Baseball Basks in Its Antitrust Exemption
But Congress and the courts challenge restraints on free market
MAJOR League Baseball teams compete vigorously on the diamond, but it's a different story in the executive suites. The owners of big-league clubs are exempt from the competition laws that govern other American business people, and they aren't about to surrender that advantage willingly.
In 1922, the United States Supreme Court ruled that the national pastime is a game, not a matter of interstate commerce, and thus is not subject to federal antitrust laws. The high court has since abandoned the premise that baseball isn't business, but the justices nevertheless have twice reaffirmed the original finding that baseball is exempt from statutes that enforce free competition.
Today, however, Major League Baseball's (MLB's) antitrust exemption is under assault on two fronts. A bill in Congress would strip away the exemption. Meanwhile, a lawsuit in Philadelphia challenges baseball's right to restrict the sale and movement of big-league franchises. Besides issues related to the ownership and location of teams, baseball's exemption arguably affects player-management relations and competition for some broadcast rights.
Baseball is the only professional sport that enjoys antitrust immunity. Pro football, basketball, hockey, and boxing are all covered by the Clayton Act, which outlaws restraints on trade. But Congress has balked at changing baseball's status.
Most economists who have studied the matter seem to favor ending baseball's unique privilege. ``The antitrust exemption has allowed baseball to insulate itself,'' says Andrew Zimbalist, an economics professor at Smith College in Northampton, Mass., and the author of ``Baseball and Billions.'' ``It has created a management style and practices that are totally unproductive.''
BUT Gerald Scully, who teaches economics at the University of Texas in Dallas and wrote ``The Business of Major League Baseball,'' thinks the exemption is irrelevant. For one thing, Professor Scully isn't convinced that baseball's purportedly monopolistic practices are doing it much good. ``Even with the exemption, baseball is the basket case of the professional sports leagues,'' he says. ``The other leagues don't have it, and they are doing better financially.''
Moreover, Scully says, lifting the exemption would have little impact on baseball's operations, since so many aspects of the sport's business arrangements are governed by the collective bargaining agreement between the clubs and the big-league players or by the 1961 Sports Broadcasting Act, which authorizes professional sports leagues to create restricted broadcasting markets.
Scully's view appears to be in the minority among scholars. ``Call Paul Tagliabue [the commissioner of the National Football League], and ask if he wouldn't love to have the antitrust exemption for the NFL,'' says Prof. Paul Weiler of Harvard Law School, who has written on the subject. ``The exemption means a great deal to baseball.''
Professors Zimbalist and Weiler contend that the antitrust exemption buttresses the team owners' power and strengthens their bargaining leverage, because it eliminates any threat of antitrust lawsuits by players or their union, by would-be owners or by cities that want to obtain a franchise.
In professional football and basketball, Weiler says, ``the mere risk of antitrust litigation has made team owners and league officials gun-shy and very careful in their dealings with outside parties.''
SEN. Howard Metzenbaum (D) of Ohio is leading the charge in Congress to eliminate baseball's antitrust exemption. According to a paper issued by the antitrust subcommittee Senator Metzenbaum chairs, the exemption ``allows the owners to engage in conduct which may be anti-competitive or anti-consumer....'' Lifting the exemption, the paper contends, would ``make the baseball owners more accountable to the public'' and ``help spur expansion.'' Metzenbaum's subcommittee held a hearing on the bill last week in Florida and may hold another hearing in Washington later this spring.
Major League Baseball is fighting to preserve the exemption. Referring to rules that restrict movement of franchises, Gene Callahan, MLB's Washington lobbyist, says: ``Fan protection is one of our main goals. We don't want our fans to go through what football fans suffered when the Raiders left Oakland or the Colts snuck out of Baltimore.'' Mr. Callahan also says removal of the antitrust exemption would destabilize the minor-league system, where big-league teams assign young players for seasoning. ``Major League Baseball would be reluctant to subsidize the minor-league teams in 169 cities if they couldn't hold on to players.''
Previous bills to remove the antitrust exemption have died in Congress, and many observers expect the same fate for the Metzenbaum bill. ``Absent a huge fan revolt over something like player strikes, there isn't much support in Congress for changing the status quo,'' Zimbalist says.
Experts are more interested in several lawsuits challenging the antitrust exemption, especially the Philadelphia case, which was brought by two local businessmen whose attempt to purchase the San Francisco Giants and move the team to Florida was blocked by MLB. Last August a federal judge, denying MLB's motion to dismiss the case, ruled that the exemption does not bar the suit, which is scheduled for trial this summer.
``If baseball loses its antitrust exemption,'' Weiler says, ``it will be through the courts, not through legislation.''