Baseball Monopoly Artemus Ward Dept. of Political Science Northern Illinois University firstname.lastname@example.org Right field grandstand, game 1 of the 1912 World Series: Boston Red Sox v. New York Giants. 35,730 saw Boston win 4-3 that day with Boston ace Smoky Joe Wood, 34–5 on the season, pitching a complete game, striking out eleven Giants. After the game, Wood would say, "I threw so hard I thought my arm would fly right off my body." Boston won the series 4 games to 3 with one tie. In game 8, Boston won in the 10th inning after Giants CF Fred Snodgrass dropped an easy fly ball to start the inning. The run later scored and Fred Snodgrass' error would go down in history as "the $30,000 muff―-- the difference between the winning and losing shares. Introduction • Major League Baseball is the only top-level professional baseball league in the country. • Each of its teams is assigned an exclusive territory (save for a few of the megacities, where the territory is shared between two teams). • Monopolies have market power, which they use to derive higher returns, misallocate resources, and take advantage of consumers. • Since 1922, MLB has benefited from a presumed exemption from the nation‘s antitrust laws. It is an unregulated, legal monopoly. • In this lecture, we will discuss how this came to be and why the neither the Supreme Court nor Congress did anything to change it. • Furthermore, we will see how when MLB was confronted with challenger leagues they simply co-opted potential rival owners, further solidifying their monopoly power. Fans line up for hot dogs at Ebbets Field, 1920. The Commerce Clause and the Era of Trust Busting I • The U.S. Constitution‘s Commerce Clause. Article I, Sec. 8 states: ―Congress shall have the power… to regulate Commerce… among the several states…‖ • In Gibbons v. Ogden (1824) Chief Justice John Marshall explained that ―Commerce undoubtedly is traffic but it is something more: it is intercourse. It describes the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse.‖ Marshall explained that the word ―among‖ means commerce involving more than one state. The completely internal commerce of a state, then, may be considered reserved for the state to regulate or not regulate as it sees fit.‖ • In 1890 Congress passed the Sherman Anti-trust Act under their Commerce Clause authority. The Act reflected hostile public reaction to the growth of giant industrial business monopolies in post-Civil War America. The Act made illegal ―every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade,‖ and made it illegal to ―monopolize or attempt to monopolize, or combine to conspire…to monopolize any part of the trade or commerce among the several states.‖ Another provision of the Act, one that would be part of Curt Flood‘s lawsuit years later, allowed any person injured by the illegal actions described above to sue and ―recover threefold the damages by him sustained.‖ Chief Justice Melville Fuller • In United States v. E.C. Knight (1895), the Court ruled 8-1 that a sugar monopoly (one company controlled 98% of the sugar refining business) was not subject to the Sherman Anti-trust Act because manufacturing had an ―indirect‖ effect on trade. Chief Justice Melville Fuller wrote: ―The fact that an article is manufactured for export to another state does not of itself make it an article of interstate commerce…. Doubtless the power to control the manufacture of a given thing involves, in a certain sense, the control of its disposition, but this is a secondary, and not the primary sense, and although the exercise of that power may result in bringing the operation of commerce into play; it does not control it, and affects it only incidentally and indirectly. Commerce succeeds to manufacture, and is not part of it.‖ • In dissent, Justice John Harlan explained that trade is the buying and selling of articles to be carried from on state to another, that monopolies artificially fix prices and harm commerce, and that congress has the power to regulate this activity: ―The common government of all the people is the only one that can adequately deal with a matter which directly and injuriously affects the entire commerce of the country, which concerns equally all the people of the Union, and which, it must be confessed, cannot be adequately controlled by any one state.‖ Justice John Harlan I The Commerce Clause and the Era of Trust Busting II • In Swift and Co. v. United States (1905), Justice Oliver Wendell Holmes articulated the ―stream of commerce‖ doctrine whereby federal regulation of interstate commerce was allowed from the point of its origin to the point of its termination. But he drew a distinction between manufacturing monopolies like the one in E.C. Knight which were indirect and sales monopolies which had a direct and intended effect on commerce like the one in Swift which involved meat packing and selling. • In 1911 the Sherman Anti-trust Act was used by the federal government to divide the American Tobacco Co. into several smaller companies: R.J. Reynolds, Liggett, and Lorillard. • American was plainly in a mood to break monopolies. Would baseball withstand the same kind of scrutiny? The Federal League Charlie Weeghman (left) at the groundbreaking ceremony for Weeghman Park (today‘s Wrigley Field), March 4, 1914. • The Federal League (FL) was the last major attempt to establish an independent major professional baseball league in the United States in direct competition with the established National and American Leagues in 1914 and 1915. At first it was a minor league at its founding in 1913 but with MLB salaries artificially depressed, the Federal League saw an opening to expand. • Fielding 8 teams, the FL had no individual owners and instead ran the teams collectively. The FL had no reserve clause, offered players long- term contracts, and granted players free agency after 10 years. The doubling of salaries led to as many as 221 MLB players joining the FL in 1914-15. The American League Baseball Club of Chicago v. Chase (1914) • One of these players was star 1B Harold ―Hal‖ Chase who left the AL‘s Chicago White Sox for the FL‘s Buffalo Fub-Feds. The White Sox obtained an injunction in New York prohibiting Chase from playing for Buffalo. In The American League Baseball Club of Chicago v. Chase (1914), the New York Supreme Court decided the matter. • The court for the first time addressed the issue of whether the National Agreement ―and the rules and regulations adopted pursuant thereof‖ violated the Sherman Antitrust Act. • First the court acknowledged that the ―game of baseball‖ had become ―commercialized and organized‖ and had ―developed into a big business conducted for profit.‖ • But was ―Organized Baseball‖—the American and National Leagues—a monopoly in violation of the Sherman Antitrust Act? The court said that Organized Baseball was most certainly a monopoly, one ―ingeniously devised and created in so far as a monopoly can be created among free men.‖ But the court then relied on E.C. Knight and said that Organized Baseball was not a monopoly insofar as the antitrust laws were concerned because the ―business of baseball‖ was not in ―interstate trade or commerce.‖ The court reasoned that Baseball was ―an amusement, a sport, a game,‖ and one that clearly came ―within the civil and criminal law of the state…and it is not a commodity or an article of merchandise subject to the regulation of congress on the theory that it is interstate commerce.‖ The court concluded that the National Agreement established ―a species of quasi-peonage unlawfully controlling and interfering with the personal freedom of the men employed,‖ one that was ―contrary‖ to both the spirit of ―American institutions‖ and the Constitution. The National Agreement ―reveals the involuntary character of the servitude which is imposed upon the players by the strength of the combination controlling the labor of practically all of the players in the country.‖ • Given all this, the New York court justified its reversal of the lower court‘s injunction because not to do so would be tantamount to assisting an agreement that had as its purpose the creation of not only a monopoly but one that interfered with the ―personal liberty of a citizen‖ and the right of any citizen to control his ―free right to labor wherever and for whom he pleases.‖ The Federal League‘s Demise The Chicago Whales at Weeghman Park 1914. • Buoyed by the Chase decision, in January 1915, Federal League owners brought an antitrust lawsuit against the American and National Leagues. The lawsuit ended up in the court of Federal Judge (and future Commissioner of Baseball) Kenesaw Mountain Landis, who remarked, ―As a result of thirty years of observation, I am shocked because you call playing baseball ‗labor.‘‖ But rather than issue a decision, he allowed the case to languish and urged both sides to negotiate. Swift action might have made a difference, but without the lawsuit going forward, the Federal League found themselves in deepening financial straits. • After the 1915 season a settlement was reached. The owners of the American and National Leagues bought out half of the Federal League owners while two more Federal League owners were allowed to buy struggling franchises in the established leagues including Charles Weeghman, owner of the Chicago Whales, who was allowed to buy the Chicago Cubs and relocate them from their wooden West Side Park in downtown Chicago to the far North Side of the city where the Whales had played in a new steel and concrete ballpark. Weeghman had secured a 99-year lease on the property and Weeghman Park was renamed Cubs Park for its new team at the start of the 1916 season. The name was later changed to Wrigley Field after Weeghman lost control of the team in 1921 to chewing gum magnate William Wrigley, Jr. The Wrigley family would control the Cubs for the next six decades before selling out to the Tribune Company for $20 million in 1981. On January 23, 2009, it was announced that the Cubs would be sold to Tom Ricketts for $900 million, pending the approval of 23 of MLB‘s 30 owners. Federal Baseball Club v. National League (1922) President William Howard Taft • One of the FL clubs that was left out of the buyout agreement at the dissolution of the FL—the Baltimore Terrapins—filed an antitrust suit in 1916. They won a $240,000 award at the trial court in April 1919. In April 1921, the DC Court of Appeals reversed, however. That Court found, ―The players…travel from place to place in interstate commerce, but they are not the game…[which] is local in its beginning and in its end…. The fact that the [owners] produce baseball games as a source for profit, large or small, cannot change the character of the games. They are still sport, not trade.‖ Hence the DC Court of Appeals departed significantly from the reasoning of the New York court in the Chase case. Baseball was not a business but was instead an ―exhibition‖ of sport. • Baltimore appealed the decision to the U.S. Supreme Court, which was headed by Chief Justice William Howard Taft. The former President had played 3B at Yale, was the first president to throw out the first pitch to start the baseball season (above), and was the first choice of the owners to be the new baseball commissioner before he was appointed Chief Justice. The Court voted unanimously but Taft decided not to write the opinion himself. Instead he assigned it to Justice Oliver Wendell Holmes, Jr. who had played amateur baseball. Taft was working on another antitrust opinion which he issued a few week before Holmes‘ Federal Baseball decision. • In 1921 Congress passed the Packers and Stockyard Act. In addition to making it unlawful for meat packers to fix prices or engage in monopolistic practices, the law prohibited packers in interstate commerce to engage in any unfair, discriminatory, or deceptive practices. In Stafford v. Wallace (1922) Chief Justice Taft upheld the Act, relied on Swift, and wrote that ―The stockyards are but a throat through which the current flows, and the transactions which occur therein are only incident to this current from the West to the East, and from one state to another. Such transactions cannot be separated from the movement to which they contribute and necessarily take on its character.‖ • Stafford was decided on May 1, 1922. On May 29, 1922, the Court handed down its decision in Federal Baseball Club. Federal Baseball Club v. National League (1922) Justice Oliver Wendell Holmes, Jr. Delivered the Opinion of the Court • ―The clubs composing the Leagues are in different cities and for the most part in different states. The end of the elaborate organizations and sub-organizations that are described in the pleadings and evidence is that these clubs shall play against one another in public exhibitions for money, one or the other club crossing a state line in order to make the meeting possible. When, as the result of these contests, one club has won the pennant of its league and another club has won the pennant of the other league, there is a final competition for the world's championship between these two. Of course, the scheme requires constantly repeated traveling on the part of the clubs, which is provided for, controlled, and disciplined by the organizations, and this, it is said, means commerce among the states. But we are of opinion that the Court of Appeals was right.‖ • ―The business is giving exhibitions of baseball, which are purely state affairs. It is true that, in order to attain for these exhibitions the great popularity that they have achieved, competitions must be arranged between clubs from different cities and states. But the fact that, in order to give the exhibitions, the Leagues must induce free persons to cross state lines and must arrange and pay for their doing so is not enough to change the character of the business. According to the distinction insisted upon in Hooper v. California, 155 U. S. 648, 155 U. S. 655, the transport is a mere incident, not the essential thing. That to which it is incident, the exhibition, although made for money, would not be called trade of commerce in the commonly accepted use of those words. As it is put by defendant, personal effort not related to production is not a subject of commerce. That which in its consummation is not commerce does not become commerce among the states because the transportation that we have mentioned takes place. To repeat the illustrations given by the court below, a firm of lawyers sending out a member to argue a case, or the Chautauqua lecture bureau sending out lecturers, does not engage in such commerce because the lawyer or lecturer goes to another state.‖ • ―If we are right, the plaintiff's business is to be described in the same way, and the restrictions by contract that prevented the plaintiff from getting players to break their bargains and the other conduct charged against the defendants were not an interference with commerce among the states.‖ Gardella v. Chandler (1949) • The Federal Baseball ruling went untested for 25 years. But the country had changed. New Deal legislation regulating the economy such as the National Labor Relations Act and the Fair Labor Standards Act were upheld by the Supreme Court as appropriate exercises of congressional commerce power. MLB had changed as well with games now regularly broadcast not only on radio but also the new medium of television. • Then following WWII, the new Mexican League was formed. In June 1946, baseball commissioner Happy Chandler announced a 5-year ban on all U.S. players who jumped to the Mexican League. Danny Gardella, a 27-year-old OF who in 1946 was offered $5,000 to play for the New York Giants, was offered $8,000 plus a signing bonus of $5,000 to play in the Mexican League. Gardella chose to play in Mexico, but like other U.S. ballplayers who made this choice, he found the playing conditions there intolerable and wanted to return to MLB. • But Gardella was blacklisted and was forced to join barnstorming teams and take on odd jobs to survive. Danny Gardella He sued MLB for $300,000. After losing his case in the trial court, he appealed and the 2 nd Circuit Court of Appeals found in Gardella‘s favor, ruling 2-1 in Gardella v. Chandler (1949) that the advent of radio and television had involved baseball in interstate commerce and that the sport was therefore likely subject to the Sherman Antitrust Act. Chief Judge Learned Hand wrote: ―When the case goes back for trial—assuming that it does so upon our opinions—it will be necessary, as I view it, to determine whether all the interstate activities of the defendants—those, which were thought insufficient before, in conjunction with broadcasting and television—together form a large enough a part of the business to impress upon it an interstate character. I do not know how to put it in more definite terms.‖ • In his separate opinion, Judge Jerome Frank went further than Hand by pointing out that Federal Baseball was likely no longer good law: ―No one can treat as frivolous the argument that the Supreme Court's recent decisions have completely destroyed the vitality of Federal Baseball Club v. National League, decided twenty-seven years ago, and have left that case but an impotent zombie.‖ Frank then attacked the reserve clause directly: ―we have here a monopoly which, in its effect on ball-players like the Learned Hand plaintiff, possesses characteristics shockingly repugnant to moral principles that, at least since the War Between the States, have been basic in America, as shown by the Thirteenth Amendment to the Constitution, condemning 'involuntary servitude,' and by subsequent Congressional enactments on that subject. For the 'reserve clause' as has been observed, results in something resembling peonage of the baseball player.‖ Frank concluded: ―Defendants suggest that 'organized baseball,' which supplies millions of Americans with desirable diversion, will be unable to exist without the 'reverse clause.' Whether that is true, no court can predict. In any event, the answer is that the public's pleasure does not authorize the courts to condone illegality, and that no court should strive ingeniously to legalize a private (even if benevolent) dictatorship.‖ • Gardella was awarded damages of $300,000 and the 1922 Federal Baseball decision seemed to no longer be good law. MLB appealed the ruling and announced amnesty for all Mexican League jumpers. But MLB was loathe to have Federal Baseball overturned in the Supreme Court and did not want another lengthy trial on whether its business constituted interstate commerce. Hence, before the Gardella case could be heard by the Supreme Court, MLB and Gardella settled for $60,000 which Gardella accepted Jerome Frank rather than continue the costly legal battle. It remained unclear whether Federal Baseball was still good law. House Inaction • Weary of its weakening monopoly status, MLB sought congressional affirmation of its presumed antitrust exemption, leading to protracted hearings before the House Subcommittee on the Study of Monopoly Power in 1951. • When the hearings opened in July, no fewer than eight antitrust cases were pending against MLB. There were also three bills that would have granted a legislated antitrust exemption not only to baseball but to all other sports. • At the hearings both league presidents, the commissioner, managers, players, sportswriters, and even Ty Cobb innocently echoed the owners‘ repeated refrain that the reserve clause was necessary to preserve competitive balance in the game. The only dissenting voice within the baseball establishment was that of long-time team executive and owner Bill Veeck. • The House hearings on baseball‘s antitrust exemption, like most congressional hearings, concluded without the adoption of any legislation. • Some have concluded that the House committee felt Gardella had effectively gutted Federal Baseball and that the sport would be subject to the nation‘s Ty Cobb antitrust laws, which would be made clear when the federal courts decided the pending Mexican League cases. • But the committee did produce a report which stated: • ―‗Organized baseball' is a combination of approximately 380 separate baseball clubs, operating in 42 different States, the District of Columbia, Canada, Cuba, and Mexico. . . . Inherently, professional baseball is intercity, intersectional, and interstate. At the beginning of the 1951 season, the clubs within organized baseball were divided among 52 different leagues. Each league is an unincorporated association of from 6 to 10 clubs which play championship baseball games among themselves according to a prearranged schedule. Such a league organization is essential for the successful operation of baseball as a business…. Of the 52 leagues associated within organized baseball in 1951, 39 were interstate in nature…. Under judicial interpretations of this constitutional provision [the commerce clause], the Congress has power to investigate, and pass legislation dealing with professional baseball, or, more particularly, 'organized baseball,' if that business is, or affects, interstate commerce…. After full review of all of the foregoing facts, and with due consideration of modern judicial interpretation of the scope of the commerce clause, it is the studied judgment of the Subcommittee on the Study of Monopoly Power that the Congress has jurisdiction to investigate and legislate on the subject of professional baseball.‖ Bill Veeck, Jr. Toolson v. New York Yankees (1953) • Toolson had been a minor leaguer in the Yankees system. When the team attempted to reassign him to another minor league club, Toolson refused to report. While MLB lawyers had assumed the Holmes decision was no longer good law, the Supreme Court—in one of its first decisions under new Chief Justice Earl Warren—reaffirmed the 1922 Federal Baseball decision 7-2 in a short, one-paragraph per curiam opinion: • ―In Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, this Court held that the business of providing public baseball games for profit between clubs of professional baseball players was not within the scope of the federal antitrust laws. Congress has had the ruling under consideration, but has not seen fit to bring such business under these laws by legislation having prospective effect. The business has thus been left for thirty years to develop on the understanding that it was not subject to existing antitrust legislation. The present cases ask us to overrule the prior decision and, with retrospective effect, hold the legislation applicable. We think that, if there are evils in this field which now warrant application to it of the antitrust laws, it should be by legislation. Without reexamination of the underlying issues, the judgments below are affirmed on the authority of Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, supra, so far as that decision determines that Congress had no intention of including the business of baseball within the scope of the federal antitrust laws.‖ Toolson v. New York Yankees (1953) Justices Harold Burton and Stanley Reed Dissenting • ―Whatever may have been the situation when the Federal Baseball Club case was decided in 1922, I am not able to join today's decision, which, in effect, announces that organized baseball, in 1953, still is not engaged in interstate trade or commerce. In the light of organized baseball's well known and widely distributed capital investments used in conducting competitions between teams constantly traveling between states, its receipts and expenditures of large sums transmitted between states, its numerous purchases of materials in interstate commerce, the attendance at its local exhibitions of large audiences often traveling across state lines, its radio and television activities which expand its audiences beyond state lines, its sponsorship of interstate advertising, and its highly organized "farm system" of minor league baseball clubs, coupled with restrictive contracts and understandings between individuals and among clubs or leagues playing for profit throughout the United States, and even in Canada, Mexico, and Cuba, it is a contradiction in terms to say that the defendants in the Harold Burton cases before us are not now engaged in interstate trade or commerce as those terms are used in the Constitution of the United States and in the Sherman Act.‖ • ―Conceding the major asset which baseball is to our Nation, the high place it enjoys in the hearts of our people, and the possible justification of special treatment for organized sports which are engaged in interstate trade or commerce, the authorization of such treatment is a matter within the discretion of Congress. Congress, however, has enacted no express exemption of organized baseball from the Sherman Act, and no court has demonstrated the existence of an implied exemption from that Act of any sport that is so highly organized as to amount to an interstate monopoly or which restrains interstate trade or commerce. In the absence of such an exemption, the present popularity of organized baseball increases, rather than diminishes, the importance of its compliance with standards of reasonableness comparable with those now required by law of interstate trade or commerce. It is interstate trade or commerce, and, as such, it is subject to the Sherman Act until exempted. Accordingly, I would reverse the judgments in the instant cases and remand the causes to the respective District Courts for a consideration of the merits of the Stanley Reed alleged violations of the Sherman Act.‖ United States v. International Boxing Club of New York (1955) • Within the next few years, Toolson's logic was criticized directly and indirectly by other justices, including some who had been in the majority. Their criticisms came in dissents from opinions in which the Court held that the antitrust exemption was specific to baseball and that other professional sports were not similarly exempt. • In United States v. International Boxing Club of New York (1955), Chief Justice Warren wrote the majority opinion denying boxing the exemption from the nation‘s antitrust law: ―This Court has never before considered the antitrust status of the boxing business. Yet, if it were not for Federal Baseball and Toolson, we think that it would be too clear for dispute." • In dissent, Justice Felix Frankfurter was highly critical: "It would baffle the subtlest ingenuity to find a single differentiating factor between other sporting exhibitions... and baseball insofar as the conduct of the Felix Frankfurter sport is relevant to the criteria or considerations by which the Sherman Law becomes applicable to a 'trade or commerce.‘ I cannot translate even the narrowest conception of stare decisis into the equivalent of writing into the Sherman Law an exemption of baseball to the exclusion of every other sport different not one legal jot or tittle from it." • Justice Sherman Minton also dissented: ―When boxers travel from State to State, carrying their shorts and fancy dressing robes in a ditty bag in order to participate in a boxing bout, which is wholly intrastate, it is now held by this Court that the boxing bout becomes interstate commerce. What this Court held in the Federal Baseball case to be incident to the exhibition now becomes more important than the exhibition. This is as fine an example of the tail wagging the dog as can be conjured up.‖ Sherman Minton Radovich v. National Football League (1957) • Another two years passed, and Radovich v. National Football League came before the Court. The circumstances of professional football at the time were almost identical to those of baseball, including a reserve system, yet the Court ruled that the antitrust exemption was specific only to baseball and that football was subject to the nation‘s antitrust laws. • Justice Tom C. Clark, writing for a 6-3 majority, said: ―If this ruling is unrealistic, inconsistent, or illogical, it is sufficient to answer, aside from the distinctions between the businesses, that were we considering the question of baseball for the first time upon a clean slate we would have no doubts. But Federal Baseball held the business of baseball outside the scope of the Act. No other business claiming the coverage of those cases has such an adjudication. We, therefore, conclude that the orderly way to eliminate error or discrimination, if any there be, is by legislation and not by court decision. Tom C. Clark Congressional processes are more accommodative, affording the whole industry hearings and an opportunity to assist in the formulation of new legislation. The resulting product is therefore more likely to protect the industry and the public alike. The whole scope of congressional action would be known long in advance and effective dates for the legislation could be set in the future without the injustices of retroactivity and surprise which might follow court action.‖ • Justice Frankfurter again dissented: ―The most conscientious probing of the text and the interstices of the Sherman Law fails to disclose that Congress, whose will we are enforcing excluded baseball—the conditions under which that sport is carried on—from the scope of the Sherman Law, but included football.‖ • Justice John Marshall Harlan II, joined by Justice William Brennan, also dissented: ―I am unable to distinguish football from baseball under the rationale of Federal Baseball and Toolson, and can find no basis for John M. Harlan II attributing to Congress a purpose to put baseball in a class by itself.‖ Senate Inaction • In the wake of the Court‘s decisions Toolson, International Boxing Club, and Radovich, the Senate held hearings on baseball‘s antitrust status in 1958 with, among others, Casey Stengel and Mickey Mantle testifying. As had the stars of the past, they cited baseball‘s ―good works‖ such as the new pension plan MLB had started in 1947. Stengel completely befuddled the Senators with his nonsensical ―Stengelese‖ about the game: – Senator Kefauver: Mr. Stengel, are you prepared to answer particularly why baseball wants this bill passed? – Mr. Stengel: Well, I would have to say at the present time, I think that baseball has advanced in this respect for the player help. That is an amazing statement for me to make, because you can retire with an annuity at fifty and what organization in America allows you to retire at fifty and receive money? – After his long, rambling non-answer concluded… – Senator Kefauver: Mr. Stengel, I am not sure that I made my question clear. Sen. C. Estes Kefauver (Laughter). – Mr. Stengel: Yes, sir. Well that is all right. I am not sure I am going to answer yours perfectly either. (Laughter) – Senator Kefauver: I was asking you, sir, why it is that baseball wants this bill passed. – Mr. Stengel: I would say I would not know, but would say the reason why they would want it passed is to keep baseball going as the highest paid ball sport that has gone into baseball and from the baseball angle, I am not going to speak of any other sport. I am not here to argue about other sports, I am in the baseball business. It has been run cleaner than any business that was ever put out in the one-hundred years at the present time. I am not speaking about television or I am not speaking about income that comes into the ball parks: You have to take that off. I don't know too much about it. I say the ballplayers have a better advancement at the present time.” • Read Stengel‘s testimony and listen to an excerpt here: Casey Stengel • http://www.baseball-almanac.com/quotes/casey_stengel_senate_testimony.shtml • Though the House had passed a bill that would have placed all sports, including baseball under antitrust regulation, with certain exceptions, the Senate failed to act on it and the issue died. The Continental League (1959-1960) • Proposed by New York attorney William Shea in 1958 after the Brooklyn Dodgers and New York Giants left the city for California, the new Continental League (CL) sought membership in MLB—distinguishing it from other attempted rival leagues such as the 1914-15 attempt by the Federal League. • Former Dodger President Branch Rickey was named league president and franchises were slated for large markets without major league teams: Denver, Houston, Minneapolis-St. Paul, Toronto, Atlanta, Buffalo, and Dallas-Ft. Worth, and New York City which had gone from supporting three teams to one. • One of the major obstacles experienced by the CL was its inability to sign major or minor league players who were contractually under reserve at the time. Thus the best and second-best talent pools were not accessible to the CL because MLB controlled the relevant labor markets. • In May 1960, Senator Kefauver held hearings on the CL and his related bill to limit the number of minor leaguers who could be William Shea controlled by the existing major league teams. MLB did extensive lobbying but did pledge to cooperate with the fledgling league and the bill was defeated 45-41 in the Senate. • The CL was finally co-opted in July 1960 when the NL voted to expand to ten teams and to form a committee including representatives from the CL to study how expansion should proceed. Shortly thereafter, the AL followed suit and MLB promised four new franchises to ownership groups from the CL, effectively ending the new league‘s plans. State v. Milwaukee Braves (1966) • To what extent did baseball‘s antitrust exemption affect the sale and movement of teams? • In 1966, the Milwaukee Braves pulled up stakes and moved to Atlanta. Future club owner and MLB Commissioner Alan H. ―Bud‖ Selig and several other area businessmen urged the Wisconsin Attorney General and others to file an antitrust case in state court to prevent the move. • The State lost in the Wisconsin Supreme Court because the antitrust exemption was found to protect the Braves‘ relocation. • Baseball was seemingly free to expand and move teams at will. Expansion • Beginning with the expansion prompted by the CL, and with the protection of the 1966 Milwaukee Braves case, MLB exploited markets for themselves, extracted concessions from cities for stadiums by creating market scarcity, and staved off potential challenges by expanding or moving existing teams into most of the proposed CL markets and others: – Minnesota Twins (1961) – Los Angeles Angels (1961) – Houston Colt 45s (1962) – New York Mets (1962) – Atlanta Braves (1966) – San Diego Padres (1969) – Montreal Expos (1969) – Kansas City Royals (1969) – Seattle Pilots (1969) – Milwaukee Brewers (1970) – Texas Rangers (1972) – Toronto Blue Jays (1977) – Seattle Mariners (1977) – Colorado Rockies (1993) – Florida Marlins (1993) – Arizona Diamondbacks (1998) – Tampa Bay Rays (1998). The Sports Broadcasting Act of 1961 • After years of false starts, congress finally acted—at least to some extent—with the passage of the Sports Broadcasting Act of 1961. • A direct response to the Radovich decision, the Act permits the sports of baseball, basketball, football, and hockey to sign league-wide package deals for national broadcasting rights on free, over-the-air television. • Hence, the teams in a league are allowed to join together as a cartel for purposes of forming a single network agreement, and then to divide the rights fees equally among all teams. • This revenue-sharing, in turn, is meant to promote competitive balance and enhance fans‘ interest in the sport. • The law, however, does not apply to cable, satellite, or pay-TV. As such the NFL, NBA, and NHL national deals with cable and satellite are subject to antitrust review. In contrast, MLB‘s deal with cable and satellite is shielded from antitrust scrutiny if baseball‘s presumed exemption is valid. • Furthermore, courts have held that local broadcasting is not free from antitrust scrutiny. • Whether baseball‘s presumed exemption for pay-television become an issue in the future remains to be seen. But MLB has moved toward providing its own programming, including live games, via the MLB Network on cable TV outlets. Officially launched on Jan. 1, 2009, the MLB Network is a joint-venture with MLB owning 2/3 of the network and the other 1/3 owned by Comcast, DirecTV, Time Warner, and Cox Communications. AT&T U-Verse and Dish Network are the two major providers not carrying the channel. Conclusion • Baseball‘s presumed antitrust exemption is the result of both congress and the courts tossing the ball back and forth rather than taking responsibility for the issue. • By co-opting potential rival leagues, moving existing teams, and expanding to new markets, MLB solidified its monopoly power. • As MLB moved into the 1960s it seemed that their unique status as an unregulated monopoly would go unchallenged for the foreseeable future. Bibliography • Abrams, Roger I. 1998. Legal Bases: Baseball and the Law. Philadelphia, PA: Temple University Press. • American League Baseball Club of Chicago v. Chase, 149 N.Y. Supp. 6 (1914). • Federal Baseball Club v. National League, 292 U.S. 200 (1922). • Flood v. Kuhn, 407 U.S. 258 (1972). • Gardella v. Chandler, 172 F. 2nd 402 (1949). • Goldman, Robert M. 2008. One Man Out: Curt Flood versus Baseball. Lawrence, KS: University Press of Kansas. • Toolson v. New York Yankees, 346 U.S. 356 (1953). • United States v. International Boxing Club of New York, 348 U.S. 236 (1955). • Radovich v. National Football League, 352 U.S. 445 (1957). • State v. Milwaukee Braves, 144 N.W.2d 1 (Wis. 1966). • Ward, Geoffrey C. and Ken Burns. 1994. Baseball: An Illustrated History. New York, NY: Knopf. • Zimbalist, Andrew. 2003. May the Best Team Win: Baseball Economics and Public Policy. Washington, DC: Brookings Press.