STATEMENT OF DONALD M. FEHR
ON BEHALF OF THE MAJOR LEAGUE BASEBALL PLAYERS ASSOCIATION
HEARING ON H.R. 3288
BEFORE THE COMMITTEE OF THE
JUDICIARY
UNITED STATES HOUSE OF
REPRESENTATIVES
Mr. Chairman, Representative Conyers, and Members of the Committee, I
regret that I am unable to attend and testify at today’s hearing. As I have explained to the Chairman, this
week is the annual meeting of the Executive Board of the Major League Baseball
Players Association (MLPA). This year
the meeting is being held near
The Commissioner’s announcement of “contraction” has complicated the timing of the hearing overwhelmingly. The Players Association has filed a grievance contending that the owners’ effort to “contract” violates our collective bargaining agreement (the “Basic Agreement”). The trial of that case will begin this week, during, and at the site of, the Board meeting. Consequently, I am unable to be with you today, but I would be happy to submit written answers to any questions the Committee may have for me. I would also be available to testify at a future hearing, of course.
It was my hope that baseball would bring an end to what may be the
record for consecutive collective bargaining related work stoppages. Frankly, the level of civility between the
central offices of Major League Baseball and the
“NO SECRETS”
As did many others, I learned through press reports that Mr. Selig planned to use this hearing to open the books and (supposedly) end any dispute about the accuracy of the owners’ claims to great financial losses. Indeed, the account I read went so far as to quote him as saying there would “be no secrets.” Like many, I was encouraged by this announcement. On the basis of those assertions, I wrote to MLB’s counsel, explaining that, given the intent to release all the economic data, I believed the MLBPA was accordingly released from any pledges of confidentiality with respect to the same underlying data. I had hoped with such a release that we would be able to assist the Committee and the public in its analysis of the owners’ financial representations.
Unfortunately, we
have been informed that the owners contend that the confidentiality provisions
remain in effect and the Players Association will be sued if any of its
representatives releases or discusses any information that Major League
Baseball believes is confidential. As a
result, while the owners will use their data and their accounting methodology
to explain the financial position of each of the 30 teams and the MLB to the
Committee, the Players Association, for now at least, is hamstrung and will
speak about this data only in generalities.
As a result, we suspect that the Committee’s ability to analyze whatever
it receives from MLB will be severely hampered, as well.
Although I believe our analysis of the owners’ data by the Association would have been of interest to the Committee, fortunately, it has no significant relevance to the public policy question before the Committee, i.e. should the antitrust laws apply to baseball decisions on relocation and elimination of teams to the same extent they apply to football, basketball and hockey? A similar question was asked regarding the application of the antitrust laws to baseball with respect to its relationship with players. Congress answered in the affirmative when it passed the “Curt Flood Act of 1998.” In fact, H.R. 3288 is patterned after the “Curt Flood Act” insofar as it limits its clarification of the law to one area of cartel behavior.
The answer to this key question is simple. The application of the antitrust laws to MLB would not deprive the owners of control over their franchises; it would only permit review of exercise of that control to ensure the decisions were not unreasonably anticompetitive.
Data of the sort, which may be offered by Mr. Selig today, might be germane to an antitrust action as part of a defense to an antitrust claim. The question before the court in an action alleging a violation of the antitrust laws in the elimination of a team would be whether the action of the owners was unreasonably anticompetitive. Perhaps the data that Mr. Selig is presenting to the Committee would convince a judge or jury that the action in eliminating one or more of the teams currently speculated about was not unreasonably anticompetitive. Other industries, including those whose structure resembles baseball, such as the NFL, NHL and NBA, understand they must be prepared to justify their actions as reasonable and have continued to thrive, notwithstanding the application of the antitrust laws.1
If nothing else, Mr. Selig’s sharing of data concerning the operations of an industry with revenues estimated in the area of $3.6 billion, surely dispels any notion that the underlying rationale of the Federal Baseball case is still valid, if it ever was. Major League Baseball’s presentation is the best evidence that the Supreme Court was correct when, at page 282 of the Flood case, it found that Professional baseball is a business and it is engaged in interstate commerce.(emphasis added.)
The MLBPA strongly supports H.R. 3288 and its Senate counterpart. It is not an overstatement to say that the owners have been sorely criticized for the action they took, to the extent it has been identified, only two days after one of the most exciting and uplifting World Series in the history of baseball. Yet with one announcement, conceived behind closed doors, with only the interests of cartel members at issue, Major League Baseball put an end to all the good will it had generated. If the owners had followed the lead of other leagues which live within the antitrust laws, and had considered all the competitive aspects of a decision regarding the elimination of teams, perhaps that good will would still be in the air, perhaps it even could carry over into collective bargaining.
Major League Baseball refuses to recognize the benefit of living with the nation’s laws on competition. Accordingly, H.R. 3288 is a very worthwhile measure. It will at a minimum reduce the necessity of litigating the underlying question of whether the antitrust laws already apply to such decisions. As will be discussed below, the MLBPA, believes that the antitrust laws currently apply in full to Major League Baseball. Stated briefly, the combination of the decision of Judge Padova in the Piazza case[2], together with the “Curt Flood Act of 1998,” compels the conclusion that MLB is subject to the antitrust laws across the board. In the Butterworth[3]case, the Florida Supreme Court agreed with the reasoning of the Piazza decision. In passing the “Curt Flood Act,” which makes it clear that the antitrust laws now apply to MLB’s relationships with major league players, Congress made clear that it was not overturning Piazza or Butterworth. The intention to leave the law as it was developing, and not to codify any alleged exemption is clear from the language of the legislation, the legislative history and the agreement of MLB and the Players Association in the Basic Agreement.
I have testified before this Committee and the Senate Judiciary and Commerce Committees many times over the last twenty years. I have recounted the history of the alleged exemption, judicial review of it and Congressional review of it. It does not seem necessary to review that history again, particularly when the Committee has in its possession an excellent recitation of the history of the alleged exemption. House Report 103-871, that accompanied the passage of H.R. 4994 from this Committee, fully surveys the history of the actions of the courts and Congress with respect to the alleged exemption.
When Congress passed the “Curt Flood Act,” it dealt only with the relationship between the owners and the players. As Judge Padova explained in the Piazza case, applying the antitrust laws to the reserve clause was the only action necessary to put an end to the legacy of the Federal Baseball case. The announcement of 6 November and other recent actions of Major League Baseball and its teams, demonstrate, however, that Congress is justified in clarifying for baseball that it can no longer operate as an unregulated cartel, free from external review of its actions. This is especially appropriate when the actions are taken in violation of a lease agreement, without prior notice or a chance to respond, without consideration of relocation as an alternative and apparently as an act of extortion that can be cured only by a commitment of public funds to build a stadium for private purposes.[4]
H.R. 3288 is a much-needed message that baseball is not above the law. I believe Major League Baseball is fully subject to the antitrust laws today. But for courts, reluctant to act prior to a clarification from the Supreme Court[5], or lawmakers who consider this question of public policy under the impression that the exemption alleged by the owners continues to exist, there is more than the necessary justification to pass this legislation.
In earlier material supplied to Members of Congress, we quoted from the 1979 National Commission for the Review of Antitrust Laws and Procedures, a bipartisan commission that included Members of Congress, enforcement officials, as well as private sector representatives. In that report, the Commission made the following recommendations to the President and the Attorney General with respect to antitrust immunities:
1. Free market competition, protected by the antitrust laws, should continue to be the general organizing principle for our economy.
2. Exceptions from this general principle should only be made where there is compelling evidence of the unworkability of competition or a clearly paramount social purpose.
3. Where such an exception is required, the least anticompetitive method of achieving the regulatory objective should be employed.
4. Existing antitrust immunities should be reexamined.
The Commission went on to outline the presumptions on which a review of particular immunities should be based:
"As mentioned at the outset, an economic system based on marketplace competition has important implications for basic American values. A preference for competition is also empirically grounded. In diverse contexts, it has been shown that competition provides an irreplaceable spur to efficiency and to diversified sources of innovation. Furthermore, in most instances competition maximizes consumer welfare...
The Commission, therefore, starts with a strong presumption against allowing exceptions from competition and, specifically, against immunities from the antitrust laws. Although careful factual inquiry should be a prerequisite to any decision to seek repeal or modification of an immunity, the burden of proof for purposes of the decision-making process should be on the proponents of continuing antitrust immunity to show a convincing public interest rationale for abandoning competition. Each existing or proposed exemption should be justified in terms of empirically demonstrated characteristics of the specific industry that make competition unworkable. The defects in the marketplace necessary to justify an antitrust exemption must be substantial and clear." (emphasis supplied.)
If nothing else, Mr. Selig’s assertion that Major League Baseball cannot realize a profit, despite an annual revenue estimated at over $3.5 billion, a fixed number of teams, and a static percentage of revenue going to salaries, is convincing proof that monopolies never work.
Lawyerly explanations of the workings of a free market system may occasionally make sense. But what makes more sense is the simple question asked by a player before a congressional hearing leading to passage of the “Curt Flood Act.” To paraphrase: “If the owners were coming to Congress now, asking for an antitrust exemption to eliminate teams and to do so when other viable markets exist, would Congress rush to enact such an exemption?” I think the answer clearly is “of course not.”
In past testimony, Mr. Selig has offered two reasons for the continued need of the antitrust exemption: (1) the need to be able to prevent franchise relocations, an ability that is not dependent on an antitrust exemption; and (2) a vague reference to a catastrophic impact removal of the exemption would supposedly have on the minor leagues, which has never been clearly articulated. At best this argument sounds like if the Majors do not have total monopoly control over the minor leagues, the minors will disappear. Oddly, the minors did quite well in the earlier part of the 20th Century when they operated as more independent forms of entertainment and feeder systems for the majors.
Uncontrolled movement of teams if MLB does
not have an absolute veto power has long been used as a scare tactic by
MLB. Citing the case Al Davis won
against the NFL, the owners seek to pit cities that have teams against those
that do not, but who seek them. What MLB
fails to mention is that the courts have never held that the leagues have no
control over relocations, just that they must have reasonable rules in deciding
when to permit a relocation. The NFL has
worked with the U.S. Conference of Mayors (USCM) to develop of procedure and
criteria by which to determine the appropriateness of proposed
relocations. And, the USCM, by a letter
dated
How are
Major League Baseball’s continued use of the minor league system as a firewall against legislation has become an amazing story in itself. We hear “the minors will collapse” – “teams will break leases and leave small towns” etc. Never has Major League Baseball offered a concrete explanation of how or why this would happen, nor have they offered other approaches to a relationship with the minors that would be equally good for both sides.
It has been said that if contraction of Major league teams occurs this year, there will be no effect on the minors. MLB’s contract with the minors – known as the Professional Baseball Agreement (PBA) has two years to run. MLB has indicated it will not “contract” the number of minor league franchises while the PBA is still in effect. But when the PBA expires, I suspect that, assuming a two team contraction at the Major league level, 12 to 16 minor league teams will as well. It should be understood, however, that it is not a given those teams will be the minor league teams associated with the two (or four) major league teams eliminated. Any minor league franchise is at risk. At the end of a contract, all minor league teams are fungible. Teams having nothing to do with the major league teams eliminated could be summarily discarded, even if their community has invested limited resources in a new stadium, required not by the minor leagues, but in reality by the major leagues. The only way minor league teams will not be reduced will be if MLB wants to carry them as the price to avoid litigation - - and preserve a fire-wall.
Major League Baseball should be asked for more than recycled vagaries or
cries of poverty to continue to ignore the rules of free enterprise and
competition. If its situation truly is
so dire, in the face of record revenues and declining player salaries as a
percentage of revenue, if its numbers are to be taken at face value but it will
not permit informed comment on those same numbers, MLB could hardly do worse
under the antitrust laws. To argue that
restraints are needed on player salaries that have gone down as a percentage of
revenues, suggests, at a minimum, the need for input from other
sources.
And, without getting into the whole issue of equity versus operating
expenses, one need only look at the words and actions of one of the members of
the “Blue Ribbon Commission” who I count among my friends, not to mention
former owners clamoring to get back in the game or failing owners proposing to
switch teams. If the business of
baseball is so bad, why has former Senator George Mitchell
reportedly joined a group bidding between $300 and $400 million for an interest
of just over 50% in the Boston Red Sox?
Ironically, perhaps the best commentary on baseball’s continuing plea to
be kept above the law comes from another member of baseball’s latest Blue
Ribbon Commission, George Will. During
the last round of congressional review of baseball’s unique status, Mr. Will
observed: “When the owners come to Congress to urge retention of the antitrust
exemption, they will say: Continue to trust us to run the nation’s last
unpoliced cartel because we are doing so splendidly, and because repeal of the
exemption would injure baseball. Can
Congress legislate the repeal while being convulsed by laughter?”
I know some still make light of the
attempt to strip baseball any last vestiges of the special status it claims by
virtue of a thoroughly discredited 1922 Court decision. But the people of
Baseball, like other professional sports and businesses, should be
subject to the antitrust laws. There is
no justification for awarding this group special status, no unique situation or
predicament that would warrant such disparate treatment, nor any compelling
evidence that the owners have exercised what they believe to be an exemption
from the law in a manner that benefits the public interest. A review of the owners of major league
baseball team is a “who’s” who of creative, intelligent businessmen and women
who have made billions in businesses that present them with antitrust issues
everyday. Why should we think that they
lose their business acumen when they buy a baseball team?
The Supreme Court made a mistake when it
held that baseball was not in interstate commerce. In Flood, it acknowledged that
mistake, but left it to Congress to remedy the wrong. The time has come for
Congress to clarify, once and for all, that Major League Baseball should be
subject to the same array of laws that apply to every other unregulated
business or company in
1 Please see the attached letter from the United States Conference of Mayors to Mr. Selig asking him to meet with the Conference to discuss the development of guidelines for relocation of team similar to those the Conference developed with the cooperation and participation of the National Football League.
[2] Piazza v. Major League Baseball 831 F. Supp. 420 (E.D. Pa. 1993). The Third Circuit Federal District Court for the Eastern District of Pennsylvania, in denying a motion to dismiss the Piazza case on the grounds of an antitrust exemption for relocation decisions, held that the application of the doctrine of stare devises to the case, in light of the Supreme Court’s findings in the Flood case, limited the antitrust exemption to the reserve clause.
[3] Butterworth
v. National League of Professional Baseball Clubs, et al. 644 So. 2d 1021 (
[4] The President of the Twins, Mr. Bell, in answer to a question posed during his testimony before the Minnesota Stadium Task Force in St. Paul on November 28, 2001, stated that a commitment to build a new stadium would very likely result in an end to speculation that the Twins would be contracted.
[5] Such clarification may be long in coming. At any point in litigation where the continued validity of the antitrust exemption is in question, history suggests, the MLB will settle the case. Consider the case of the Seattle Pilots in which litigation by then Attorney General Slade Gorton was settled as the case went to the jury, resulting in the addition of the Mariners and the Blue Jays, or the decision in Piazza, in which the denial of a motion to dismiss on the basis of the antitrust exemption was quickly followed by an undisclosed settlement.