[Congressional Record Volume 142, Number 53 (Tuesday, April 23, 1996)]
[Senate]
[Pages S3955-S3957]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. THURMOND:
  S. 1696. A bill to provide antitrust clarification, to reduce 
frivolous antitrust litigation, to promote equitable resolution of 
disputes over the location of professional sports franchises, and for 
other purposes; to the Committee on the Judiciary.


      the professional sports antitrust clarification act of 1996

  Mr. THURMOND. Mr. President, I rise today to introduce the 
Professional Sports Antitrust Clarification Act of 1996 to address 
underlying problems which have resulted in recent franchise instability 
and movement in professional sports, particularly the National Football 
League. My legislation clarifies that the antitrust laws do not apply 
to professional sports leagues and their member franchises when they 
establish rules and make decisions about whether a team may change its 
home territory. This antitrust protection is obtained, however, only if 
the sports league provides notice and a hearing and examines 
appropriate factors prior to its decision on relocation, and institutes 
revenue sharing of the public benefits received by its teams, in order 
to reduce the incentive for teams to move simply to reap large public 
subsides. I will clarify the importance of these points in a moment.
  Let me initially explain why this issue deserves the attention of the 
Congress. First, larger and larger amounts of public funds seem to be 
spent subsidizing professional sports, by building new or improved 
stadiums, providing rent abatement and special tax treatment, and even 
making direct cash payments. Cities and States are being pitted against 
each other by the threat or promise that a team will relocate depending 
on the subsidy offered, which raises serious questions about the 
appropriate use of scarce public resources. Baltimore and Cleveland 
made headlines last winter by competing to be the hometown of the 
Browns football team, with hundreds of millions of public dollars at 
stake. The resolution, of course, was for both cities to pour hundreds 
of millions of dollars into new or improved stadiums so each could 
secure a football team. Even more remarkable, perhaps, is the report 
that Cincinnati has been handing over $3 million in cash to its 
football team in each of the last several years to stave off 
relocation.
  Second, professional sports are an important part of American life, 
emotionally as well as financially, and relocation of a popular team 
can devastate its fans and shake the confidence of its hometown. The 
Browns' announcement that they intended to move to Baltimore upset the 
team's fans tremendously both in Cleveland and around the country. The 
current willingness of so many teams to consider moving frightens fans 
of all teams, regardless of whether their own team is openly 
threatening a move.
  The current level of sports franchise instability is at its highest 
since the Congress focused its attention on these issues in the 1980's. 
In 1982 and 1985, I held several hearings as chairman of the Judiciary 
Committee on legislation dealing with sports franchise relocation. 
Since that time, the financial stakes for local and State governments 
have escalated. The public funds routinely expended to keep a team in 
place or entice a team to move seem to have risen from tens of millions 
to hundreds of millions of dollars. At a time when public resources at 
all levels of government are becoming ever tighter, this transfer of 
scarce public funds to rich owners and rich players is remarkable. 
Accordingly, it is time to address these issues.
  Two hearings have been held in the Senate Judiciary Committee in 
recent months on these issues. As chairman of the Antitrust, Business 
Rights, and Corporation Subcommittee, I chaired a hearing on November 
29, 1995, which analyzed sports franchise movement. Witnesses included 
a range of elected officials, sports league commissioners, and 
antitrust and economic experts. Senator Hatch chaired a second hearing 
of the full Judiciary Committee on January 23, 1996, in order to 
further examine these issues. This legislation is an outgrowth of those 
hearings.
  Let me turn to the specifics of the legislation I am introducing 
today. My bill does not grant a special exemption from current 
antitrust law, but essentially codifies existing judicial 
interpretations which permit a sports league to determine where its 
member franchises may operate, provided certain requirements are met. 
My legislation clarifies and provides certainty in this complex area of 
the law, where costs of defending claims are always high, and any 
damages resulting from liability or an incorrect judicial decision are 
trebled and may amount to hundreds of millions of dollars or more. 
Antitrust certainty would restore integrity to the decision- making 
processes of professional sports leagues which have been chilled by the 
prospect of huge treble damage judgments.

  A sports league cannot enjoy this antitrust certainty, however, 
unless it meets three requirements set forth in the legislation. First, 
the league must provide notice and a hearing to all interested parties 
concerning a team's proposed move. Second, the league must protect the 
public interest by considering specified factors in deciding whether to 
permit the move. Last, the league must promote comparable economic 
opportunities for its teams by sharing revenue derived from the public 
benefits and subsidies the teams receive.
  This conditional antitrust protection will help resolve the problems 
of franchise instability caused by large public subsidies. The 
antitrust certainty provided by this bill will permit a sports league 
to take more decisive action to stop teams from moving when the league 
believes relocation will not serve the public interest. The 
requirements that the league analyze specific factors and provide 
notice and a hearing to interested parties before deciding whether a 
team can relocate will help ensure that proper decisions are made. The 
third requirement, instituting revenue sharing of public benefits, is 
crucial to address an underlying cause of sports franchise instability. 
Unlike the first two requirements, the effectiveness of revenue sharing 
does not depend on the opinion of the league about a particular move. 
Let me briefly explain the economic background of this revenue sharing 
requirement.
  As revealed during my Antitrust Subcommittee hearing, the franchise 
instability we are now experiencing is largely the result of changing 
economics within major league sports. Now that players are free agents, 
competition among owners for the best talent has driven player salaries 
to amazing heights. This, in turn, has increased pressure on owners to 
increase their

[[Page S3956]]

revenues, particularly relative to other owners, in order to compete 
for the best players. In this competition for talent, the total amount 
of an owner's revenue matters less than whether that owner has fallen 
behind the other owners.
  Football, hockey, and basketball each share a significant portion of 
total revenues among the teams in the league. Because owners seek to 
better their positions compared to other owners, however, they 
naturally seek to raise revenue in areas where revenue is not shared. 
As a result, owners aggressively seek new public benefits and 
subsidies, often through new or improved stadiums with more luxury 
suites as we have seen in football, because they have not been required 
to share that revenue. In this effort, owners routinely use threats of 
relocation to another city as leverage.
  Let me emphasize that my legislation would not in any way prohibit 
public funds from being used to attract or keep a team, if a city or 
State voluntarily decides to allocate its resources in that way. 
Instead, my legislation would require the league to promote comparable 
opportunities for all teams by equalizing the public benefits among 
them. This would level the playing field, so to speak, so that teams 
need not move or threaten to move in order to obtain more public funds 
to keep from falling behind others in the league. Let me illustrate how 
this is intended to work in practice.
  Last Fall, Art Modell, owner of the Cleveland Browns, announced that 
he planned to move his team from Cleveland to Baltimore. His move 
reportedly was motivated by financial pressure on the franchise caused 
by rapidly increasing player salaries, plus promises of large public 
benefits from Baltimore. If my revenue-sharing provision had been in 
place, however, Mr. Modell would have faced different options. Under my 
legislation, the league would have instituted procedures to promote 
comparable economic opportunities to address disparities in team 
revenue due to public benefits and subsidies. So in our example, if Mr. 
Modell was obtaining fewer public benefits in Cleveland than average, 
he would receive transfers to bring his team up to the league average. 
On the other hand, if the annual public benefits received for moving to 
Baltimore pushed Mr. Modell above the average, he would have to share 
some of the value of the public benefits in order to keep his team at 
the league average. Faced with these choices and a hometown that loved 
his team, it is hard to imagine that Mr. Modell would have chosen to 
move--and endure tremendous criticism--if he would receive the league 
average either way. Even if Mr. Modell still wished to relocate, 
however, the league might well have blocked the move, based on the 
factors established and the antitrust certainty provided by this 
legislation.

  Of course, it is sometimes appropriate and even desirable for a team 
to relocate, such as when the fans and local business community do not 
adequately appreciate and support their team. My revenue-sharing 
requirement would not stop such moves, but would encourage professional 
sports to look more to private funding than to public subsidies in such 
cases.
  Nor does this revenue-sharing requirement stop a community from using 
public funds to construct or improve a stadium or arena if it wishes to 
do so. The provision would require the team using the facility to share 
revenue only if the team receives financial benefits as a result of the 
public expenditures, such as rent abatement or extra luxury suite 
income, which exceed the league average. In other words, if the city 
chose to build or renovate a stadium, and used any additional revenues 
to repay the public expenditures for the construction, those new 
revenues would not be included in any revenue-sharing arrangement.
  As I indicated earlier, the recent problems with franchise 
instability have occurred largely in the National Football League. It 
may be no coincidence that since a $49 million antitrust judgment was 
levied against the NFL for trying to block the Raiders' move to Los 
Angeles in the 1980's, football has been more reluctant than basketball 
and hockey to risk antitrust litigation over the propriety of league 
actions. It should be noted that my legislation does not require any 
league to take any action, but simply provides antitrust certainty to 
those leagues which choose to comply with the bill's requirements. Some 
leagues may not choose to participate initially.
  Certainly this legislation should not be taken as any indication that 
joint conduct by a league in addressing franchise movement or any other 
issue would be illegal under the current state of antitrust law. The 
conduct of a league may very well be found lawful under the antitrust 
laws when making and enforcing rules governing franchise relocation by 
its teams, without consideration of this legislation. My bill simply 
provides certainty to leagues that choose to comply with its terms.
  Finally, this bill does not limit its antitrust clarification to the 
major sports, but defines professional sports league broadly. It should 
be noted, however, that major league baseball is excluded from the bill 
as long as baseball's judicially created antitrust exemption concerning 
franchise relocation remains in place. I would hasten to add that 
franchise relocation issues are expressly not affected by the separate 
baseball legislation, S. 627, that I introduced with Senator Hatch and 
others, to limit baseball's judicially created antitrust exemption. Let 
me repeat so there is no confusion: neither this legislation I am 
introducing today, nor our baseball legislation, S. 627, which has 
passed both the Antitrust Subcommittee and the full Judiciary 
Committee, would in any way impact baseball's current ability to 
control franchise movement. Indeed, this new legislation along with S. 
627 would go a long way toward putting all professional sports on an 
even footing under our Nation's antitrust laws.
  Mr. President, the instability of sports franchises caused by large 
public subsidies of professional sports raises important issues which 
have a direct and significant impact on the lives and finances of most 
Americans. The Professional Sports Antitrust Clarification Act will 
help to resolve these concerns.
  I send the bill to the desk and ask unanimous consent that it be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1696

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Professional Sports 
     Antitrust Clarification Act of 1996''.

     SEC. 2. ACTIONS AUTHORIZED.

       (a) In General.--Notwithstanding any provision of the 
     antitrust laws, and subject to section 3 and subsection (b) 
     of this section, a professional sports league or its member 
     franchises may establish and enforce rules and procedures for 
     the purpose of deciding whether a member franchise may change 
     its home territory.
       (b) Construction.--Nothing in this section shall be 
     construed to exempt from the antitrust laws any conduct which 
     would be unlawful under any antitrust law if engaged in by a 
     single entity.

     SEC. 3. REQUIREMENTS FOR ANTITRUST PROTECTION.

       (a) In General.--This Act applies to a professional sports 
     league and its member franchises if such league--
       (1) establishes applicable rules and procedures to govern 
     whether a member franchise may change its home territory that 
     are available upon request to any interested party;
       (2) affords due process, including 180 days notice and an 
     opportunity to be heard, to interested parties prior to 
     deciding whether a member franchise may change its home 
     territory; and
       (3) promotes comparable economic opportunities by sharing 
     revenue among member franchises to account for disparities in 
     revenue received or costs saved due to direct or indirect 
     public benefits and subsidies, including publicly financed 
     facilities, rent abatement, special tax treatment, favorable 
     arrangements for parking, concessions, and other amenities, 
     and other public benefits not generally available to 
     businesses as a whole within the jurisdiction.
       (b) Rules and Procedures.--Rules and procedures established 
     under subsection (a)(1) shall require consideration of 
     various factors to protect the public interest, including--
       (1) the extent to which fan support for a member franchise 
     has been demonstrated through attendance, ticket sales, and 
     television ratings, during the period in which the member 
     franchise played in its home territory;
       (2) the extent to which the member franchise has, directly 
     or indirectly, received public financial support through 
     publicly financed facilities, rent abatement, special tax 
     treatment, favorable arrangements for parking, concessions, 
     and other amenities, and any other public benefits not 
     generally

[[Page S3957]]

     available to businesses as a whole within the jurisdiction, 
     and the extent to which such support continues;
       (3) the effect that relocation would have on contracts, 
     agreements, and understandings between the member franchise 
     and public and private parties;
       (4) the extent of any net operating losses experienced by 
     the member franchise in recent years and the extent to which 
     the member franchise bears responsibility for such losses; 
     and
       (5) any bona fide offer to purchase the member franchise at 
     fair market value, if such offer includes the continued 
     location of such member franchise in its home territory.

     SEC. 4. JUDICIAL REVIEW.

       (a) Standard of Review.--The standard of judicial review 
     shall be de novo in any action challenging the establishment 
     and enforcement of rules and procedures for deciding whether 
     a member franchise may change its home territory, except that 
     the reviewing court shall give deference to actions of the 
     professional sports league regarding compliance with 
     paragraphs (1) and (3) of section 3(a).
       (b) Declaratory Actions.--A professional sports league or 
     any interested party may seek a declaratory judgment with 
     respect to whether paragraphs (1) and (3) of section 3(a) are 
     adequately satisfied by the professional sports league for 
     this Act to apply.
       (c) Limitation on Monetary Damages.--A judicial finding 
     that a professional sports league did not comply with any 
     provision of section 3 shall result only in further 
     proceedings by the professional sports league and shall not 
     result in liability under the antitrust laws or monetary 
     damages, if--
       (1) the professional sports league implemented a revenue 
     sharing plan in a good faith attempt to comply with section 
     3(a)(3) prior to the specific dispute in issue; or
       (2) a prior declaratory judgment held that the revenue 
     sharing plan of the professional sports league complied with 
     section 3(a)(3).
       (d) Venue.--In any action challenging the establishment and 
     enforcement of rules and procedures to decide whether a 
     member franchise may change its home territory, venue shall 
     be proper only in the United States District Court for the 
     District of Columbia, except that--
       (1) venue shall be proper only in the United States 
     District Court for the Southern District of New York if the 
     existing or proposed home territory of a member franchise is 
     located within 100 miles of the United States District Court 
     for the District of Columbia; and
       (2) venue shall be proper only in the United States 
     District Court for the Northern District of Illinois if--
       (A) the existing home territory of a member franchise is 
     located within 100 miles of the United States District Court 
     for the District of Columbia or the Southern District of New 
     York; and
       (B) the proposed home territory of the member franchise is 
     located within 100 miles of the United States District Court 
     for the District of Columbia or the Southern District of New 
     York.

     SEC. 5. DEFINITIONS.

       For purposes of this Act--
       (1) the term ``antitrust laws''--
       (A) has the same meaning as in subsection (a) of the first 
     section of the Clayton Act (15 U.S.C. 12(a)), except that 
     such term includes section 5 of the Federal Trade Commission 
     Act (15 U.S.C. 45) to the extent that such section relates to 
     unfair methods of competition; and
       (B) includes any State law comparable to the laws referred 
     to in subparagraph (A);
       (2) the terms ``professional sports team'', ``team'', 
     ``member franchise'', and ``franchise'' mean any team of 
     professional athletes that is a member of a professional 
     sports league;
       (3) the terms ``professional sports league'' and ``league'' 
     mean--
       (A) an association of 2 or more professional sports teams 
     that governs the conduct of its members and regulates the 
     contests and exhibitions in which such teams regularly 
     engage;
       (B) whose decisions relating to franchise relocation would 
     otherwise be subject to the antitrust laws; and
       (C) that has combined franchise revenues of more than 
     $10,000,000 per year;
       (4) the term ``interested party'' means the member 
     franchise at issue, local and State government officials, 
     owners and operators of playing facilities, concessionaires, 
     and others whose business relations would be directly and 
     significantly affected by the franchise relocation at issue, 
     and representatives of organized civic and fan groups; and
       (5) the term ``playing facility'' means the stadium, arena, 
     or other venue in which professional sports teams regularly 
     conduct their contests and exhibitions.

     SEC. 6. EFFECTIVE DATE.

       This Act applies to any action occurring on or after the 
     date of enactment of this Act.

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