OPEC, Meet MLB: Cutting the Cartel Crap From Professional Sports.
Posted in Politics, Sports by ben
The Washington Nationals are homeless no more. Major League Baseball and the DC City Council have reached an agreement to begin construction on a brand new ballpark in Southeast. Nevermind the sign outside of RFK Stadium declaring it to be “The Home of the Washington Nationals.” That stadium is old. How is baseball supposed to sell the Nats off to new owners without a deal in place for a brand new stadium? No investors will want to buy a team without a stadium. I mean a new stadium. If Washington wants to keep the team, the city will just have to build a new stadium for them.
RFK is an old stadium, and certainly could be replaced, but there’s really no urgent reason to build a new stadium now, before the owners are even selected. Well, no urgent reason other than the profits that the other Major League Baseball owners stand to make from the sale of the team.
The Nationals are collectively owned by Major League Baseball. In moving the team from Montreal to Washington, the DC City Council signed an agreement with MLB in which they promised to publicly-finance a brand new stadium for the team. I’m not interested in debating whether or not DC got a good deal in this specific case. The City Council must honor its commitments, regardless of whether or not the deal was in the city’s best interests.
What I want to know is, why do professional sports owners hold this kind of power over cities and fans? The short answer is simple competitions. There are plenty of markets in this country for professional sports. The biggest markets, however, don’t always have franchises. Why did the Houston Oilers move to Tennessee, or the Cleveland Browns move to Baltimore? New, publicly-financed stadiums. Why expand baseball to Denver, Miami, Phoenix, and Tampa Bay before grudgingly coming to Washington? Internal league politics.
Aside from the basic economics of the situation—a scarce commodity (sports franchises) going to the highest bidder (new stadium deals)—is there a good, common-sense reason that the system works this way? The city essentially pays the team for the privilege of having the team, who must then be paid again for tickets, parking, concessions, souvenirs, and so forth. With the amount of money that franchises make from their host cities, it’s quite a racket that the owners can get free stadiums thrown in as well.
Is this a problem? If so, how could it be addressed?
As a result of a 1922 court case, Major League Baseball is exempt from antitrust laws. The argument at the time was that baseball games are played within the boundaries of a single state and were not, strictly speaking, interstate commerce. A better argument that has been advanced in recent years is that the entire league is responsible for producing the final product, not just the individual clubs, and therefore MLB operates as a single entity rather than a cartel of independent owners. In that sense, professional sports leagues are natural monopolies. The NFL holds only limited antitrust exemptions (hence the XFL and earlier upstarts), but since the merger of the AFL and the NFL into today’s NFL, football owners have operated with the same cartel tactics that baseball owners employ.
The ownership cartels, whether arising from antitrust exemption or mergers, force communities to compete for business rather than franchises. Could a league-split be the answer?
Today’s major sports leagues have natural fault-lines between conferences. Major League Baseball could be split into two independent leagues, the American League and the National League. The AFC and the NFC could function as independent leagues as well. Basketball and hockey fit this pattern as well. Each professional sport could cooperate to organize a common draft, an all-star game, and a championship.
This sounds like an extreme solution, but it requires only minor steps back in the way sports leagues are organized. For baseball, the antitrust exemption would have to be revoked. The logic might have applied in 1922, but today, visiting teams generate revenue across state lines through television broadcasts. Professional sports in the modern world are indisputably interstate commerce, and therefore subject to Congressional regulation and antitrust laws. For football, only a repeal of the 1970 AFL-NFL merger (incidentally, achieved by an act of Congress) would be necessary.
Could this work? Well, the first three Super Bowls were cooperative efforts between the independent AFL and NFL. I see no reason that that level of cooperation would not apply now. Thus, fans would continue seeing the Super Bowl, The World Series, the NBA Championships, and the Stanley Cup.
Owners, however, would face more competition between clubs. Under such a split-league solution, Orioles owner Peter Angelos would have had no power to block a National League team from coming to Washington. Furthermore, with two leagues competing for market share, owners might be more hesitant to abandon major markets in pursuit of stadium revenue, knowing that their competitors could snap up the abandoned market.
The split-league solution offers minimal disruption of the sport for the fans while maximizing competition incentives among owners.
March 10th, 2006 at 1:09 pm
Very well said. I will comment on what you said soon, however, I was hoping you would bring up something that wasn’t in the article: Anthony “Baseball” Williams.
The only time I ever hear Anthony Williams’s name mentioned is when people are talking about the nationals. Does anyone else find that peculiar?
March 14th, 2006 at 4:43 pm
Ok, now I will comment for real.
A split league decision could definitely have its benefits. All of these are outlined in the article. The reason I would hesitate to push for split leagues is simply because the amount of effort it would take and hostility it would cause. Are the benefits really worth the costs?
My theory is as follows. Sports fans would get angry because their “sacred” sport was altered (even if it is back to its original state). Owners of teams would get angry for obvious reasons and probably launch many lawsuits. League directors would be angry because their jobs would be changed dramatically or possibly eliminated. And finally, it will probably cost some amount of money to split the leagues.
I will agree there are definitely benefits to splitting leagues, but the costs are a little high and I think outweigh the benefits. But that’s only if my assumptions hold up.
March 14th, 2006 at 5:15 pm
I don’t know if split-league would work as well as I envisioned it, but I think you’re overestimating the costs.
The fans getting angry? I don’t see it. The game has not been altered in the least. The only changes are in the administrative organization of the sport. You still get the draft, the all-star game, and the championship. Fans have been willing to put up with changes to actual game rules (most recently in the NHL, post-strike) that have greater impact on the play of the game than the owners’ compliance to fair competition laws. The only way you get a fan backlash on this is if the owners fail to come to an agreement for the Super Bowl or World Series one year, and there’s too much money to be made in the post-season for that to happen.
Owners and league bureaucrats won’t like it, no argument. The problem is that the owners have consistently abused their power, and we’re looking for a solution to fix that. The owners aren’t going to like any solution, split-league or otherwise.
Lawsuits? The owners would have to be able to explain, in court, why they deserve exemption from antitrust laws. Currently, they are exempt, but I think that the decision would have a hard time standing up in court today. Pro sports are clearly interstate commerce, and therefore the basis of their antitrust exemption no longer stands. The lawsuits will be launched, but the owners and league bureaucrats will lose.
As for the cost, I can’t see it being astronomical. You’re talking about the reorganization of a large corporate body. Some jobs will be created, some jobs will be moved, some jobs will be lost. From the purely speculative standpoint, I haven’t seen any evidence one way or the other about the cost. I would very much like to see a feasibility study on this topic, though.
When the dust settles, the benefits will outweigh the costs. Unfortunately, I don’t expect this solution to be implemented. The owners have too much power to let it go, and you’d either need a lawsuit or an act of Congress to get a league split. I don’t think it’s realistic to expect either.
March 14th, 2006 at 6:30 pm
I think the benefits and costs argument is a little too fine to actually argue in depth about. But for the most part I see what you’re saying and I agree with the fact that a split league would definitely be beneficial.