area, submitted bids of $160 million for the Expos; I
am also told that that was more than major league baseball paid
for the club.
Mr. DuPuy. The latter point, I concede. I am not sure what
the details were of the offer, so I cannot comment on that. But
there were letter inquiries about acquiring the Expos and
moving them, yes, sir.
Senator DeWine. Certainly, you would think that that would
raise possible antitrust concerns if major league baseball is
stifling competitive bids to preserve these clubs. If you could
bring a club to a viable market and keep going, it seems to me
that that is a concern. That is a public policy issue. That is
what we get down to here. Some people may ask why is Congress
having these hearings, why is Congress talking about these
issues. But it is the exemption that enables you to make what
many would consider to be an arbitrary decision when you have a
bidder out there who has money, who can bid, who can bring a
team to a viable market--at least, what most people think is a
viable market--and you stifle that and say, no, we are not
going to do that; instead, we are going to basically est out on
a path to contract this club.
You understand why there is a concern, a public policy
concern, that goes beyond the issue that I raised in my opening
statement when I was talking about what I see as a fan and the
competitive problems of baseball.
Mr. DuPuy. And again, Senator, the purpose of the
contraction decision was to improve the competitive product. If
the product that baseball produces is a competitive baseball
game, the contraction decision was an attempt to do that.
The commissioner has indicated more receptivity to
relocation than at any time in the past 30 years. He has also
made public comments about Washington and Northern Virginia
being probably the most likely or the most prominent relocation
candidates. But he has also said that until we fix the economic
system, merely moving a team from one location to another, all
that does is ensure the failure of the new market. He has
indicated that relocation is on baseball's horizon, done in a
carefully managed way, but only after the economic system is
fixed. The system right now cannot support--
Senator DeWine. As you have heard and as you know, Mr.
DuPuy, there is no stronger advocate for revenue sharing and
for fixing the current system than Mike DeWine.
Mr. DuPuy. I appreciate that, Senator.
Senator DeWine. But I do not know too many people who think
that a moved Expos team in the Washington, D.C. area could not
survive. I just do not know too many people who can look you in
the eye and tell you they could not survive in this place, and
that people who have put together some viable options and put
the money together could not move the Montreal Expos to the
Washington, D.C. area and do just fine and compete just real
well.
Mr. DuPuy. Senator, there are other markets, other cities
the size of Washington, D.C., that are not thriving in the
current system.
Senator DeWine. Well, it seems to me, with all due respect,
that that is a separate issue, which I agree with you on. I am
not sure that your point--or, that one point makes the other.
Let me ask a question to Mr. Brand. I want to talk about
the whole question of whether or not the minor leagues as we
know them depend on the antitrust exemption. And maybe a better
question is if you remove the antitrust exemption, what would
we end up with as far as the minor leagues.
I understand that the National Hockey League does have a
minor league system in place, and they do not have the minor
league exemption, do they?
Mr. Brand. No, they do not.
Senator DeWine. What is the difference?
Mr. Brand. Well, one difference is that if you look at the
stability of minor league hockey franchises over the last 10
years, you will find great instability. Those leagues shrink,
they contract; they do not exist in places the way Indianapolis
has existed in Indianapolis for 100 years. They do not exist in
the breadth and reach that the current minor league system
does.
So I do not think that hockey is an appropriate analogue,
because as I say, the franchise stability is nowhere near what
it has been in baseball.
Senator DeWine. Mr. Chairman, my time is up. I think we
have a vote. I have a number of questions that I would like to
ask, and I would be more than happy to go and vote and come
back.
Chairman Leahy. I understand. Let me do this, and it is a
little bit unusual, but the Senator from Ohio is extremely
knowledgeable in this subject. I would not mind recessing and
then having the Senator from Ohio reconvene the hearing. I will
not be able to come back, but I do not want to cutoff any
Senator, and the Senator from Alabama has not asked questions
yet; is that correct?
Senator Sessions. Yes. If possible, I would like a few
minutes before we recess.
Chairman Leahy. Why don't we do this, if this will work for
both of you. I will put my questions in the record. Because of
the votes, we have delayed this panel a great deal, and I do
have a number of questions, especially to the two attorneys
general, because I am very, very concerned about Federal action
that cuts out the rights of our States. As a former State
attorney, I feel that way, and I know that our attorney general
would feel that way. So I am going to put those questions in
the record.
Senator Sessions, why don't you begin your questioning now,
and Senator DeWine, when you come back, I will leave it in your
capable hands, and when you have finished, if you would then
recess the hearing.
Senator DeWine. Thank you, Mr. Chairman.
Senator Sessions. Thank you, Mr. Chairman, and I thank
Senator DeWine; he is certainly a thoughtful and wise person
when it comes to these issues.
General Butterworth, it is good to see you. We are glad to
have you back in Washington. I enjoyed serving with you as
attorney general.
It is troubling to me that we have not had a ball team here
in Washington for over 30 years. We are first in war and first
in peace, and no place in the American or National Leagues is a
source of pain in light of the fact that we have football and
basketball teams.
And you know, antitrust exemptions are just problems for
us. I have a little twisted slogan that I made up: Oh, what a
tangled web we create when we first start to regulate.
When you get an exemption, you have gotten a privilege, so
we have to look at that thing and ask if it is being executed
and carried out in a way that is healthy and positive for the
public, or is it not.
I thought over the years, not having been a member of this
committee, that from the fan point of view--and I am a long-
time baseball fan--the goal was to keep ball players a little
longer on the same team so they do not get sent everywhere, and
that we could somehow maintain more stability there. But it
looks like there are a lot of other forces at work, as I guess
I should not be surprised.
So in recent weeks, I had the opportunity to talk to a law
school classmate of mine, Mr. Don Watkins, who is an African-
American who has done exceedingly well in business and is
interested in buying a baseball team. And basically, he tells
me that he has been treated courteously by the league officials
and feels that they have made some good progress. But if you
look at the newspapers about moving or buying a franchise, you
know it is a long and difficult process.
So I would think that major league baseball would be
interested in having an African-American owner; he would be the
first one. But really, I am told that since he first applied to
buy the Tampa Bay Devil Rays, he has heard nothing from the
league in nearly a year. His most recent expression of interest
in the Minnesota Twins was ignored until last December when, at
a House Judiciary Committee hearing, a Congressman from Alabama
asked the Twins' president in front of the commissioner why
nobody had spoken to Donald Watkins, and only then did he
receive a call about it.
I also understand that Donald's efforts to inquire into the
possibility of purchasing the Montreal Expos and moving them to
Washington was summarily foreclosed as not on the table by
league officials.
So to me it is odd, Mr. DuPuy, when you say, as I believe
you said a little earlier, that there is no interested buyer
for the Montreal Expos. I am encouraged that he has been
permitted by the league officials to talk to the Twins and the
Devil Rays, and I am also encouraged by the recent comments
from Commissioner Selig after the owners' meeting that
Washington was the most likely relocation city. These comments
were understandably confusing to Donald Watkins, who had been
told by league officials only a week earlier that it would be a
waste of time to discuss relocation of a team to Washington,
D.C.
Mr. Watkins' plan would be to build a privately financed
stadium with a destination-class museum and hall of fame for
African-American athletes that would clearly make a major
contribution to our Capital's large minority population and
tourist flow. It would seem to make more economic sense to
locate it here than in Minnesota or Tampa Bay.
So I think his request to discuss this possibility ought to
be honored. Would you agree, Mr. DuPuy?
Mr. DuPuy. I would certainly agree with the latter
statement, Senator, yes. I have to admit to a little bit of
confusion in that my understanding from your earlier comments
was that Mr. Watkins was interested in acquiring the Minnesota
Twins. He in fact met with the owner of the Minnesota Twins,
and he met with the president of the Minnesota Twins. He had a
meeting with Tom Ostertag, our general counsel, and Bill
Bartholemy, the Chairman of our ownership committee, which is
not usually done that early in the process, and my
understanding is that he submitted at least a preliminary offer
to acquire the Minnesota Twins, and I am now a little surprised
to hear that he would like to have a team in Washington, D.C. I
am not sure that that solves the Minnesota attorney general's
issues.
But we would be delighted--to go back to your very first
statement--we would be honored and delighted to have an
African-American owner of a major league baseball team, and I
hope it happens sooner rather than later.
Senator Sessions. Well, why shouldn't he be able to shop
around? If Montreal is going to be on the market, why shouldn't
he be able to ask about that one, the Devil Rays, or Minnesota,
talk to the various owners and make the best deal?
Mr. DuPuy. He certainly has the right to shop around. We
have not denied him permission to talk to any team, Senator.
Chairman Leahy. Well, if I could, Senator Sessions, just
ask this question--are there any minor league baseball teams--
minor league teams--that have owners from racial minorities?
Mr. Brand. Yes.
Chairman Leahy. How many?
Mr. Brand. There are several and I would have to submit
that for the record, which I would be happy to do.
Chairman Leahy. OK. Please do.
Well, then, Mr. DuPuy, are there any major league baseball
teams that have owners from racial minorities?
Mr. DuPuy. I do not know all the members of some of the
ownership groups. There are a number of teams that are owned by
very broad ownership groups. But in terms of the principal
owners, the answer would be no.
Chairman Leahy. Thank you.
And Mr. Brand, you understand that I am referring to
principal owners--
Mr. Brand. Majority owners. I am not aware of any majority
owners. There are minority owners representing minorities.
Chairman Leahy. I just wanted to make sure everybody
understands, because I think the question raised by the Senator
from Alabama is a very good one. I just wanted to make sure we
had that for the record.
Thank you.
Senator Sessions. Thank you, Mr. Chairman.
Mr. DuPuy, my question is this. Has there been an approval
of Mr. Watkins as a possible owner of a major league baseball
team, and has he been apprised of all ownership opportunities
that might exist, and would you apprise him of any ownership
opportunities that might exist?
Mr. DuPuy. Answering your third question first, absolutely.
Answering your second question, I believe he is aware of all of
them. Answering your first question, he was authorized to begin
discussions. We do not sell major league teams. The owners sell
those teams. So he has been authorized to talk to the Tampa Bay
Devil Rays and authorized to talk to the Minnesota Twins.
Senator Sessions. But do you have the authority to approve
him as an owner or not, and do you assert the authority to
control the ability to talk to a major league team or not?
Mr. DuPuy. We have very detailed written ownership
guidelines that I would be happy to discuss with you. The first
process is that a club indicates to us the desire to sell, and
we then preliminarily approve anyone who is going to talk to
those people to avoid early problems. Then, eventually, the
clubs as a group must approve any transfer of ownership. That
is a shorthand version of a very detailed process.
Senator Sessions. So if Mr. Selig has said that it is a
possibility that you could move the Montreal Expos to
Washington, D.C., you are telling me that Mr. Watkins would be
able to be approved for discussions with regard to possibly
buying that team and moving it here?
Mr. DuPuy. I was not aware that the commissioner had
indicated any intent or desire to move the Expos to Washington.
Senator Sessions. Well, he said it would be the next
location.
Mr. DuPuy. Yes, sir.
Senator Sessions. I guess that is a distinction.
Mr. DuPuy. Yes, sir.
Senator Sessions. But still, what we are asking is if you
have a good location, and you have a buyer who is willing to
put in a lot of money to buy a stadium and build a center to go
along with it, they ought to be given a chance to do that, it
seems to me.
Mr. DuPuy. Those facts, that hypothetical, absolutely,
under every circumstance. That is what we want--good locations,
with good stadiums and competitive teams.
Chairman Leahy. Senator Sessions, we are going to have to
recess because we only have about 3 minutes left in the vote.
We will recess, and Senator DeWine will resume the hearing,
and of course, you are welcome to come back and ask further
questions.
I thank all of you very, very much for being here. We will
recess for about 10 minutes. It might seem like it has been
kind of a chopped-up session, but trust me, this hearing has
been on the internal monitors, and from the emails I have been
getting since I have been up here, a lot of people in the
Senate have been watching. So it is a matter of some concern
here, and it certainly is a matter of great concern to Senator
Hatch and myself.
I worry very much that a perceived antitrust exemption--
perceived antitrust exemption--actually ends up hurting
baseball more than helping it, but we will continue that debate
as we go on.
Thank you.
[Recess.]
Senator DeWine. [Presiding.] The Committee will reconvene.
Let me thank the panelists for your patience in putting up
with the crazy Senate schedule. You have endured this morning,
now by afternoon, six different roll call votes which have
disrupted the hearing, so I appreciate your patience.
Let me start with Mr. Fehr and Mr. DuPuy, a question about
the status of negotiations. The World Series ended this year
unusually, in very, very early November, on a very high note, a
great World Series. I think some of us who follow this closely
expected that we might see some beginnings of negotiations. I
take it, though, from comments that both of you have made that,
really, there has not been much negotiation going on. Is that
correct?
Mr. Fehr. Senator, let me respond briefly to that in a
couple of ways. First, we have made an effort this time on both
sides not to accompany every negotiating session with a press
conference, and that may account for some of the feelings that
people have.
We did have a sustained interruption in the negotiations,
and over the last several months on both sides, we have been
working through the contraction issue. There have been a number
of meetings, and as a matter of fact, probably the most
important meeting I will have in the next 2 days is a
scheduling meeting to tie down a number of dates. I expect that
we will be back at it with frequency fairly quickly.
Mr. DuPuy. I would agree with that, Senator. I think the
absence of agreement does not suggest that the parties are not
bargaining. We have fundamental serious differences, but we are
bargaining.
Senator DeWine. All right. That is good news, so you are
assuring baseball fans that some negotiations are going on, or
at least some discussions are going on; is that correct?
Mr. DuPuy. That is correct.
Senator DeWine. Is that correct?
Mr. Fehr. Sure it is.
Senator DeWine. All right. Let me ask a question for all
the members of the panel, but maybe I will start with Mr.
Brand.
Imagine a world where there is no antitrust exemption for
baseball, specifically in regard to the minor leagues. Where
are the teams going to get the players, and what would happen?
If wiped away tomorrow, the 6-year reserve clause is gone, they
have to get the players somewhere. What is going to happen? Are
you telling me that we would see no minor league teams, that we
would see some minor league teams, that there would be
different minor league teams?
Mr. Brand. I think we would see some minor league teams.
That would depend on the level of economic incentives that the
major leagues would have to invest as they do now. I do not
think they would have anything close to that.
They would be in effect under the same system that they are
under now at the major league level, which I think would
significantly reduce the number of minor league players that
they would be able to sign. I think that would impact most
critically the smaller markets--Kinston, North Carolina, towns
and cities that are smaller than 100,000, of which we have
many, many, many clubs. I am sure they would continue to use
colleges as some aspect of it and complex baseball centered
around the spring training sites--but it would look nothing
like the system that we have now. And I think that in many,
many, many smaller and rural markets in America--like Oneonta,
New York, like Kannapolis, North Carolina, like Kane County,
Illinois--there may not be minor league baseball as we know it.
It would be some system--I think it would be a lot smaller and
a lot less diverse geographically.
Senator DeWine. There are two ways of looking at this. One
is from the point of view of the public. In Ohio, we have a
number of minor league baseball teams, as you know, and a
number of new stadiums, new ball parks, which we are delighted
to see and are a great asset to our State and to the economic
development of the downtowns of a number of cities.
The other way of looking at it, of course, is from the
point of view of an 18-year-old, a 19-year-old, a 20-year-old,
or whatever age you want to put on that minor league player.
So Mr. Brand, from the point of view of that young man,
would he be better off with the antitrust exemption around or
not?
Mr. Brand. Well, from my perspective, I think you are
better off with it if the idea is that you can sign more
players and roster them to more places around the country,
giving you a chance to matriculate to the next level of
baseball and ultimately around to a 40-man roster. I think that
would give you more opportunities rather than less.
Senator DeWine. Understanding that only a small percentage
make it. That is just the reality, that is life.
Mr. Brand. Yes. But I think that will be true under any
system, that a smaller percentage of prospects will make it
onto a 40-man roster than are drafted.
Senator DeWine. Mr. Fehr--the same two questions.
Mr. Fehr. I have a number of responses. First, if you will
permit me just to say that Mr. Brand referred to a quote
attributed to me in a Los Angeles paper some 8 years ago about
wasting money on the minor leagues.
Senator DeWine. You are kind of slow to respond to that.
You are usually a little quicker than that.
Mr. Fehr. Well, there were other questions. But I have no
memory of that and do not know what it referred to. I want to
assure everyone that the Players Association has never made
proposals except in the context of some current issues relating
to the draft, which I will come to in a second, which would say
you should dispense with a number of minor league teams, or we
want you to change funding, or anything like that. We do not
represent those players.
There was an issue that troubles us philosophically, and
that is when we draft vastly more players than we will ever
have by an order of 9-1/2-to-one, a chance for a substantial
major league career--
Senator DeWine. That is what the figures are on the draft?
Mr. Fehr. Yes. And effectively, what we tell the high
school players is: ``Do not go to college, play minor league
baseball,'' knowing that most of them will never make it and
then will be out of baseball sometime in their mid-twenties
without a college degree, without any job skills, and without
any training. That is troubling.
We have had points made by major league baseball to us in
prior negotiations that football and basketball have it easier,
because the colleges do it for them. But we are not out to
affect the operation of minor league baseball. I do not know
why the bill on the House side was drafted the way it was, and
I think Senator Wellstone's comments for the purposes of his
bill ought to resolve that issue.
With respect to your specific question, if the antitrust
exemption was suddenly agreed by everyone to have disappeared,
what would happen is that a new system would have to be
developed. I do not think anyone can predict what it would be,
but the notion that there would be no player restraints and no
rosters and no set of procedures which would be deemed
reasonable under the antitrust laws strikes me as a very
unlikely prospect. I do not think we can predict what it would
be. Major league baseball still needs to train the players.
They believe you have to train vastly more than make it in
order to have the quality to get you to the major leagues, and
although many more players come out of college than used to,
you still have large numbers that do not go.
Senator DeWine. Excuse me. What percentage come out of
college that make it in the major leagues?
Mr. Fehr. I do not know that now, but we can certainly
provide that to you probably by some time next week.
Senator DeWine. Do you have a guess--just a guess.
Mr. Fehr. I do not offhand, but my guess is that the number
of players in the major leagues that have at least some college
at this point is probably less than 50 percent, but is growing,
and it is a higher percentage among players who grow up in
North America as opposed to Latin America.
We can certainly provide that. That is easily
ascertainable.
Senator DeWine. OK. Go ahead. I interrupted you. I am
sorry.
Mr. Fehr. The last comment--with respect to the point of
view of the 18-year-old, it has this principal effect. If a
player is drafted, he is stuck with the organization that he
goes into, and if he happens to be a first baseman, and that
organization is loaded with first basemen, his opportunity to
advance is going to be retarded as compared to an organization
that is not.
From his standpoint, having some choice about where he
plays would obviously be better.
Senator DeWine. I am not sure I understand your answer
about the big picture. I understand your answer, Mr. Fehr,
about the player, and I appreciate that.
Can you guess what kind of a world you think we would see?
Take off your hat as a representative of the players--I mean,
you have a great deal of experience in baseball--what kind of
world do you think would evolve?
Mr. Fehr. You have to remember that the players that are
contracted now are in most instances not signed by the minor
league clubs--they are signed by the major league clubs--and I
think they would have to consider whether or not the current
system is reasonable or whether it is not--reasonable in an
antitrust sense--or whether it is not, and if so, they would
have to make some modifications.
I find it difficult to believe that major league baseball
would still not want to operate a very substantial minor league
system. I think it is probably likely if that happens that
there would be a renewed interest in exploring whether or not
the current rules under which the major colleagues play by
could in some fashion be amended so that you could have more
college baseball than there now is, even during the summer when
the colleges are not in session.
But if you really want me to speculate about that, I would
prefer to think about it a little more before I respond. It is
not a subject that I have thought about precisely before.
Senator DeWine. OK.
Mr. DuPuy?
Mr. DuPuy. Senator, I think it is clear that the major
league would not run the risk of making a decision on whether
something is reasonable or not and then be subjected to 9-1/2-
to-one times in terms of the number of players seeking treble
damages under the antitrust laws. While I cannot speculate as
to what would happen, I agree with Mr. Brand that the
likelihood is that places like Columbus and Toledo would
probably survive and have teams either because there would need
to be places for the highly developed athletes just before they
reached the major leagues, or because some competitor would
spring up. But I think the much more likely result in terms of
the Mahoning Valleys of the world is that we would have
development camps in the Florida and Arizona areas, in the
spring training sites; we would run people through development
camps, and eventually, they might be signed to professional
contracts rather than run the risk.
So I think there is a very likely chance that it would have
a significant negative impact on the number of communities that
have minor league ball.
Senator DeWine. Do you want to take on the question of the
18-year-old? Is it in my interest to have the antitrust
exemption?
Mr. DuPuy. I think it is in your interest to be found in a
development system that operates and treats everyone equally
and gives them equal opportunity. I think there is more
opportunity in that system.
If we go to the few ``haves''--it would be the same as the
major league clubs who can now afford to sign foreign players.
There are only a few. And now you have the opportunity where
you can end up playing for any of 30. Under that system,
certain clubs can only sign so many young kids, and I think
some of the other kids would fall by the wayside.
Senator DeWine. General Swanson or General Butterworth, do
either of you want to respond?
Mr. Butterworth. Senator, I am not sure what effect it
would have. I would assume, since baseball is in the business
of baseball, and they have to train their players, they are
going to train their players, whether it be through the minor
league program which is working right now, or what I like is
the idea of what I am hearing today, that is, that if in fact
we have young athletes in this country who are being told do
not go to college, and your chances are 2 percent in order to
make it in the major leagues, and you end up staying there 5
years, you get married, have a couple kids, and then you are
out there with nothing--to me, that is something that we should
not be allowing to happen.
On the 18-year-old, I am sure that anyone who believes that
he has a talent, and a team is interested in him, the team will
be able to sign him, if they still can, for a term of years
anyway. So I do not think it would have that much of an effect.
But what I am hearing here today really discourages me,
Senator, with all due respect. If these leagues are telling our
talented youngsters that ``You are going to be a star,'' when
only one or 2 percent of them might even make it, in essence,
ruining their lives and their chance for an education, I think
that is flat out wrong. We should be encouraging those young
athletes, if they are eligible, to go into colleges. Florid has
a lot of good colleges. They have a lot of good baseball teams.
We have seven college teams right now that could probably beat
one of our Florida pro teams.
Mr. DuPuy. Senator, could I respond just on the last point?
Senator DeWine. Certainly.
Mr. DuPuy. We do have a college scholarship program for
minor leaguers to the tune of about $10 million a year. I do
not want the attorney general to leave here believing that we
are not trying to see these kids finish school. We do fund a
college scholarship program.
Mr. Butterworth. This is the first time I have heard this,
Senator.
Senator DeWine. Mr. Brand?
Mr. Brand. If I might, these people are not conscripted;
they are paid, and they are also paid $90 million a year in
signing bonuses. We do not tell them not to go to college.
Senator DeWine. Now, Mr. Brand, the average player for--
pick a team--and I am not here in any way to criticize the
minor league system, and I have not taken a position on whether
we should do away with the antitrust exemption or not, and we
are asking questions about what impact it would have on minor
league baseball, and I think I have already said that minor
league baseball is very important to Ohio--but I find your
statement a little misleading. There are a number of players
who do not make very much money who play in minor league
baseball, and we know statistically that the majority of them
will not make it to the major leagues. Are those two statements
I just made not true?
Mr. Brand. They are paid at a level based on
classification, and they are paid signing bonuses, some of
which total up to several million dollars.
Senator DeWine. But the average player does not get a
signing bonus of several million dollars.
Mr. Brand. I do not know what the average signing bonus is.
I know that down into the draft, that can be into the several
hundreds of thousands of dollars, down into several rounds of
the draft.
My point is--
Senator DeWine. Would you supply us with that information?
Mr. Brand. Absolutely.
Senator DeWine. Again, our job here is not to make this
decision on that basis, but I think that your implication that
every kid who is playing in the minor leagues is doing very
well, I do not think is true. Now, if I am wrong on the
statistics, you let me know.
Mr. Brand. No. My point was simply that they do that under
their free will for a chance--
Senator DeWine. Oh, absolutely.
Mr. Brand. For a chance to make it into the major leagues,
and sometimes with the addition of a substantial signing bonus.
That is my point, and I have submitted for the record the
reason why, for a lot of practical reasons, I do not think the
college system presents an alternative player development
system.
Senator DeWine. Why don't you elaborate on that for a
moment, since that has been raised as an issue?
Mr. Brand. First, the college schedule is significantly
reduced. The NCAA has rules about how much can be spent on
baseball. There are any number of reasons why I do not think
that system could take the place of the current minor league
system.
I think the fact that in most minor league classifications,
you are playing a 70- to 144-game schedule, a professional
player is playing baseball and not going to college, a college
student is studying to be a professional of a different sort.
So I do not see that as an alternative. I certainly recognizer
the responsibility that baseball has to remunerate its players,
and I will supply those for the committee.
Senator DeWine. Thank you very much.
Mr. Fehr and Mr. DuPuy, as I noted in my opening comments,
I believe that baseball's biggest problem is the ever
increasing level of revenue disparity. The Blue Ribbon Panel
recommendations, which I have here and which you have both
obviously spent a lot of time looking at, makes a number of
recommendations about how to address this problem.
I would like to ask both of you to tell us first what is
the status of these proposals--and you got into that a little
bit a moment ago--do you think these proposals will help
address revenue disparity?
Does the antitrust exemption or the possible repeal of it
impact on the ability of baseball to implement these proposals?
Specifically, I would like to hear your comments on the
impact of the antitrust exemption on baseball's ability to
implement greater revenue sharing and more extensive
competitive balance tax, minimum club payroll, draft reform,
unequal distribution of central fund revenues.
I would also like to ask the panel to comment on the impact
of the antitrust exemption with regard to franchise relocation
and contraction.
Let me go through these one by one, and I know I was going
fast, and I did not expect you all to take notes, but let me go
through these, Mr. Fehr and Mr. DuPuy, one by one, just a
summary of the recommendations, and give us some indication--
two questions--does antitrust impact the ability to achieve
this, and second, what is your opinion about this--and I
assume, Mr. DuPuy, you like it because it is part of the
recommendation. I do not know that, but you can tell us if you
do not like it. And Mr. Fehr, tell us whether this is something
that is viable.
I understand, Mr. Fehr, that this is something that is
subject to negotiation, and I also understand that your
position on one issue may affect your position on another, and
I understand how bargaining goes. But give us some indication
of whether any of these are totally out of the ball park or
whether they can at least be discussed and what your opinion is
of them.
Let me start with the first recommendation, that major
league baseball should share at least 40 percent and perhaps as
much as 50 percent of all local revenues after local ball park
expenses are deducted under a straight pool plan.
Why don't we start with you, Mr. Fehr?
Mr. Fehr. Let me make a couple of preliminary comments,
Senator. The Blue Ribbon report is an interesting document; I
want the record to be sure to reflect the following, however.
Its members were selected by the major league owners. All of
them had prior or existing relationships with the major league
owners. The deliberations of the Blue Ribbon Panel to the
extent they were conducted with anyone were not conducted with
representatives of the players, with the exception of one
proceeding which took less than an hour, most of which was
taken up in pleasantries.
We tended to look at that when it came out, I suspect, much
as you might if your Democratic colleagues on an issue selected
a blue ribbon panel of people they were familiar with and came
out with conclusions and said, ``Let us go with it.''
Second, hopefully, we will not be engaged in bargaining by
public relations, but one can argue that the release of the
report and so on was designed principally to affect bargaining,
because the recommendations that you referred to, which are the
core of the report, constitute in the main bargainable issues.
With that said, when you look at how these matters should
be addressed in bargaining, in the discharge of my
responsibilities, we do two things. We do look at the issues
separately, but what we attempt to look at is the combined
effect of whatever series of procedures you have in place on
two things--the entrepreneurial activity of the clubs, how does
it affect what they do with players and otherwise. We all know
that things like tax rates affect behavior; that is why you
have so many debates about that kind of thing in this body.
Secondly, we try to ask what do we think is the likely
effect on players; and then, third, we say that regardless of
how we view these things in the abstract, we understand that we
have an obligation to bargain in good faith about them. The
club puts it on the table, as they do with proposals we make,
and we would.
On the 40 percent or perhaps 50 percent revenue sharing, in
our view, there are two issues there outside of what additional
revenue sharing or similar-type measures might compound the
difficulty of understanding what the effects would be.
The first one is we believe there ought to be additional
revenue sharing. We made a proposal in that regard. It was--and
I do not think I will compromise the bargaining process by
suggesting it was an initial proposal. We hoped to get a
response back which moved in our direction; it has not happened
yet.
But there is no doubt in my mind there will be significant
additional revenue sharing of one type or another.
There is a phrase in there, though, called ``straight
pool'' which I also want to comment on. We have in the current
agreement what is known as a ``split pool,'' and in
oversimplified shorthand, what that means is that we have a
revenue sharing pool put together--and obviously, the clubs
with higher revenues contribute vastly more than the clubs with
less revenue--and then, what we do is we split a part of that
out which goes exclusively to the recipient clubs and most of
it to the clubs at the bottom, and then we divide the rest of
it equally. That is why it is called a ``split pool.''
When you go to a ``straight pool,'' that changes. What
happens is instead of splitting a part out for the clubs that
are the recipient clubs and the ones that need it the most at
the bottom, you divide it all equally without splitting that
out and then divide the rest of it equally. That has the
effect, at whatever amount of revenue sharing you have, of
diverting money from the clubs at the bottom and giving it to
the clubs in the middle.
So the question we have asked about that is why do you want
to divert money from the clubs at the bottom and give it to the
clubs that have higher incomes in the middle--at whatever level
of revenue sharing, that is the effect.
The only answer I can come to is that there are more votes
in the middle of clubs. That is a problem we have because when
you come to issues like contraction and the issues we have to
bargain with, anything which operates in that way as compared
to a split pool makes the pressures on the clubs that have less
income more rather than less severe.
Senator DeWine. Mr. DuPuy?
Mr. DuPuy. I did not really hear an answer whether Mr. Fehr
liked it or did not like it, but if that is your question, we
do like it. And the comments about the Blue Ribbon Panel
report--
Senator DeWine. Excuse me.
Mr. Fehr, did you say you liked it or did not like it?
Mr. Fehr. I said that there would have to be additional
revenue sharing, and it has to be negotiated.
Senator DeWine. So you are for the concept of additional
revenues.
Mr. Fehr. Additional revenues--yes.
Senator DeWine. OK.
Mr. DuPuy. In terms of the effect of the antitrust laws, in
terms of across the table, Senator, I think the antitrust laws
have no place. In terms of the collective bargaining agreement,
we have a different statutory framework, the National Labor
Relations Act. But in terms of the ability to--
Senator DeWine. It has no impact, you say?
Mr. DuPuy. In terms of the negotiations between the players
and the club.
Senator DeWine. Right--a labor issue, right?
Mr. DuPuy. Right. But in terms of the ability to implement
that within the club network, it has a most certain impact.
Senator DeWine. What does that mean?
Mr. DuPuy. Because theoretically -let us take a team, the
Biloxi Senators, who happen to be the major revenue producer in
major league baseball--and the clubs would vote to have 50
percent straight pool revenue sharing, let us say. But the
Biloxi Senators might be unhappy about that. They might in turn
file an antitrust suit against the other owners in baseball. In
that respect, in my view, the antitrust exemption is very
useful in terms of operating as we believe we should be
treated, as a single business.
Professional sports leagues, as you know, are a unique
blend of cooperation and competition. You cannot have a league
with one team--it is like one hand clapping. And you cannot
have a team without a league; otherwise, you have the Harlem
Globetrotters barnstorming. We need a league. We need a league
of competitive teams, and the antitrust exemption helps within
that framework, but not in terms of the bargaining process, I
concede. The bargaining process is covered by the National
Labor Relations Act.
Senator DeWine. Do you want to comment on the issue of
going to a ``straight pool''? You heard Mr. Fehr's comment, and
I want to know if you want to comment on that.
Mr. DuPuy. The club votes are the commissioner's business,
frankly, and not Mr. Fehr's. The commissioner has indicated
that he has the votes for the Blue Ribbon Panel report; he
recommended the Blue Ribbon Panel report, and we are prepared
to negotiate the Blue Ribbon Panel report. We have attempted to
negotiate the Blue Ribbon Panel report, and the preference is
for the ``straight pool'' plan, which the commissioner and the
clubs believe is a fairer method of allocating.
Senator DeWine. Would you like to respond to that at all,
Mr. Fehr?
Mr. Fehr. I guess just a couple of things. The club's
bargaining position certainly has been as Mr. DuPuy has just
suggested. But when we look at this, again, we look at two
things. We have an obligation to the membership to try to
ascertain how clubs will behave differently and what the effect
on players will be, and without getting into the issue of
individual club votes, although there are some very interesting
and fascinating issues there, we think that the ``split pool''
on balance is a better approach because of the factors that I
described before.
The only other comment I would make is to harken back to
the first testimony I ever gave before this committee. Clubs
and leagues want to describe themselves as single businesses,
single entities. There is a lot of debate about whether they
are or are not. But the central premise of the antitrust laws
is that if you have a single entity in a market, and it is the
only entity, you have a problem.
Senator DeWine. Mr. DuPuy, on the issue of the Biloxi
Senators, just to clarify, isn't it true that even if you did
not have the antitrust exemption, you would be under basically
a rule of reason--if it is a reasonable effort to share
revenue, it is OK. In the NFL, the NBA, that is how they have
to operate; true?
Mr. DuPuy. Absolutely.
Senator DeWine. They do it.
Mr. DuPuy. Absolutely.
Senator DeWine. Let me ask if anybody else on the panel
wants to comment on anything that has been said about this
proposal before I move to the next proposal. Does anybody want
to jump in?
[No response.]
Senator DeWine. OK, good. The second proposal is that major
league baseball should levy a 50 percent competitive balance
tax on club payrolls that are above $84 million.
Mr. Fehr?
Mr. Fehr. There are two things about that. First of all,
the proposal we got from the clubs, in fairness, was not at $84
million; it was at $98 million, the difference essentially
reflecting the increase in league revenues from the time the
blue ribbon report was written until the time of bargaining.
Secondly, as we approach this, we look at it in two ways--
what is the combined effect of what they call a ``competitive
balance tax''--I think they have a good PR person to call it
that; it used to be called a ``luxury tax''--but what it is in
effect is a procedure which says that we will penalize someone
financially for hiring an employee. That, you will understand
and I think everyone will appreciate, is a difficult problem
for people who represent employees. We do not think players are
luxuries, et cetera.
We had a luxury tax in the early years of the agreement
which just expired. It went away as the level of revenue
sharing increased. Our position has been as follows and remains
that we do not like luxury taxes, we do not think they are
necessary. If you are going to have one, this particular
vehicle does not strike us as an appropriate way to go, and we
think that these matters can be resolved with revenue sharing.
In any event, it looks like revenue sharing and that
discussion ought to follow the revenue sharing discussion.
Senator DeWine. Mr. DuPuy?
Mr. DuPuy. Senator, the teams like the luxury tax--frankly,
the teams would prefer a salary tax like the NFL has, like the
NBA has. They recognize, based on the history of negotiation,
that they could not achieve a salary cap in baseball without a
devastating and perhaps lengthy work stoppage. No one wants a
work stoppage. So the clubs proposed something that the players
lived with under the earlier agreement, lived with under the
last agreement, without apparently any appreciable impact on
the rising salaries. This is an attempt to bring payrolls back
together, to make payrolls closer and therefore give more money
to distribute to the other clubs, to the Cincinnatis of the
world, so as to allow them to sign players.
The idea that this will act as a restraint on the Biloxi
Senators--if the Biloxi Senators are in a pennant race, and
they want to acquire a player in September to help them over
the hump, they will do so whether they have to pay a $2 million
luxury tax or a $1 million luxury tax, or competitive balance
tax, or a $500,000 competitive balance tax. It is the same
principle that allows people to buy homes. If you ever look at
what you pay in total in terms of the interest you pay on your
house when you acquire your house, you would never buy a house.
But the teams will continue to acquire players to win pennants.
Senator DeWine. Let me move to the third proposal--and
again, any of the panel members can jump in if you have a
comment about any of this, but we need to keep moving. The
third proposal is that major league baseball should use unequal
distribution of new central fund revenue to improve competitive
balance, creating a commissioner's pool that is allocated to
assist low-revenue clubs in meeting a minimum club payroll of
$40 million.
Mr. Fehr?
Mr. Fehr. With respect to that, I think the initial
proposal for uneven distribution of central fund revenue was
probably ours about 10 years ago, or maybe a little less long
ago than that.
It is an issue that is open for discussion. We have made
proposals on it, and they have made some. I would expect it to
be discussed. I cannot tell you whether it will be part of the
eventual agreement, but it is a subject which has been
discussed.
Obviously, you get into the magnitude of it, the
circumstances under which it is distributed, what does it mean
when you say ``unequal distribution'' and all the rest.
Senator DeWine. Mr. DuPuy?
Mr. DuPuy. We are for it.
Senator DeWine. The next proposal is that major league
baseball should conduct an annual competitive balance draft of
players.
Mr. Fehr. In that case, that was not part of the initial
suggestions made by the clubs to us. We recently asked them
about that, and they indicated to us that that was something
that they would be willing to consider. I expect we will have
further discussions about it.
In that regard, I should point out that we view things like
moving draft choices around, moving players around on rosters,
as an item which could be in many respects a significant aid to
clubs that need it, not as an add-on to everything else, but
perhaps in substitution for part of the other things. I expect
that we will continue discussing that.
Senator DeWine. Mr. DuPuy?
Mr. DuPuy. We did not include it in our original proposal
because we thought it was objectionable to the players. Given
their more recent statement of receptivity, we are revisiting
that issue.
Senator DeWine. The next proposal is that major league
baseball should reform the Rule 4 draft process.
Mr. Fehr?
Mr. Fehr. The Rule 4 draft is the so-called amateur draft.
That is an issue about which the parties have had very
substantial discussions, and I would expect those to be
ongoing.
It is one which is a little bit of a tricky bag, however,
and I want to just indicate one reason why. In baseball, we
sometimes talk about things that are a little bit peculiar from
the outside, but in this set of circumstances, we would be
talking about reforming an amateur draft which would affect
principally individuals who will never become members of our
bargaining unit. That makes the process a little difficult. But
I do expect those discussions to continue.
Senator DeWine. Mr. DuPuy?
Mr. DuPuy. The purpose is to get all eligible players
available to all teams so as, again, to help the competitive
imbalance problem. So we are for it.
Senator DeWine. The next item is that major league baseball
should utilize strategic franchise relocations when necessary
to address the competitive issues facing the game.
I think we have probably exhausted that issue by now,
unless someone wants to add anything more to that.
[No response.]
Senator DeWine. Finally, major league baseball should
expand its initiatives to develop and promote the game
domestically and internationally, and I assume everybody is for
that.
Mr. Fehr. Yes.
Mr. DuPuy. Yes.
Senator DeWine. Let me ask the members of the panel if
anyone has any additional closing comments that they want to
make--I am sure you are all ready to go and have lunch.
Mr. Butterworth. If I could make one quick comment,
Senator.
Senator DeWine. Yes, General Butterworth.
Mr. Butterworth. What happened here started in 1922 when
one branch of Government decided they wanted to legislate. Our
Founding Fathers probably would never have allowed the United
States Supreme Court to do what they did, but I think the U.S.
Supreme Court did what they thought was right under the
circumstances of baseball at that particular point in time in
order to put some integrity into the sport. Then, when Congress
looks at it later and says, well, it is so obvious that they
messed up, we are not going to take any action--in fact, when
you look at it, if in fact they do have an exemption,
professional baseball is the only industry in the United States
that is exempt from the antitrust laws without being subject to
alternative regulatory supervision. Congress decided that,
``This is such a slam-dunk, we are going to let the United
States Supreme Court decide it again,'' and the United States
Supreme Court decided it again. They said, ``Congress, you
really should decide this.''
Those of us like Lori and myself who are in the trenches in
Minnesota and in Florida--I have a Florida Supreme Court that
says the antitrust exemption is only a reserve clause. Lori's
Supreme Court says no--it is everything. I have a Federal court
judge who says no--now it is everything. Lori has a district
court judge that is going with her.
So, please, we need help.
Senator DeWine. Anyone else?
Mr. Fehr?
Mr. Fehr. Only, Mr. Chairman, that it does seem to me that
to the extent there are public/private policy issues sufficient
to attract the attention of the Congress, if there is to be an
exemption, someone ought to articulate what it is, be satisfied
that the appropriate demonstration of need has been made, so
that we do not have these kinds of uncertainties.
Senator DeWine. I think the testimony has been very
helpful, and I thank you all very much.
Let me just make one final comment. I believe that all the
problems that we have discussed today--and we have discussed
many problems--that the bulk of the problems of organized
baseball will in fact be solved if you solve the disparity in
income problem.
I believe that baseball will never be truly healthy, will
never be truly competitive, will never truly be the sport that
we all love so much and that we know it can be again, unless we
solve this competitive problem.
So, Mr. DuPuy and Mr. Fehr, I think you have a big
responsibility, and it is a responsibility, quite candidly,
that goes beyond your responsibility to your respective
parties, beyond your responsibility to the owners, beyond your
responsibility to the players. I think that is the great
tradition of baseball and the history of baseball, and I
believe some obligation--a compelling obligation--to the fans.
So we wish you well. Thank you.
Mr. Fehr. Thank you, Senator.
Mr. DuPuy. Thank you.
Senator DeWine. The hearing is adjourned.
[Whereupon, at 1:40 p.m., the Committee was adjourned.]
[Questions and answers and submissions for the record
follow.]
QUESTIONS AND ANSWERS
Responses of Stanley M. Brand to questions submitted by Senator Leahy
Question 1. In your testimony you contend that professional
baseball continues to enjoy antitrust immunity and that minor league
baseball is likewise immune from federal antitrust law. On what do you
base your contention that minor league baseball is immune from federal
antitrust laws? In your view, when did minor league baseball first gain
immunity from federal antitrust laws?
Answer. Minor League Baseball is exempt from the antitrust laws
based on the rationale of the Supreme Court's various decisions on the
subject, the decisions of lower federal courts, and Congressional
action. This ``immunity'' or ``exemption'' dates back to the Supreme
Court's 1922 decision in Federal Baseball Club of Baltimore, Inc. v.
National League of Professional Baseball Clubs, 259 U.S. 200 (1922).
The rationale for the decision of the Supreme Court in Federal Baseball
was not limited to the Major Leagues but applied generally to the
``business of baseball.'' Federal Baseball Club of Baltimore, Inc. v.
National League of Professional Baseball Clubs, 259 U.S. 200 (1922). In
1946, a federal district court in the state of Washington observed in
dicta in a case involving claims against a minor league baseball club
that ``professional baseball did not constitute commerce in the
commonly-accepted use of those words,'' relying on the Supreme Court's
1922 decision. Niemiec v. Seattle Rainier Baseball Clubs, Inc., 67 F.
Supp. 705, 712 (W.D. Wash. 1946). Since that time other federal courts
have specifically held that the baseball antitrust exemption applies to
minor league baseball. See, e.g., Portland Baseball Club, Inc. v. Kuhn,
368 F. Supp. 1004 (D.Or. 1971), affd, 491 F.2d 1101 (9th Cir. 1974)
(per curiam); Moore v. National Association of Professional Baseball
Clubs, No. C78-351 (N.D. Ohio 1976); New Orleans Pelicans Baseball,
Inc. v. National Association of Professional Baseball Leagues, Inc.,
No. 93-253 (E.D. La. March 1, 1994). When Congress has in the past
taken up the subject of the baseball antitrust exemption, it
specifically examined ``Organized Baseball,'' referring to the
combination of the two major leagues (the National and American) and
the 17 minor leagues represented by the National Association of
Professional Baseball Leagues that have, for over 90 years, contracted
with one another to abide by certain rules and regulations. See
Organized Baseball: H.R. Rep. No. 2002, 82 Cong., 1st Sess. 12-43
(1952).
This record of judicial and legislative recognition of the
antitrust immunity afforded minor league baseball creates a strong
reliance interest recognized by the Supreme Court in its 1957 decision
in Radovich v. National Football League, 352 U.S. 445, 450-451, reh'g
denied, 353 U.S. 931:
``. . .vast efforts had gone into the development and
organization of baseball since that [Federal Baseball] decision
and enormous capital had been invested in reliance on its
permanence.
Congress had chosen to make no change. All this, combined with the
flood of litigation that would follow its repudiation, the harassment
that would ensue, and the retroactive effect of such a decision, led
the Court to the practical result that it should sustain the
unequivocal line of authority reaching over many years.'' 352 U.S. at
450-451.
Question 2. You testified that you consider the Vermont Expos a
``viable minor league club,'' and that you believed it was only
``theoretically'' possible that the club would be eliminated after the
expiration of the current contract in 2003. What concrete assurances
can you provide that the Vermont Expos will continue to exist within
the baseball minor leagues beyond two years? Do the minor leagues have
to gain the approval of the major league owners to continue a minor
league team in existence?
Answer. It is only ``theoretically possible'' that a minor league
club such as the Vermont Expos would be eliminated as no longer viable
after the Professional Baseball Agreement expires in the sense that the
major leagues might try to reduce their support for the minor leagues,
especially if the antitrust laws are changed. I consider that to be
``theoretical'' or speculative because the parties have, especially in
recent years, worked well together to assure that Minor League Baseball
receives the necessary support to continue in viable markets. The minor
leagues do not have to gain approval of major league owners to continue
a minor league team in existence.
Question 3. In 1997 we heard testimony from a former minor league
player who played with affiliated minor league teams and with the St.
Paul Saints of the independent Northern League. He indicated that under
the standard minor league player contract, a player was required to
waive all rights to appeal any action by the team in State or federal
court and that the only avenue of appeal is to the Commissioner of
baseball. Is that accurate? What does the player contract for minor
league players provide with respect to player's rights, the reserve
clause and compensation? That player questioned why Congress would want
to ``create a new federal law exempting the owners' actions in the
minors from the antitrust laws.'' He asked:
``What are the laws [owners] must be able to break in order to run
minor league teams? How much more power do they need when bargaining
with an 18-year old kid whom they own for 7 years, and what minor
league player is going to jeopardize his career by challenging the
system?'' Since no minor league player testified this year, I ask them
of you on their behalf.
Answer. A copy of the current uniform Minor League player contract
is attached. As with a growing number of employment agreements in many
industries, it contains alternative dispute resolution (``ADR '')
language. The Supreme Court has endorsed ADR, even to resolve statutory
discrimination claims, most recently in Circuit City Stores, Inc. v.
Adams,-- U.S.----, 149 L. Ed. 2d 234, 121 S. Ct. 1302 (2001).
In answer to the former minor league player's questions, Minor
League Baseball is not requesting a change in the law but a
continuation of baseball's status as excluded from the antitrust laws.
Actually, minor league prospects have a good deal of leverage in
bargaining with Major League teams, as indicated by the burgeoning
signing bonuses paid to drafted players and their ability to decline to
sign with the club that drafts them and re-entering the draft pool.
Recent examples abound of players declining to sign and playing clubs
off one another to bid up signing bonuses. The magnitude of the signing
bonuses and the number of players who receive significant bonuses
indicate bargaining power that players entering baseball have acquired.
Several players or their agents have used these strategies to
significantly increase their economic well-being and the reality of the
power of players is no longer as portrayed by the minor league player
referred to in your question, if that was ever the case.
Question 4. If you were to suggest language for a statutory federal
antitrust exemption for minor league baseball, what would it say?
Answer. Minor League Baseball believes that the Supreme Court
decisions creating the baseball exemption are clear and that statutory
language is therefore not necessary. If this were to be confirmed by
Congress, we suggest that appropriate language would make it clear that
federal and state antitrust laws do not apply to the business of major
league and minor league baseball, including but not limited to all of
the areas listed in subsection (b) of the Curt Flood Act.
Question 5. I am uncertain from your testimony whether you believe
that the minor league draft for players, the minor league reserve
clause, and the Professional Baseball Agreement between major league
teams and the National Association of Professional Baseball Leagues
would withstand federal antitrust scrutiny if challenged. For each of
these aspects of the minor leagues about which you testified, do you
believe that would be upheld as reasonable if challenged as contrary to
federal antitrust law?
Answer. I believe each of the aspects of baseball's operations is
reasonable given the unique nature of sports leagues which require
cooperation to produce on-field competition. But after having been
permitted and encouraged to develop for 80 years without the risk and
expense associated with such challenge, Minor League Baseball's future
should not now be gambled in countless courtrooms.
Question 6. You note that because minor league players are not part
of any collective bargaining unit and that the minor league player
draft is not protected by the labor antitrust exemption as the result
of collective bargaining with a labor union. Is one solution to that
problem collective bargaining with minor league players?
Answer. Minor League Baseball does not believe that collective
bargaining at the minor league level is appropriate, or that collective
bargaining would benefit players, fans or teams.
Question 7. In 1922, the Supreme Court held that professional
baseball was personal effort and not a subject of ``commerce'' and
that, therefore, the actions of the National League, American League
and individuals in allegedly conspiring to monopolize the business of
baseball by destroying the Federal League were not to be subject to
scrutiny under the Sherman Anti-Trust Act. Do you contend that minor
league baseball is immune from federal antitrust laws on that basis? Do
you contend that minor league baseball is exempt from federal antitrust
laws? If so, what is your basis for that contention?
Answer. Yes, see my answer to question no. 1, above.
Question 8. Please help us understand the history of the minor
leagues. (A) Is it true that from 1914 and continuing for 25 years,
Judge Kennesaw Mountain Landis, while serving as commissioner of
baseball, on a number of occasions acted to oppose secret agreements
and handshake deals between major league interests and minor league
baseball teams and had occasion to declare a number of minor league
players free agents? Please provide a description of the actions taken
and basis therefore. (B) Am I correct that in 1914, the National
Commission that governed the National League and American League had
prohibited major league teams from owning minor league teams or
developing a farm system and that minor leagues also acted to prohibit
major league owners from also owning minor league teams? (C) Is it
accurate that in 1921, the National Agreement among major league owners
allowed major league teams to own minor league teams? (D) Is it true
that in the Cedar Rapids case in 1938, Commissioner Landis made a
ruling that resulted in as many as 90 minor league players becoming
free agents? (E) Is it true that in 1939, ``major league baseball
owners sought legislation to codify relations between big league teams
and minor league teams,'' as Peter Golenbock writes in The Spirit of
St. Louis? What was that legislation and what happened to it?
Answer. I have not been able to confirm the actions of the Baseball
Commissioner and National Commission between 1914 and 1939 about which
your question asks.
Question 10. 1 believe that at least one of the bidders for the
Boston Red Sox was Miles Prentice, a minor league owner. From his
experience in connection with the minor leagues, do you have any reason
to doubt that Mr. Prentice would make an outstanding baseball team
owner? What is your understanding why Mr. Prentice's bid and the other
higher bids for the Boston Red Sox were rejected and Mr. Henry's bid
was preferred by the other major league baseball owners?
Answer. Based on his minor league experience, I have no reason to
doubt that Miles Prentice would make an outstanding Major League owner.
I have no knowledge of the reason why the Major Leagues made their
decisions concerning the sale of the Boston Red Sox.
Question 11. Which minor league baseball teams include owners from
racial minorities, and what percentage of those teams is owned by
members of a minority group?
Answer. Minor League Baseball does not ask prospective owners about
their race or ethnicity and does not keep records of such
characteristics.
Question 12. Please provide the Committee with a current copy of
the Professional Baseball Agreement governing the relationship between
the major and minor leagues.
Answer. A copy is attached.
Question 13. Is it your understanding that the provisions of the
Curt Flood Act apply to independent 5 minor league teams? Do those
teams enjoy the exemption from the antitrust laws that you claim for
the affiliated minor leagues?
Answer. It is not my understanding that the Curt Flood Act applies
to so-called independent minor league teams, which are not part of the
professional baseball system of major league and affiliated minor
league teams that evolved in reliance on the Supreme Court's 1922
decision.
Question 15. We have heard concerns that the major league interests
and their affiliated minor league have been attempting to prevent or
discourage the development or expansion of the independent minor
leagues. Is this true? Are there any restrictions in major or
affiliated minor league policies, formal or informal, on ownership or
other types of participation in both affiliated and independent minor
league teams? Have the geographical divisions of territory of the major
and affiliated minor leagues been used to discourage the development or
expansion of independent minor league play? Even if your answer is
``no,'' please explain those geographical allocations of territory, and
how they affect the locales in which the independent teams may operate.
Answer. Minor League Baseball supports the growth of professional
baseball where it can be viable and not threaten public investments in
existing facilities. Minor League Baseball restricts members of its
teams' ownership groups from direct and indirect violations of their
mutual agreements. Those agreements include provisions that provide
reasonable recognition to territorial exclusivity. Those provisions are
included in the National Association Agreement, a copy of which is
attached.
Question 16. I understand that time at the hearing was limited, so
if you would like to expand on any of your own responses, or respond to
any comments made by other members of the panel, please do so.
Answer. During the testimony by the panel on February 13, 2002 a
question was raised about the source of a quote attributed to Mr. Fehr.
I later corresponded with Mr. Fehr, and a copy of my letter and the
newspaper article in which he was quoted is attached. I ask that they
be made a part of the record.
Responses of Mr. Brand to questions submitted by Senator Hatch
Question 1. Mr. Brand, as was discussed during the hearing, the
current contract between Major League Baseball and Minor League
Baseball will expire at the end of 2003 season. What are the legal
obligations on Major League Baseball, if any, to support the same
number of minor league teams in the 2004 season as are playing today?
Could you please explain the obligation of Major League Baseball to
support any minor league clubs in 2008. 2012, or 2016?
Answer. The PBA will not necessarily terminate with the end of the
2003 season, but is only subject to termination in the event certain
conditions occur as specified in the PBA. A copy of the PBA is
attached. Minor League Baseball hopes and expects to renew the PBA
whenever it expires, and that it will include the same level of support
for the minor leagues (in large part because MLB's continued support of
the minor leagues helps to justify the exemption baseball enjoys from
the antitrust laws).
Question 2. What is the process by which a minor league team
becomes a member of one of the leagues of the National Association of
Professional Baseball Leagues? How does such a team become affiliated
with a major league club and how is the level of play determined? Once
a club is affiliated at a certain level, such as at AAA, can it be
switched to a different league? Have there ever been more AAA teams or
AA teams than there are major league clubs?
Answer. The process by which leagues can apply for membership in
the National Association of Professional Baseball Leagues is spelled
out in the NAA, a copy of which is attached. Expansion of affiliated
leagues is governed by the NAA and portions of the Major League Rules
that are a part of the PBA, a copy of which also is attached. The
affiliation process and level (``classification '') of play also are
governed by these same agreements and rules. A club at a classification
is not switched to a different league, but occasionally clubs may
relocate to other home cities, either because that city is vacant or
through a draft of a territory by a league of higher classification.
Again, the process for such is spelled out in the attached agreements
and rules.
Question 3. Has there ever been any communications or direction
from Major League Baseball to its clubs to ensure that all affiliations
between major league teams and minor league teams expire at the same
time or prior to a new round of negotiations between Major League
Baseball and National Association of Professional Baseball Leagues?
Answer. Not to my knowledge, except as pursuant to the terms of the
PBA.
Question 5. Mr. Brand, has there been any discussion among the
members of your organization concerning the possibility of contraction
of minor league clubs and the consequences for current owners?
Answer. Yes, because of the publicity and attendant speculation.
Question 6. If Major League Baseball does proceed with its stated
plans to contract the number of major league clubs, which has ranged
from two to six according to various news reports, and as a result, the
number of minor league clubs is reduced after the end of the 2003
season, what legal alternatives are available to local jurisdictions
that either lose a team or see their current team replaced with a club
playing at a lower level, such as AAA team being replaced with a AA or
A team?
Answer. See answer to question no. 1 above.
Question 7. As you indicated during the hearing, the Committee does
lack some basic information about the status and operation of the minor
leagues. Consequently, please provide the following information about
the 206 clubs which belong to your organization:
A. The number of clubs which play in facilities which were built
either in total or in part with taxpayer funding;
Answer. In the United States, the National Association of
Professional Baseball League clubs in Lexington, Kentucky, Memphis,
Tennessee and Chattanooga, Tennessee currently play in facilities built
without taxpayer funding.
B. The number of minor league clubs with either lease agreements or
other contractual arrangements with local jurisdictions for terms that
extend beyond the 2003 season;
Answer. 97
C. The number of clubs that, last season, played in a facility that
was built or remodeled after 1995; and
Answer. Every National Association of Professional Baseball League
facility has been remodeled or constructed after 1995.
D. The number of minor league facilities that were remodeled or
constructed to comply with the requirements of the current Professional
Baseball Agreement.
Answer. All.
Question 8. Please provide an explanation of the legal alternatives
open to a local jurisdiction in instances where a major league club
terminates a minor league club's affiliation and there are still
outstanding legal agreements with either a governmental entity or
private companies. Are there any damages that may be recoverable for
the cost of upgrades, renovations, or new construction of stadia in
order to comply with the requirements of the Professional Baseball
Agreement?
Answer. See answer to question no. 1 above.
Question 9. Mr. Brand, in your written statement, you indicated
that one of the benefits of baseball's antitrust exemption is the
stability that it can bring to both major league and minor league
franchises. This Committee has received testimony in the past that
between 1987 and 1993, there were 49 minor league franchise
relocations. Would you please provide a list of the franchise
relocations or changes in affiliations that have occurred between 1994
and 2001?
Answer. The Minor League Baseball teams that have relocated during
the six years between 1994 and 2001 are as follows:
------------------------------------------------------------------------
Relocated to Relocated From
------------------------------------------------------------------------
Akron, OH........................ Canton, OH
Lowell, MA....................... Elmira, NY
Salisbury, MD.................... Albany, GA
Lancaster, CA.................... Riverside, CA
Mobile, AL....................... Wilmington, NC
Jackson, TN...................... Memphis, TN
Salem-Keizer, OR................. Bellingham, WA
Pulaski, VA...................... Huntington, WV
Myrtle Beach, SC................. Durham, NC
Tucson, AZ....................... Phoenix, AZ
Fresno, CA Tucson, AZ
Dayton, OH....................... Rockford, IL
Niles, OH........................ Erie, PA
Missoula, MT..................... Lethbridge, Alberta
Round Rock, TX................... Jackson, MS
Lakewood, NJ..................... Fayetteville, NC
Staten Island, NY................ Watertown, NY
Sacramento, CA................... Vancouver, BC
Orange County, FL................ Orlando, FL
Brooklyn, NY..................... St. Catharines, Ontario
Sevierville, TN.................. Knoxville, TN
Vancouver, BC.................... Medford, OR
Troy, NY......................... Pittsfield, MA
Portland, OR..................... Albuquerque, NM
Pasco, WA........................ Portland, OR
Casper, WY....................... Butte, MT
Provo, UT........................ Helena, MT
------------------------------------------------------------------------
Some of the relocations listed above occurred because of expansion,
and resulted in Minor League Baseball being played in an additional
market. For example, the Durham Single A club relocated to Myrtle Beach
to permit an expansion AAA club to locate in Durham. Others were
relocations within the same market (e.g. Knoxville to Sevierville,
Tennessee).
Question 10. Would you please describe the average and median
salaries of players at the AAA level, the AA level, the A level, and
the rookie level?
Answer. Major League clubs pay the salaries of these players, who
are under contract to those clubs, and Minor League Baseball therefore
does not have the information on player salaries, bonuses, etc.
necessary to answer this question.
Question 11. Mr. Brand, in the early 1990s, the President of the
National Association of Professional Baseball Leagues asked Congress to
repeal baseball's antitrust exemption. You now assert that the minor
league clubs are the primary beneficiaries of that exemption. Please
explain the change in position.
Answer. To the best of my knowledge and information, no President
of the National Association of Professional Baseball Leagues has taken
the position that Congress should repeal baseball's antitrust
exemption. There has been no change in the organization's position.
Question 12. Mr. Brand, I have read the standard contract that
every minor league player is required to sign to play professional
baseball. Would you please explain the origins or reasons why a player
is bound to a major league organization in the standard minor league
contract for a period of seven seasons? Would you also explain why it
is necessary, in the Minor League Uniform Player Contract, for a player
to assign to the club all rights involving his likeness for a term that
exceeds the contractual relationship? I should note that the
description of the photographs or motion pictures does not appear to be
limited to those involving baseball.
Answer. The term of a minor league baseball player's contract (up
to a maximum of seven seasons) strikes a reasonable balance between the
player's interest in free agency and a major league club's interest in
realizing a potential return on its investment in developing a player.
If the major league clubs paid a player in his early minor league
years, developed a prospective star, and then had no assurance he would
be available to play for the major league club for any length of time,
there would be significantly reduced incentive to provide players for
the rosters of the many clubs that comprise Minor League Baseball.
The Minor League Uniform Player's contract specifies that use of a
player's likeness continues after the contract ends so as to prevent
disputes about whether the minor league club is liable if it, for
example, offers as a promotional item in a subsequent season the image
of a player made while that player was in the minor league club's
uniform the previous season. Minor league clubs have been subject to
litigation over precisely that issue, questions about which would
generate additional litigation and diminish the value of the clubs'
marks (e.g. logos and designs) which identify players with the club in
particular and Minor League Baseball in general, identification which
adds value to a player likeness.
Question 1. In what specific ways do the antitrust laws--and
baseball's limited exemption from these laws--actually affect or
contribute to the problems that have been repeatedly identified by
industry participants and commentators?
Answer. We believe that this question is directed to problems at
the major league level. Minor League Baseball believes that Major
League Baseball's problems are almost entirely in the areas of
competitive balance and poor financial performance, and neither the
antitrust laws nor baseball's exemption contributes to these problems.
These problems mainly relate to issues that must be bargained
collectively, and collective bargaining is covered by the labor laws
and the non-statutory labor exemption. Repeated citations to baseball's
antitrust exemption as a cause of baseball's problems, particularly
after the passage of the Curt Flood Act, are simply misplaced.
Question 2. How, specifically, would legislative action modifying
or clarifying baseball's exemption ameliorate or eliminate the relevant
problems?
Answer. For the reasons given in the answer to question 1, it would
not. Moreover, changes to baseball's status under the antitrust laws
would cause significant and unjustifiable harm to Minor League
Baseball, for the reasons explained in my testimony.
Responses of Robert A. Butterworth to questions submitted by Senator
Leahy
Question 1. Team relocations can raise real concerns in any sport,
and the United States Conference of Mayors and the National Football
League crafted a policy several years ago to address those concerns. As
I understand it, this jointly-developed set of principles governs the
future relocation of any professional football team, and includes a
variety of community-sensitive processes and substantive requirements:
There are public hearings, conversations with local governments and
stake holders, and a league mandate that the fans be well-served. The
cooperative effort of the mayors and the league seems well-designed to
bring some balance to this potentially contentious issue, and the
procedures they have developed shed real light for the affected public
on what is actually happening. Do you think that such a mechanism could
work effectively for baseball as well?
Answer. Any process governing the relocation of professional sports
teams that involves the community can be seen as a positive step.
Oftentimes local community and government interests have little, if
any, input regarding the relocation of teams that they have come to
support and subsidize. Procedural safeguards that allow for public
comment also take into account the issue of ``fairness'' that is not
currently part of the relocation process. Furthermore, individual clubs
should take into account, and justify, whether relocation will really
solve their current problems, assuming their problems do indeed exist.
Unfortunately, fan loyalty is often unrepresented at the table of
discussion surrounding relocations of professional sports teams.
However, it should be stressed that absent a clarification by
Congress as to the scope of the antitrust exemption, if such an
exemption exists, any such. procedural or substantive measure would
largely be meaningless. Major League Baseball operates in the dark, as
we have seen by its recent contraction proposal. It has no interest in
being forthcoming with its financial data, or in giving straight
answers to the public. Therefore, since MLB operates above the law,
there is no guarantee that it will provide honest public hearings, or
issue written fact findings that are based on subjective criteria, such
as fan loyalty. Furthermore, since the owners act in concert with each
other to the detriment of communities, any individual club's written
notice of a proposed transfer (as required by the NFL's Policy and
Procedures for Proposed Franchise Relocations) is largely illusory and
perfunctory.
Question 2. The Conference of Mayors and the NFL have also
developed a stadium financing program, which allows owners to borrow
money from the league to build new stadia. It thus seems much less
likely to result in communities being forced to pay the full cost of
new facilities in order to keep their teams--a situation that many have
charged prevails in baseball today. Do you think that such an approach
would foster better community relations with major league baseball,
were it adopted?
Answer. The NFL's stadium financing program is a positive step in
that it recognizes that the league may provide additional funds to
assist in the financing of stadia. It also implicitly recognizes that
private parties need to commit funds, instead of relying on public
entities to fund new stadia with government subsidies that could be
better spent elsewhere on necessities such as education and hospitals.
However, by simply describing the stadium financing venture as a
``public-private partnership,'' it does not expound upon the level of
commitment that should be expected from private entities. Therefore,
under MLB's current scheme, a league subsidy agreement would only be
effective to the extent that individual clubs were committed to funding
new stadia. Without such a commitment from the individual club, public
entities will continue to be threatened with contraction or relocation.
Also, the cartel-like behavior of MLB, including the recently reported
loan from an owner to the Commissioner, suggests that owners do not
exercise their independent business judgment in dealing with matters of
financing new stadia. In at least one instance, Florida has been
threatened by the Commissioner that ``the Marlins cannot and will not
survive in South Florida without a new stadium.'' In the current
climate of extortion, it is unlikely that more involvement from the
league will be beneficial.
Question 3. I understand that time at the hearing was limited, so
if you would like to expand on any of your own responses, or respond to
any comments made by other members of the panel, please do so.
Answer. The other points I'd like to make are part of our answers
to the questions posed by Senator Hatch.
Responses of Robert A. Butterworth to questions submitted by Senator
Hatch
Question 1. In what specific ways do the antitrust laws--and
baseball's limited exemption from these laws--actually affect or
contribute to the problems that been repeatedly identified by industry
participants and commentators?
Answer. The short answer is that the antitrust laws do not affect
or contribute to the problems that baseball has experienced but the
exemption has. Part of the problem is identified by the language of
your own question. Is the baseball antitrust exemption ``limited?'' No
one seems to know the scope of the . exemption. A very careful reading
of the briefs and opinions as well as the Congressional Record suggests
that the baseball antitrust exemption has always been limited to at
most the reserve system, but no one seems to know for sure, so, in the
meantime, baseball acts with impunity.
This uncertainty as to the scope of the baseball antitrust
exemption has allowed MLB to claim immunity when its members collude to
determine what is in their pecuniary interest and the interest of the
industry as a whole, which means that fans and the communities that
support MLB are not a top priority. The baseball antitrust exemption
allows the various owners of MLB clubs to get together, unlike any
other sport, and vote to do away with two or more of their own members
so that each remaining member can benefit fmancially from the unlucky
teams' demise. No other sport can vote to restrict its overall output.
Indeed, most encourage development of teams and expansion efforts.
The antitrust laws, if they were allowed to be applied, would level
the playing field by making MLB more accountable to local communities
and to fans. With the exemption lifted, the focus would shift from the
owner's ``what's in it for me'' attitude, which ultimately will be the
death of baseball, if not checked, to ``how do I compete with the other
teams or on behalf of my community to make not only a profit but to
provide real entertainment arid competitive value for the fans in my
community.''
At the core of this issue are fundamental notions of fairness and
equality under the law.
Exemption from the law promotes lawlessness. The relationship
between the clubs and its communities is an interdependent partnership,
where both sides have something to offer the other. When the clubs act
in concert, the independent judgment of the individual club is gone,
and all pro-competitive incentives to compete for a city's resources
are eliminated. The result is an ``all-or-nothing'' approach, where the
clubs band together and impose demands as a collective, leaving the
cities powerless. Deals that include terms more favorable to cities are
certainly frowned upon and discouraged, since another club in a
different market might have to accept similar terms. The arrogance of
MLB on this point should not be understated. A Florida state senator's
receipt of threats from the Commissioner of MLB that ``the Marlins
cannot and will not survive in South Florida without a new stadium,''
suggests that Miami-Dade County is somehow unworthy of a MLB club
unless it builds a new stadium at the taxpayers' expense. It is our
belief that in a truly free, competitive market, clubs should be
competing for some of our great cities, and not the other way around. I
will also let the greatness of Miami speak for itself as a community
that is fully capable of supporting a MLB club.
Another result of MLB's cartel behavior apparently condoned by the
existence of an antitrust exemption is its dealings with cities without
clubs. Existing clubs that are not financially sound are prevented
froze relocating to other locations that could support a club (such as
the Washington, D.C. area), so that MLB can retain the city as a threat
against other communities who are reluctant to divert crucial funds for
local government to the construction of shiny new stadia.
No other industry is so enigmatically and inextricably exempt from
the nation's laws against anticompetitive behavior.
Question 2. How, specifically, would legislative action modifying
or clarifying baseball's exemption ameliorate or eliminate the relevant
problems?
Answer. It is naive to think that bringing MLB under the full realm
of antitrust law will solve MLB's current woes. There appears to be
many fundamental management problems, especially since MLB claims that
only five teams were profitable in 2001, despite the fact that baseball
had record-breaking revenues. Nonetheless, we in Florida feel strongly
that many relevant issues could be resolved by clarifying baseball's
antitrust exemption.
Clarifying the exemption would create better law. The trilogy of
Supreme Court decisions (Federal Baseball, Toolson, and Flood) does not
provide any clear guidance and the current state of the law has created
a vacuum of enforcement where neither state nor federal authorities can
apparently investigate MLB's anticompetitive conduct. This result has
confounded judges on the state and federal levels as to the scope and
meaning of such an anomalous exemption from the law. This anomaly,
which was created by the Supreme Court, was left for Congress to
resolve. Therefore, Congress is apparently tasked with responsibilities
of interpretation and clarification of the law, which are tasks
normally reserved for our nation's judiciary. Indeed, Congress has
laudably taken on this arduous task through numerous hearings. This
confusion of constitutional roles has allowed MLB to argue conflicting
positions in different forums, as Flood noted in his 1971 brief before
the Supreme Court:
For half a century! Organized Baseball has succeeded in persuading
one forum after another that `some other forum' is the appropriate one
to deal with the abuses of the reserve clause. In its brief to this
Court in 1922, Organized Baseball argued that ` baseball should be
exempted from federal antitrust regulation because `a state is entirely
competent to reach and deal with any evil in this field of sport
requiring legislative remedy.' (Citation omitted) It then told Congress
that the federal courts were available. In the words of the Cellar
Subcommittee's 1952 Report, Baseball `represented by eminent counsel,
has assured the subcommittee that the legality of the reserve clause
will be tested [in the courts] by the [Sherman Act's] rule of reason.'
(Citation omitted) Then, in 1953, Baseball successfully- if
opportunistically--argued to this Court in TooLron that it ought not
subject the reserve system to the Sherman Act's `rule of reason'
because Baseball was sufficiently regulated by state law .... But in
1966, Baseball argued to the Wisconsin state court that only federal
law could regulate baseball adequately.
Brief for Petitioner at 19-20, Flood v. Kuhn, 407 U.S. 258 (1972)
(No.71-32) (emphasis original). As Congress is awarc, the Suprcmc Court
in Flood determined that baseball's reserve system was exempt from the
federal antitrust laws, and state antitrust regulation would conflict
with federal policy, and the burden on interstate commerce was
outweighed by the state's interests in regulating baseball's reserve
system. Flood v. Kuhn, 407 U.S. 258, 284 (1972). Eliminating the
exemption or at least clarifying its scope would allow under the
appropriate circumstances for an enforcement mechanism which would
discourage MLB's anticompetitive conduct.
Currently, communities negatively impacted by MLB's collusive
conduct have limited legal recourse. Communities can, and have, spent
millions on stadiums to keep teams from relocating only to learn a few
short years later that the team may still be relocated for greener
financial pastures and an even better facility. Threats like these are
used to extract even more concessions from communities desperate to
keep their teams from leaving.
Antitrust laws should therefore be available to these communities
so that they may have some recourse to take to protect their vast
investments in attracting and maintaining the team. The existence of
the antitrust laws as. a potential avenue of relief would hopefully
give MLB pause when considering business decisions that may benefit the
industry as a whole but destroy the communities who trusted MLB's
representations regarding the teams' commitment.
In this vein, it is important to understand that applying the
antitrust laws to baseball will not automatically give rise to
antitrust violations every time MLB acts. More often than not, the rule
of reason test, will most likely apply to baseball's conduct. That
test, which requires a balancing of potential procompetitive effects
against anticompetitive ones would have to be considered before a
violation of the antitrust laws could be detennined. Consequently,
lifting the exemption will merely level the playing field; it will not
bring the rain of litigation the proponents of the exemption fear.
Rather, the lifting of the exemption should create just enough
deterrence to ensure that MLB takes into account competitive effects
before acting in concert, just as the NFL, NHL, and soccer leagues have
done for years, with minimal litigation resulting.
Communities win when businesses play fair. Eliminating the
exemption would create an open and honest dialogue, which is absent
when owners act in concert. Despite the obviousness of this statement,
MLB defends its exemption on the ground that it promotes stability. MLB
has a short memory. One newspaper reporter, commenting on the trial in
Washington state regarding the 1970 move of the Seattle Pilots to
Milwaukee, reflected on Seattle's woes:
It all began, of course, when the American League took the Seattle
Pilots out of here and shipped them to Milwaukee. Actually, it began
before that. It began in the late `50s anal through much of the `60s,
when baseball franchises were moved, from city to city, like so many
touring road companies. No matter `public confidence,' or any other
quality, such as fan loyalty, civic pride, or whatever; the national
game became a financial roadshow. Teams went to better `markets,' to
communities which `qualified' by offering favorablc rcnts, subsidizcd
playing sitcs (up to `major lcaguc standards') and `good' concession
deals.
Emmett Watson, Baseball on Trial, Seattle Post-Intelligencer, Jan.
25, 1976.
It is worthy to mention that the following year after the Pilots
moved to Milwaukee, the Washington Senators relocated to become the
Texas Rangers.
Currently, representatives from the communities of Minnesota and
Montreal, as well from other communities from teams that are candidates
for contraction, certainly do not feel that the exemption has created
any semblance of stability. Rather, it is an illusory game that MLB
uses to justify its lawlessness. If owners do not decide collectively
to relocate a club, then communities will still have to fear the
league's elimination of the team by contraction.
Elimination of the exemption is good policy. No one should be above
the law. Congress should strive to discourage cartel-like behavior, and
force MLB owners to deal directly and honestly with communities.
Furthermore, MLB has not earned any type of special treatment. If there
is any question as to whether it has, we would invite Congress to
convene special hearings with representatives from communities that
have lost baseball clubs, or are currently being threatened with the
loss of the club, and ask them if they feel MLB has treated them
fairly.
Whatever course Congress decides to take, it must be resolute. MLB
has a history of settling its disputes in order to maintain its claim
to special status under the antitrust laws. However, Congress can
expect these issues to re-surface until this matter is resolved until
it takes action, or the Supreme Court agrees to revisit this issue.
Responses of Robert A. DuPuy to questions submitted by Senator Leahy
Question 1. I asked Mr. Brand during the hearing what assurances he
could give me concerning the fate of the Vermont Expos after expiration
of the current contract in 2003. After the hearing, I received your
letter dated February 14 in which you say we do share the desire to see
minor league baseball thrive in the state of Vermont. I thank you for
your letter. In precise terms, what the owners' commitment to minor
league baseball in Vermont after expiration of the current contract?
What you intend to do about the minor league teams associated with any
major league teams that are subject to contraction?
Answer. Baseball is committed to preserving and supporting the
Vermont Expos and all affiliated minor league clubs while the current
Professional Baseball Agreement is in place. After that agreement
terminates, that issue and many other interrelated matters are subject
to bilateral negotiations with the minor leagues. We remain committed
to working with the minor leagues to deliver professional baseball to
as many communities as possible.
Question 2. I noted in my opening statement that I will ask you to
submit language that you and Mr. Selig would support Congress enacting
in order to provide a statutory antitrust exemption for major league
baseball. I ask that you do so in writing.
Answer. Baseball believes that the Supreme Court decisions creating
the baseball exemption are clear and that statutory language is
therefore not necessary. For purposes of responding to the question,
however, we would suggest that any statutory language make clear that
federal and state antitrust laws do not apply to the business of
baseball, including but not limited to all of the substantive areas
listed in subsection (b) of the Curt Flood Act other than Major League
Baseball player employment matters as described in subsection (a) of
that act.
Question 3. You say in your testimony that major league baseball's
contention that it continues to enjoy an antitrust exemption ``played
no role in the Minnesota litigation.''
(A) Did major league baseball or the Twins make arguments to the
Minnesota state courts based on a theory that issuance of the
injunction to require the Twins to play this coming season in Minnesota
would violate the Commerce Clause in the United States Constitution?
Answer. Yes.
(B) How is such an argument consistent with major league baseball
continuing to assert that the justification for it to enjoy exemption
from federal antitrust laws is the premise that baseball is not
commerce?
Answer. Major League Baseball does not assert that justification.
Question 4. In a recent article by Mark Asher in the Washington
Post, Mr. DuPuy, you are quoted as saying: ``No one expected the level
of opposition we received,'' to your plan for contraction. Mr. Selig
lived through the loss of the Milwaukee Braves to Atlanta after 1965.
He saw what happened when the Seattle Pilots became his Brewers. And,
of course, he recalls the landmark relocations of the modern sports
era, when the Dodgers and the Giants abandoned New York for the west
coast. Did you proceed down this path without expecting the public and
public officials to react in opposition to these plans?
Answer. My statement was not meant to imply that we did not expect
opposition from all the sources that have generated opposition. What we
did not expect was the decision in regard to the Metrodome lease by the
Minnesota courts, which we believe is contrary to Minnesota law.
Question 5. Since our last hearings, major league baseball has
modified a number of agreements. Please provide the Committee with
copies of major league baseball's current governing documents,
including but not limited to its new Constitution, any bi-laws,
guidelines, the Professional Baseball Agreement with the minor leagues,
the rules that govern changes in ownership, the existence and location
of teams and territorial agreements. We are not asking for the rules
that govern the playing of the game of baseball but the rules and
protocols governing the business of baseball.
Answer. Such documents are attached hereto.
Question 6. Would you provide copies of the papers filed before
Judge Hinkle in the recent case and the briefs on behalf of major
league baseball teams to both the District Court and 11`" Circuit? It
appears from Judge Hinkle's footnote 16 that you argued that passage of
the Curt Flood Act constituted ``an endorsement by Congress of the
exemption of the business of baseball'' from all antitrust laws.
Answer. Copies of such papers are attached hereto or will be sent
when they are completed.
Question 7. 1 have read recent reports that Paul Beeston, who is
described by Murray Chase in the New York Times as baseball's chief
operating officer and the clubs' primary negotiator with the players'
union is stepping down. Who will be replacing Mr. Beeston as baseball's
eighth lead labor negotiator in the last three decades of labor
negotiations?
Answer. Baseball's negotiating team currently consists of Bob
DuPuy, Rob Manfred, Howard Ganz, Andy MacPhail and Peter Angelos. None
of those representatives has been designated as lead negotiator.
Question 8. 1 believe that at least one of the bidders for the
Boston Red Sox was Miles Prentice, a minor league owner. From his
experience in connection with the minor leagues do you have any reason
to doubt that Mr. Prentice would make an outstanding major league
baseball team owner? Why was Mr. Prentice's bid for the Boston Red Sox
rejected and Mr. Henry's bid preferred by the other major league
baseball owners?
Answer. No.
Mr. Henry's bid was the only bid presented by the Boston Red Sox to
the other Major League Baseball owners for approval.
Question 9. Which, if any, major league baseball teams include
owners from racial minorities, and what percentage of ownership of each
of those teams to minority members hold?
Answer. Due to a variety of factors which include the complexity of
club organizational structures, the frequency of ownership transfers
and ownership confidentiality concerns, the Commissioner's Office does
not compile information regarding the races of equity investors of the
major league clubs. However, examples of club owners from racial
minority groups include Hiroshi Yamauchi (Seattle Mariners), Linda and
Robert Alvarado (Colorado Rockers) and Daniel Manning (Arizona
Diamondbacks). We believe there are others.
Question 10. Is it your understanding that the provisions of the
Curt Flood Act apply to independent minor league teams? Do those teams
enjoy the exemption from the antitrust laws that you claim for the
major and affiliated minor leagues?
Answer. Because of the wording of the Curt Flood Act and that of
the Supreme Court opinions establishing Baseball's antitrust exemption,
together with the reliance arguments in the Toolson and Flood opinions,
we do not believe that the independent minor leagues enjoy the same
benefits under Baseball's antitrust exemption.
Question 11. We have heard concerns that the major league interests
and their affiliated minor league have been attempting to prevent or
discourage the development or expansion of the independent minor
leagues. Is this true? Are there any restrictions in major or
affiliated minor league policies, formal or informal, on ownership or
other types of participation in both affiliated and independent minor
league teams? Have the geographical divisions of territory of the major
and affiliated minor leagues been used to discourage the development or
expansion of independent minor league play? Even if your answer is
``no,'' please explain those geographical allocations of territory, and
how they affect the locales in which the independent teams may operate.
Answer. At the major league level, there have been no such efforts
or restrictions and we are not aware of any such effects.
Question 12. Following up on Senator Nelson's comments at the
hearing, please explain the major league owners' position on pensions
due to players in the Negro Baseball League who played in that league
between 1947 and 1960
Answer. In 1994, the owners voluntarily and retroactively created a
pension program for Negro League Players who played prior to the
integration of Major League Baseball in 1947. The owners had no legal
obligation to create such a benefit and, in fact, the beneficiaries of
the program, in many cases, were never employed by a Major League
Baseball club. Benefits were not made available to Negro League Players
based on service between 1947 and 1960 because players of all races had
an opportunity to play in Major League Baseball during that period.
Although the integration of Baseball was admittedly not complete by
1947, that year seemed to be an appropriate point of demarcation for
this voluntary program.
Question 13. I understand that time at the hearing was limited, so
if you would like to expand on any of your own responses, or respond to
any comments made by other members of the panel, please do so.
Answer. See answer to question 8 from Senator Hatch.
Responses of Robert A. DuPuy to questions submitted by Senator Hatch
Question 1. Mr. DuPuy, does Major League Baseball believe that its
actions with regard to its umpires are not subject to the antitrust
laws, or does it consider itself bound by the court's decision in
Postema v. National League of Professional Baseball Clubs, 799 F. Supp.
1475 (S.D.N.Y. 1992)?
Answer. Major League Baseball's umpires are members of a collective
bargaining unit and their relationship with Major League Baseball is
currently governed by a collective bargaining agreement. Therefore, the
non-statutory labor antitrust exemption covers that relationship, as
set out by the United States Supreme Court in the 1996 Brown v.
National Football League case. Baseball believes the Postema case was
wrongly decided. The United States Court of Appeals for the Second
Circuit reached the conclusion, contrary to the one in Postema, that
baseball's relationship with its umpires was not subject to the
antitrust laws. Salerno v. American League of Professional Baseball
Clubs, 429 F.2d 1003 (2d Cir. 1970). See also Moore v. National
Association of Professional Baseball Leagues, C78-351 (N.D. Ohio, filed
July 7, 1976), which found baseball's exemption applicable to former
umpires' claims of antitrust violations following umpires' discharge
(``It cannot be disputed that professional baseball umpires perform an
integral function in `the business of baseball' '')
Question 2. Mr. DuPuy, does Major League Baseball believe that
issues involving local radio broadcasts are not subject to the
antitrust laws, or does it consider itself to be bound by the court's
decision in Henderson Broadcasting Com. v. Houston Sports Ass'n, 541 F.
Supp. 263 (S.D. Texas 1982)?
Answer. Major League Baseball respectfully disagrees with the
opinion in the Henderson case. In fact, there is contrary authority
even in Texas. In Hale v. Brooklyn Baseball Club, Inc., Civil Action
No. 1294 (N.D. Tex. 1958), the court held that the television
broadcasting of baseball games was covered by the exemption. The court
stated:
The telecasting simply lifts the horizon, so to speak, and
brings in another set of viewers of the same identical game
that those present in the grandstand are seeing at the same
time, ordinarily, and I believe it's straining realities to
suggest that this television business has become a new facet of
activity that you can look at apart from the ordinary business
of baseball; and I can't follow that because there couldn't be
such broadcasting except for the old-fashioned baseball game
being played somewhere--the very gist and essence of the
baseball business.
Question 3. During your testimony to the Committee, you indicated
that baseball's exemption from the antitrust laws has ensured that
there has been no team relocation in almost three decades. On the other
hand, there have been approximately twelve separate instances where a
major league club has indicated that it would have to move unless local
communities provided some form of public subsidy. Please provide an
explanation of what steps the Commissioner took, if any, in each of
these instances to assure the local jurisdictions involved that moving
a team was not a real option available to the club. If the stadiums or
the improvements had not been approved, would the teams have been
permitted to relocate?
Answer. It cannot be disputed that baseball's antitrust exemption
has contributed greatly to our franchise stability for the last 30
years. Baseball's franchise stability policy has never, however,
completely closed the door to a franchise relocation; we have stated
publicly on many occasions that major league clubs will not be
consigned to economic failure due to the absence of public and fan
support. The question posed is very general and therefore difficult to
address, but clubs seeking new ballparks have usually urged a joint
public/private partnership and a degree of local support commensurate
with the local benefit being created. Commissioners have encouraged
such progress while hoping also to maintain baseball's franchise
stability policy. As proud as baseball is of its record of no teams
relocating over the last thirty years, it is equally proud of its many
magnificent new ballparks, which the public has, without exception,
embraced upon their completion.
Question 4. Mr. DuPuy, as I understand, when every minor league
player signs with a major league club, he is required to sign the Minor
League Uniform Player Contract. In that contract, there is a provision
that requires that any dispute between the club and the player may be
appealed only to the Commissioner of Baseball and may not be reviewed
in federal or state court. Would you please explain the extent of this
legal waiver? Would it, for example, apply to disputes involving rights
afforded employees under the Fair Labor Standards Act, federal civil
rights laws, the Americans with Disabilities Act, or federal labor
laws? Would, for example, disputes involving a player's allegation of
employment discrimination based upon race be appealed only to the
Commissioner or could a suit be brought in federal or state court?
Answer. To perform services for a minor league club affiliated with
a major league club, a player must sign a Minor League Uniform Player
Contract. That contract contains a broad dispute resolution procedure
that requires any ``dispute or claim between [a] player and [a] club
arising under any of the provisions of [the] Major League Uniform
Player Contract'' to be resolved in an arbitration proceeding before
the Commissioner. The argument that claims under certain federal
statutes would not be covered by this provision has never been raised.
Question 5. How many disputes involving minor league players have
been appealed to the Commissioner over the last five years under the
procedures set forth in the Minor League Uniform Player Contract? In
addition, would you explain the procedures that are established to
handle player disputes that are brought to the Commissioner under the
terms of the contract, including those instances where the commissioner
would have to recuse himself? Is a player permitted, for example, to be
represented by counsel during such appeals? On questions of legal
interpretation, to whom does the Commissioner turn for assistance?
Answer: There have been approximately nine such appeals. The
procedure resembles that of an appellate court, and it is a procedure
that Baseball takes very seriously. The appellant submits in writing
anything he chooses--a letter, a lengthy brief with enclosures, or
anything in between. The respondent responds similarly. The appellant
then has the opportunity to submit a reply brief or other materials. A
briefing schedule for the submissions is generally set, though
extensions of time have been liberally granted to accommodate the needs
of any party. Oral argument is rarely, if ever, requested. There is no
specific procedure covering recusal, but the Commissioner could recuse
himself when appropriate. A player is, of course, permitted to be
represented by counsel during such appeals, and the Commissioner turns
to one or more lawyers in the Commissioner's Office for assistance on
questions of legal interpretation.
Question 6. Mr. DuPuy, during your testimony and the testimony of
Mr. Selig in the House, you both repeatedly stressed the important role
that the antitrust exemption played in guaranteeing baseball's
stability. On the other hand, your representatives indicated to staff
that contraction was a certainty and, according to press reports
following the hearing, as many as eighteen teams were considered as
possible candidates for contraction. How was each team notified that it
was under consideration for contraction? In addition, please explain
how contraction is different than relocation to the fans and cities
that end up losing a team?
Answer. Within the past twelve to eighteen months, each of the
thirty teams engaged in a comprehensive review of its financial
situation and overall status with the Commissioner or his
representatives and financial experts. When individual Clubs were
considered as contraction candidates, I and other representatives of
the Commissioner's Office met specifically with those teams.
We do not believe that most fans would see any difference between
losing a team through relocation or contraction.
Question 7. Mr. DuPuy, since roughly 1985, the Arizona
Diamondbacks, the Baltimore Orioles, the Chicago White Sox, the
Cincinnati Reds, the Cleveland Indians, the Colorado Rockies, the
Detroit Tigers, the Houston Astros, the Milwaukee Brewers, the Seattle
Mariners, the Texas Rangers, and the Toronto Blue Jays have received an
estimated $2.5 billion in public subsidies. Would you please explain
which of these clubs, if any, was considered as a possible candidate
for contraction and, if so, why?
Answer. See answer to question 6, above.
Question 8. Mr. DuPuy, during the hearing, you indicated that no
one was interested in purchasing the Montreal Expos. Obviously, your
assessment seems to contradict a variety of reports from individuals in
Washington, D.C-, who have repeatedly expressed their interest in
purchasing the Expos and moving them to the Nation's Capital. Would you
please explain the steps taken by Major League Baseball to determine
whether there were any potential buyers of the Expos and why the two
organizations in the Washington, D.C. area did not qualify? Did Major
League Baseball receive any notification that an offer from Washington,
D.C. was being made to the Expos, as reported in the media?
Answer. Baseball did not consider any suggestions that the Montreal
Expos be sold and relocated, for the reasons given in the answer to
question 7 from Senator Sessions. I would like to clarify, however,
that Baseball did receive one or two communications (not offers) in
regard to a potential purchase of the Expos, purportedly with the
objective of keeping the Expos in Montreal. Baseball did not pursue
such possibilities because it was already involved in the complex
transactions recently completed regarding the Expos, Marlins and Red
Sox.
Question 9. Mr. DuPuy, during your testimony, you made several
references to the considerable losses major league clubs are suffering.
To better understand the nature of these losses, would you please
provide the following:
a) The amount deducted from net income by the major league clubs in
2001 for franchise amortization?
Answer. $170.7 million.
b) The amount of the loss in 2001 that is attributable to teams
that are owned by individual or limited partnerships?
Answer. The industry does not accumulate financial data by
ownership structure.
c) The amount of the loss in 2001 that is attributable to teams
that are owned by entities, which also own cable or broadcast companies
or other businesses that broadcast or carry, televised baseball games?
Answer. Franchises owned by media corporations and their 2001
losses from baseball operations are as follows (in millions):
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Anaheim/Walt Disney Company ($ 9.6)
Atlanta/AOL/Time Warner ($14.4)
Chicago (NL)/Tribune Compan None
Los Angeles/Fo ($45.3)
Toronto Blue Jays/Rogers Communications ($52.9)
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d) The amount of the loss in 2001 that is attributable to interest?
Answer: $112.5 million, net.
e) The amount in 2001 of salaries, bonuses, or other management
related payments, including loans, which the owners paid to themselves?
Answer. This information has not been accumulated.
f) The amount in 2001 paid out to players in compensation that was
treated as loss in prior years but deferred?
Answer. This information is not available.
g) The amount of player compensation that was treated as loss in
2001 but not paid in cash?
Answer. This information is not available.
h) The amount in 2001 paid out in cash for signing bonuses to
amateur and professional players, as compared to the amount actually
incurred as costs on operating systems?
Answer. This information is not available.
i) The amount of the loss in 2001 that reflects the non-cash cost
incurred for the depreciation of stadia and stadium improvements?
Answer. This information is not currently available. In 2000, the
amount was $67.5 million.
Question 10. In your response to my question about the 18 percent
annual increase in baseball franchise values, you noted that the Blue
Ribbon report states that the sale of some clubs does not make enough
to cover operating losses and still earn a significant return. Doesn't
your response really underscore the fact that in some instances,
operating losses, when using normal accounting methods, may not
accurately reflect the value of an asset like a club?
Answer. I do not believe that the response referred to in your
question suggests that ``operating losses, when using normal accounting
methods, may not accurately reflect the value of an asset like a
club.'' My comments before the Committee were intended to make the
point that, even taking into account asset appreciation realized at the
time of sale, many franchises do not generate market investment returns
(or in some cases any return) for owners. There can be no debate that
the ``value'' of a club asset is the price that the asset commands in
the market. Our analysis indicates that for many clubs, the asset
appreciation is simply not great enough to offset operating losses
incurred during the period of ownership.
Question 11. Would you please explain in further detail why, given
the significant losses reportedly suffered by almost every single club
in baseball the value of baseball franchises is still increasing at a
rate of 18 percent a year?
Answer. The estimate that franchise values have increased at a rate
of 18% per year is simply not accurate. In fact, lower revenue
franchises that continue to suffer significant operating losses or a
lack of competitiveness on the field have seen little or no asset
appreciation in recent years.
Question 12. In your response to my question, you referred to the
Boston Red Sox as one of the flagship franchises in baseball. In his
testimony before the House, Mr. Selig referred to the Red Sox as one of
the ``five'' franchises worth owning. Would you please identify the
other four?
Answer: Any answer would include a degree of subjectivity and could
change over time. Therefore, there is no definitive list of such
franchises.
Question 13. In your response to my question, you noted that Mr.
Henry sold the Marlins for what he paid Mr. Huizenga for them.
According to published reports, Mr. Henry allowed Mr. Huizenga to
receive all luxury suite income generated by the Marlins as well as
other income generated by the Marlins, as well as other income streams
such as rental payments. What is the role of Major League Baseball in
reviewing a sale of a team, as in the case of Mr. Henry? If Major
League Baseball believes that the sale is structured in such a way that
it will put a new owner in a situation where he or she cannot succeed,
will the sale be blocked? If so, in the case of Mr. Henry, did Major
League Baseball believe Mr. Henry would be able to succeed in Florida?
Answer. Major League Baseball reviews potential sales of teams
carefully to make judgments about the financial wherewithal of new
ownership groups, among other reasons, and then to make recommendations
to the clubs. It is highly unlikely that Major League Baseball would
recommend club approval in any situation in which we believed that a
new owner could not succeed. Major League Baseball did believe that Mr.
Henry would be able to succeed in south Florida and did not anticipate
the extent of the decrease in fan support together with the ongoing
lack of support for a new ballpark.
Question 14. Has Major League Baseball had any discussions with
club owners other than those of the Twins and Expos regarding the
prospect of contracting their clubs? Specifically, have their been any
discussions or contacts concerning contraction between Major League
Baseball and the current or prospective owners of the Florida Marlins,
the Tampa Bay Devil Rays, the Kansas City Royals, the Oakland
Athletics, the Philadelphia Phillies, the Toronto Blue Jays, or the San
Diego Padres?
Answer. See answer to question 6, above.
Question 15. Mr. DuPuy, is it the position of Major League Baseball
that the operating losses attributed to the Los Angeles Dodgers, the
Texas Rangers, the Atlanta Braves, and the Toronto Blue Jays have
nothing to do with the business plans or objectives of the media
companies which own these clubs? What is Major League Baseball's
explanation for the unequal concentration of losses among these four
clubs when compared to the other twenty-six franchises in baseball?
Answer. Major League Baseball's position is that the operating
losses of the Los Angeles Dodgers, Texas Rangers, Atlanta Braves and
Toronto Blue Jays are caused, in large part, by the fundamentally
flawed economic system that exists in Baseball. In addition, local
market factors--like the exchange rate that burdens Toronto--play a
role. It is also important to note that clubs such as the Los Angeles
Dodgers and the Toronto Blue Jays suffered from a lack of profitability
even before the acquisition of those clubs by media companies. Since
the media companies acquired clubs such as the Dodgers and Blue Jays,
the books of those clubs have been subjected to intense scrutiny to
insure that all related party transactions yield ``market'' revenues
for the clubs and that reported losses are not overstated.
Question 16. In your testimony, you endorsed a proposal to tax all
franchises at a 50 percent rate on any new incomes they may earn in a
given season. As I understand, if this proposal is implemented, if the
income of a struggling franchise increases by one dollar, its share of
revenue sharing is reduced by 50 cents. This kind of an arrangement
would appear to create a disincentive for small clubs to take major
risks to generate new income, the very same kind of growth impediment
we have seen with high income tax rates. Would you please explain how
such an arrangement will benefit small franchises?
Answer. The 50% straight pool plan benefits low revenue clubs by
significantly reducing revenue disparity. The revenue of high revenue
clubs is reduced and the revenue of low revenue clubs is augmented.
This reduction in disparity gives lower revenue clubs a greater
opportunity to be competitive on the field, which is the key to revenue
growth in Baseball.
The alleged disincentive for revenue growth is largely a
theoretical issue. Most important, with the exception of revenue
increases associated with new stadium construction, most revenue growth
in Baseball requires little capital investment. As a result, clubs have
every incentive to earn more revenue whether they keep 50 cents or 75
cents of each incremental dollar. Currently, some low revenue clubs
face a 39% marginal tax rate (as compared to 19% for top revenue
clubs.) Despite this fact, low revenue clubs have significantly
increased their revenue in recent years and there is no evidence of any
disincentive effect. Baseball's current proposal also includes the
discretionary reallocation of central fund revenues. It is contemplated
that these reallocations would be used to reward, or to create
incentives for, revenue growth.
Finally, the move to the straight pool plan eliminates a
substantial inequity. As noted above, under the current plan, the
highest revenue clubs face a marginal tax rate of only 19% compared to
39% for some lower revenue clubs. The straight pool plan would correct
this inequity and make all clubs subject to exactly the same growth
incentives.
Question 17. One of the proposals made by the Blue Ribbon panel was
for payroll floors. Given the specificity of some of the
recommendations, would you please explain what Major League Baseball
believes would be an appropriate floor for each club? Would there be
penalties for the clubs that do meet such floors?
Answer. Baseball's current proposal to the Players Association is
that a $45 million payroll minimum should be applicable to all clubs.
The minimum would be enforced by disqualifying a club that fails to
meet the minimum payroll from any discretionary reallocation of central
revenues such as those described in the answer to question 16, above.
Question 18. I was surprised to hear your assertion that both of
the teams in Florida were under consideration for contraction. As I
understand, Tampa Bay was required to pay an entry fee in 1998 of $150
million. What impact do you believe this entry fee has had on Tampa
Bay's ability to become competitive and, if it is contracted, will some
portion of the fee be returned?
Answer. We do not believe that Tampa Bay's performance on the field
is the result of the expansion fee paid between 1995 and 1997. No
decisions have been made regarding teams to be contracted or the terms
of contraction
Question 19. The prospective move of the Oakland Athletics to Santa
Clara calls into question whether that township is part of the San
Francisco Giants franchise rights area. In what year did Santa Clara
become part of the Giant's franchise area? Why was it made at that time
and what were the factors considered or the assumptions made that led
to that determination?
Answer. 1990.
The Giants requested the additional territory as part of their
effort at the time to obtain a new ballpark in Santa Clara.
Question 20. In your written statement, you indicated that one of
the benefits of the antitrust exemption is that it permits the league
to impose uniform equipment rules and requirements. Other major league
sports are able to institute rules governing uniforms and equipment,
however, even though they are subject to the antitrust laws. Would you
please explain why baseball is different and why, unlike the NBA, the
PGA, or the NFL, Major League Baseball would be unable to ensure
equipment uniformity without an exemption from the antitrust laws?
Answer. One must assume that without an antitrust exemption
baseball would be suddenly subject to litigation relating to the
various aspects of its business that have been allowed to develop for
eighty years under the exemption. Among the potential plaintiffs could
be equipment manufacturers who might attempt to force upon baseball,
for instance, aluminum bats, claiming that they are used successfully
in college baseball and almost all other baseball leagues. The PGA has,
in fact, lost an antitrust lawsuit involving equipment standards and
had a standard relating to golf clubs forced upon it.
Question 1. In what specific ways do the antitrust laws--and
baseball's limited exemption from these laws--actually affect or
contribute to the problems that have been repeatedly identified by
industry participants and commentators?
Answer.
Baseball's problems are almost entirely in the areas of competitive
balance and poor financial performance, and neither the antitrust laws
nor baseball's exemption contributes to these problems. These problems
mainly relate to issues that must be bargained collectively, and
collective bargaining is covered by the labor laws and the non-
statutory labor exemption. Constant citations to baseball's antitrust
exemption as a cause of baseball's problems, particularly after the
passage of the Curt Flood Act, are simply misplaced.
Question 2. How, specifically, would legislative action modifying
or clarifying baseball's exemption ameliorate or eliminate the relevant
problems?
Answer.
For the reasons given in the answer to question 1, it would not.
Responses of Robert A. DuPuy to questions submitted by Senator Sessions
Question 1. Please explain the process by which Major League
Baseball reviews and approves candidates to purchase ownership interest
in Major League Baseball franchises.
Answer.
Baseball's ownership guidelines and procedures, which explain the
process in detail, are enclosed herewith.
Question 2. Does Major League Baseball intend to eliminate teams
before the 2003 season? If so, how will these teams be chosen?
Answer.
Yes As we have previously stated, the teams will be chosen based on
the absence of local support and the inability to generate local
revenues sufficient to produce competitiveness on the field and
financial stability off the field.
Question 3. What would happen to the minor league affiliates of any
teams that are eliminated?
Answer. Baseball is committed to preserving and supporting
affiliated minor league clubs while the current Professional Baseball
Agreement is in place. After that agreement terminates, the issue of
minor league affiliates and many other interrelated matters are subject
to bilateral negotiations with the minor leagues. We remain committed
to working with the minor leagues to deliver professional baseball to
as many communities as possible.
Question 4. Does Major League Baseball formally or informally
recognize areas of exclusivity which prevents relocation of competing
franchises?
Answer.
Although major league clubs do have territories, any major league
club may relocate anywhere with the vote of three-fourths of all major
league clubs.
Question 5. Are Clubs allowed to vote against expansion to prevent
competition?
Answer. Expansion also requires a three-fourths vote, and clubs are
of course allowed to vote for or against expansion.
Question 6. Has the Baltimore Oriole organization objected to the
location of a franchise in the Washington, D.C. area?
Answer.
The Baltimore Orioles have not made any such formal objection. The
Orioles have, however, publicly and privately stated the belief that
the placement of a major league club in Washington, D.C. would have a
significant negative financial impact on the Orioles.
Question 7. If the Baltimore Oriole organization did not object,
would Major League Baseball permit a relocated or new franchise in the
Washington, D.C. area?
Answer. Baseball has looked generally at the possibility of
relocation and has not ruled it out with regard to any city in the near
future. It is not, however, an immediate answer to the problems we are
trying to solve. In researching and studying various relocation
possibilities, it became clear to us that moving a club during this
past offseason, given our current industry economic environment, would
merely be substituting one problem for another problem. Although we are
very proud that no clubs have moved for thirty years, we may well find
that relocation can become one part of our overall solution in the near
future. But it is not the answer to any problems we are facing at this
time.
Question 8. If a prospective buyer can demonstrate satisfactorily
their ability to build a privately-financed stadium, would they be
permitted to purchase the Montreal Expos for relocation to Washington,
D.C.? If not, why?
Answer.
See answer to question 7, above.
Responses of Lori R. Swanson to questions submitted by Senator Hatch
Question 1. In what specific ways do the antitrust laws--and
baseball's limited exemption from these laws--actually affect or
contribute to the problems that have been repeatedly identified by
industry participants and commentators?
Answer. The State of Minnesota, as Senator Hatch's question
implies, believes that Major League Baseball has a limited antitrust
exemption, more specifically an exemption limited to Baseball's reserve
clause. A federal court, the Florida Supreme Court and a lower court in
Minnesota agreed. The problem is that other courts take a different
view and have determined that Baseball enjoys a broad exemption. That
is why Congress should clarify that any exemption does not apply to
franchise relocation or contraction. Although it is difficult to
predict with certainty how Major League Baseball would be different if
there were a clear pronouncement that franchise relocation and
contraction are--as they are in any other sports league--subject to the
antitrust laws, it is difficult to see how a truly competitive
environment could harm the League or local communities. Indeed, state
and federal governments should be able to investigate abusive,
anticompetitive practices and get behind Baseball's wall of secrecy. As
long as some courts construe the exemption broadly, however, such
investigations are severely constrained.
As you are aware, the hallmark of an antitrust violation is an
agreement that has the effect of raising prices, lowering output, or
rendering output unresponsive to consumer demand. NCAA v. Board of
Regents of the Univ. of Oklahoma, 468 U.S. 85, 107 (1984). The decision
by twenty-eight team owners to buy out two other owners and put their
teams out of business appears, for example, to be such an effort to
restrict supply. As a consequence, there will be fewer teams available
to buyers in the market for Major League Baseball franchises, thereby
driving up the value of the remaining franchises. Furthermore, the cost
of obtaining a franchise is increased by making certain that there are
always fewer teams in the League than viable markets that could support
franchises. By maintaining an artificial scarcity of franchises, cities
with teams are pit against cities without teams in bidding wars to
maintain or attract the franchises through public subsidies for stadia
and other amenities. The exemption--or more accurately, the exemption
as interpreted in an expansive manner by certain lower courts precludes
any evaluation of the owners' conduct to inquire whether contraction
would benefit fans, as consumers of the game, or simply line the
owners' pockets.
Question 2. How, specifically, would legislative action modifying
or clarifying baseball's exemption ameliorate or eliminate the relevant
problems?
Answer. As I noted during my testimony, the Minnesota Attorney
General's Office believes that Major League Baseball's antitrust
exemption has already been limited post-Flood v. Kuhn so that
contraction does not fall within the scope of any remaining exemption.
Nevertheless, lower courts are divided on the issue, and a federal
district court in the Northern District of Florida has gone so far as
to find that contraction falls within the antitrust exemption.
Legislative action clarifying Major League Baseball's antitrust
exemption would resolve the matter once and for all with respect to
contraction and franchise relocation, and would ensure that any actions
by the League in regard to these matters would be subject to the same
scrutiny they would be in the context of other sports leagues.
Responses of Lori R. Swanson to questions submitted by Senator Leahy
Question 1. Team relocations can raise real concerns in any sport,
and the United States Conference of Mayors and the National Football
League crafted a policy several years ago to address those concerns. As
I understand it, the jointly-developed set of principles governs the
future relocation of any professional football team, and includes a
variety of community-sensitive processes and substantive requirements:
There are public hearings, conversations with local governments and
stake holders, and a league mandate that fans be well-served. The co-
operative effort of the mayors and the league seems well-designed to
bring some balance to this potentially contentious issue, and the
procedures they have developed shed real light for the affected public
on what is actually happening. Do you think that such a mechanism could
work effectively for baseball as well?
Answer. The fact that a mechanism to address relocation issues was
worked out by the National Football League and the Conference of Mayors
suggests that Major League Baseball's warnings of dire consequences for
franchise stability should Congress approve the FANS Act are overblown.
Commissioner Selig has not been shy in earlier testimony about
asserting that revocation of Major League Baseball's antitrust
exemption would prevent the League from keeping franchises in smaller
markets. The Commissioner, in previous testimony before Congress, has
pointed to the Raiders' example from the NFL in the early 1980's (Los
Angeles Memorial Coliseum Comm'n v. NFL, 726 F.2d 1381 (9th
Cir. 1984)) and warned that Baseball would be powerless to prevent
similar situations from happening.
While no Major League Baseball franchises have relocated since
1972, Baseball's position is ironic since the League has used the
threat of relocation in a number of instances over the years in order
to extract financial concessions from state and local governments. In
1997, for instance, the Minnesota Twins threatened to move from the
Twin Cities to a smaller market in Charlotte, North Carolina in order
to pressure the Minnesota legislature into funding a new stadium.
Commissioner Selig's own franchise, the Milwaukee Brewers, also
threatened to move to Charlotte before the State of Wisconsin provided
public-funding for a new stadium. According to Professor Stephen Ross
of the University of Illinois School of Law, seven teams including the
Twins--had threatened to move to Florida's Tampa-St. Petersburg area
during a ten year period before an expansion franchise was located
there. Minneapolis Star Tribune, May 12, 1997.
Furthermore, the League's dire warnings of franchise instability do
not account for the fact that modern federal antitrust doctrine allows
a certain degree of cooperation among sports competitors when that
cooperation fosters pro-competitive outcomes. Federal courts have held
that some degree of cooperation among competing teams is essential for
the existence and functioning of sports leagues. Without commenting on
the extent of cooperation that might be allowed under the antitrust
laws, the mechanism implemented by the NFL and the Conference of Mayors
suggests that Major League Baseball could preserve its stated goal of
franchise stability while operating within the confines of the Sherman
Act.
Question 2. The Conference of Mayors and the NFL have also
developed a stadium financing program, which allows owners to borrow
money from the league to build new stadia. It thus seems much less
likely to result in communities being forced to pay the full cost of
new facilities in order to keep their teams--a situation that many have
charged prevails in baseball today. Do you think that such an approach
would foster better community relations with Major League Baseball,
were it adopted?
Answer. The existence of a program crafted by the NFL and the
Conference of Mayors to deal with stadium funding issues suggests that
less drastic alternatives than contraction might be available to the
League to deal with any economic issues it might have. And it stands to
reason that if the League adopts some sort of creative approach for
funding of new stadia that does not involve the threat of contraction
or relocation unless the public funds the facility, relations between
the League and its host communities might improve.
Over the past several years--and continuing to the present--teams
essentially have held cities hostage by threatening to relocate unless
public funding is provided for new facilities. The Twins' threatened
move to North Carolina in 1997, for example, is a graphic illustration
of a decision that did not appear to be in the team's or Major League
Baseball's best interests (since the team was threatening to move to a
smaller market) unless the goal was to obtain public money for a new
stadium for the team--and to serve as an example to other communities
that they had better fall in line or risk losing their franchises. And
because of the expansive construction of the Baseball antitrust
exemption given by a number of courts, the League is able to conduct
itself in a cartel-like manner out of the reach of law enforcement
investigations. Baseball should be subject to the same antitrust
scrutiny as other sports leagues.
Perhaps if Congress made clear that Baseball is in fact subject to
the antitrust laws in the context of franchise relocation and
contraction, the League would be less inclined to engage in boycott-
like behavior to pressure cities to provide public funding for new
facilities, which in turn might also foster better community relations.
Question 3. I understand that time at the hearing was limited, so
if you would like to expand on any of your own responses, or respond to
any comments made by other members of the panel, please do so.
Answer. The only additional comment I would like to make for the
record is to again reiterate our belief that, post-Flood v, Kuhn, Major
League Baseball's antitrust exemption has been limited to the so-called
reserve clause. We believe that Major League Baseball's contraction
plans do not fall within the scope of the exemption as it presently
exists. Nevertheless, given the split among lower courts concerning the
extent of the exemption post-Flood v, Kuhn, we would support
legislation clarifying that the contraction of franchises is subject to
scrutiny under the antitrust laws.
SUBMISSIONS FOR THE RECORD
Statement of Hon. Jeff Sessions, a U.S. Senator from the State of
Alabama
The topic of today's hearing is of great interest to many
Americans. After all baseball is the all-American sport. In the past
few months I have learned that Major League Baseball's owners have
decided to contract by two or more teams. This decision is somewhat
troubling to me. Indeed, the loss of the Minnesota Twins--as the media
has reported--would be felt not only in Minnesota but in other smaller
communities throughout the country--in Connecticut, Iowa, Tennessee,
and Florida--which are home to the Twins' farm teams.
Though we have no Major League Baseball team in Alabama, we do have
several minor league teams that are indirectly threatened by agreements
to contract the operations of Major League Baseball. If there are fewer
major league clubs because of contraction, it is logical to assume that
some of the minor league teams they support will be eliminated too.
This is of great concern for me and the people of Alabama.
The topic of today's hearing, the application of the antitrust law
to Major League Baseball, would not require Baseball to maintain
franchises that are not economically viable. It would, however, apply a
rule of reason analysis to assure that economic viability is determined
by market forces, rather than by the internal politics and the self-
interest of a small group of owners. Whether this so-called antitrust
exemption should continue is a topic that must be studied fully and
carefully before we draw any conclusions.
It is troubling to me that Major League Baseball has deprived our
Nation's Capitol of a franchise for the past 30 years. Especially,
since every other major league sport is represented in this City. For
over the past three decades it could be said of Washington, First in
war, first in peace and nowhere to be found in the American or National
leagues. It seems to me that it makes good sense for Major League
Baseball to relocate a struggling team to Washington. One obvious
example is the Montreal Expos, who for some time have been a huge
money-losing operation for the league. In an environment governed by
the antitrust laws either the current owner or a new owner could move
that team to a more profitable location--most likely Washington. It
makes no economic sense for the League to buy the Expos as it has
decided to do and continue to operate it with massive losses in
Montreal, unless the League's ultimate goal is to eliminate this team.
What is preventing this team from being relocated to Washington?
Major League Baseball has chosen to establish a complicated set of
procedures where the League will control any transaction to purchase or
sell a franchise. I have learned much about the League's mysterious
processes from watching and talking to my friend and law school
classmate Donald Watkins who is attempting to purchase a Major League
franchise. Though Donald tells me that he has been treated very
courteously by League officials and feels he is now making good
progress, you only have to read the newspapers to see that it has been
a long road.
For its own good, if for no other reason, I would have thought that
Major League Baseball long ago would have aggressively recruited an
individual with the potential to become the first African-American
owner of a Major League Baseball team. Instead, when Donald first
applied to buy the Tampa Bay Devil Rays he heard nothing from the
league for nearly a year. His more recent expression of interest in the
Minnesota Twins was ignored until last December, when at a House
Judiciary Committee Hearing a Congressman from Alabama asked the Twins
President in front of the Commissioner why the team had never spoken to
Donald. Only then did Donald receive a call. I also understand that
Donald's effort to inquire into the possibility of purchasing the
Montreal Expos to move them to Washington was summarily foreclosed as
``not on the table'' by League officials.
I am encouraged that Donald has finally been permitted by the
League to talk with both the Twins and the Devil Rays. I am also
encouraged by recent comments from Commissioner Selig after the owners'
meeting that Washington was the most likely relocation city. These
comments were, understandably, quite confusing to Mr. Watkins, who had
been told by league officials only a week earlier that it would be a
waste of time to discuss relocation of a team to Washington, D.C.
However, Mr. Selig, as numerous columnists have pointed out, has said
positive things about Washington before and nothing ever seems to
happen.
Donald's plan to build a privately-financed stadium with a
destination class museum and Hall of Fame for African-American athletes
would clearly make a major contribution to the nation's capital with
its large minority population and tourist flow from all across the
country. It also would seem to make more economic sense to locate it
here than in either Minnesota or Tampa Bay. I would urge Baseball to
discuss this possibility with him as he has requested.
Normally, if someone like Mr. Watkins wanted to buy a team in any
other professional sport, he would be free to call on current owners
and, subject to financial and fitness qualifications, be allowed to buy
a team. He would also have some flexibility to move the team under
appropriate circumstances. Major League Baseball apparently does not
operate in this way, but instead sees itself as something of an
exclusive ``private club.'' The unfortunate result could be to deprive
it of a minority owner who could bring much needed energy, creativity
and spirit to the sport. This would be a disservice to the fans, the
sport and the country, and I hope it does not happen.
Statement of Hon. Strom Thurmond, a U.S. Senator from the State of
South Carolina
Mr. Chairman:
Thank you for holding this important hearing on the applicability
of antitrust laws to Major League Baseball. We have worked together in
the past on this issue, and I appreciate your commitment to
establishing a sound public policy that will enable America's pastime
to flourish.
We are here today because of the latest development in the
continuing saga of baseball and its unique treatment under the
antitrust laws. The Commissioner of Major League Baseball has announced
that two baseball teams will be eliminated, or contracted, after the
upcoming baseball season. The Commissioner asserts that contraction is
a necessity due to the economic conditions facing baseball today. It is
widely expected that the Minnesota Twins and the Montreal Expos will be
the teams that are eliminated. In response to the expected dissolution
of these teams, Senators Wellstone and Dayton have introduced a bill
that would further reduce the remaining vestiges of baseball's
antitrust exemption. S.1704, the Fairness in Antitrust in National
Sports Act of 2001, would make the antitrust laws applicable to the
elimination or relocation of major league baseball teams. In layman's
terms, Major League Baseball would no longer be able to shut down an
existing team or prevent a team from relocating to another city. If
this bill were to gather significant support, Major League Baseball
would probably not pursue contraction because the antitrust exemption
is important to the owners of major league teams.
Major League Baseball's antitrust exemption was established by the
case of Federal Baseball Club, Inc. v. National League of Professional
Baseball Clubs, 259 U.S. 200 (1922). In this case, the Supreme Court
held that antitrust laws did not apply to ``exhibitions of baseball''
because the games did not implicate interstate commerce. The Supreme
Court eventually rejected the legal basis of the exemption in Flood v.
Kuhn, 407 U.S. 258 (1972), noting that professional baseball was indeed
a business that involved interstate commerce. The Court, however,
refused to overturn the longstanding precedent of Federal Baseball
Club, stating that it was up to Congress to do away with the antitrust
exemption.
In 1998, I worked with the distinguished Chairman and Ranking
Member to pass the Curt Flood Act, which ensured that antitrust laws
applied to Major League Baseball. The Act provided antitrust
protections to major league baseball players and applied only to issues
of employment between major league owners and players. The Act left
untouched the state of the law in all other areas where the antitrust
exemption was applicable, such as matters relating to minor leagues and
the relocation of baseball franchises.
Although some courts have also narrowed the antitrust exemption in
recent years, many experts believe that the exemption has continued
viability in several areas. Senator Wellstone's bill seeks to chip away
at one area of exemption, the movement of franchises, presumably in
hopes of persuading Major League Baseball to retreat from its
contraction plans.
As I see it, the Players Association and Major League Baseball are
playing elaborate games designed to force each other to the bargaining
table. The real issue is one of economic stability for the game of
baseball, and the government should intervene once again only if there
is a compelling need.
Major League Baseball can help cure its economic ills by increased
revenue sharing and by the use of salary restraints. Other professional
sports are thriving today as a result of implementing these measures.
Revenue sharing and salary restraints enable small-market teams to
compete with teams from larger cities, thereby encouraging a
competitive sporting environment. The inability of the Major League
Baseball Players Association and the owners of major league teams to
agree on reasonable competitionenhancing measures is ruining the game
of baseball. I hope that sensible people with the courage to work
toward a compromise will put an end to the labor unrest that has
plagued Major League Baseball for years.
In July of 2000, a Blue Ribbon Panel on Baseball Economics issued a
report that found revenue disparities were causing a ``chronic
competitive imbalance.'' As one example of this serious imbalance, one
club had a payroll equal to the sum of the five lowest payroll clubs in
1999. In 2000, Minnesota, Florida, and Kansas City had Opening Day
player payrolls that were less than the combined salaries of two
players of one club. The panel also found that there was ``a strong
correlation between high payrolls and success on the field.'' For a
five-year period between 1995 and 1999, no team in the bottom half of
payrolls in Major League Baseball won a single postseason game. I
believe that the panel's findings demonstrate that baseball must find a
way to make its smaller-market teams competitive. If baseball does not
reform itself, the public will lose interest in a predictable and
uncompetitive sport.
The Blue Ribbon Panel also made recommendations that should be
given considerable thought. The panel found that Major League Baseball
should share at least 40 percent of all members clubs' local revenue.
Although there is limited revenue sharing that takes place currently,
it may not be enough to overcome the serious disparities that exist.
The panel also found that a competitive balance tax should be applied
to club payrolls that are above a fixed amount and encourage all clubs
to have a minimum payroll amount. A competitive balance tax would
function much like a salary cap utilized by other professional sports.
I hope that the owners and the players will seriously consider these
recommendations for the sake of the survival of baseball.
I am pleased that we are bringing together representatives of
baseball and the union today. I will gladly listen to reasonable
proposals to change current law. However, we have greatly limited the
antitrust exemption in the past and have provided protections to major
league baseball players. Before we enter the fray, I want to ensure
that both management and the players have negotiated in good faith. The
current trouble with baseball has very little to do with the antitrust
laws. This is an ancillary issue. Baseball's current troubles are
economic and should be addressed by the players and the owners through
constructive negotiations over revenue sharing and salary restraints.
Statement of Miles Wolff, Commissioner, Northern League Baseball
In 1993 I founded and assumed the role of Commissioner of the
Northern League Baseball, the first of the modern independent leagues,
which presently comprising eighteen teams in twelve states and two
Canadian provinces. In 2001, I became Commissioner of the Central
Baseball League, another independent league, comprising eight teams in
four states. In addition, I own the Quebec Capitales of the Northern
League, and am the owner of the Burlington Indians of the Appalachian
League. I was President and publisher of Baseball America, the trade
publication of professional baseball, for nineteen years and am
coeditor of the Encyclopedia of Minor League Baseball, most recent
edition 1996. Over the past twenty years, I have owned six National
Association teams, including the Durham Bulls during the time the movie
Bull Durham was filmed.
The business of professional baseball in the United States is
comprised of three ownership components Major League Baseball
(``MLB''), the National Association of Professional Baseball Leagues
(``NAPBL''), consisting of those minor leagues which are affiliated
with and subsidized by MLB, and five independent minor leagues which
are not affiliated with or subsidized by MLB or the NAPBL. There
currently are more than 50 independent minor league teams in 21 states
across the country, in addition to two teams which play in Canadian
cities (Winnipeg and Quebec City). MLB and the NAPBL refer to
themselves as ``organized baseball'' in that they operate under an
umbrella agreement called the Professional Baseball Agreement (aPBA'')
which provides, among other things, for the division among themselves
of exclusive geographic territories. The scope of these territories are
extensive and, in many cases, go well beyond the limits of relevant
market considerations and have had the effect of precluding the ability
of many American communities to attract professional baseball. It is
the scope of these exclusive territories which to a significant extent
resulted in the creation, nearly 1 D years ago, of the independent
minor leagues.\1\
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\1\ It should be noted that MLB and the NAPBL have a significant
statutory advantage over the independent minor leagues since the latter
apparently do not enjoy the antitrust exemptions provided MLB and the
NAPBL under the federal Curt Flood Act of 1998.
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The number of NAPBL teams in the United States effectively is
``capped'' by the PBA, which limits the obligation of MLB to subsidize
only a specified number of organized baseball affiliates. Thus, as a
practical matter, the expansion of minor league baseball to additional
American communities is dependent almost entirely on development of the
independent minor leagues. As an example, were it not for the
independent leagues, there would be no professional baseball at this
time in states such as South Dakota (Sioux Falls) and North Dakota
(Fargo-Moorhead). In addition, except for the Major League Minnesota
Twins, the only professional baseball available in the State of
Minnesota is through the independent minor leagues.
The calibre of play in the independent leagues generally is strong
and is represented principally by talented younger players who either
have been overlooked by the Major League draft system or were signed
and later released by Major League organizations. Most players view the
leagues as a ``second chance' opportunity to demonstrate their
professional talent and, ultimately, have their contracts acquired by
Major League teams- Many have been able to achieve that goal and a
number currently are playing in the Major Leagues.
Although it does not appear that any of the independent teams have
positioned themselves in a manner that adversely affects the market
condition of any MLB or NAPBL team, many of them do conduct play within
the boundaries of the exclusive territories allocated by MLB and the
NAPBL between themselves. Subsequent to enactment of the Curt Flood Act
in 1998, which extended statutory privileges of antitrust exemption to
the NAPBL, that organization actively began exploring means by which it
could prevent independent teams from entering these exclusive
territories. One of the tactics utilized by the NAPBL was to implement
policies designed to punish any individual over whom the NAPBL might
have jurisdiction or control if they were to ``cooperate'' in any way
with any other professional league whose ``existence'' conflicted in
any way with the NA or any of its teams, or which included a team that
played within any of the territories claimed by the NAPBL or MLB.
In view of the scope of the exclusive territories allocated by MLB
and the NAPBL, it is virtually impossible for any independent
professional baseball league to operate without ``intruding'' on these
territories. Accordingly, the position of the NAPBL effectively
prohibits any relationship with any independent professional team. The
concept of ``cooperation'' has been broadly defined by the NAPBL to
include not only ownership interests, but virtually any form of
business or professional service relationship.
Since the NAPBL for 100 years has effectively controlled the
industry of minor league baseball in the United States, arid has
developed extensive resources, vendor and other industry-relevant
relationships over that period of time, the effect of its blackball of
persons having relationships with independent professional teams has
been substantially to limit the business opportunities and investor
resources available to independent professional baseball, and to
preclude independent teams from playing in many communities which are
desirous of attracting professional baseball.
An example of the influence wielded by the NAPBL involves the
nation's capital. The exclusive ``organized baseball'' territory which
includes Washington, D.C. is actually owned at this time by the NAPBL
(not MLB) for the benefit of one of its teams based in Woodbridge,
Virginia.\2\ Several years ago, an effort was made by an independent
professional league to establish a team in Washington. The NAPBL
promptly responded with threats of punitive action that forced the
independent team to back away. Similar experiences have been
encountered in other communities in different parts of the country.
Given the enormous industry power of the NAPBL, which includes
political lobbying clout funded by the NAPBL as well as MLB, the NAPBL
has been a major deterrent factor in the efforts of many American
communities to attract professional baseball, except to the extent so
desired by the NAPBL or MLB.
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\2\ MLB would be entitled under the PBA to acquire the territory
but would be required to compensate the NAPBL team and league which
presently has territorial control over the District.
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In some instances, these efforts have been undertaken by the NAPBL
as agent for MLB- evidenced in an August 1999 resolution adopted by the
NAPBL Board of Trustees--while, in others, the NAPBL has pursued its
own territorial interests. In either case, the power and influence of
the ``organized baseball'' establishment--which represents the only
components of professional baseball entitled to the exemptions provided
under the Curt Flood Act--are such that growth of the independent minor
leagues has been restricted,
Although these issues may not be directly germane to the pending
debate regarding MLB contraction (which ultimately would have the
effect of reducing the number of NAPBL teams) or relocation, they do
represent clear examples of the abusive manner in which the ``organized
baseball'' system, including the NAPBL, has claimed the right to decide
which communities are entitled to professional baseball and which are
not, without regard to the wishes of local communities or even, in many
cases, valid market considerations.
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