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Robert Whiting

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Unfair Trade Advantage: Anti-Trust Exemption (Part 4 of 4)

by Robert Whiting (April 2008)

Continuing our discussion of unfair trade advantages, begun in a previous column, the basis thesis, restated, is: MLB enjoys certain benefits under US law and custom that give it a decided advantage over the NPB in competition for the international market for players and for fans. NPB teams may be poor at making money through baseball, but the gap between them and MLB teams would not be so great if the MLB did not have what could reasonably be called "unfair trade advantages."

One of these unfair trade advantages is MLB's exemption from U.S. antitrust laws and interstate commerce laws which prohibit actions that unreasonably restrain competition. U.S. antitrust laws were put into place in the early part of the 20th century, to stop monopolistic practices of powerful big oil and steel corporations. In 1922, the Supreme Court ruled that the anti-trust law did not apply to baseball. The rationale was that baseball games were local affairs, not interstate commerce, which was more or less true at the time. Thus, baseball is the only major sport that has an exemption from anti-trust law.

Of course, the situation has changed in the past 86 years. MLB baseball has become a huge business and MLB owners indeed act like a monopoly at times, controlling when franchises can move and where they can move to. Greater New York, for example, is big enough to support three MLB teams, possibly even four, but the owners of the Mets and the Yankees have a veto power, under MLB rules, and can prohibit any other MLB team from moving there.

MLB's anti-trust exemption has been challenged more than once in the courts, but each time the Supreme Court has upheld the anti-trust exemption, ruling that since Congress granted the original exemption, Congress should therefore be the one to decide whether or not it should be continued. This means baseball owners cannot be sued for anti-trust violations.

If the antitrust exemption disappeared, one could conceivably see small-market franchises attempting to move to big market cities like New York, Chicago, and Los Angeles. The powers-that-be in the MLB would probably retaliate by contracting, forcing those franchises to leave the league, which, would then raise the possibility of the contracted franchises forming a new professional major league of their own. In either event, the more profitable, established franchises would find themselves faced with stiffer competition. A natural result would be a reduction in their revenue streams, meaning less money to spend on acquiring players – including players from Japan.

Another result of removing the antitrust exemption would be the teams' loss of control of minor-league contracts. MLB teams now have deep minor league systems, four to five times as deep as NPB teams. Eliminating the contractual rights to the several hundred minor league players each MLB team controls would mean that the owners would lose power in negotiating with the players. This would increase competition, player salaries and player movement from one organization to another, causing MLB operating costs to rise.

So, to review, the unfair advantages we have listed include stadium subsidies, depreciation of salary costs and exemption from antitrust and interstate commerce laws that are applicable to other businesses.

This does not mean that the NPB could not do a better job of selling itself to the public. Promotions, along with integrated media, merchandise and concession rights, as well as revenue-sharing, are all worthwhile things that the NPB should be doing.

However, the idea that the MLB is a perfect example for Japanese baseball to emulate is ridiculous.

The truth is that Japanese baseball talent is being siphoned off with the partial assistance of U.S. tax subsidies. There is no way that the Japanese government could -- or would -- dispense largesse to Japanese baseball on such a lavish scale.

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