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Baseball has long been considered America’s favorite pastime. The qualities of this staple sport go far beyond the realm of simple entertainment; they represent a culture, one that is mired in decades of history, and complemented with the idealistic image of a close-knit family. When one thinks of the United States of America, cultural icons such as the American flag, apple pie, and baseball come to mind. Thus, it is important that when dealing with the economic facets of baseball, one considers the emotional response that can be incurred from the population. Dealing with more than one billion dollars, baseball undoubtedly deserves economic discussion. One issue that is highly controversial in this train of thought is the existence of anti-trust law exemptions in baseball.
Anti-trust laws are laws which prohibit anti-competitive behavior and unfair business practices. Their purpose is to make sure that businesses and consumers cannot be abused by powerful firms that hold or wish to hold a monopoly in the market. They also take into account certain ethical standards, and therefore can be considered quite subjective. Many specific strategies are outlawed by anti-trust laws, including price fixing (agreement on prices of uniform goods or services), predatory pricing (setting a low price in order to knock off competitors), and vendor lock-in (virtually forcing a consumer to buy from a certain supplier).
Anti-trust laws have had a colorful history in the United States. The earliest anti-trust law was created primarily by Senator John Sherman in 1890. It was signed by President Benjamin Harrison and put into effect, and today is the root of all anti-trust legislation. The Sherman Anti-Trust Act was used extensively during the Progressive era by “trust busters” such as Theodore Roosevelt, William Howard Taft, and Woodrow Wilson. The Standard Oil Company (headed by John D. Rockefeller) and the United States Steel Corporation (headed by Andrew Carnegie) were among the giants that fell to the wrath of the anti-trust acts. If these mammoth firms could not stand up to the anti-trust policies, what protected baseball from falling to them as well?
The controversy began to take root when in the beginning of the twentieth century, a player in the National League attempted to join a newly created club in the American League. The dispute was settled in 1903, claiming that the two leagues were a shared monopoly between the owners. Years later, Federal Baseball Club of Baltimore, Inc. v. National Baseball Clubs became a pivotal case in the status affirmation of baseball in the economy. Any business that operates across state borders has been subject to anti-trust legislation because this implies interstate commerce (Rovell). Baseball may seem to fall under this category, since it has a nation-wide agenda in which teams travel from state to state to play games. But in 1922, the Supreme Court unanimously determined that baseball did not fall under this category since the state-to-state travel is “not the essential thing” in the sport. They felt that baseball exhibitions were purely stately matters and did not apply to the Sherman Act. Since this monumental ruling, baseball has kept its unique status and has been exempt from anti-trust laws. This, of course, has a wide spectra of effects on many different things. Toolson v. New York Yankees (1953) and Flood v. Kuhn (1972) further established the exemption by rejecting opposition to it.
One effect that the anti-trust exemption has had on baseball is its close tie to the minor leagues. The minor leagues follow a reserve system in which each team is assigned to a major league counterpart and whose players can only negotiate with the parent team. There are mixed feelings on this, as this system has been part of baseball history. It encourages the development of a farm system and provides a whole different dimension to fans. On the other hand, the players for the most part support a lift of the exemption so that they could follow in the path of the major leaguers and become free agents. The league dumped the reserve system regarding its major league players in the 1970s; before that, major leaguers too were only able to negotiate with one team.
Relocation is another issue that is directly affected by the anti-trust exemption. With the exemption in place, teams must gain the approval of the commissioner before moving to another city. The commissioner would rather keep teams in big cities where the taxpayers can take care of many costs, such as for the stadiums, and to keep ticket prices high. Also, by limiting the number of teams in the league and fueling competition between these big cities, the MLB can see its profits go up (Barra).
The effects of the anti-trust exemption go beyond the numbers, however. The uneven distribution of teams throughout the nation, for example, is something that is not commonly seen in other sports. The fact that California has five teams while Wisconsin has none may discourage some fans, but most realize that it would be economically irrational to maintain teams in areas where they are bound to fail financially. Thus, most fans who do not have a hometown team simply root for the closest available or one they favor. Similarly, many people see it as unfair that well-off metropolitan teams such as the New York Yankees have a clear advantage over lower end teams such as the Colorado Rockies when it comes to signing free agents and trading. To counter this problem, many other sports incorporate a salary cap in order to provide all teams an equal opportunity (Witting). Under the salary cap, each team is allowed to spend up to a certain amount and cannot go over. In a sense, salary caps can be viewed as an anti-trust law in itself; both aim to de-monopolize and spread the wealth. Major League Baseball does not include the concept of a salary cap and instead offers an alternative in luxury tax. This penalizes teams who spend over a certain amount, but it has done little to stop teams like the New York Yankees, Boston Red Sox, and Los Angeles Angels of Anaheim from offering enormous contracts.
In a heated issue such as this one, many people have expressed their thoughts. Some support the exemption, stating that anti-trust in and of itself is at the core of the problem. Trust busting can be seen as unfair because it prohibits success and the control of one’s own properties (Richman). The case can be made that the MLB simply deals within its confines and there should be interference to this. The flip side is that without anti-trust regulation, the MLB holds too much executive power and that players have no bargaining room, among other things. Really what this is a debate of is the age-old issue of government intervention or complete laissez-faire.
I believe that, in the long run, society and baseball would benefit from lifting the anti-trust exemption. The MLB would incur quite a few short run losses because of minor leaguers able to negotiate for more expensive contracts and lower ticket prices in small cities, but these losses can be relieved by lifting the exemption slowly and creating a plan that would stretch over time. It would be beneficial for society because consumer costs could go down and teams could become more competitive and it would be good for baseball because it would reaffirm its relationship with its fans and its place in American culture.
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