Baseball club owners have been drawing a lot of fire lately. While I will not comment on most of the issues that have been raised in your sports section recently, I will address the Dave Anderson column of December 13, in which he discussed the antitrust exemption granted by the Supreme Court in the Federal Baseball Case of May, 1922. The unanimous opinion in Federal Baseball was written by Oliver Wendel Holmes, Jr. Mr. Holmes simply affirmed the opinion of the Court of Appeals for the District of Columbia when he wrote the decision in this case. That the Supreme Court unanimously affirmed the decision of the Court of Appeals during a period of trust busting should be carefully noted. That Holmes was a Union Army veteran who had been wounded in Antietam in September, 1862, only adds to the drama of a case in which Plaintiff's attorney refers to the barons of baseball as "confederates."

The decision in Federal Baseball, although criticized by some, has remained unaltered by the Judiciary or Congress for seventy years, although there have been ample opportunities to change or overrule that decision. They have refused to act for the very good reason that baseball's exemption from antitrust is reasonable.

The issue raised by most critics of the exemption is that organized baseball is involved in interstate commerce. Therefore, some would say, it must be subject to the antitrust laws. That is the wrong inquiry. Baseball's exemption from the antitrust laws is reasonable not because organized baseball is not engaged in interstate commerce, but rather, the exemption is reasonable because cities, states and millions of fans benefit from the fact that baseball can regulate itself and prevent franchise moves such as the abandonment of Baltimore, St. Louis and Oakland by teams of the nonexempt NFL.

It is a mistake to conclude there would be public benefit if baseball lost its exemption. Congressman Bunning, quoted by Mr. Anderson, misstates the case completely when he states that "it's unfair to those cities that have to deal with the 28 owners not to have remedies you normally have through the Sherman Act." In fact, the facts are just the opposite. The cities that do not have teams but covet them want the remedies of the Sherman Act. Baseball's exemption protects the cities that currently have teams. As Dave Anderson states, Congressman Bilirakis of Tampa is proposing a law removing the exemption currently enjoyed by baseball in order to grant Tampa/St. Petersburg the benefit of antitrust remedies that they do not have. Currently, San Francisco and all the other cities of the American and National leagues enjoy the benefits of baseball's exemption, which results in franchise stability.

The rally cry for those who would overturn Federal Baseball is that baseball is a business. This results from a misreading of the Sherman Act and concluding that it makes illegal all restraints on trade or monopolies. The Sherman Act proscribes unreasonable restrictions on trade or monopolies that cause injury to the consumer. In the famous Standard Oil Case of 1914, the same Supreme Court that ruled in Federal Baseball developed the "Rules of Reason" analysis that our modern jurisprudence applies. Federal Baseball was an application of this "Rule of Reason."

Before lifting the exemption, let us project the baseball world that would exist without it. First, unlike the NFL, where 90% of revenues are shared equally, baseball shares only its joint revenues, and there is an enormous difference in club resources based on market size. Player salaries and benefits, on the other hand, are determined on an industry-wide basis. From this factor alone, it is fair to assume that the pressure to relocate is stronger in baseball than in football. With no exemption, the Giants would be in St. Petersburg today. Speculation concerning the wisdom of this non-move must wait until we see the amount of support given by San Franciscans as fans and politicians to Peter Magowan's saving of their team.

We must look to the real potential for chaos that exists if baseball loses its ability to self-regulate. first, let's select the smallest market, Seattle, and suppose that the coalition that came forward to buy the team last summer had failed to materialize. A New Jersey sportsman could acquire the team and move it to the Meadowland. He would only have to outbid others for the Seattle franchise, and he could then move without the necessity of League approval. Theoretically, this could be done in the middle of a home stand with the Twins. Or, suppose that Ted Turner decided that he wanted an American league team to play in the new Atlanta stadium so that there could be 162 games there. Further assume that the new stadium movements in either Detroit or Milwaukee fail, as did the new stadium efforts in San Francisco. So, the Tigers go to Atlanta, or the Brewers, or the Royals or even the Twins move, while the American league sits by powerless to act. Mr. Anderson makes light of the prospect of such franchise moves, but in the volatile world of the major leagues, the scenario is very possible. It is the antitrust exemption allowing the control of markets that prevents such possibilities from becoming facts and congressional delegations from areas with teams should consider carefully a vote that may allow their teams to move by removing baseball's ability to regulate itself.

The central issue today is whether baseball acts like a monopolist and, if so, is the behavior unreasonable, which would be the only reason to remove its antitrust exemption. A monopolist, for example, is able to exert such power up on the relevant market so as to be able to raise prices and extract, therefore, an unreasonable profit. It is worthy to note here that the nonexempt sports leagues and their teams charge far higher prices for game ticket than does exempt baseball. the NBA acts like a monopoly, not organized baseball. Furthermore, baseball is not profitable to the extent its profits are derived from monopolistic pricing.

The fact that organized baseball is involved in nationwide television contracts has no bearing on the exemption question, anyway. Congress has granted an explicit exemption to sports leagues that allows them to join together in a noncompetitive way to negotiate national television broadcast contracts. Furthermore, organized baseball's labor issues would not disappear, since labor matters have both statutory and non-statutory exemptions from antitrust laws.

In fact, exemptions from antitrust laws are quite common, perhaps most obviously with regard to natural monopolies or utilities. In exchange for exemption from antitrust regulation and certain grants from municipalities, enormous monopolies run our power, water and gas companies. The patent office daily crates monopolies for the use of technology. Since the year of the Federal Baseball decision, 1922, agricultural cooperatives have been granted statutory exemption for the collective process, preparing for market, and handling and marketing of agricultural products. However, it is important to note that the agricultural cooperative exemption does not apply if a cooperative combines with other businesses, includes firms as members that are not engaged in the production of agricultural products, or engages in conduct unrelated to the purpose of the exemption. The limitations on the agricultural cooperatives exemption are, for our purposes here, worthy of note. Similarly, baseball's exemption may be limited to the facts and conditions extant at the time of Justice Holmes decision. It is reasonable, in fact, to extend baseball's exemption to the NFL, NHL and NBA.

A thorough analysis of professional sports leagues leads inescapably to the conclusion that teams must cooperate with each other. These are "leagues," after all. The product being produced is an intangible that is almost incapable of being adequately described. When the Kansas City Royals play the Yankees, the thing being sold is an exhibition that has the potential for excitement, thrills, drama and intrigue. However, the games can have that potential only when the two teams are perceived as equals. Baseball teams must cooperate with each other to create a perception of equality among themselves to ensure the success of all the teams. If that same game between the Royals and Yankees were likely to result in a twenty run margin of victory, the stands would be empty and the industry would decline.

The exemption from antitrust regulations granted in Federal Baseball that has survived since 1922 is only a shield. Baseball does not use this exemption as a sword. The industry is in turmoil today and should be allowed to retain the small shield that allows self-regulation, which is the basis upon which it would correct its own problems in due time.

Sincerely Yours,

Clark C. Griffith