Antitrust Rule Is Examined

Suppose leaders from Ford and General Motors got together on which two plants to close and how to cut production to insure profits. A court might well find that to be a violation of antitrust laws.

So how is it, then, that baseball owners could decide to eliminate two teams--probably the Montreal Expos and Minnesota Twins--and not be hauled into court to explain why or to answer charges that they’re improperly interfering with the marketplace?

Because, unlike most every other entity doing business in the United States, baseball is exempt from federal antitrust laws.

No other professional sporting enterprise enjoys such such status.

A quirk in U.S. legal and social history, the exemption enables baseball’s owners to make extraordinary decisions--such as the proposal to “contract” two teams to increase profits--that otherwise might violate antitrust laws.

In response, a bill was introduced Wednesday in Congress to limit--but not revoke--baseball’s exemption so that owners would be subject to antitrust laws if they decided to fold or relocate a team. It’s being called, the Fairness in Antitrust in National Sports, or FANS, Act of 2001.

Antitrust laws are designed to break up monopolies in big business. Violators face the possibility of being hit with triple damages. For example, a $1 million verdict would automatically become $3 million.

Baseball owners, however, can act with what many critics perceive as an ongoing arrogance because the antitrust laws don’t apply--even though baseball is indisputably a business that generates billions of dollars annually.

“Anytime you don’t have to worry about having to go into court and defend yourself, that makes life a little easier,” said Charles F. (Rick) Rule, who headed the U.S. Justice Department’s antitrust division for much of President Reagan’s second term and now practices law at the powerhouse law firm of Fried, Frank, Harris, Shriver & Jacobson in Washington, D.C.

Sen. Paul Wellstone (D-Minn.), one of the sponsors of the bill introduced Wednesday, said, “It just appears as if you’ve got a cartel, where owners get together and they figure out how to divvy up profit and quite frankly they play one community off against another community.” Reaction to the bill was prompt--and predictable.

Don Fehr, executive director of the players’ union, issued a statement saying the bill “is fair, good for the game and the right thing to do.”

Major league baseball also issued a statement. In it, Robert A. DePuy, baseball’s chief legal officer, said that the antitrust exemption has promoted “franchise stability and our thriving minor league system.” The bill, if made law, would “put at risk” that stability, he added.

DePuy also said, “By pursuing contraction, baseball is attempting to protect the economic viability of its remaining franchises in each of their markets.”

Wellstone is from St. Paul, but he believes outrage over contraction extends beyond the Twin Cities and Canada, where the U.S. antitrust laws, much less an exemption to those laws, have little if any bearing.

“I just think there’s a little bit more anger in the [United States] and not just in Minnesota or Michigan,” Wellstone said. Rep. John Conyers Jr. (D-Mich.), the ranking Democrat on the House Judiciary Committee, is a co-sponsor of the bill.

, “People do view [contraction],” Wellstone said, “ as the owners putting their profits ahead of the loyalty of their fans.”

Over the years, many have tried--and failed--to prod Congress to eliminate baseball’s exemption, which was created by the U.S. Supreme Court and which only Congress can erase.

The reasons for their failure speak as much to issues such as inertia and the press of other, more urgent matters before Congress as to baseball’s unique and romanticized station in American history and society--to a time when, as French-born author Jacques Barzun put it about a half-century ago, “Whoever wants to know the heart and mind of America had better learn baseball, the rules and realities of the game.”

Professional baseball would appear to be the classic sort of monopoly structure that the antitrust provisions were designed to eliminate, or at least regulate. Traditionally, baseball owners have been able to divide the markets for their product while exercising near-complete dominance over baseball’s production and distribution and its related activities. The exemption dates to 1922, when the Supreme Court ruled that antitrust laws did not apply to baseball because the sport essentially involved an exhibition before paying customers staged within a single state. Antitrust laws apply only when interstate commerce is involved.

Many critics have found that reasoning suspect. But Justice Oliver Wendell Holmes wrote the opinion, which was unanimous, meaning other legal luminaries, such as Louis Brandeis, concurred.

“Not exactly feeble minds,” said John Rossi, a history professor at LaSalle University in Philadelphia and author of a book published last year entitled “The National Game: Baseball and American Culture.” Rossi also co-authored a 1995 law review article on baseball and the antitrust laws.

Over the years, Rossi said, the 1922 decision imbued baseball’s owners with an understandable imperiousness. Then, in 1953, the high court affirmed the 1922 decision. On the court then were the likes of Earl Warren, Hugo Black, Felix Frankfurter and William O. Douglas.

“When it when it was reaffirmed in 1953, that did begin to blind [the owners] and distort their judgment, lead them to think, ‘We’re special people, we can do things special ways, therefore baseball is special,’ ” Rossi said.

In 1972, the court again affirmed the 1922 case--in a lawsuit that set the stage for much of baseball’s modern economics.

The case involved Curt Flood, the St. Louis Cardinal outfielder who had refused a trade to Philadelphia and battled for the right to free agency all the way to the Supreme Court, which ruled against him.

Players have done their part to generate ill-will among fans, Rossi said, but owners seem to think, “We’re special and can do things differently.”

A handful of lower-court decisions in recent years have cast some doubt on the scope of the exemption.As for Congress, it did pass a bill three years ago dubbed the Curt Flood Act, legislation that overturned part of the exemption--but as to labor relations only. It did not address such issues as relocation, league expansion or the minor leagues. That act took three sessions of Congress to pass. The odds are long, experts said, that the exemption will now be even further revoked, as Sen. Wellstone and Rep. Conyers Jr. proposed. For one thing, legislators are concentrating on the war. For another, any bill would have to be signed by President Bush, who once enjoyed the benefits of baseball’s antitrust exemption as owner of the Texas Rangers.

Rather than rework the antitrust scene, “The most efficient way to deal with this would be [for the owners] to negotiate with the players and hammer out a deal,” said Dan Lazaroff, who teaches antitrust law and sports law courses at Loyola Law School in Los Angeles and has written extensively on baseball’s exemption.

If he were in charge of the Justice Department’s antitrust division today, Rule said, he would not be inclined to fight baseball owners about their contraction plan. Nor would he press to revoke baseball’s exemption, believing that labor laws and other protections offer enough of a remedy.

“I don’t think the antitrust laws are a panacea,” he said. “What they do is generate money for antitrust lawyers and a lot of litigation. I’m not sure at the end of the day [a revocation of the exemption] would solve the problems people in Montreal and Minneapolis--or, for that matter, in D.C.--have with respect to baseball.”

Wellstone acknowledged the difficulties.

He said, “Our country has tremendously urgent priorities--we have the war in Afghanistan, the war against terrorism, and our urgent need for economic stimulus legislation to keep our nation from plummeting even further into recession.

“Unfortunately, however, major league baseball owners did not give us a choice on timing.

“They have picked a particularly inauspicious time to announce their unilateral, shortsighted and self-serving decision, so we must respond.”