Overcoming an "aberration": San Jose challenges Major League Baseball's longstanding antitrust exemption.

Author:Kutcher, D. Logan
 
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  1. INTRODUCTION II. BACKGROUND A. A History of Greatness B. The Oakland Coliseum C. Attempts to Relocate 1. Fremont, CA (2006-09) 2. San Jose, CA (2009-Present) 3. Lease Extension (Summer 2014) D. Professional Baseball's Antitrust Exemption 1. The Origin of the Exemption 2. Subsequent Litigation and Statutory Development a. Subsequent Cases i. The Toolson v. New York Yankees Case ii. The Flood v. Kuhn Case iii. The City of San Jose v. Office of the Comm'r of Baseball Case iv. Other State Court Decisions b. Subsequent Statutory Development i. The Clayton Act ii. The Curt Flood Act of 1998 iii. Application of the Antitrust Laws to MLB 3. Non-exemption of Professional Sports from the Antitrust Laws III. ANALYSIS A. Analyzing the Fed. Base Ball Club Case 1. The Game Has Changed 2. The Exemption's Impact: Monopolization as Defined Under the Sherman Act 3. Criticism of the Fed. Base Ball Club Decision B. Analyzing the Toolson v. New York Yankees Case C. Analyzing the Flood v. Kuhn Case D. Analyzing the City of San Jose v. Office of the Comm'r of Baseball Case E. Analyzing the Baseball Amendment to the Clayton Act IV. RECOMMENDATION A. The Ninth Circuit Might Uphold the Exemption B. The Ninth Circuit Should Overturn the Exemption C. Chances of a Settlement? V. CONCLUSION I. INTRODUCTION

    The Sherman Act is the cornerstone of American antitrust law, from which Major League Baseball (MLB) is exempt. The Supreme Court established the exemption in 1922, (1) and has since upheld it twice. (2) First, the Court held that professional baseball was exempt from American antitrust laws (3) because it did not constitute interstate commerce. (4) A half-decade later, the Court realized that professional baseball clearly constituted interstate commerce, but upheld the exemption nonetheless. The Court subsequently changed its reasoning, however, now basing the exemption on congressional inaction. (5) Congress narrowed the exemption in 1998 by passing the Curt Flood Act. (6) The Court has yet to analyze this Act, and its impact remains unclear.

    In part, this exemption allows each individual team to maintain its own exclusive territory. (7) No team is allowed to infringe upon another's territory without first obtaining permission from the territory's owner, the Commissioner, or approval by 75% of all owners. (8) The City of San Jose's (9) lawsuit against MLB is the latest illustration of the exemption controversy. (10) Oakland's professional baseball team, the Oakland Athletics (A's), are attempting to move to San Jose, which is arguably within the San Francisco Giants' exclusive territory. (11) Because the A's were unable to obtain owner or Commissioner approval for the move, the City of San Jose sued MLB's Commissioner for violating American antitrust law by maintaining local monopolies on professional baseball teams. (12) The City of San Jose urged the judiciary to remove the exemption in its entirety. (13)

    This Note advocates for either the judiciary or the legislature to overturn professional baseball's antitrust exemption, putting an end to MLB's longstanding monopoly over the sport. Part II presents the A's general history, the obstacles preventing their move to San Jose, and provides an overview of professional baseball's antitrust exemption. Part III compares the strengths and weaknesses of each Supreme Court case and federal statute on the subject. Part IV analyzes the City of San Jose's ongoing lawsuit against the Commissioner's Office of Baseball, and asserts that the judiciary should rule in the City of San Jose's favor, thereby abolishing the exemption.

  2. BACKGROUND

    1. A History of Greatness

      Believe it or not, the A's are one of the greatest franchises in MLB's history. Despite an overwhelming lack of recognition, the A's have won more World Series championships than any other MLB franchise, excepting the New York Yankees and the St. Louis Cardinals. (14) Although its last World Series win was in 1989, the A's have recently returned to their winning ways. (15) The A's were the American League West champions in the 2012 and 2013 seasons, and again made the playoffs in the 2014 season. (16)

    2. The Oakland Coliseum

      The A's have the fifth-oldest MLB stadium--the Oakland Coliseum (the Coliseum). (17) In June 2013, a post-game sewage problem at the Coliseum forced the A's and the Seattle Mariners to share a locker room. (18) "The pipes backed up on the lower levels of the stadium ... creating a stink and pools of water in the clubhouses used by both teams and the umpires." (19) In addition to its old age, the Coliseum is the only stadium still shared between a MLB team and a National Football League team. (20) Because of the Coliseum's age, sewage problems, and dual-sport purpose, the A's are in pursuit of a new stadium.

    3. Attempts to Relocate

      1. Fremont, CA (2006-09)

        In 2006, the A's announced their intent to move to Fremont, California, 25 miles south of Oakland on the east side of the San Francisco Bay. (21) The A's chose Fremont after several years of searching for possible areas to relocate. (22) The City of Fremont agreed to build the A's a new stadium, Cisco Field, by the start of the 2011 season. (23) However, by 2009 the A's had scrapped its plan to move to Fremont, citing procedural holdups and expected project delays as reasons for their decision. (24) Of the more than $80 million the A's committed to the project, $24 million were unrecoverable. (25)

      2. San Jose, CA (2009-Present)

        After scrapping the Fremont relocation plan in 2009, the A's turned their sights to San Jose, California. However, San Jose, part of Santa Clara County, lies within the San Francisco Giants' (26) exclusive territory. (27) Under MLB rules, "each of the 30 teams enjoys a monopoly in its market. No other team is permitted to intrude upon the home team's territory." (28) Therefore, the A's may not move to San Jose unless they receive either the Giants' consent, or MLB's permission. (29) The resulting monopolization of local professional baseball teams led the City of San Jose to bring its lawsuit, contending that MLB's conduct violates American antitrust law. (30)

        In 1990, the A's were thriving, drawing the third-largest nightly crowds in all of baseball. (31) By 1992, the Giants, conversely, were threatening to relocate to Tampa, Florida. (32) At that time, the Bay Area territorial rights were clearly divided: "the Giants had the rights to San Francisco and San Mateo Counties, and the A's controlled Alameda and Contra Costa Counties. Neither team had Santa Clara County." (33) The Giants' then-owner, Bob Lurie, approached the A's then-owner, Walter Haas, requesting permission to move the Giants to San Jose. (34) To keep the Giants in the Bay Area, Haas granted Lurie permission without requesting any consideration in return. (35) The A's contend that at the time of the agreement, MLB Commissioner Bud Selig said, "Walter Haas, the wonderful owner of the Oakland club who did things in the best interests of baseball, granted permission." (36)

        After obtaining the A's permission, the Giants' attempt to build a publicly financed stadium in Santa Clara failed. (37) Lurie sold his ownership in the team, and the Giants stayed in San Francisco. (38) Fast-forward to 2014 and the only thing stopping the A's from moving to San Jose is the San Francisco Giants, who are unwilling to surrender their exclusive territorial rights to Santa Clara County. (39) Both franchises want rights to the area, as San Jose is the largest of the three cities and is filled with corporate sponsors, disposable income, and potential fans. (40)

        In 2012, the A's and Giants disputed the territorial split's enforceability. (41) The A's claimed the MLB-recorded minutes clearly indicated the Giants had to relocate to Santa Clara County as a condition of the agreement. (42) Furthermore, A's owner Lew Wolff claimed "the team [had] exhausted all viable options for a new stadium within its territory ... and that moving to San Jose [was] the only way the team [could] survive in northern California." (43)

        Conversely, the Giants claimed the A's previously reaffirmed the split, (44) and the Giants' current owners bought the team under the belief that they had exclusive rights to San Jose. (45) The Giants also contend that they have "spent tens of millions of dollars trying to woo fans and sponsors" in San Jose. (46) Therefore, allowing the A's to take control of the territory would "erode their investment." (47) Finally, the Giants assert the A's current owner, Lew Wolff, knew that San Jose was within the Giants' exclusive territory when he bought the team. (48)

        As of March 2014, there is a vast disparity between the values of these two teams. (49) In 2014, Forbes named the Giants the fifth most valuable MLB franchise, (50) valued at $1 billion. (51) The valuation attributed $456 million to the Giants' city and market size. (52) Additionally, AT&T Park, the Giants' stadium, generated $240 million in revenue during the 2013 season. (53) In contrast, the A's $495 million valuation made them the third lowest valued MLB franchise. (54) The A's city and market size represented $137 million of that value, and the Coliseum contributed a mere $85 million to the team's 2013 revenue. (55)

        Immediately below is a diagram displaying how the Bay Area is divided between the A's and the Giants, as of February 2014. (56)

        In 2009, MLB Commissioner Selig created a committee to study the A's potential move to San Jose. (57) In 2012, losing patience with Selig's committee, the A's began pushing for an owners' vote regarding their proposed move to San Jose. (58) The A's would need approval of at least 75% of team owners to overturn the Giants' territorial rights to the South Bay. (59) However, MLB's other owners would likely be reluctant to open the "floodgates to team movement" by voting in the A's favor. (60) As of the summer of 2013, Commissioner Selig's committee was still evaluating the move. (61) On...

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