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Thread: Baseball's Anti-trust Exemption: Good or bad?

  1. #1

    Baseball's Anti-trust Exemption: Good or bad?

    Baseball, as I'm sure all of you are well aware, has had an antitrust exemption dating fron a 1922 federal court decision handed down by the noted American jurist Oliver Wendell Holmes. Today this exemption from federal anti-trust laws is still intact, although events of the past forty years like the end of the reserve clause and the advent of free agency have gutted it somewhat.

    So is the antitrust exemption good for baseball, or should it be discontinued? If it were, baseball would be subject to federal anti-trust laws for one thing. Has anyone any suggestions for what else would happen in the event of the demise of its antitrust exemption?

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    Don't really understand the technicalities, but I believe basketball, football, etc., lack the exemption, is that not the case? Yet they do all sorts of things in restraint of competition. My understanding is that they are somewhat limited at the margins in what they can get away with, but would losing baseball's exemption make any really fundamental differences?

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    I think baseball should never have had an exemption. But even having anti-trust laws don't do much for workers. Baseball players organizing into a union would have the most practical benefits. And since they have done that, I see no reason for baseball having an anti-trust exemption.

    I am not a big union fan at all. But baseball was one example of a field that desperately cried out for workers to unite and organize. The early union fronted by David Fultz did little good. It lacked full participation and strong leadership.

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    Antitrust laws are not really intended to be of direct benefit to labor, although when one monopolist dominates an industry it is presumably bad for everybody, workers included, the sole exception being the monoplolist.

    But what actual practical difference does it make whether baseball has the exemption or not? My understanding is that on the margins it enables organized baseball to get along with some particular practices it could not otherwise. But I don't believe the NBA and NFL have the exemption, and their amateur drafts, for example, are even more restrictive than baseball's.

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    Quote Originally Posted by Bill Burgess View Post
    ... But baseball was one example of a field that desperately cried out for workers to unite and organize. The early union fronted by David Fultz did little good. It lacked full participation and strong leadership.
    "fronted by David Fultz" seems unfair to Fultz and "full participation" is generous to the MLBPA, which comprises major league players alone.

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    Quote Originally Posted by Beady View Post
    Antitrust laws are not really intended to be of direct benefit to labor, although when one monopolist dominates an industry it is presumably bad for everybody, workers included, the sole exception being the monopolist.
    I disagree that it is normally bad for workers; anyway that should not be presumed. Both Joseph Schumpeter and John Kenneth Galbraith observed in effect that no one should want to work for a perfect competitor, everyone should hope to work for a monopolist. Vaguely I recall that Galbraith said this almost literally, probably with some purpose to turn a memorable phrase. (Both these economists, about 100 and 50 years ago, argued that monopoly power is good to a degree.)

    I don't know the legal history or the law.
    It seems obvious to me that baseball shaped American notions of what is normal operation in spectator sports industry. In particular, what is normal in organization and operation of the exclusive territorial franchise system. The other major league sports might be different today if they had not developed along lines baseball established. (I speculate.)


    Vaguely I recall that Al Davis, owner of the Oakland - LA - Oakland Raiders, challenged the power of the NFL to control territories a la baseball. He moved the football club from Oakland to LA and later from LA to Oakland without the same necessity to court approval of a majority or supermajority of other owners.

    Since Davis first moved there have been several other moves by NFL, NBA, and NHL clubs (dozens?) --none as far as I know coordinated by the central office. There has been only one move by any MLB club, and only with heavy involvement by the central office.
    Last edited by Paul Wendt; 10-14-2010 at 12:50 PM.

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    I can't think of an instance in the last 50 years when BB actively used its so called monoply powers.
    Buck O'Neil: The Monarch of Baseball

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    Quote Originally Posted by Bill Burgess View Post
    But even having anti-trust laws don't do much for workers.
    Anti-trust laws weren't put in place to prtect workers. They were seen as consumer protection.

    60 years ago the anti-trust exemption was seen as preventing the majors from moving beyond their 1903 boundaries. During the 1950s a Brooklyn congressman held hearings about why the Majors wouldn't move to the west coast.

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    Quote Originally Posted by KCGHOST View Post
    I can't think of an instance in the last 50 years when BB actively used its so called monopoly powers.
    Before the mid-1970's emergence of 'free agency', and the creation of the Player's Association, the team owners used its exemption from the National Sherman Anti-Trust Act to support its' infamous Reserve Clause.

    But since the mid-1970's, its' exemption has been rendered somewhat academic and moot. If they repealed it now, it would not have much effect.

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    The Al Davis case was what I was vaguely remembering myself. The NFL had its version of the reserve rule struck down by the courts, I believe in the late 1950's, but they replaced it with an option year system that had little practical effect. The player could play an option year at a 10% pay cut and become a free agent. As I understand it, at first the clubs simply conspired not to sign one another's players, then they put in a system that compensated the team losing the player -- essentially, a player-initiated trade. But the compensation was set by the commissioner, who of course had no reason to want to open the floodgates, with the result that compensation was set so high that almost no players wound up playing out their options and moving to other clubs.

    So far as I can tell, for many decades the NFL and NBA have operated, looking at it from a broad perspective, much as major league baseball has, in spite of their lack of the antitrust exemption.

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    The option year system was known as the Rozelle Rule and was only used once. Following the 1967 season San Francisco 49er Dave Parks signed with the New Orleans Saints. Commissioner Pete Rozelle awarded the 49ers a 1st. Round draft pick which turned out to be Notre Dame defensive tackle Kevin Hardy.

    Neither Parks or Hardy fulfilled expectations and the high price paid for a "free agent" served to inhibit player freedom.

    MLB does benefit from Anti Trust legislation in that no one can start a competitive professional league without the blessing of MLB. Branch Rickey attempted to challenge this by announcing plans for the Continental League
    in 1960. The Continental League was to bring N.L. baseball back to New York and place a franchise in Houston.

    This lead to the creation of the Los Angeles Angels, Washington Senators, (the original Senators having decamped for Minnesota and morphing into the Twins); the Houston Astros and the New York Mets.

    MLB's protective impulse lead to the creation of the Seattle Mariners to placate potential litigation following the Seattle Pilots leaving for Milwaukee and becoming the Brewers following their intial 1969 seasson.
    Last edited by Steven Gallanter; 10-15-2010 at 04:29 PM. Reason: spelling

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    I don't understand. MLB'e antitrust exemption offers it a some degree of protection for its own business practices, but how can it exercise an absolute veto on anybody else's plans? They could initiate a trade war against anybody who tried to organize a startup, but they couldn't claim it was illegal to do so. They have an exemption from antitrust law, not a government-chartered monopoly.

    In fact, I suspect MLB would not wage an all-out, old-style trade war against an interloper, but as a practical matter it would probably be impossible to start an outlaw league in the United States, anyway. But is it any different for basketball, football or hockey?

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    In the late 60s and the early 70s the NFL and the NHL each had to contend with a serious competitor which led to contract jumping and escalating salaries, especially in pro basketball. The solution of each of these leagues was a merger, something that baseball hadn't done since the 1890s.

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