[Senate Report 104-231]
[From the U.S. Government Publishing Office]
Calendar No. 332
104th Congress Report
SENATE
2d Session 104-231
_______________________________________________________________________
MAJOR LEAGUE BASEBALL REFORM ACT OF 1995
_______
February 6, 1996.--Ordered to be printed
_______________________________________________________________________
Mr. Hatch, from the Committee on the Judiciary, submitted the following
R E P O R T
together with
ADDITIONAL AND MINORITY VIEWS
[To accompany S. 627]
The Committee on the Judiciary, to which was referred the
bill (S. 627) to apply the antitrust laws of the United States
to major league baseball, having considered the same, reports
favorably thereon without amendment and recommends that the
bill do pass.
CONTENTS
Page
I. Text of S. 627, as reported......................................2
II. Purpose..........................................................2
III. Legislative history..............................................3
IV. Vote of the committee............................................4
V. Discussion.......................................................5
A. Background of baseball's exemption.................. 6
B. General applicability of the antitrust laws......... 7
C. Impact of exemption on baseball's labor relations... 9
D. Owners' arguments for special treatment under the
antitrust laws..................................... 11
VI. Section-by-section analysis.....................................14
VII. Cost estimate...................................................15
VIII.Regulatory impact statement.....................................16
IX. Additional views of Senator Thurmond............................17
X. Minority views of Senator Specter...............................19
XI. Minority views of Senator Simon.................................21
XII. Minority views of Senator Brown and Feinstein...................23
XIII.Minority views of Senator Feinstein.............................29
XIV. Changes in existing law.........................................30
I. Text of S. 627, as Reported
[104th Cong., 1st sess.]
A BILL To require the general application of the antitrust laws to
major league baseball, and for other purposes
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 ``Major League Baseball
Antitrust Reform Act of 1995.''
SEC. 2. APPLICATION OF THE ANTITRUST LAWS TO PROFESSIONAL MAJOR LEAGUE
BASEBALL.
The Clayton Act (15 U.S.C. 12 et seq.) is amended by adding
at the end the following new section:
``Sec. 27 (a) Subject to subsection (b), the antitrust laws
shall apply to the business of professional major league
baseball.
``(b) Nothing in this section shall be construed to
affect--
``(1) the applicability or nonapplicability of the
antitrust laws to professional baseball's amateur
draft, the minor league reserve clause, the
Professional Baseball Agreement, or any other matter
relating to the minor leagues;
``(2) the applicability or nonapplicability of the
antitrust laws to any restraint by professional
baseball on franchise relocation; or
``(3) the application of Public Law 87-331 (15 U.S.C.
1291 et seq.) (commonly known as the Sports
Broadcasting Act of 1961).''
II. Purpose
This Committee has long held the view that free market
competition, protected by the antitrust laws, is the foundation
of our economic system. Immunity from the antitrust laws is
appropriate only in very limited circumstances, and only if
certain precautions are taken. Immunity should be granted and
maintained only where it is clear that competition will not
work in a particular industry or market. Moreover, any industry
that is granted immunity is well advised to adopt the least
anticompetitive practices possible, in order to preserve the
fairness of the economic system and maintain its exemption.
With these principles in mind, the Committee has reviewed S.
627, the ``Major League Baseball Antitrust Reform Act of
1995.''
The purpose of S. 627 is to affirm that major league
baseball's owners and players are subject to the Nation's
antitrust laws. Professional baseball is the only industry in
the United States that claims an exemption from the antitrust
laws without being subject to alternative regulatory
supervision. Yet Congress has never declared professional
baseball to be exempt from the antitrust laws. Instead, the
U.S. Supreme Court shielded the owners of major league baseball
from the antitrust laws through its judicial decisions,
beginning in 1922. While subsequently finding the exemption to
be an ``anomaly,'' the Court expressly left it to Congress to
modify the exemption.
This legislation, S. 627, will end the anomalous antitrust
loophole enjoyed by the owners of major league baseball, by
clarifying that the antitrust laws do apply to major league
baseball with certain exceptions. Under S. 627, the antitrust
laws will apply expressly to areas of immediate concern such as
player relations, competition from new leagues, and
telecommunications activities that are not within the scope of
the Sports Broadcasting Act of 1961. However, S. 627 will not
affect existing law with respect to professional baseball's
ability to restrain franchise relocation, matters relating to
the minor leagues, or the statutory provisions of the Sports
Broadcasting Act.
The baseball strike of 1994-95--which tarnished the
national pastime by curtailing the 1994 season and shortening
the 1995 season--has reemphasized the need to express Congress,
intent to apply to professional baseball the rules of fair and
open competition that are followed by all other unregulated
business enterprises in this country, including all other
sports leagues. The strike, which started in August 1994 and
did not end until April 1995, was not prompted by the players'
demand for more money, but by their lack of any alternative
when faced with the owners' threats to impose unilaterally
terms and conditions of employment that could violate the
antitrust laws. Other professional athletes and similarly
situated employees have alternatives to striking specifically
because of these laws. Unfortunately, negotiations were
unproductive and, to the fans great dismay, the 1994 World
Series was never played. These failed negotiations achieved
what the Great Depression, world wars, and scandal could not--
the cancellation of the World Series. The strike continued into
the 1995 season, which began only after a Federal injunction
restored the terms of the old agreement. Remarkably, the owners
and players have yet to reach a new labor agreement. It is
clearly time to end baseball's antitrust exemption.
III. Legislative History
Many bills have been introduced over the decades in
response to the Supreme Court's 1922 decision establishing
baseball's antitrust exemption. During the previous Congress,
this Committee voted on June 23, 1994, and narrowly failed to
pass S. 500, which as amended, would have eliminated the
antitrust exemption for major league baseball as it related to
labor issues.
In the 104th Congress, Senators Hatch, Moynihan, Graham,
and Bingaman introduced S. 415, the Professional Baseball
Antitrust Reform Act of 1995, on February 14, 1995. On that
same day, Senators Thurmond and Leahy introduced S. 416, the
Major League Baseball Antitrust Reform Act of 1995. While the
two bills had similar goals, the primary difference was that S.
415 would have overridden the ``nonstatutory labor exemption''
in certain circumstances. The Subcommittee on Antitrust,
Business Rights, and Competition promptly held a hearing on the
bills.
Senator Thurmond chaired the Antitrust Subcommittee hearing
on February 15, 1995, at which both S. 415 and S. 416 were
analyzed. Witnesses included: Senators Hatch, Moynihan,
Kassebaum, and Graham; Mr. Selig, chairman of the Major League
Baseball Executive Council; Mr. O'Connor of Morgan, Lewis &
Bockius; Mr. Rill of Collier, Shannon, Rill & Scott; Mr. Fehr,
executive director of the Major League Baseball Players
Association; Mr. Cone and Mr. Murray, both baseball players and
members of the Major League Baseball Players Association; and
Mr. Arquit of Rogers & Wells.
Following the hearing, on March 27, 1995 Senators Hatch,
Thurmond, and Leahy introduced a compromise bill, S. 627, the
Major League Baseball Antitrust Reform Act of 1995, which was
cosponsored by Senators Moynihan and Graham. The legislation
was referred to this Committee and the Antitrust Subcommittee.
On April 5, 1995, with a quorum present, the Antitrust,
Business Rights, and Competition Subcommittee approved S. 627
by voice vote for full Committee consideration.
IV. Vote of the Committee
On August 3, 1995, with a quorum present, the Committee on
the Judiciary ordered S. 627 favorably reported by a vote of 9
to 8, with one member abstaining. In compliance with paragraph
7 of Rule XXVI of the Standing Rules of the Senate, the members
of the Committee voted as follows on S. 627:
YEAS NAYS
Hatch Grassley
Thurmond Specter
Simpson Brown
Thompson Kyl
DeWine Biden
Abraham Heflin
Kennedy Simon
Leahy Feinstein
Feingold
ABSTENTION
Kohl
Senator Simpson offered an amendment that would have
maintained the existing antitrust exemption if an independent
baseball commissioner was appointed in accordance with specific
procedures. The amendment was not adopted by a vote of 6 to 11,
with one abstention, as follows:
YEAS NAYS
Hatch Thurmond
Simpson Specter
Grassley Thompson
Brown Kyl
Kennedy DeWine
Leahy Abraham
Biden
Heflin
Simon
Feinstein
Feingold
ABSTENTION
Kohl
V. Discussion
Major league baseball has enjoyed an esteemed position in
this Nation over the last century. Often referred to as
America's national pastime, the game has been a bond linking
generations and evokes special memories of family and childhood
for many.
Unfortunately, the realities of baseball do not always
match this perception. The game is, in fact, a lucrative
business--when not sidelined by labor problems--generating
billions of dollars in revenues and related income each year.
With their current antitrust status, the owners may conspire
and collude without restraint, and they have repeatedly taken
unfair advantage of their unique legal position. The antitrust
laws were designed to prohibit the very kind of economic
practices that exist in major league baseball today.
The list of those harmed by baseball's antitrust exemption
is long. Municipalities, minor league owners, prospective
investors, players, and fans have all been victims of
professional baseball's anticompetitive practices. It is no
surprise that the owners' relationship with the players has
been so contentious; in fact, baseball has been plagued with
more work stoppages than all other professional sports
combined. Nor is it surprising that record numbers of fans
decided to demonstrate their frustration in 1995 by staying
away from ballparks across the country--overall, the decline in
attendance is estimated at more than 20 percent.
As the Committee began its consideration of S. 627,
Chairman Hatch summarized the need for legislation to resolve
these problems by stating:
This bill will bring about sound reforms that ensure
that baseball is treated fairly and properly under the
antitrust laws. In the long run, our bill will
contribute to constructive labor relations between the
players and owners, and will subject Major League
Baseball to the same treatment under the nation's laws
that the other professional sports experience.
Among groups which have analyzed and support this
legislation, two are particularly noteworthy. By letter of
August 3, 1995, the Department of Justice--which has
enforcement responsibilities over our Nation's antitrust laws--
responded to Senator Leahy, the ranking member of the Antitrust
Subcommittee, stating that the ``Department supports
legislation that would narrow baseball's special antitrust
exemption by applying the antitrust laws to Major League
Baseball with certain exceptions.'' Likewise, the Section of
Antitrust Law of the American Bar Association supports S. 627
because it ``reverses baseball's anomalous antitrust exemption
and places professional baseball on the same footing as other
professional sports.''
At the Committee's markup, Senator Leahy observed:
``Congress may not be able to solve every problem or heal
baseball's self-inflicted wounds, but we can do this: We can
pass legislation that will declare that professional baseball
can no longer operate above the law that governs all other
professional sports and commercial activity.''
A. BACKGROUND OF BASEBALL'S EXEMPTION
Major league baseball's unusual antitrust status began with
the U.S. Supreme Court's decision in Federal Baseball Club,
Inc. v. National League of Professional Baseball Clubs, 259
U.S. 200 (1922). Explaining why the antitrust laws should not
apply, the Court held that exhibitions of baseball did not
satisfy the interstate commerce jurisdictional requirement
because they were ``purely state affairs'' and not ``trade or
commerce in the commonly accepted use of those words.'' In
1922, the Supreme Court could not have envisioned the 1993
World Series, where Canada's Toronto Blue Jays defeated the
Philadelphia Phillies in a game televised around the world. The
game the Court sought to protect bears little resemblance to
the billion dollar industry operating today.
A series of cases followed the 1922 decision of Federal
Baseball, in which the Federal courts refused to extend an
antitrust exemption to any other sport, 1 and held that
other sports were subject to the antitrust laws. 2 These
decisions acknowledged the erroneous nature of Federal
Baseball, but refused to abandon the precedent as it applied to
baseball.
\1\ Radovich v. National Football League, 352 U.S. 445 (1957)
(professional football); Haywood v. National Basketball Ass'n, 401 U.S.
1204 (1971) (professional basketball); Nassau Sports v. Peters, 352 F.
Supp. 870 (E.D.N.Y. 1972) (professional hockey).
\2\ See, e.g., Dessen v. Professional Golfers Ass'n, 358 F.2d 165
(9th Cir.), cert. denied, 385 U.S. 846 (1966) (professional golf);
Washington State Bowling Proprietors Ass'n v. Pacific Lanes, Inc., 356
F.2d 371 (9th Cir.), cert. denied, 384 U.S. 963 (1966) (professional
bowling); Amateur Softball Ass'n v. United States, 467 F. 2d 312 (10th
Cir. 1972) (amateur softball).
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The decision of the Supreme Court in Flood v. Kuhn, 407
U.S. 258 (1972), repudiated the legal basis of the Federal
Baseball case and its progeny. The Court correctly acknowledged
in Flood that its prior decisions which created the exemption
were now outdated and incorrect. Specifically, the Court found
that ``[p]rofessional baseball is a business and it is engaged
in interstate commerce.'' 407 U.S. at 282. Rather than modify
the exemption it had created, however, the Court avoided the
issue by holding that ``[i]f there is any inconsistency or
illogic in all this, it is an inconsistency and illogic of long
standing that is to be remedied by the Congress and not by this
Court.'' Id. 3 Without the Supreme Court decisions in
Federal Baseball and Flood, major league baseball would have no
arguable claim to antitrust immunity. 4
\3\ The Court in Flood also held that state antitrust enforcement
is pre-empted, affirming the appellate court's ironic conclusion that
the ``burden on interstate commerce outweighs the states' interests''
in enforcing their own antitrust laws against baseball. 407 U.S. 284.
To the extent that the Federal exemption was due to baseball not being
in interstate commerce and a ``purely state affair,'' however, State
antitrust laws are the only ones that would apply to baseball.
\4\ A federal court recently grappled with the Supreme Court's
Flood decision in Piazza v. Major League Baseball, 831 F. Supp. 420,
436 (E.D. Pa. 1993). The underlying facts in Piazza concerned the
efforts of investors to purchase the San Francisco Giants and move the
team to St. Petersburg, FL. The league thwarted the move, and the
investors sued. Noting that the Supreme Court in Flood had repudiated
the legal basis for the decision in Federal Baseball, the district
court limited the case to its facts and denied the league's motion for
summary judgment. Specifically, the court found that the reserve clause
at issue in Federal Baseball and Flood remained exempt from the
antitrust laws, but that in all other respects baseball was a business
in interstate commerce and was therefore subject to the antitrust laws.
The league reportedly settled the suit before trial for $6 million. In
a related case, the Supreme Court of Florida found the Piazza rationale
persuasive and adopted it in Butterworth v. National League of
Professional Baseball Clubs, 644 So.2d 1021 (Fla. 1994). See also
Morsani v. Major League Baseball, 1995 Fla. App. Lexis 10391 (Fla. 2d
DCA 1995) (following rationale of Butterworth to reinstate state
antitrust claims). But see New Orleans Pelicans Baseball, Inc. v.
National Ass'n of Professional Baseball Leagues, Inc., No. 93-253, 1994
WL 631144 (U.S.D.C., E.D. La. Mar. 1, 1994) (rejecting Piazza as an
``impressive dissent from precedent'' and granting summary judgment
based on existence of antitrust exemption).
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B. GENERAL APPLICABILITY OF THE ANTITRUST LAWS
Courts have repeatedly held that the antitrust laws do
apply to other professional sports, including professional
football, basketball, and hockey, as discussed above, as well
as all other unregulated businesses. However, the courts also
have long recognized that a professional sports league is a
joint venture whose product--a series of contests leading to a
championship--could not be obtained if the individual
franchises or teams were not permitted a high degree of
cooperation and business coordination beyond that required in
most other industries.5
\5\ See, e.g., Mackey v. National Football League, 543 F.2d 606,
619 (8th Cir. 1976), cert. dismissed, 434 U.S. 801 (1977); National
Collegiate Athletic Ass'n v. Board of Regents of Univ. of Oklahoma, 468
U.S. 85, 86 (1984).
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Courts generally review the conduct of a bona fide joint
venture under the so-called ``rule of reason'' analysis,
discussed next, which balances benefits against any harm to
competition, rather than holding the conduct per se illegal
without analyzing any defense or justification. A second
important doctrine explained below is the nonstatutory labor
exemption from the antitrust laws, which applies generally to
all sports and industries.
1. The rule of reason
Section 1 of the Sherman Act prohibits contracts,
combinations, or conspiracies that unreasonably restrain trade.
15 U.S.C. 1. Legality under the antitrust laws generally
depends on whether the conduct in question is considered
``procompetitive'' or ``anticompetitive.'' Actions and conduct
by joint ventures often have both procompetitive and
anticompetitive aspects, so legality is determined by balancing
the beneficial effects on competition against the restraints
the conduct imposes on competition. This balancing involves
analyzing the facts peculiar to the business, the history of
the restraint, and the reasons why the restraint was
imposed.6 This balancing analysis is known as the ``rule
of reason,'' and is routinely used by courts in deciding
antitrust cases involving professional sports.7
\6\ See, e.g., Chicago Bd. of Trade v. United States, 246 U.S. 231,
238 (1918); National Soc'y of Professional Eng'rs v. United States, 435
U.S. 679, 691 (1978).
\7\ See, e.g., National Collegiate Athletic Ass'n, 468 U.S. at 86;
Los Angeles Memorial Coliseum Comm'n v. National Football League, 726
F.2d 1381, 1386 (9th Cir.), cert. denied, 469 U.S. 990 (1984).
Some professional sports leagues have argued for treatment as a
``single entity'' for purposes of antitrust analysis, rather than
individual teams. See, e.g., Los Angeles Memorial Coliseum Comm'n, 726
F.2d at 1387; San Francisco Seals, Ltd. v. National Hockey League, 379
F. Supp. 966 (C.D. Cal. 1974). See also Gary Roberts, The Single Entity
Status of Professional Sports Leagues under Section 1 of the Sherman
Act: An Alternative View, 60 Tul. L. Rev. 562 (1986); Myron C. Grauer,
Recognition of the National Football League as a Single Entity under
Section 1 of the Sherman Act: Implications of the Consumer Welfare
Model, 82 Mich. L. Rev. 1 (1983). Because there can be no ``contract,
combination, or conspiracy in restraint of trade'' unless the conduct
involves two or more separate entities, such treatment would immunize
sports leagues against most antitrust liability. See Copperweld Corp.
v. Independence Tube Corp., 467 U.S. 752 (1984). Courts have rejected
the argument that sports leagues constitute a single entity. See, e.g.,
Los Angeles Memorial Coliseum Comm'n, 726 F.2d 1381; North Am. Soccer
League v. National Football League, 670 F.2d 1249, 1257-1259 (2d Cir.),
cert. denied, 459 U.S. 1074 (1982); cf. Chicago Professional Sports &
WGN v. National Basketball Ass'n, 961 F.2d 667 (7th Cir.), cert.
denied, 113 S. Ct. 409 (1992) (Judge Easterbrook remanded case and
encouraged league to raise single entity theory before district court).
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While most restraints of trade are analyzed in terms of
their reasonableness based on their nature, purpose, and
effect, practices such as price fixing have such a pernicious
effect that they are presumed conclusively to be unreasonable.
Under the per se rule, these ``naked restraints'' on
competition are deemed to be automatic antitrust violations
without inquiry into their specific harm or business
justifications.
In sports cases, as noted, the courts typically rely on the
rule of reason to look at the purpose of any restriction and
whether it reasonably relates to legitimate objectives or
whether it is motivated by an anticompetitive intent, such as
eliminating a competitor from the marketplace. The legality of
a practice under the rule of reason can only be determined by
its effect on competition in a relevant market. That is, to
constitute an antitrust violation, the restriction must result
in the substantial foreclosure of competition of a particular
product in a particular geographic area.
2. Nonstatutory labor exemption
Understanding the broad outlines of the ``nonstatutory
labor exemption'' is necessary to determine the practical
impact and effect of S. 627. The nonstatutory labor exemption
from the antitrust laws applies to all sports and industries,
regardless of the existence of other antitrust exemptions.
In an effort to harmonize the nation's antitrust and labor
laws, Congress has since 1914 protected from antitrust
challenge the formation of labor unions and their collective
activities as authorized under the labor laws.8 While the
statutory exemption is limited to unilateral activities of
labor unions and employees, the courts have developed a limited
``nonstatutory'' labor exemption from the antitrust laws that
applies to concerted activities and agreements between labor
and nonlabor parties, such as between a union and employers in
a collective bargaining setting.
\8\ Clayton Act Sec. 6, 15 U.S.C. 17 (exempts operation of labor
organizations from the antitrust laws by stating that labor is not an
article of commerce); Clayton Act Sec. 20, 29 U.S.C. 52; and Norris-
LaGuardia Act, 29 U.S.C. 101-110, 113-115.
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The nonstatutory labor exemption is limited, both because
the exemption lasts only as long as there is a collective
bargaining relationship and because all implied exemptions to
the antitrust laws are strongly disfavored and to be construed
as being no broader than clearly necessary. See, e.g.,
California Retail Liquor Dealers Ass'n v. Midcal Aluminum,
Inc., 445 U.S. 97, 105-106 (1980).
That being said, there are conflicts and disagreements
among courts and academics over the extent and scope of the
nonstatutory labor exemption and, in particular, whether a
union must decertify in order for individual employees to be
protected by the antitrust laws.9 It is clear, however,
that at some point the nonstatutory labor exemption ends and
employees have a right to invoke the antitrust laws. Thus, any
assertion that the antitrust laws have nothing to do with labor
relations is incorrect.
\9\ The Supreme Court has granted certiorari in order to review
Brown v. Pro Football, 50 F.3d 1041, 1053-54 (D.C. Cir. 1995), which
adopted a broad view of the nonstatutory labor exemption as protecting
the entire collective bargaining process, and rejected the players'
argument that the exemption expires with the formal collective
bargaining agreement.
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The recent bargaining between the National Basketball
Association and the NBA Players Association provides an
instructive example of the importance of the possibility of
invoking the antitrust laws in the context of labor relations.
The threat of union decertification led the parties to return
to the bargaining table and ultimately to a new contract. The
National Football League has also experienced successful
application of the antitrust laws to the relationship between
labor and management in the multiemployer context.
The Committee need not address or resolve the debate over
the scope of the nonstatutory labor exemption and whether
decertification is a necessary prerequisite before players
invoke the antitrust laws. It is sufficient to recognize that
the antitrust laws play a role in the labor-management context,
and S. 627 will ensure that the same rules apply to baseball as
to all other sports and industries.
c. impact of exemption on baseball's labor relations
On August 12, 1994, major league baseball experienced its
eighth baseball work stoppage since 1972--more stoppages than
in professional basketball, football, and hockey, combined. The
strike undeniably has had an impact on this legislation. For
many supporters of this legislation, the strike provided the
motivation to seek modification of baseball's anomalous
antitrust exemption. On the other hand, among those who defend
the current exemption, the strike provided a reason to take no
action. Senator Thurmond discussed the effect of the strike
during his subcommittee's hearing on February 15, 1995:
Some Members of Congress believe that we should not
get involved during the current strike, while other
Members have asserted that in the absence of a strike
there is no need for the Congress to take action on
this issue. Whether there is a strike or not, it is my
belief that it is proper for the Congress to consider
this antitrust issue as a matter of public policy. The
Congress has considered baseball's antitrust exemption
in the past, including serious attention by the Senate
Judiciary Committee last year, prior to the current
strike. I intend to continue working on this issue,
even if the strike were to end today.
This most recent strike ultimately led to the cancellation
of the remainder of the 1994 regular season and the World
Series. The 1994-95 strike was the longest in professional
sports history, and the only sports work stoppage to result not
only in the complete loss of postseason play, but to carry over
into the next season. The strike caused immeasurable emotional
and financial damage to professional baseball and the country,
as has been noted by the media and fans. This course of events
has crystallized for the public the peculiar tendency of
professional baseball to resort to strikes and lockouts as a
means of resolving labor disagreements--a result, in large
measure, of its judicially granted antitrust exemption. In
testimony before the Antitrust Subcommittee, Mr. Arquit
explained the impact of baseball's special antitrust status on
labor relations as follows:
At present, because of the baseball exemption, owners
can act in concert to impose conditions on players,
even in the absence of the nonstatutory labor
exemption. Knowing that they have the legal freedom
ultimately to play this trump card, the owners have
less incentive to negotiate seriously at the early
stages of the process. In contrast to the Congressional
policy favoring collective bargaining, as embodied by
the National Labor Relations Act, the baseball
antitrust exemption encourages exactly the opposite
conduct by owners: protracted collective bargaining,
leading precisely to impasse. Given the jagged
interface between antitrust and labor relations created
by the exemption, the acrimonious history of collective
bargaining in the context of Major League Baseball
comes as no surprise.
The facts leading up to the strike demonstrate its
connection to baseball's antitrust exemption, for baseball
players faced a choice that would never be faced by any other
professional athlete or similarly situated employee. In 1993,
even though the collective bargaining agreement in major league
baseball had expired, the owners promised the players that they
would not unilaterally implement new terms of employment in the
off-season. Consequently, there was no work stoppage. In 1994,
however, the owners would not make the same promise. If no
agreement was reached between the owners and players before the
1994-95 off-season, then the owners could unilaterally attempt
to change the terms of employment before the period for signing
contracts for the 1995 season.10
\10\ Labor law permits the major league baseball owners, as it does
other employers and owners in other sports, to change the terms of
employment at an impasse in the negotiations.
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The difference between baseball and other sports is that
other athletes have the option of challenging new terms of
employment under the antitrust laws.11 Baseball players,
having no such option, are forced to either accept the new
conditions or strike. Mr. Fehr discussed this dynamic at the
February 1995 hearing:
\11\ As discussed above, players in other sports might have to
decertify their union to be able to bring an action in court, but the
option remains nonetheless.
When parties sit down at the negotiating table they
do so fully knowledgeable of the rights and obligations
of the other side. In the case of baseball, when the
owners sit down at the table they look across the table
at athletes who they believe, if negotiations break
down, have two and only two options--accept their offer
or strike. In any other sport, when the owners sit down
at the bargaining table they look across the table at
athletes who they know, if negotiations break down,
have three options--accept their offer, strike, or
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exercise their rights under the antitrust laws.
As a result, the players chose to strike in August 1994 in
an attempt to force negotiation of a new collective-bargaining
agreement during the season. Unfortunately, negotiations were
unproductive and on December 22, 1994, the owners implemented
new terms of employment. The strike continued, as players
refused to sign contracts under new terms that were less
favorable to the players than those in the expired collective-
bargaining agreement. The remainder of the 1994 season was
lost, including the first cancellation of the World Series. The
1995 season began only after a Federal judge issued an
injunction restoring the terms of the old agreement.12
While the strike has ended, the dispute continues, as no labor
agreement has been reached. This legislation would help resolve
baseball's labor problems. As Chairman Hatch emphasized at the
Committee's markup, S. 627 ``does not impose a big-government
solution to baseball's problems. On the contrary, it would get
government out of the way by eliminating a serious government-
made obstacle to resolution of the labor difficulties in
baseball.''
\12\ Silverman v. Major League Baseball Player Relations Comm., 880
F. Supp. 246 (S.D.N.Y.) (National Labor Relations Board had reasonable
cause to believe that the owners' unilateral actions constituted an
unfair labor practice), aff'd, 67 F.3d 1054 (2d Cir. 1995).
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Arguments that Congress should not interfere in ongoing
labor negotiations are unconvincing when there are no
significant negotiations in progress. As Chairman Hatch said
during the Committee markup: ``There are no meaningful
negotiations underway. The players made their last proposal on
March 30, 1995, and the owners have not made a counterproposal.
Indeed, the owners suspended negotiations for 14 weeks after
the March 30 proposal.'' In light of this record, the Committee
believes that S. 627 could provide the incentive to bring both
parties back to the negotiating table to resolve a labor
dispute that threatens the very future of the game.
d. owners' arguments for special treatment under the antitrust laws
The Committee views antitrust exemptions with skepticism,
because free market competition, protected by our antitrust
laws, forms the foundation of our economic system. As with any
other group advocating an antitrust exemption, the burden of
persuasion lies with the owners, for an exemption should be
maintained only so long as it serves the public interest. In
reviewing the owners' arguments, it is important to note that a
number of the potential concerns raised by the owners are not
implicated by S. 627, for the legislation does not affect the
application of the antitrust laws to franchise relocation
decisions or the relationship of the major leagues to the minor
leagues.
1. Baseball is not a business
The rationale for professional baseball's judicially
created exemption from the antitrust laws in the Federal
Baseball case was that professional baseball was not a business
in interstate commerce. 259 U.S. at 208. It has long been
recognized by the Court, however, that such a proposition is no
longer true. Flood, 407 U.S. at 282. It is now indisputable
that major league baseball not only involves interstate
commerce, but constitutes a significant interstate financial
enterprise, generating revenues and related economic activity--
when not on strike--of billions of dollars a year.
Despite the size and financial impact of professional
baseball, its owners have long asserted that their industry is
notable for its lack of profitability. Prior to the recent
strike, for example, owners had predicted industrywide losses
of some $100 million for the 1994 season. It is impossible to
verify assertions of economic losses due to the lack of
financial disclosure by the owners, as well as the multiplicity
of revenue sources which may benefit owners apart from the team
itself. Of course, profitability is not a factor in determining
whether a particular enterprise is engaged in interstate
commerce or should be subject to the antitrust laws.
2. Effect on the minor leagues
Owners argue for continuation of professional baseball's
antitrust exemption on the basis that it is necessary to
preserve the minor league system. At the Antitrust Subcommittee
hearing, Mr. Selig asserted that:
* * * the exemption preserves and enhances our Minor
League system throughout the United States, allowing
millions of fans the opportunity to watch professional
baseball who would otherwise be deprived of that
privilege.
Currently, most of the various minor league teams are bound
to major league affiliates. This relationship is governed by
the Professional Baseball Agreement, under which the major
league teams substantially contribute to the payment of minor
league player costs. The owners of the major league and minor
league baseball clubs assert that if the antitrust laws applied
to baseball, the major leagues would reduce or eliminate this
``subsidy'' payment. The owners further argue that certain
aspects of the operation of minor league baseball, such as its
reserve clause (by which players are bound to teams for up to
6\1/2\ years), would be susceptible to legal attack under the
antitrust laws. Mr. Rill stated at the Antitrust Subcommittee
hearing that:
If the antitrust exemption is repealed, the continued
use of the minor league contract would very likely
result in challenges similar to those that wheeled
around the majors' reserve clause. * * * Without the
protection of the minor league contract, [major league]
clubs would not invest the hundreds of millions of
dollars necessary to operate the minor league system.
In addition to the usual skepticism with which claims for
antitrust protections are greeted, many commentators and
Members of Congress have questioned the owners' sincerity in
asserting a need for special treatment to protect the minor
leagues, in light of the owners' own threats to the minor
leagues. For example, in the midst of contract negotiations in
1990, the owners threatened to do away with the minors
altogether.13 As the current agreement with the minor
leagues comes up for renegotiation, there is no certainty that
the relationship will continue as it has in the past regardless
of what happens to baseball's antitrust exemption.
\13\ The Associated Press reported that the ``chief negotiator for
the major leagues said the commissioner's office would begin
discussions to start new minor leagues and clubs outside the * * *
current minor league governing body.'' Ronald Blum, AP Sports News,
Lexis, AP File (Nov. 18, 1990); ``Majors, Minors Can't Agree,''
Sporting News, Nov. 26, 1990, at 37 (major league baseball sending out
new franchise applications and would abandon attempts to reach
agreement with minor leagues).
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More importantly, the Committee has elected to leave the
law as it currently exists with regard to the minor leagues.
The legislation expressly states in section 2 that it shall not
be construed to affect ``the applicability or nonapplicability
of the antitrust laws to professional baseball's amateur draft,
the minor league reserve clause, the Professional Baseball
Agreement, or any other matter relating to the minor leagues.''
At the Antitrust Subcommittee hearing, Senator Thurmond
explained the importance of maintaining the status quo for the
minor leagues:
Protecting the current relations with the minor
leagues is important to avoid disruption of the more
than 170 minor league teams which are thriving
throughout our Nation. This is a priority which other
Members and I have clearly expressed.
Despite the unambiguous language of the bill, opponents of
the legislation have continued to maintain that it might harm
the minor leagues. The Committee has asked repeatedly for the
input of the minor leagues, to determine if the proposed
statutory language is insufficient to preserve current law.
However, the minor league owners have proposed no changes to
the language of the bill.
3. Effect on franchise relocations
Those defending the antitrust exemption also contend that
it enables professional baseball to protect local communities
and fans against abandonment by teams seeking more lucrative
venues. Major league baseball does enjoy a good record of
franchise stability, as least compared to other leagues. The
bill expressly provides that it shall not affect ``the
applicability or nonapplicability of the antitrust laws to any
restraint by professional baseball on franchise relocation.''
It is the Committee's intent that the status quo of the law
concerning franchise relocation remain in place. Thus, S. 627
would have no impact on baseball's current ability to prevent
franchise relocation.
4. Effect on broadcast relationships
Another concern voiced with respect to application of the
antitrust laws to professional baseball is that the laws might
unreasonably intrude upon the owners' ability to negotiate
jointly national broadcast contracts. The Sports Broadcasting
Act of 1961 addresses that concern, and applies to professional
baseball. 15 U.S.C. 1291 et seq. The Sports Broadcasting Act
provides a limited antitrust exemption to enable the member
clubs of professional sports leagues to jointly pool their
separate rights in sponsored telecasting of their games to sell
to a purchaser.
To further ensure that baseball comes within the Sports
Broadcasting Act, S. 627 provides that the legislation shall
not be construed to affect ``the application'' of the Sports
Broadcasting Act. Thus, any congressional repeal of baseball's
judicially created antitrust exemption would not prejudice
professional baseball's ability to negotiate jointly such
agreements with the networks. Major league baseball would be in
the exact same position as the other major professional
sports.\14\
\14\ With respect to local broadcast rights, application of the
antitrust laws to major league baseball would prevent unreasonable
restraints of trade from being imposed by the league on individual
teams. Well-established precedent limits a sports league's latitude in
abusing its local broadcast market. See Chicago Professional Sports
Ltd. Partnership v. National Basketball Ass'n, 961 F.2d 667 (7th Cir.),
cert. denied, 113 S. Ct. 409 (1992) (the Chicago Bulls--owned by Jerry
Reinsdorf, coowner of the Chicago White Sox--successfully challenged an
NBA rule limiting the number of games ``superstation'' WGN could
carry). See also National Collegiate Athletic Ass'n, 468 U.S. 85 (NCAA
rule restraining member schools in the number of games they could
contract to broadcast held unlawful). There is no reason to conclude
that baseball cannot live with the same rules that govern the other
professional sports leagues. Indeed, one Federal court has held that
baseball's exemption is inapplicable to local broadcasting. Henderson
Broadcasting Corp. v. Houston Sports Ass'n, 541 F. Supp. 263 (S.D. Tex.
1982).
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5. Role of the baseball commissioner
Some have argued that professional baseball need not be
subject to the antitrust laws, because of the existence of a
strong and independent commissioner. Even if the Committee
accepted the unique argument that private regulation could
suffice to justify an antitrust exemption, examination of the
facts clearly reveals that baseball's commissioner has not been
characterized by ``strength'' and ``independence.'' Major
league baseball has been operating without an even nominally
independent commissioner since Fay Vincent's departure in 1992.
The owners recently weakened the powers of the vacant
commissioner's office through the actions of a Restructuring
Committee. Previously, the commissioner had authority to take
any and all actions deemed to be in the ``best interests'' of
the game. The recommendations recently adopted by the
Restructuring Committee, however, will prevent future
commissioners from using the ``best interests'' powers with
respect to a list of issues, including: the expansion, sale,
and relocation of teams; scheduling; interleague play;
divisional alignment; and revenue sharing among owners. The
commissioner is also explicitly prohibited from using the
``best interests'' powers with regard to collective bargaining
matters. After reviewing the changes the owners made to the
commissioner's office, former commissioner Peter Ueberroth
commented:
Basically, the commissioner seems to have no
portfolio, power or job. * * * I think the changes
dramatically change the position. There will be the
appearance of more responsibility, but substantially
less authority. That's the recipe for a non job.
The commissioner would have no power, for example, to prevent
or end a play-stopping decision by the owners to stage a
lockout of players over collective bargaining issues.
VI. Section-by-Section Analysis
Section 1 states the bill's short title, the ``Major League
Baseball Antitrust Reform Act of 1995.''
Section 2 of the bill amends the Clayton Act to add a new
section 27. Section 27(a) removes the judicially created
antitrust exemption for professional baseball and provides that
the antitrust laws shall apply to the business of professional
baseball as they apply to all other professional sports. The
phrase ``the antitrust laws shall apply'' is intended to
incorporate the entire jurisprudence of the antitrust laws, as
it now exists and as it may develop. In so applying the
antitrust laws, the various judicial doctrines which have
developed over the years and now apply to other professional
sports leagues would, depending on the applicable facts, apply
to professional baseball.
S. 627 clarifies that major league baseball's owners and
players are subject to the Nation's antitrust laws. The
legislation was specifically drafted so that it would not
implicate issues relating to other activities, such as
franchise relocation or the operation of the minor leagues. The
bill clarifies the law at the major league level. While it is
far from clear as a public policy matter that clarification of
the antitrust laws as they apply to the minor leagues should be
omitted from this legislation, S. 627 is nonetheless
specifically limited to the major leagues.
New section 27(b)(1) of the Clayton Act states that
subsection (a) does not affect the applicability or
nonapplicability of the antitrust laws to professional
baseball's amateur draft, the minor league reserve clause, the
Professional Baseball Agreement, or any other matter relating
to the minor leagues.
New section 27(b)(2) of the Clayton Act likewise states
that subsection (a) does not affect the applicability or
nonapplicability of the antitrust laws to any restraint on
franchise relocation by professional baseball. Thus, both
subsections (b)(1) and (b)(2) leave the law as it is, and as
the courts may interpret it in future cases.
New section 27(b)(3) of the Clayton Act provides that the
legislation will not affect the application to professional
baseball of the Sports Broadcasting Act, 15 U.S.C. 1291 et
seq., which explicitly permits the owners in sports leagues to
pool their separate rights in sponsored telecasting of their
games.
There is no language in the Committee-approved S. 627 that
would grant baseball players any rights not enjoyed by athletes
in other professional sports. The availability of antitrust
remedies as a last resort has made a positive contribution to
resolving several labor disputes experienced in other
professional sports, and there is no reason why baseball
players and fans should not benefit from these alternatives as
well.
The Committee wishes to make clear that by supporting these
particular modifications of baseball's judicially created
antitrust exemption in S. 627, it does not intend to imply that
more comprehensive change is not also justified--or to imply
that the courts should not act decisively themselves to limit
further baseball's exemption in appropriate cases. Indeed, a
Federal court and the highest court of a State have already
taken such action. Piazza, 831 F. Supp. 420; Butterworth, 644
So. 2d 1021.
VII. Cost Estimate
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 8, 1995.
Hon. Orrin G. Hatch,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
reviewed S. 627, the Major League Baseball Antitrust Reform Act
of 1995, as ordered reported by the Senate Committee on the
Judiciary on August 3, 1995. CBO estimates that enacting S. 627
would result in no significant costs to the federal government
or to state or local governments. Also, enacting this bill
would not affect direct spending or receipts. Therefore, pay-
as-you-go procedures would not apply.
S. 627 would remove major league baseball's current
exemption from antitrust laws, except that it would retain the
antitrust exemption for minor league baseball and for decisions
regarding the relocation of major league franchises. By
removing the antitrust exemption under these circumstances,
this bill would allow the players under certain circumstances
to challenge in federal court certain decisions by the owners.
Enacting S. 627 would impose additional costs on the U.S. court
system to the extent that additional antitrust cases are filed.
However, CBO does not expect any resulting increase in caseload
or court costs to be significant.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susanne S.
Mehlman.
Sincerely,
June E. O'Neill,
Director.
VIII. Regulatory Impact Statement
In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee concluded that no
significant additional regulatory impact or impact on personal
privacy would be incurred in carrying out the provisions of
this legislation. After due consideration, the Committee
concluded that enactment of the Act would not create any
significant additional paperwork.
IX. ADDITIONAL VIEWS OF SENATOR THURMOND
It has been a pleasure to work with Chairman Hatch on S.
627, the Major League Baseball Antitrust Reform Act of 1995,
during this Congress. I join in the majority report, and wish
to emphasize a few key points on this important issue.
First, the Antitrust, Business Rights, and Competition
Subcommittee s hearing on ``The Court Imposed Major League
Baseball Antitrust Exemption,'' which I chaired in February
1995, was vital to provide the foundation for this legislation.
While those who oppose the bill assert that additional analysis
is needed, I believe we achieved the goal of providing a
balanced and fair hearing to both those who favor baseball's
antitrust exemption and those who oppose it. Moreover, both the
Senate and the House of Representatives have previously held
numerous hearings on this issue. Although the antitrust aspects
of baseball's special exemption are complex, the issue does not
suffer from lack of public hearings.
Second, opponents of this legislation continue to dwell on
whether the Congress should get ``involved'' in baseball's
antitrust exemption, given that a new labor agreement has not
been reached despite the end of the strike. However, the
Congress has played an important role in baseball's antitrust
exemption simply by its inaction. The Supreme Court has long
viewed as outdated the reasoning underlying its decision
creating baseball's exemption in Federal Baseball Club, Inc. v.
National League of Professional Baseball Clubs, 259 U.S. 200
(1922), yet has steadfastly maintained that the solution should
come from Congress. Flood v. Kuhn, 407 U.S. 258 (1972). Thus,
the Congress is involved even if it fails to act, as I stated
at the Antitrust Subcommittee markup of S. 627 on April 5,
1995:
As long as the special antitrust exemption remains in
place for baseball, the Congress is involved in the
sport in a way that it should not be. The Congress has
an ongoing impact on the sport simply by permitting the
special exemption to remain long after the factual
basis for it has disappeared.
This bill is not a matter of choosing between owners and
players--for both groups are responsible for baseball's labor
problems--but exercising the responsibility of the Congress to
legislate an end to the judicially created exemption which the
Court itself has long held to be an anomaly.
Finally, opponents assert that S. 627 would be harmful to
baseball's ability to control franchise relocation, despite
language in the bill expressly providing that it shall not
affect ``the applicability or nonapplicability of the antitrust
laws to any restraint by professional baseball on franchise
relocation''. In introducing S. 627, I stated in the clearest
possible terms that the legislation maintains the status quo
for franchise relocation, although I noted ``that it may be
worthwhile reviewing the franchise relocation issue as it
relates to all professional sports.'' Relocation is a
significant issue to all professional sports, as illustrated by
the events of the last year in the National Football League. As
I indicated at my subcommittee's February hearing, legislation
may be desirable to protect objective franchise relocation
rules in professional sports. Nonetheless, S. 627 would have no
impact on baseball's current ability to control franchise
movement.
Strom Thurmond.
X. MINORITY VIEWS OF SENATOR SPECTER
I have been involved in sports antitrust issues since
coming to the Senate. Franchise relocation, protection for
smaller market teams, revenue sharing have all been issues of
concern to me, and all implicate the antitrust laws. Like many
Americans, I have been a sports fan since I was a child. I was
especially a baseball fan. My current perspective, however, is
not just a fan's. As a legislator, I must look at the numerous
issues affecting sports and public policy, from intangible ones
that interest fans to the very tangible economic issues that
drive professional sports today. After carefully weighing all
the relevant issues, I must oppose S. 627 at this time.
Despite the successful completion of the 1995 baseball
season, there is still no agreement between the players' union
and the major league owners. The underlying issues, which have
caused several strikes and lockouts over the past several
years, most notoriously the strike that began during the 1994
season, causing the cancellation of the World Series, have not
been resolved. The players are free to strike again, and the
owners retain the option of locking the players out. Even as
free agents are signed and the ``hot stove'' league is in full
swing, the 1996 season is threatened by this failure of the
parties to reach a collective-bargaining agreement.
Whatever the merits of eliminating major league baseball's
broad, judicially created exemption from the antitrust laws,
Congress should not act while the labor situation remains
uncertain. Any action we take is certain to be viewed as
favoring one side to the dispute or the other. In such
instances, Congress acts best when it does not act at all. The
complex labor problems that have characterized baseball for the
past years ought to be resolved by the parties without
congressional interference.
I am particularly concerned with this legislation because
it will not achieve one of its primary purposes, that of
resolving baseball's labor strife. This is a complex time for
labor relations in professional sports. The professional
football players' union was decertified in 1989. In the spring
of 1995, the professional basketball players' union faced a
serious internal struggle over whether to be decertified, and
the National Basketball Association locked out the players.
These matters were finally resolved with the adoption of a new
collective-bargaining agreement. Even after the agreement was
struck, however, some union members took the union to court. In
hockey, last season began with a players' strike against the
National Hockey League.
Football, basketball, and hockey do not enjoy an exemption
from the antitrust laws. Given the labor relations records of
these other professional sports, there is no reason to believe
that the existence of major league baseball's antitrust
exemption is the reason for baseball's labor relations
problems. Thus, Congress should not intervene to no purpose
while there is no contract between the players' union and the
owners.
The problems faced by baseball and these other sports
reflect a variety of factors. Experts cannot agree on solutions
to the problems that confront sports. Some argue that
baseball's problems are especially acute because of the
exemption from the antitrust laws, which makes baseball less
susceptible to market forces. Others argue that the antitrust
exemption is irrelevant to baseball's problems. I am not able
to say which side has the better of the argument, but the labor
problems encountered by other professional sports leagues makes
me skeptical that eliminating baseball's antitrust exemption
would have a salutary effect on its labor relations.
I do generally agree with the supporters of this bill that
exemptions from the antitrust laws are bad public policy.
Baseball, however, has such an exemption. Expectations and
reliance interests are based on that exemption. Whether or not
that exemption ought to be retained, I believe strongly that
given the current state of play, it would be a mistake for
Congress to enact this bill. This bill would only upset the
current situation, making it less likely that the parties to
baseball's labor strife will be able to resolve their dispute
between themselves. We should not lose sight of the fact that
voluntary collective bargaining is the basis of labor relations
in this country. The parties should be left to settle their
current impasse themselves without interference from Congress.
I must also raise a parochial reason for opposing the bill:
the future of the Pittsburgh Pirates. While the bill purports
to preserve the antitrust exemption that allows major league
baseball to block franchise relocations, the uncertainty that
the bill would engender is likely to result in severe
dislocations to the sport. In such an atmosphere, it is
impossible to be certain that the Pirates would be retained in
Pittsburgh.
S. 627 does nothing to solve the roiling labor issues in
baseball. It will only serve to upset the current situation
even further and can only make a labor agreement less likely,
as all sides learn to deal with a new set of rules. Whatever
the possible merits of this bill as antitrust policy, this is
the wrong time for the Senate to adopt this bill.
Arlen Specter.
XI. MINORITY VIEWS OF SENATOR SIMON
In approving a repeal of major league baseball's
longstanding antitrust exemption, this Committee has decided to
alter the balance of power in an ongoing labor dispute between
millionaires while the truly pressing problems facing our
Nation remain unresolved. Congress should be devoting its time
and resources to other matters rather than inserting itself
into a controversy for which both sides deserve blame. Indeed,
of the many labor disputes ongoing in America today, I can
think of few, if any, that are less deserving of our attention
than this one. The American people, who have consistently
opposed government's interference in this area, agree.
Not only does S. 627 reflect Congress' misplaced
priorities, it is also unlikely to solve the problem it
purports to address. Under two recent Federal appellate
decisions interpreting the antitrust laws' so-called ``non-
statutory labor exception,'' 1 it appears that the
antitrust laws are not applicable to the dispute between the
players and the owners. Given that the baseball strike of 1994-
95 ended not because of any expected change in major league
baseball's status under the antitrust laws, but because of the
courts' application of our labor laws, S. 627 also appears
unnecessary. In short, it is doubtful that S. 627 will do
anything other than give the players an additional weapon in
their broader, ongoing conflict with the owners.
\1\ Brown v. National Football League, Inc., 50 F.3d 1041 (D.C.
Cir. 1995); National Basketball Association v. Williams, 45 F.3d 84 (2d
Cir. 1995).
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Finally, while I agree that baseball's antitrust exemption
raises certain questions, we should also remember that in some
ways, Congress may have more to learn from professional
baseball than professional baseball has to learn from Congress.
Of the four major professional sports in America, baseball has
enjoyed by far the most franchise stability. While NFL fans
from Cleveland and Houston--and perhaps other cities--are faced
with the prospect of losing their beloved teams to other
communities, and while this very Committee is studying
antitrust legislation to prevent these moves, no baseball
franchise has changed cities in over a quarter-century. Even
assuming that baseball's work stoppages are a direct result of
baseball's antitrust exemption--and we should remember that
those major sports which do not enjoy an antitrust exemption
have also experienced often-extended work stoppages in their
own right--the problems created by the application of the
antitrust laws to franchise relocation may be, in the minds of
many loyal fans, even greater.
S. 627 seeks to address this prospect by excepting
franchise relocation issues from its coverage. Similarly, it
attempts to deal with concerns about the effect of the bill on
the minor leagues by excepting the minor leagues from its
scope. Disputes regarding the scope and nature of these
exceptions, however, will undoubtedly result in additional
litigation--the outcome of which simply cannot be predicted.
Indeed, the minor leagues oppose S. 627 despite the minor-
league exception, and it can safely be said that this
legislation, at the very least, should make those concerned
about sports franchise relocation very uncomfortable.
The variety of problems facing our professional sports
leagues demonstrates that even if professional baseball is a
deserving subject of Congress's attention, such consideration
should not take place on an ad hoc basis, in response to one
``crisis'' or another, but should be part of an overall and
careful reexamination of professional sports under the law.
Only by studying the issue raised by S. 627 in this broader
context can Congress avoid the justifiable criticism that it is
simply playing favorites in a rancorous dispute that, but for
the parties' stubbornness and lack of reason, should have been
resolved long ago.
Paul Simon.
XII. MINORITY VIEWS OF SENATORS BROWN AND FEINSTEIN
In 1922, Justice Oliver Wendell Holmes determined that the
game of baseball is not commerce to be regulated by the
antitrust laws. Since that time, Congress and the courts have
had ample opportunity, during good times and bad, to revoke
that antitrust exemption. Proponents of this legislation argue
that the baseball antitrust exemption, which has remained in
place for 75 years, to the benefit of franchise stability and
minor league support, despite repeated judicial and
congressional inquiries, should now be lifted in the middle of
an ongoing labor dispute.
That argument is unconvincing for a couple of reasons.
First, we need to acknowledge, just as the National Football
League (NFL) has after suffering through a stunning number of
franchise relocations, that there are times when, in the
interest of the fans, professional sports teams must act as
business partners instead of business competitors. For example,
the Colorado Rockies and the San Francisco Giants need to agree
on the size of the field and the rules of the game before they
can successfully compete. Second, and more importantly,
Congress should not, as a matter of principle, intervene in an
ongoing labor dispute.
Baseball and the Interests of the Fans
Before we jump to any conclusions about whether Baseball
has abused its exemption from application of the antitrust
laws, we should consider some of the facts:
Baseball has a history of franchise stability that
must be the envy of the other major sports. In the past
year, the NFL had two franchises abandon the second
largest market in the United States: the successful Los
Angeles Raider franchise relocated from Los Angeles to
Oakland, and the Los Angeles Rams jumped to St. Louis.
The NFL also will apparently now lose the historic
Cleveland Browns franchise to Baltimore and the Houston
Oilers to Memphis. The Chicago Bears are threatening to
move to Gary, IN, while the Phoenix team (itself a
recent transplant from St. Louis) has talked of moving
again. In hockey, franchises continue to move
regularly. Even the NBA, which has gone through the
most popular era in its history after a decade of
problems, had the San Diego Clippers relocate to Los
Angeles. Baseball has not had a single relocation in
the past 25 years. On the contrary, the recent effort
of the San Francisco Giants to move was rejected by
Baseball and the Giants remained in San Francisco.
Contrary to the Oilers, at the urging of Baseball, the
Houston Astros decided not to pursue relocation but
instead redoubled their effects to be successful in
Houston. All of that was made possible by the
exemption, without which Baseball would be in the same
vulnerable position as the other sports. Given that
Baseball, more than any other sport, is steeped in
tradition and stability, unchecked franchise relocation
would be disastrous to the national pastime.
Regarding the number of franchises, Baseball has kept
pace with the other major sports. In addition, Baseball
has already announced the addition of its 29th and 30th
franchises to begin play in Tampa Bay and Phoenix in
1998 and has under consideration the possibility of
adding two additional franchises before the year 2000.
Despite the exemption, Baseball supports the minor
league system at a level of over $200 million per year.
Minor league baseball benefits hundreds of communities,
large and small, across the country. Relations between
the major and minor leagues are at an all time high.
The relationship is so inextricably intertwined that
any attempt to eliminate the exemption, upon which 75
years of cooperative dealings have been based, even
with an attempted carve out, will no doubt create
numerous points of contention. For instance, the
majority is clear that it is eliminating the exemption
with regard to labor relations. But more than 37
percent of the players on each team's major league
roster are actually playing in the minor leagues.
Despite this bill's attempt to except the minor
leagues, the potential for conflict is inherent and
obvious.
Civic Involvement With Home Teams
Professional baseball and football are not like other
businesses. They are not commodities like Coca-Cola or Post
Toasties. Around baseball teams and football teams, perhaps
more than anything else, there is a civic spirit and a civic
commitment. Communities show this spirit in building stadiums
and fixing up stadiums, which are very costly; in chamber of
commerce support; civic lunches and receptions; and parades and
other community celebrations.
There is no business that has the kind of civic dimension
that professional baseball and football have. The players are
role models for children, spending time at recreation centers
and schools, helping underprivileged youngsters. Employees of
other companies do not do this to the same extent. Indeed, most
teams have foundations which perform charitable and community
activities, such as engaging in canned food drives, toys for
tots campaigns, and raising money for causes such as children's
hospitals, Special Olympics, and the March of Dimes. There are
no companies which are so involved in the civic dimension of
the community.
Intervening in an Ongoing Labor Dispute
The current bill intervenes in a continuing labor dispute.
The majority report justifies this legislation on the basis
that it ``would help resolve baseball's labor problems.'' This
conclusion is dubious at best.
The middle of an ongoing labor dispute is not the right
time to change the rules of the game. Both President Clinton
and his chosen mediator, William Usery, repeatedly stated that
the problems of baseball should be decided at the negotiating
table. But, every time this issue comes before Congress, the
parties drop what they are doing, leave the negotiating table,
and focus their efforts on legislation.
Despite baseball's antitrust exemption, the Major League
Baseball Players Association has been among the most successful
unions in any industry in the history of this country. The
average player's salary has grown to over $1 million per year,
despite several teams have severe financial problems, according
to Major League Baseball. Through negotiations, the Players
Association has also gained from the owners, in addition to the
exorbitant salaries, the elimination of the reserve system, and
treble damages for any collusion among owners regarding free
agents.
Contrary to the proponents' suggestions, the courts are not
always hostile to the baseball exemption. The two Federal
courts which have addressed the exemption since the Piazza
opinion cited by the majority expressly rejected Piazza and
held that the exemption was both valid and expansive. New
Orleans Pelicans Baseball, Inc. v. National Ass'n of
Professional Baseball Leagues, Inc., No. 93-0253, 1994 U.S.
Dist. WL 631144 (E.D. La. Mar. 1, 1994); McCoy v. Major League
Baseball, No. C95-383D, 1995 U.S. Dist. Lexis 19858 (W.D. Wash.
Nov. 2, 1995). The Butterworth case cited by the majority is a
State court decision which contained no independent analysis
and relied entirely on the reasoning of Piazza.
Baseball is not the only enterprise with this regulatory
status. Other industries have operated under regulatory schemes
independent of the antitrust laws. Many will disagree with the
suggestion by the majority that baseball is the only industry
to claim an exemption without being subject to alternative
regulatory supervision. Here are some illustrations:
Fewer than 3 years ago, in the National Cooperative
Production Amendments Act of 1993, Congress conferred
broad protection from antitrust treble damages
liability on production joint ventures in any industry,
so long as they file notification with the Justice
Department. This legislation extended to production
joint ventures the same longstanding antitrust
protection previously accorded to research joint
ventures by the National Cooperative Research Act of
1984.
The Soft Drink Interbrand Competition Act of 1980
confers broad antitrust protection on the distribution
systems of soft drink producers, with no regulatory
supervision, so long as soft drinks face ``substantial
and effective competition.'' That act has been invoked
repeatedly and successfully to forestall antitrust
liability.
The Health Care Quality Improvement Act of 1986
protects doctors and other health care providers from
all damages liability under the antitrust laws for peer
review activities so long as those activities offer a
minimum of procedural due process.
It is obvious that Baseball, like these other businesses,
will not come crashing down if antitrust laws do not apply in
the near future. Whereas, if we were to act now, it would be to
take a position in an ongoing dispute. That should not be the
role of Congress. Elimination of the antitrust exemption would
not ensure labor peace--to the contrary, it would guarantee
protracted, uncertain, and expensive litigation and would
complicate matters further.
The Exemption Is Unrelated to the 1994-95 Baseball Strike
Proponents of the legislation suggest that all of the labor
discord in Baseball can somehow be attributed to the existence
of the exemption and that its elimination would be a labor
panacea. Nothing could be further from the truth. In fact, all
that its elimination would cause is unbridled litigation. In
addition, the nonstatutory labor exemption would preclude an
antitrust suit absent decertification in any event, so
eliminating the exemption in the fashion contemplated would
merely shift the fight from the current judicial exemption to
the nonstatutory labor exemption.
Despite the applicability of the antitrust laws to the
other major sports, they too have had their own significant
labor problems. The NFL went through 5 years of litigation and
even played a portion of one season with replacement players.
The National Hockey League (NHL) lost a significant part of
last season and almost lost the entire season while the owners
engaged in a lockout of the players. Although the National
Basketball Association (NBA) has not lost any portion of a
season as a result of a work stoppage, it did play the first 55
days of this season with replacement referees.
Following the proponents' logic that the antitrust
exemption somehow created the labor controversy, we would have
to assume there are other examples, aside from the strike, of
labor disadvantage. Take a look at salaries: the NBA, the NFL
and the NHL, which do not have an exemption, do have a form of
salary restraint. Baseball, which has the exemption, does not
have a salary restraint.
By suggesting that the 1994 strike could have been averted
if only the union had the ability to file an antitrust suit
against the owners, supporters of the proposed legislation
greatly overstate both the speed and effectiveness of antitrust
legislation. Whatever else they may be, antitrust cases are
uncertain, expensive, and above all, very time-consuming.
As the majority concedes, before an antitrust suit could be
filed, the union will still confront--as do the players in
every other professional sport--the nonstatutory labor
exemption from the antitrust laws, which derives from several
Supreme Court decisions, most notably Connell Constr. Co. v.
Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616
(1975). In order to bring an antitrust action against the
owners, the players would first have to decertify their union
to sever the collective bargaining relationship with the club
owners. The players could then have to file suit and proceed
through the typical morass that comprises current antitrust
litigation. Only the NFL has proceeded down such a path, and
that litigation took in excess of 5 years to resolve, with the
final resolution not determinative.
Although the majority report only discusses the repeal of
baseball's antitrust exemption as affecting labor issues, it
likely will have ramifications in other areas as well.
Disciplinary Action
Dating all the way back to the Black Sox scandal of 1919,
baseball has been able to effectively discipline its own
personnel. However, the exercise of this power has been
challenged on antitrust grounds. For example:
When the Executive Council of Major League Baseball
suspended Cincinnati Reds owner Marge Schott for
racially and ethnically insensitive remarks, Ms. Schott
argued that without the antitrust exemption her
suspension would be considered an illegal group boycott
violative of antitrust laws. Schott made it clear that
without an antitrust exemption, every league suspension
could be challenged in court.
When baseball Commissioner Bowie Kuhn disapproved the
assignments of three player contracts after their sale
by Oakland Athletics owner Charles Finley, the
Athletics commenced an action in federal court claiming
violations of antitrust laws.
Other sports have also been subjected to antitrust
challenges for protecting the integrity of their games:
When professional golfer Jane Blalock was suspended
by the Ladies Professional Golf Association for
allegedly cheating, she retaliated against the league
by commencing an antitrust challenge.
When professional bowler Ralph Manok was suspended
for cheating by his bowling association, he too
responded by instituting antitrust litigation.
When NBA star Jack Molinas was indefinitely suspended
for gambling, he sued the league on antitrust grounds.
Removing baseball's exemption could well open the
floodgates to further challenges to Baseball's important
ability to protect the integrity of the game.
Equipment Deals
Eliminating the antitrust exemption could also subject
Major League Baseball to challenges of exclusive contracts that
it has established with equipment manufacturers. Although the
exclusive equipment deals help to maintain the uniformity of
the game, every new contract would carry the risk of an
antitrust challenge. Antitrust challenges against other sports
leagues illustrate just some of the types of costly and
counterproductive court battles baseball could face if the
exemption is lifted:
When the PGA banned the use of golf clubs with
certain U-shaped grooves on the professional tour, a
golf club manufacturer sued, alleging that the ban was
an unlawful boycott and restraint on competition in
violation of antitrust laws.
The United States Tennis Association, which banned
double-strung racquets from the professional tour, was
subjected to a lengthy antitrust challenge by a tennis
racquet manufacturer before the court ruled in the
USTA's favor.
In another golf case, a golf shoe manufacturer sued
the USGA on antitrust grounds, alleging that a USGA
determination that a certain golf shoe did not conform
to a USGA rule violated antitrust laws.
It is clear from past examples of lawsuits--both within and
outside of Major League Baseball--that Major League Clubs could
face a storm of new antitrust challenges if the exemption is
lifted. While it is impossible to say for certain whether any
or all of these challenges would succeed, it is important not
to underestimate the chilling effect of potentially costly and
time-consuming antitrust litigation, which will only be
encouraged by this legislation.
Conclusion
The important consideration here is the fans. Our first
priority ought to be to protect them. Ending a baseball season
is unacceptable; so too is franchise relocation; so too is
terminating support of the minor leagues. To accommodate these
interests, our sports teams are going to have to act as
business partners at times. As even the proponents concede, the
exemption serves a useful function in some areas: franchise
stability, the relationship with the minor leagues, certain
broadcast matters. To act now in the middle of an ongoing labor
dispute would be counterproductive. As a matter of principle,
Congress ought to stay out of this continuing labor dispute.
Hank Brown.
Dianne Feinstein.
XIII. MINORITY VIEWS OF SENATOR FEINSTEIN
In addition to the joint views I have filed with Senators
Brown and Heflin, I write separately to add some personal
views. As the former mayor of a city with two professional
sports franchises, baseball's Giants and football's 49ers, I
had to fight to keep baseball in San Francisco, and I know
firsthand that the only reason the Giants didn't leave San
Francisco was baseball's antitrust exemption. The need to
maintain franchise stability, which baseball's antitrust
exemption clearly does--no Major League Baseball team has
abandoned its city for another since the Washington Senators
left the Nation's Capital for Texas almost 25 years ago--is the
overriding reason that I have consistently opposed repeal of
the exemption, and will do everything in my power to see that
this bill does not pass.
Moreover, I believe that baseball's antitrust exemption,
far from being repealed, should be extended to other major
professional sports. As we state in the joint views, these
teams, too, are integral parts of their communities, and their
fans and hometowns deserve the same protections which baseball
fans enjoy. Thus, I intend to introduce legislation which will
extend the exemption to other sports.
Dianne Feinstein.
XIV. Changes in Existing Law
In compliance with paragraph 12 of Rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
S. 627, as reported, are shown as follows (existing law which
would be omitted is enclosed in bold brackets, new matter is
printed in italics, and existing law in which no change is
proposed is shown in roman type):
UNITED STATES CODE
* * * * * * *
TITLE 15--COMMERCE AND TRADE
* * * * * * *
CHAPTER 1--MONOPOLIES AND COMBINATIONS IN RESTRAINT OF TRADE
Sec. 12. Words defined; short title
(a) ``Antitrust laws,'' as used herein, includes the Act
entitled ``An Act to protect trade and commerce against
unlawful restraints and monopolies,'' approved July second,
eighteen hundred and ninety; sections seventy-three to seventy-
seven, inclusive, of an Act entitled ``An Act to reduce
taxation, to provide revenue for the Government, and for other
purposes,'' of August twenty-seventh, eighteen hundred and
ninety-four; an Act entitled ``An Act to amend sections
seventy-three and seventy-six of the Act of August twenty-
seventh, eighteen hundred and ninety-four, entitled `An Act to
reduce taxation, to provide revenue for the Government, and for
other purposes,' '' approved February twelfth, nineteen hundred
and thirteen; and also this Act.
* * * * * * *
Sec. 27. (a) Subject to subsection (b), the antitrust laws
shall apply to the business of professional major league
baseball.
(b) Nothing in this section shall be construed to affect--
(1) the applicability or nonapplicability of the
antitrust laws to professional baseball's amateur
draft, the minor league reserve clause, the
Professional Baseball Agreement, or any other matter
relating to the minor leagues;
(2) the applicability or nonapplicability of the
antitrust laws to any restraint by professional
baseball on franchise relocation; or
(3) the application of Public Law 87-331 (15 U.S.C.
1291 et seq.) (commonly known as the Sports
Broadcasting Act of 1961).
* * * * * * *