Baseball Antitrust Loophole May Strike Out

As Americans face their first October in 90 years without a World Series, Sen. Howard M. Metzenbaum (D-Ohio) knows that this is his last--and maybe his best--chance to persuade Congress to finally revoke Major League Baseball’s unique exemption to the federal antitrust laws.

Metzenbaum, who retires after this session, has opposed the loophole for years but has never received much support from his colleagues. Indeed, his bill to ban the exemption died in the Senate Judiciary Committee last June when he could muster only two Democratic votes.

Today, a House subcommittee chaired by Rep. Jack Brooks (D-Tex.) will hear testimony on the issue from acting baseball Commissioner Bud Selig and players union chief Donald Fehr, among others. Legislation is pending in the House that would remove or limit the exemption, and Metzenbaum still hopes to use a floor amendment to keep a limited ban alive in the Senate.

The antitrust exemption was never conferred on baseball by Congress. It was the U.S. Supreme Court, in a 1922 decision written by Justice Oliver Wendell Holmes, that ruled that “exhibitions of baseball . . . are purely state affairs” and involve interstate commerce only in an incidental way.

Thus, baseball isn’t subject to antitrust laws governing business activities that cross state lines. The Supreme Court has affirmed the decision twice, with less enthusiasm each time.

As a result, baseball, unlike professional football or basketball, is free to keep its teams from moving from city to city and is protected from lawsuits by ballplayers who might view certain contractual restrictions--such as an owner-imposed salary cap--as a restraint on interstate trade.

Without the antitrust exemption, baseball experts say, the owners would not have pushed their demand for a salary cap to the point where players felt compelled to launch the season-ending strike.

The arguments at today’s hearing in the House are likely to cover the same ground as in past years.

Selig and the other club owners will say that baseball has developed for more than 70 years while relying on the antitrust exemption. To eliminate it now would, for one thing, mean losing control over minor league salary costs, which could ruin the economics of the game for 170 minor league communities nationwide and their 27 million fans (many of them voters).

For major league cities, it would mean the prospect of sudden abandonment, as happened to National Football League fans in Baltimore in 1984 when owner Robert Irsay moved the Colts to Indianapolis, literally under the cover of darkness.

Besides, the owners’ argument goes, with major league baseball players averaging $1.2 million a year in salary, the owners can hardly be said to have abused their privilege.

Fehr and the players, for their part, will contend that baseball’s exemption is an anachronistic concession to an industry that wraps itself in the American flag and sentimental poetry while depriving its employees of the fundamental right to use the courts.

“When a monopolist argues that he can’t control his market without a monopoly, are we supposed to accept that as legitimate?” former players union chief Marvin Miller asked in an interview this week.

It is ridiculous to pretend, the players will say, that baseball isn’t every bit as involved in interstate commerce as pro football and basketball, which federal courts have specifically ruled are subject to antitrust. Those sports haven’t been ruined by obeying the law; what’s so different about baseball?

And the owners have, too, abused their privilege, the players will say. For example, while the owners have contended that they don’t need government oversight because their commissioner acts as a regulator, they fired previous commissioner Fay Vincent when he wanted to intervene in labor matters. Also, they blocked the San Francisco Giants’ plan to move to Tampa/St. Petersburg, Fla., which showed promise of supporting the team far better than San Francisco ever had.

The rhetorical ground has been walked before, but the difference this year, experts say, is that public anguish over the players’ strike and the owners’ cancellation of the World Series might help focus Congress’ attention.

“Environmentally, because of the damage to fans, this is probably the best time in history” for opponents of the exemption to make their case, said Martin Greenberg, director of the National Sports Law Institute at Marquette University in Milwaukee.

“A place like Arizona has got to be concerned about the impact of losing spring training next year,” Metzenbaum said. “The owners are so damn intransigent that I’m afraid the whole (1995) season may go by the boards.”

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Even if Congress stays in the dugout, the antitrust exemption could be picked off in federal court in Philadelphia, where the two Pennsylvania businessmen who wanted to move the Giants to Florida are suing baseball for thwarting them.

U.S. District Judge John Padova has indicated that he wants to bring the case to trial in order determine the breadth of the exemption. If the challenge ultimately reaches the Supreme Court, the justices would have another chance to second-guess Justice Holmes.

Last time around, in a famous 1972 challenge brought by St. Louis Cardinal outfielder Curt Flood, several justices expressed grave doubts that the original ruling made any sense, but the majority held that any change “was a matter for Congress, not the Supreme Court.”

Fehr has promised that if Congress passes even a limited ban, allowing the players to sue on restraint of trade issues, he will recommend that the players end their strike.

What else do experts think might happen if the exemption were lifted?

* Baseball would likely expand to cities such as Tampa/St. Petersburg or face lawsuits contending that the industry has illegally created artificial scarcity of its product. More teams, critics note, would mean further dilution of talent.

* Minor league salaries would certainly rise from their current average of about $10,000 a year, as players challenge a system that allows them to be drafted straight out of high school and bound to a single team for seven years. Rising costs could force marginal clubs out of business.

* Entrepreneurs might try to form new baseball leagues, as has been done in football, basketball and hockey.

“Right now, no investor in his right mind would put up money to compete against an unregulated monopoly which has an antitrust exemption,” Metzenbaum said.

* With more teams in the game, cities might feel less pressure to underwrite stadiums and offer other extravagant benefits to attract or retain big league clubs.

“Today cities bid against each other for the right to the cartel’s ticket,” said Gene Orza, Fehr’s top legal lieutenant. “Imagine a world in which the American and National Leagues were actually in competition.”