Thursday, September 13, 2007

Why Mark Cuban Will Never Own a Baseball Team

Evan Weiner of the New York Sun talks about how cool it would be to have a third Major League team in New York, and then hits on exactly what will prevent it from happening:

Another obstacle is a 1922 Supreme Court ruling that granted baseball an anti-trust exemption and monopoly status. One of the effects of the 1922 ruling is that owners can block any franchise shift . . .The only recourse in overturning the 1922 ruling is to get Congress to write new legislation and have the President sign it into law. There seems to be no incentive for anyone in Congress, though, to overturn the ruling to put another team in the area, nor does there seem to be any willingness from any owner to sue his fellow owners.

Of course the reason why there is no willingness on the part of any owners to sue to overturn Federal Baseball Club of Baltimore, Inc. v. National Baseball Clubs is because Selig has made it a priority to block anyone but his closest buddies and those who wouldn't think of rocking the boat from purchasing teams during his tenure. If you don't believe me, ask yourself: if you were the owner of a team that had a stadium that looked like this (and that is a picture taken during yesterday's Marlins-Nats game) wouldn't you want to move to New Jersey or sue for the right to do so? You wouldn't if you were Jeff Loria, however, because you owe everything you have to Selig and the sweetheart deals that got you out of Montreal, down to Miami, and no doubt garnered you all kinds of other treats we don't know about.

Baseball's antitrust exemption is about the biggest sitting duck in Anglo-American jurisprudence. While baseball has successfully fought off challenges to their golden goose on occasion, none of the subsequent cases have strengthened Federal Baseball Club of Baltimore in any appreciable way, and in reality, it's hanging by a thread.

The 1953 case of Toolson v. New York Yankees, Inc. represented a strained "well, we don't suppose Congress meant to include Baseball when it wrote the law" analysis that simply wouldn't fly with today's Supreme Court. Later cases characterized the exemption as "an anomaly" (Flood v. Kuhn in 1972) or went so far as to actually hold (on the trial court level anyway) that the exemption doesn't apply to relocation (Piazza v. Major League Baseball in 1993), only to have the court punt to Congress in the former instance or have the case melt away due to a settlement/payoff in the latter. The other sports -- hockey, football, basketball, golf, boxing -- have repeatedly tried to get the same sweetheart deal from the courts in the past, and have been rebuffed every single time because, unlike the Supreme Court in 1922, latter courts have tended to, you know, actually apply the damn law.

If there was an honest to goodness controversy regarding baseball's antitrust exemption before the courts -- a case in which an even moderately litigious owner was trying to move his team to Newark or Schaumburg or San Jose, only to be rebuffed by Major League Baseball -- the antitrust exemption would go away faster than you could say "Al Davis." That won't happen, however, because Bud Selig won't let anyone he doesn't trust on this point into the exclusive club that would grant someone standing to sue.

UPDATE (November 7, 2008): My thinking about all of this has evolved in the 13 months since I wrote it. Fresher takes can be found here and here.


64cardinals said...

I'm not a lawyer and don't pretend to know the law by any means. But isn't it a restraint of free trade if they don't allow an eligible buyer to buy a club, if he offers the most money?

How do they legally keep him from doing this? Or is that all part of the anti-trust thing?

If someone tried to buy a furniture store and move it to another part of town, I don't see how other furniture store owners could legally prevent this.

Just another question, as a curiousty. If Selig is mandating that clubs hire (oops, I mean interview) minority candidates, why isn't he doing anything about ensuring a minority candidate buys the Cubs? Must be someone out there?

Oprah, anyone?

Shyster said...

64: I believe it would be a violation of the antitrust laws for baseball to block the sale of a willing owner/seller to a willing perspective owner/buyer.

The closest any court has ever come to deciding this issue was the Piazza v. MLB case from the early 90s in which some buyers from Pennsylvania tried to buy the Giants and move them to Florida. Then-Giants owner Bob Lurie was going to sell, and then MLB stepped in and indicated that they would not approve the sale, allegedly slandered the prospective buyer etc. The buyers sued, arguing (among other things) that the baseball illegally restrained free trade in the market in which baseball teams are bought and sold. Baseball argued that it was allowed to do this pursuant to the anti-trust exemption.

The trial court agreed during the preliminary stages of that case, ruling that the anti-trust exemption didn't apply to the purchase of teams. This wasn't a final decision on the merits, however. Rather, the court basically ruled that if the plaintiffs could prove that MLB wrongfully thwarted the sale, they could win.

It never got that far. Having seen that their antitrust exemption was in peril, baseball settled with the paintiffs (paid them $6M) and the case went away, so there was no final determination which said that baseball was absoltutely wrong to, well, do whatever they did in that case.

Since that time, baseball has continued to approve or deny "ownership applications" (MLB views this as a situation in which they are simply denying club membership like your country club would rather than restraining the sale of goods in a free market). To my knowledge, no one since the Pennsylvania people in the Piazza case have raised a fuss over a team sale, and with no dispute, there can be no court case.

Why no dispute? I think because all owners since the Piazza case has been decided have taken MLBs termperature as to whether they approve of the buyer before actually accepting an offer to sell (if owner x doesn't accept, there is no deal in the first place). While such a system doesn't preclude a thwarted owner from saying that it was all a sham and MLB actually is interfering, no one has felt wronged enough to do it.

What I think is really happening? No self-respecting businessman would WANT to sue his way into a club that acts in such a provincial, petty-ante fashion. If a smary businessman sees that he's going to get screwed over like that, he is probably right to think that the opportunity to own a baseball team isn't all that it's cracked up to be.

If this is ever successfully challenegd, I think it will be a joint effort of a seller (i.e. a current owner who has grown disillusioned with Bud) and a potential buyer who have a mutual interest in getting a deal done, to hell with whatever MLB thinks.

Rob said...

unlike the Supreme Court in 1922, latter courts have tended to, you know, actually apply the damn law.

The "damn law", in this case, being in plain violation of the U.S. Constitution's 10th Amendment, post-FDR courts having seen to it that this same is a dead letter. It reminds me of nothing so much as Mencken's wisecrack, "A judge is a law student who marks his own examination papers."

Andrew said...

I think the exemption is safe. The Court has punted the issue to Congress, and Congress has let it be, even passing a law on removing part of the exemption but leaving the rest (Curt Flood Act). By not doing anything, Congress has approved of the Sup. Ct.'s interpretation. The aggrieved owner would have to make some contributions to some Senators to get something done.

Anonymous said...

The only way all of baseball's laws make sense is to think of Major League Baseball as a single company, with each team representing a franchise (Similar to, say, McDonald's). This is actually not that far off from the way it operates (revenue sharing and the like would never take place otherwise). Just as McDonald's can govern how business is transacted in any of their franchises, and where they can be located, Major League Baseball behaves similarly. Is that legally how it's set up? Probably not. But it's sure how it behaves.

Shyster said...

It's not set up like that, anonymous. Each of the teams are considered seperate business entities under a loose umbrella organization known as Major League Baseball (formerly the American League and National League). The reason they act like McDonalds, to use your example (although that may not be the best example, because franchisees are separate companies too) is because of the antitrust exemption that allows them to do so, in conjunction with other, voluntary contractual realtionships among the teams.

Interestingly, new sports leagues have seen how restrictive such an approcah can be, assuming you don't have an antitrust exemption, which no one else does or ever will have. As such, they have set themselves up as unified entities, with each team techinically being an operating division of the single company that is Major League Soccer, for example.

From a business perspective this makes total sense, although it has always struck me as odd on some level, feeling as it does that entities that are supposed to be competing against each other are actually rigging something.

That's not really the case, of course, but it does show that it's awful hard to distinguish between business competition and athletic competition on some level.

Anonymous said...

Justice Holmes also said it was OK to neuter mentally handicapped people over their objections ("three generations of idiots are enough"). I don't feel so bad about revisiting his decisions. But the fact remains that antitrust is almost dead.