Transcript Baseball Monopoly Artemus Ward Dept. of Political Science Northern Illinois University [email protected] Right field grandstand, game 1 of the 1912 World Series: Boston Red Sox v.

Baseball Monopoly
Artemus Ward
Dept. of Political
Science
Northern Illinois
University
[email protected]
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
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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
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Chief Justice Melville Fuller
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Justice John Harlan 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.”
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.”
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 longterm 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)
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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.
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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
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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
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“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)
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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.
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
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
rather than continue the costly legal battle. It remained unclear whether Federal Baseball was still good
law.
Danny Gardella
Learned Hand
Jerome Frank
House Inaction
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Ty Cobb
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Bill Veeck, Jr.
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
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.”
Toolson v. New York Yankees (1953)
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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
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“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
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
alleged violations of the Sherman Act.”
Harold Burton
Stanley Reed
United States v. International Boxing Club of New York (1955)
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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
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.”
Felix Frankfurter
Sherman Minton
Radovich v. National Football League (1957)
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Tom C. Clark
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John M. Harlan II
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.
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
attributing to Congress a purpose to put baseball in a class by itself.”
Senate Inaction
•
Sen. C. Estes Kefauver
Casey Stengel
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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.
(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:
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)
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William Shea
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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
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:
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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
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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
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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.