The Realistic Effect of Baseball’s Supposed Antitrust Exemption

The most rational way to determine whether or not Major League Baseball should continue to enjoy its antitrust exclusion is to consider the implications that would occur to the game and to its consumers of either doing away with or officially allowing the exemption to continue. Listed below are some important topics and how the practical meaning of the assumed exemption has been handled to date and what would theoretically happen if it were abolished.

Minor Leagues and Amateur Draft

A result of the assumed exemption is that Major League Baseball has been allowed to pursue restricting labor market practices when dealing with its minor leagues. MLB has a draft of amateur players from the U.S., Canada, and Puerto Rico every June. The worst MLB teams pick first and so on. After a player is selected, he can sign with his team for $850/month plus a corresponding signing bonus, depending on how high he was drafted. Once signed, the player is locked to the franchise for four years before another franchise can sign him. If the player is put on the team’s major league 40-man roster, he is required to play seven years in the team’s system before he has an opportunity to choose a different organization.

It is clear that these limitations are obvious examples of restraints on trade. First, the player is unable to entertain competing bids at the draft. Second, he can’t receive contract offers from other franchises for up to seven years after the player is drafted. Third, the player’s salary is determined according to a scale that is set by the owners. “Since there is no labor union of minor league players, there has been no collective bargaining wherein a player’s representative bargained away free labor market rights in exchange for other benefits,” like there is in the major leagues (May the Best Team Win, Zimbalist).

However, if the antitrust exemption was revoked, it would give any minor leaguer the opportunity to sue Major League Baseball. It is not clear that anyone would do so because these players are, after all, very young and are focused on making it to the big leagues as soon as possible. There also is no guarantee that a minor leaguer would even win his case in court.

The most significant point here is that it would allow a judicial review of MLB’s procedures and guidelines. The minor league system most likely would still survive with these changes. Affiliated teams may lose their relationship with the major league parent club and be forced to create an independent minor league(s). If ballplayers were not “owned” by MLB teams, it is to be expected that competitive balance would improve on the big league level. For the draft, teams would select players from the minor leagues instead of out of high school or college. The players would be further along in the developmental process and their prospective talent level would also be more predictable.

Franchise Relocation

Pretend that you are an owner of a house and were told by politicians that you were restricted to selling your home to someone who is from out of town. Or more to the point, pretend owning a corporation in a state that has high labor costs with even higher taxes and you were told that you couldn’t move the operations to a more appealing state. Perhaps it seems as though someone is interfering with your desire to dispose of your resources at your discretion and that you are not being able to take advantage of a free market. This is, in essence, what happens in Major League Baseball.

In the NFL (football), NBA (basketball), and NHL (hockey), which are all the equivalent of Major League Baseball for their respective sport, there are no presumed antitrust exemptions. In each of the three leagues the relocation guidelines have transformed into one where the majority of ownership proposals to relocate are negotiated between the owner and the MLB commissioner. The owner more often than naught is able to move the team by paying a relocation fee in the order of tens of millions dollars. The problem with Major League Baseball operating as a monopoly is that the league creates non-traditional markets for franchises looking to relocate. This means that the city instead of the franchise owner will be forced to pay the hefty relocation fee.

A prime example of a city that gets burned by MLB creating non-traditional markets is Washington, D.C. The city is considered a major asset of baseball even though no team is currently playing there. Since the city is a potential host, MLB is basically acting as if the city belongs to them. The reason is because Washington could be leveraged against other, smaller cities to get more lucrative deals for a franchise. This is a primary result of MLB creating markets for teams. If there was a competing league with MLB, there would undoubtedly be at least one, possibly two franchises in the nation’s capital and eighth leading media market.

On the other hand, it is important to point out that the league has not thought twice on occasions to threaten a team from relocating to a new city. The major reason behind this political move was to extort much larger public funding from the franchises’ current host cities in order to build new stadiums. In the past, MLB owners have threatened to move the Milwaukee Brewers to North Carolina and the San Francisco Giants to Tampa Bay before new stadium deals were set into motion.

In the end, if Major League Baseball was not allowed to operate as a ruling monopoly, there would not be very many, if any, of these demands for franchises to hold their current host cities ransom for a huge pay day so they can build a new stadium. Also, there wouldn’t be cities like Washington and major media markets like North Carolina, Oregon, and Virginia that don’t have a professional baseball team.
- posted by Hot Rod @ 9:36 PM