Sunday, January 06, 2008

Anti-trust exemptions

In the comments of the previous post, X calls me out for mentioning baseball's antitrust exemption as the reason Congress gets involved in baseball. He was right in that I had no idea what the "anti-trust exemption" actually means. But after some reading on the web, I'm pretty it's not a small thing. Here's my current understanding:

The idea of the exemption is based on two Supreme Court cases, 1922's Federal Baseball Club v. National League (which held that in baseball, interstate commerce "was not the essential thing") and 1958's Toolson v. New York Yankees, Inc. (which held that "Congress had no intention of including the business of baseball within the scope of the federal antitrust laws"). But the antitrust exemption doesn't make baseball exempt from labor laws, thanks to Flood v. Kuhn, 1972.

Today there are basically two things that Major League Baseball (an umbrella organization of 30 privately-held companies) can do that most other interstate businesses cannot:

1) MLB can control franchise sales and moves, something no other organization - not even the NFL, NBA, NHL, etc. - can do.

2) The Sport Broadcasting Act of 1961 gives teams in ALL the pro leagues (though not the NCAA) the ability to pool resources to get exclusive TV broadcasting rights. This had previously been ruled illegal under antitrust laws.

As far as MLB is concerned, these are both a big deal. Without #1, baseball teams would be all over the place; for example the SF Giants would have moved to St. Petersburg in 1992. (Which probably means no Devil Rays*). Also, the whole possibility of contracting teams arises from this exemption.

Exemption #2 is probably even bigger - without it, broadcasts could only be made by individual teams, and national broadcasts basically would never happen (unless paid for by very rich teams). This was actually just in the news: Sen. Arlen Specter's threat to revisit NFL's antitrust exemption is why those of us who don't get the NFL Network got to see the Patriots play the Giants last Saturday.

* and if that's not an argument for getting rid of the exemption, I don't know what is!


  1. Nice work. I agree the so called exemption (I'll have to call it that), is a big deal. And as you point out, it is most applicable to team movement (more on that in a second).

    My main point was that congress is involved w/ the steroid mess, not because of the exemption, but because of their egos. No one seriously believes that just because baseball wouldn't have a firm drug test that Congress would have passed a rule that overturns a case (or two) from a half century ago) which still would not clean up the steroid mess or give Congress the power to do so. Any linkage of the two, is pure banter created by columnists. And grandstanding by politicians. You have to agree on that point.

    As for the court rulings themselves, I think (alhtough I'm not 100% sure) that the other leagues absolutely have the right limit team movement. Although the leagues just are not as heavy handed as in baseball. After all, why wouldn't, say the vikings, move to LA.

    What is more interesting, without the exemption, would be if the Devil Rays decided they were going to move to New Jersey and the Marlins to Boston. The other piece I'm not so sure of - a monopoly has supposed barriers to entry and limits its output (only 30 teams). Without the ruling, could the 4 of us just start a team and start play in the AL?

    Oh well - nice work Earl.

  2. Re Congress: I *totally* agree. I misinterpreted your ego comment. It's a great point - the exemption just gives them a convenient excuse to get involved.

    Re other leagues: back in 1980 the NFL was trying to block the Oakland Raiders from moving to LA. Al Davis filed an antitrust lawsuit against the NFL (as did the LA Coliseum), and won; Raiders went to LA.

    Re us forming a team without the exemption: we could try, but no one would play us, unless they wanted to.

  3. I am joining a tad late. I have a slightly different perspective on the reasons for congress getting involved. If baseball as an interstate business that has special exemptions, fails to address some pretty basic issues (e.g. enforce illegal drug use/trafficing) I think it is worthy of some federal agencies investigation. Whether or not Congress is the right agency is another discussion. This is where the egos come in - congress sees this as an opportunity to gain some press/public awareness. Whatever - I still think someone should look into it.

    I wonder, now that we've somewhat demonstrated that steroids have been an issue in baseball what about the trafficing of these drugs? Does anyone else find it interesting that McNamee followed Roid-ger through his career? Do we think that was random?

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