South-Western College Publishing - Economics  

Policy Debate: Should the antitrust exemption for baseball be eliminated?


 

Issues and Background

If baseball's exemption were lifted, real fans might be able to afford tickets, and teams would stop holding cities hostage.
~Allen Barra

 

Baseball's status in the life of the nation is so pervasive that it would not strain credulity to say the Court can take judicial notice that baseball is everybody's business. To put it mildly and with restraint, it would be unfortunate indeed if a fine sport and profession, which brings surcease from daily travail and an escape from the ordinary to most inhabitants of this land, were to suffer in the least because of undue concentration by any one or any group on commercial and profit considerations. The game is on higher ground; it behooves every one to keep it there.
~Judge Irving Ben Cooper

 

In 1901, Napoleon Lajoie attempted to leave his National League team to join a new American League team. This was in violation of a National League contract that required him to either play for his original team or not play baseball. This dispute, and others of this sort, were settled in 1903 with the creation of the National Agreement between the two leagues. This agreement held that the two leagues of major league baseball constituted a shared monopoly that is jointly operated by all of the owners. Under this agreement, the owners established rules concerning player contracts and salaries.

This monopoly arrangement was challenged in the Federal Baseball case in 1922. This case was brought by owners of teams in the Federal League (created in 1913 in an ultimately unsuccessful attempt to provide a third league that would compete with the National and American Leagues). The U.S. Supreme Court ruled that baseball is a sport subject to state regulations and not a business subject to Federal antitrust laws. While the Supreme Court ruled in Toolson (1953) that the decision in the Federal Baseball case was in error, they held that since the situation had not been altered by Congress during the intervening 30 years, that it was an issue to be addressed by Congress and not the courts.

In 1972, the player's union challenged baseball's antitrust exemption in the case of Flood v. Kuhn. Once again, the Supreme Court held that the elimination of baseball's antitrust exemption should be decided by Congress and not the courts. Since Congress had addressed this issue on many occasions without taking action, it was held that longstanding Congressional inaction on this issue was a sign that Congress does not intend for baseball to be subject to the antitrust laws.

One of the issues that most troubled baseball player advocates is the use of the reserve system. Under this system, used since the early years of baseball, a player can only play for the team that initially signed the player. While that contract could be traded to other teams, players were restricted to negotiating over salary with only one team. This system was weakened substantially as a result of an arbitrator's decision in 1975. This decision allowed players to become free agents after one year of involuntary play for a team. In response to this decision, collective bargaining agreements created a system in which contracts allow players to become "free agents" after a specified number of years. Player salaries rose substantially with the introduction of free agency.

In 1998, Congress passed the Curt Flood Act which revoked baseball's exemption from the antitrust laws in matters dealing with labor relations. The remainder of the exemption was left intact.

Opponents of the antitrust exemption for baseball argue that this exemption results in higher ticket prices and provides individual teams with the ability to extort public funding for the construction (or reconstruction) of baseball stadiums. (For more information on this topic, you may wish to visit the related debate on public funding of municipal sports stadiums.) It is suggested that, in the absence of the antitrust exemption, cities in which baseball is highly valued would be able to attract additional teams. In this situation, cities would not be as subject to a threat that a team will leave if the city does not provide a new or rebuilt stadium.

Those who advocate baseball's antitrust exemption, however, argue that major league baseball is able to exert pressure on teams to stay in their current location. Other leagues are unable to do this because of the threat of antitrust violations. As evidence of this, they note that no Major League Baseball team located in a U.S. city has relocated since 1971 when the Washington Senators moved to Texas. (In 2005, Major League Baseball returned to Washington when the Montreal Expos relocated and became the Washington Nationals.)

Proponents of the antitrust exemption also argue that the antitrust exemption allows professional baseball to maintain a high quality of play by restricting the number of teams allowed to compete in the major leagues. They often suggest that baseball's monopoly power is significantly limited by competition for fans with other professional sports and other forms of entertainment. This competition, it is suggested, helps keep prices relatively low.

At the end of the 2001 baseball season, Major League Baseball announced plans to eliminate two unprofitable baseball franchises. It was widely believed that the Montreal Expos and the Minnesota Twins were likely candidates for elimination. This proposal resulted in substantial criticism of baseball's antitrust exemption. "The Fairness in Antitrust in National Sports (FANS) Act" was proposed in late 2001 in response to this announced contraction. This Act would have eliminated the antitrust exemption in cases dealing with team relocation or elimination. This Act may have helped prevent the elimination of these franchises.

The debate on the antitrust exemption for baseball is now nearly 80 years old. It is likely to continue to be a source of contention for some time to come.

 

Primary Resources and Data

  • Major League Baseball
    http://www.mlb.com/
    The official web site for Major League Baseball contains information on current issues related to professional baseball.

  • ESPN, Baseball
    http://sports.espn.go.com/mlb/index
    This web site contains links to online ESPN stories and video clips related to baseball.

  • USA Today, Baseball
    http://www.usatoday.com/sports/mlb.htm
    USA Today's online coverage of baseball events and issues is available at this web site.

  • Yahoo! Sports, "Major League Baseball"
    http://sports.yahoo.com/mlb/
    Yahoo! provides current information and links to current and recent news stories related to baseball on this web site.

  • Major League Baseball History: 1871 - present
    http://baseballhistory.vzz.net/
    This web site, provided by Billy Harrelson, contains historical information and statistics related to major league baseball.

  • Baseball-Reference.com
    http://www.baseball-reference.com/
    This web site provides current and historical information on teams, players, and ballparks.

  • John Skilton, "Baseball Links"
    http://www.baseball-links.com/
    An extensive collection of links to online baseball resources may be found at this site. Links to news articles may be found here along with statistics and information related to all levels of baseball teams.

  • The Baseball Archive, "Minimum & Average Player Salaries 1967-1997"
    http://www.baseball1.COM/bb-data/bbd-mas.html
    This web site provides data on minimum and average major league baseball salaries from 1967 to 1997.

  • The Baseball Almanac, "Minimum Wage & Average Salary Data"
    http://www.baseball-almanac.com/charts/salary/major_league_salaries.shtml
    This web site provides data on minimum and average major league baseball salaries at five-year intervals from 1970 to the present.

  • MLB4Uwiki, "Average Salaries"
    http://mlb4u.com/wiki/index.php/Average_Salaries
    This wiki site provides annual data on average and minimum player salaries by year and average salaries by team.

  • MLB4Uwiki, "Payrolls"
    http://mlb4u.com/wiki/index.php/Payrolls
    This wiki site provides recent data on on opening day team payrolls for major league baseball teams.

  • The Baseball Almanac, "Minimum Wage & Average Salary Data"
    http://www.baseball-almanac.com/charts/salary/major_league_salaries.shtml
    This web site provides data on minimum and average major league baseball salaries at five-year intervals from 1970 to the present.

  • Historic Baseball
    http://www.historicbaseball.com/
    This web site provides information on the history of baseball as well as information about the current season.

  • Historic Baseball, "Renegade League Battled with AL, NL for Fans"
    http://www.historicbaseball.com/federalleague.html
    This page provides a nice summary of the history of the Federal League and the background of the case that established the antitrust exemption for baseball.

  • Federal Club v. National League
    http://laws.findlaw.com/us/259/200.html
    This page contains the text of the 1922 U.S. Supreme Court decision creating the antitrust exemption for professional baseball.

  • Toolson v. New York Yankees
    http://laws.findlaw.com/us/346/356.html
    In this 1953 U.S. Supreme Court decision, the Federal Club case was not overturned on the grounds that there had been no evidence that Congress wished to include baseball under the antitrust laws.

  • Flood v. Kuhn
    http://laws.findlaw.com/us/407/258.html
    This page contains the text of the 1972 U.S. Supreme Court decision that argued that the Federal Club decision was erroneous, but chose to not reverse this decision. The rationale for this decision was that baseball had been exempt for 50 years and Congress had failed to take positive action to include baseball under the antitrust laws. It was decided that Congress is responsible for deciding whether to end the antitrust exemption for baseball.

  • Radovich v. National Football League
    http://laws.findlaw.com/us/352/445.html
    This 1957 U.S. Supreme Court decision held that the antitrust exemption given to baseball did not apply to professional football.

  • Antitrust Division of the U.S. Department of Justice
    http://www.usdoj.gov/atr/
    The Antitrust Division of the U.S. Department of Justice (in cooperation with the Federal Trade Commission) is charged with investigating possible cases of antitrust violation, analyzing merger applications, conducting studies on competition and antitrust policy, and prosecuting violations of antitrust law.

  • Federal Trade Commission
    http://www.ftc.gov/
    The Federal Trade Commission (FTC), in cooperation with the Antitrust Division of the Department of Justice, is charged with enforcing U.S. antitrust laws. This web site contains information on recent antitrust cases, press releases, speeches, and other information relating to U.S. antitrust policy.

  • Bureau of Competition
    http://www.ftc.gov/bc/mission.htm
    The Bureau of Competition is the group within the Federal Trade Commission that is charged with investigating possible violations of U.S. antitrust law. The Bureau of Competition coordinates its activities with the Antitrust Division of the U.S. Department of Justice.

  • The Antitrust Case Browser
    http://www.stolaf.edu/people/becker/antitrust/index.htm
    Anthony Becker of Saint Olaf College provides this site that contains summaries of U.S. antitrust cases, U.S. Supreme Court antitrust decisions, and links to a variety of U.S. and international antitrust related web sites. In addition, this site contains the complete text of the Sherman Antitrust Act, and slightly edited and abridged versions of the Clayton Antitrust Act and the Federal Trade Commission Act.

  • U.S. Antitrust Law
    http://www4.law.cornell.edu/uscode/15/ch1.html
    This page, provided by the Cornell University Law School, contains the complete text of current U.S. antitrust law. You may use the search feature on this site to find the specific status of baseball under U.S. antitrust law.

  • The Baseball Archive, "Congressional Legislation Relating to Baseball's Anti-Trust Exemption"
    http://www.baseball1.COM/bb-data/congress/
    This web site, provided by The Baseball Archive contains links to 1993-1995 Congressional resolutions related to baseball's antitrust exemption. While these materials are a bit dated, the extensive collection of links indicate that this topic has received a good deal of Congressional attention.

  • Curt Flood Act of 1998
    http://roadsidephotos.com/baseball/curtflood.htm
    The Curt Flood Act of 1998 ended baseball's antitrust exemption in issues involving labor relations. This page contains the text of this Act.

  • Stadium Financing and Franchise Relocation Act of 1999
    http://thomas.loc.gov/cgi-bin/query/z?c106:S.+952:
    The Stadium Financing and Franchise Relocation Act of 1999 provided an expansion of the antitrust exemption for baseball and football leagues in return for league participation in financing the cost of new stadiums.

  • Jonathan Ringel, "11th Circuit Extends Baseball Antitrust Shield"
    http://www.law.com/jsp/article.jsp?id=1052440802381
    This May 29. 2003 news article describes a decision by the 11th Circuit Court that holds that the federal antitrust exemption for professional baseball also provides an exemption from state antitrust laws.

  • Michael J. Haupert, "The Economic History of Major League Baseball"
    http://eh.net/encyclopedia/article/haupert.mlb
    This online EH.NET encylopedia article provides an interesting discussion of the economic history of major league baseball in the U.S. The economic effects of the antitrust exemption are examined in this article.

 

Different Perspectives in the Debate
  • Allen Barra, "In Antitrust We Trust"
    http://www.salon.com/news/feature/2000/05/19/antitrust/
    Allen Barra provides an argument for eliminating the antitrust exemption for baseball in this May 19, 2000 Salon article. He argues that the current antitrust exemption allows major league teams to pressure their cities to construct new sports stadiums at public expense. He suggests that, in the absence of this provision, cities would be able to attract other teams (including new teams) to fill existing stadiums if the current teams were to depart. Barra argues that more teams would be created that would provide more services to baseball fans in those cities in which there is a high level of demand for baseball. He also suggests that the antitrust exemption has resulted in excessively high admission prices.

  • Raymond J. Keating, "The Economic Woes of Pro Sports: Greed or Government?"
    http://www.libertyhaven.com/.../ecowoes.shtml
    In this January 1997 article appearing in Ideas on Liberty, Raymond J. Keating argues that baseball's antitrust exemption has helped prevent baseball teams from moving from city to city. He suggests that other professional leagues are subject to antitrust restrictions that prevent them from interfering with owners who wish to relocate to other cities. Baseball's antitrust exemption, in Keating's view, allows major league baseball to place more pressure on teams to stay in their current locations. He argues that all professional sports leagues should be given an antitrust exemption.

  • Raymond J. Keating, "We Wuz Robbed!: The Subsidized Stadium Scam"
    http://www.policyreview.org/mar97/keating.html
    Raymond J. Keating argues, in this March-April 1997 Policy Review article, that new stadium construction is generally unprofitable to municipalities. He argues, as in the article listed above, that baseball's antitrust exemption should be extended to other sports leagues to help curtail the threat of franchise relocation.

  • Roger G. Noll and Andrew Zimbalist, "Are New Stadiums Worth the Cost?"
    http://www.brookings.edu/press/review/summer97/noll.htm
    Roger G. Noll and Andrew Zimbalist discuss the causes and consequences of the rise in new stadium construction in this online article. They argue that the monopoly power for professional sports leagues allows them to maintain fewer professional teams than there are large cities capable of supporting such teams. This allows teams to play one city against another in attempting to acquire public financing for new sports stadiums. Noll and Keating, though also note that baseball, because of its antitrust exemption, is better able to restrict team movements than other professional sports. They suggest that a good solution is to "break up existing leagues into competing business entities."

  • Jerome Ellig, "Superstars as Slaves"
    http://www.libertyhaven.com/noneoftheabove/sports/superstarsslaves.shtml
    Jerome Ellig, in this online article, argues that baseball player complaints against the antitrust exemption of baseball are misguided. He notes that the baseball market is essentially a bilateral monopoly in which the player union bargains with major league baseball to set the basic terms and conditions of the contract. Ellig suggests that players voluntarily accept this market relationship when they choose a career in professional baseball. He argues that demands for more immediate free agency represent attempts by players to get a larger share of the pie.

  • Mark Thornton, "Bring in the Scabs"
    http://www.mises.org/freemarket_detail.asp?control=262
    Mark Thornton discusses the effect of baseball's antitrust exemption in this February 1995 Free Market article. He argues that baseball's antitrust exemption allows major league baseball to maintain a high quality of play. Thornton suggests that by maintaining this supply restriction, major league baseball "maintains standards and attempts to offer its customers the best possible game." He argues that competition comes from other baseball leagues, other sports, and other entertainment activities.

  • Gregg Fields, "Teddy Roosevelt, Meet John Henry"
    http://www3.neilrogers.com/news/documents/1999092101.html
    In this September 20, 1999 Miami Herald article, Gregg Fields discusses the demands for a new stadium for the Florida Marlins. He argues that such demands receive serious consideration as a result of baseball's antitrust exemption that allows major league baseball to restrict the number of franchises.

  • John J. Siegfried, "Sports Player Drafts and Reserve Systems"
    http://www.cato.org/pubs/journal/cj14n3-4.html
    John J. Siegfried discusses the effect of the reserve system in this online Cato Journal article. He argues that the player drafts and reserve systems do not result in maintaining a competitive balance among teams. He suggests, though, that it is efficient to provide better players and more resources to teams in markets that more highly value winning.

  • CNN/Sports Illustrated, "Baseball Antitrust Quotes"
    http://sportsillustrated.cnn.com/baseball/news/2001/12/05/antitrust_quotes_ap/
    This website contains an entertaining list of quotes dating back to 1881 concerning the "losses" that are received by baseball team owners. It is suggested that the losses are the result of accounting practices and are not indicative of economic losses.

  • Darren Rovell, "Economists: Baseball's Debts Misleading"
    http://espn.go.com/mlb/s/2000/0719/641139.html
    This July 21, 2001 ESPN online article summarizes a study that suggests that professional baseball teams tend to structure their accounts in such a way that it falsely appears that they are not profitable. It is suggested that this is accomplished by owners paying themselves consulting fees and, in the case of teams that are owned by media companies (such as the Cubs, Braves, and Dodgers), paying less than the market value for broadcast rights. Further evidence of the profitability of major league baseball teams is the increasing price of baseball franchises over time. If teams were unprofitable, it would be expected that their market value would decrease.

  • Dan Peltier, "Statement before the Senate Judiciary Committee"
    http://www.diamondfans.com/minors-peltier.html
    In this June 17, 1997 statement, Dan Peltier describes the pay, working conditions, and incentives facing minor league baseball players. He argues that professional baseball players in the minor leagues receive low pay, low benefits, and face limited prospects for promotion to the major leagues. Peltier argues that baseball's monopoly power in the major leagues provides teams with excessive bargaining power relative to the players. He argues for a weakening of baseball's exemption from antitrust.

  • John Conyers, Jr., Paul Wellstone, Tom Harkin, Mark Dayton, Betty McCollum, Martin Olav Sabo, James P. Moran, and Earl Pomeroy, "Make Baseball Play by the Same Rules as Other Professional Sports and Businesses Before Baseball Eliminates 2 Teams"
    http://www.house.gov/judiciary_democrats/fansdc11301.pdf
    This letter asks for additional cosponsors for the "Fairness in Antitrust in National Sports (FANS) Act of 2001." Under this Act baseball's antitrust exemption would be limited for decisions on team elimination or relocations. It is argued that baseball's antitrust exemption has resulted in "the perpetuation of a closed, cartelized industry...." The Adobe acrobat viewer plugin is required to view this document. You may download this viewer by clicking here.

  • Darren Rovell, "Baseball's antitrust exemption: Q & A"
    http://espn.go.com/mlb/s/2001/1205/1290707.html
    Darren Rovell addresses questions associated with baseball's antitrust exemption and team relocation in this December 9, 2001 ESPN online article. He provides a history of baseball's antitrust exemption and notes that it is not clear that MLB would be exempt from an antitrust suit if it attempted to prevent a team relocation. Rovell also discusses the proposed "Fairness in Antitrust in National Sports (FANS)" bill.

  • David Greenberg, "Baseball's Con Game: How did America's pastime get an antitrust exemption?"
    http://slate.msn.com/id/2068290/
    David Greenberg discusses the history of baseball's antitrust exemption in this July 19, 2002 Slate article. He suggests that the Supreme Court's past decisions on this issue are inconsistent with the Court's changing interpretation of the role of the government in regulating antitrust activity. Greenberg argues that the elimination of this exemption might cause baseball owners to act in a less arrogant manner towards fans and players.

  • Bruce Fein, "Baseballís Privileged Antitrust Exemption"
    http://www.dcbar.org/for_lawyers/Washington_lawyer/October_2005/stand.cfm
    Bruce Fein argues against the antitrust exemption for baseball in this October 2005 Washington Lawyer article. He argues that this exemption is inconsistent with antitrust law and generates harm to the public. He cites the decision to award a portion of the television rights to the Washington Nationals games to the owner of the Baltimore Orioles as evidence of the monopoly power that this exemption has created.

  • William F. Shughart II, "The Government's War on Mergers: The Fatal Conceit of Antitrust Policy"
    http://www.cato.org/pubs/pas/pa323b.pdf
    In this October 22, 1998 Cato Institute article, William F. Shugart II argues that antitrust policy does not necessarily benefit consumers. He suggests that antitrust action is often brought as a result of pressure from competitors who are concerned about the potential effects of large enterprises on product prices and not from concerns over the effect of economic concentration on consumers. He suggests that antitrust policy, while designed to protect consumers from monopoly prices, may instead help to maintain higher market prices by preventing the realization of economies of scale.

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