Root, Root, Root for the Home Team: Is the FANS Act of 2001 Really Good for Baseball Fans?

• Author: Jean-Paul A. Escudier
• Position: J.D./B.C.L., May 2004, Paul M. Hebert Law Center, Louisiana State University
• Pages: 387-410

J.D./B.C.L., May 2004, Paul M. Hebert Law Center, Louisiana State University. I would like to express my deepest thanks to Professors Paul R. Baier and James W. Bowers, and especially to Professor Kenneth M. Murchison of Louisiana State University's Paul M. Hebert Law Center for their invaluable guidance and encouragement in writing this article. Without their help I would have been lost in this process. I would also like to thank my family and friends who have given me their complete support throughout my entire law school career.

Since the writing of this article, Major League Baseball has shelved plans of contraction, although not ruling it out in the future. Also, while the FANS Act has not been a presumably will not be voted on in Congress, the legal issues raised in the article still hold true. Finally, for the first time since 1971, when the Washington Senators moved to Arlington, Texas to become the Texas Rangers, Major League Baseball has announced the relocation of one of its franchises. On September 29, 2004, Major League Baseball announced that the Montreal Expos, who for the previous two seasons had split home games between Montreal and San Juan, Puerto Rico, were relocating to Washington, D.C. to become the Washington Nationals. See Press Release, Major League Baseball, Washington, D.C.'s Proposal Selected by MLB (Sept. 29, 2004), available at http://www. mlb.com/NASApp/mlb/mlb/news/mlb_press_release.jsp?ymd=20040929&conte nt_id=875110&vkey=pr_mlb&fext=.jsp.

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Imagine for a minute that the American Association of Cell Phone Manufacturers met in Chicago last week, and at the meeting thirty of the largest manufacturers got together for cocktails to identify which of them they could buy out and close down in order to reduce the output of their product and maximize the profitability of the remaining manufacturers. Good idea, right?

But of course we all know that eventually their strategy would fail. It would fail because, first of all, their conspiracy would very likely be in violation of the Sherman Antitrust Act, and in an act of fairness to all entrepreneurial Americans, the government would remedy the situation, right? Or maybe if the government failed to remedy the situation, energetic young entrepreneurs would start up new manufacturing companies, through increased competition, driving prices down and choices for cell phones up.

That is the way it works here in America, right? Except for baseball.

-Minnesota Governor Jesse Ventura¹

On November 6, 2001, two days after the completion of what was one of the greatest World Series in history,² Major League Baseball'sPage 388 Commissioner Allan H. "Bud" Selig announced a plan by the owners of the thirty major league franchises to "contract" the league by eliminating two teams before the start of the 2002 season.³ The owners of the league's thirty franchises overwhelmingly approved the plan in order to alleviate some of the league's economic struggles.⁴ In order to accomplish this proposal, the Commissioner's Office and franchise owners relied on an exemption to federal antitrust laws that Major League Baseball has enjoyed since the 1922 United States Supreme Court decision in Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs.⁵ Congress quickly responded on November 14, 2001, when late United States Senator Paul Wellstone and United States Representative John Conyers introduced the "Fairness in Antitrust in National Sports (FANS) Act of 2001"⁶ to attempt to halt the threat of contraction statutorily. This legislation proposes to make federal antitrust legislation applicable to the elimination or relocation of Major League Baseball franchises.⁷

In drafting the FANS Act, Senator Wellstone and Representative Conyers modeled the Curt Flood Act of 1998.⁸ The Curt Flood Act was meticulously crafted by Congress in collaboration with Major League Baseball and the Major League Baseball Players Association (MLBPA) so that it would place a specific limitation on professional baseball's federal antitrust exemption and not unintentionally affect the application of the exemption to other areas of the game.⁹ The current wording of the FANS Act, however, significantly diverges from that of the Curt Flood Act. The ramifications of the divergence could significantly affect many more aspects of professional baseballPage 389 than the elimination or relocation of franchises. Therefore, Congress should not pass the FANS Act of 2001 as it is currently written, and alternative solutions should be explored to protect fans and cities from the contraction of Major League Baseball teams. Ultimately, the best solution is to revise the FANS Act, constructing it so that its scope more closely emulates that of the Curt Flood Act of 1998. This would avoid the unintended consequences that the FANS Act currently presents.

The first step in a thorough analysis of the FANS Act requires a study of the evolution of Major League Baseball's exemption to federal antitrust laws, the effects of that exemption, and all remedies to the problems created by the exemption. Part I of this analysis will provide a general overview of federal antitrust legislation. Part II will analyze the history of baseball's exempt status through numerous court decisions and legislative action. Part III will then look at the effects that this exempt status has on various aspects of the game, specifically on free agency, the minor league system, and the contraction or relocation of franchises. Part IV will explore the effects that the proposed act would have on the issues created by professional baseball's exemption to antitrust legislation. This part will also explore the effects of alternative measures such as a judicial overruling of the original creation of the exemption, or a revision of the current wording of the FANS Act. Finally, the conclusion will assert that, in order to best protect baseball fans from the danger of contraction without unintentionally upsetting other aspects of the game, Congress must revise the FANS Act so that it more closely emulates the carefully worded Curt Flood Act of 1998.

I General Overview of Federal Antitrust Legislation

The driving force behind America's free enterprise system of economics is competition.¹⁰ The struggle between competitors for business creates an environment of efficiency where many parties must supply consumers with quality goods and services at reasonable prices or risk being driven from the market.¹¹ The environment of the late nineteenth century, however, did not conform to this desired model. During that time, American businesses thrived, showing enormous gains in both size and strength.¹² As a result of this period of immense prosperity, somePage 390 businesses acted shrewdly to overpower competitors and began to dominate their markets creating monopolies or "trusts," particularly in the oil, steel, sugar, and tobacco industries.¹³

Recognizing the increasing monopolization of the American economy, President Benjamin Harrison in 1889 called for legislation to control "dangerous conspiracies against the public good."¹⁴ This call to action resulted in the passage in 1890 of the Sherman Antitrust Act,¹⁵ which today remains at the core of antitrust legislative policy.¹⁶Section 1 of the Sherman Act detailed a sweeping proscription of "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states."¹⁷ For this section to apply, there must be at least two parties joining to restrain interstate commerce. Section 2 of the Sherman Act similarly prohibits monopolization and conspiracies to monopolize any part of interstate commerce.¹⁸

Courts found it difficult to enforce the Sherman Act in its early years, however.¹⁹ Legislators observed two deficiencies in the Sherman Act: (1) it did not address threats to competition in their incipiency, and (2) it was excessively general in that it did not include a prohibition of specific practices with anti-competitive effects.²⁰ As a result, Congress passed the Clayton Act in 1914.²¹This Act prohibits a detailed list of practices that "may be substantially to lessen competition, or to tend to create a monopoly in any line of commerce."²² Thus, the Clayton Act expands the prohibitions of the Sherman Act in regulating activity which may not constitute a trade restraint but may develop into one in the future.²³These two acts provided the basis on which the courts would apply antitrust legislation to all industries in the future, except for professional baseball.

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II Historical Development of Major League Baseball's Antitrust Exemption

A Top of the First: Lead-off Home Run in the Establishment of the Exemption

Baseball's long history of exempt status from federal antitrust regulation began with the 1922 Supreme Court decision in Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs.²⁴ In that...