S. HRG. 107–427 THE APPLICATION OF FEDERAL ANTITRUST LAWS TO MAJOR LEAGUE BASEBALL HEARING BEFORETHE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED SEVENTH CONGRESS SECOND SESSION FEBRUARY 13, 2002 Serial No. J–107–59 Printed for the use of the Committee on the Judiciary ( U.S. GOVERNMENT PRINTING OFFICE 79–393 DTP WASHINGTON : 2002 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 VerDate Feb 1 2002 12:33 May 20, 2002 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 C:\HEARINGS\79393.TXT SJUD4 PsN: CMORC COMMITTEE ON THE JUDICIARY PATRICK J. LEAHY, Vermont, Chairman EDWARD M. KENNEDY, Massachusetts ORRIN G. HATCH, Utah JOSEPH R. BIDEN, JR., Delaware STROM THURMOND, South Carolina HERBERT KOHL, Wisconsin CHARLES E. GRASSLEY, Iowa DIANNE FEINSTEIN, California ARLEN SPECTER, Pennsylvania RUSSELL D. FEINGOLD, Wisconsin JON KYL, Arizona CHARLES E. SCHUMER, New York MIKE DEWINE, Ohio RICHARD J. DURBIN, Illinois JEFF SESSIONS, Alabama MARIA CANTWELL, Washington SAM BROWNBACK, Kansas JOHN EDWARDS, North Carolina MITCH MCCONNELL, Kentucky BRUCE A. COHEN, Majority Chief Counsel and Staff Director SHARON PROST, Minority Chief Counsel MAKAN DELRAHIM, Minority Staff Director (II) VerDate Feb 1 2002 12:33 May 20, 2002 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 C:\HEARINGS\79393.TXT SJUD4 PsN: CMORC C O N T E N T S STATEMENTS OF COMMITTEE MEMBERS Page DeWine, Hon. Mike, a U.S. Senator from the State of Ohio ................................ 33 Feingold, Hon. Russell D., a U.S. Senator from the State of Wisconsin ............. 28 Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 22 Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 1 Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama .......................... 86 Thurmond, Hon. Strom, a U.S. Senator from the State of South Carolina ........ 88 WITNESSES Brand, Stanley M., Vice President, Minor League Baseball, Washington, D.C. 35 Butterworth, Hon. Robert A., Attorney General of Florida, Tallahassee, Florida ................................................................................................................... 4 Dayton, Hon. Mark, a U.S. Senator from the State of Minnesota ....................... 18 DuPuy, Robert A., Executive Vice President and Chief Legal Officer, Office of the Commissioner of Major League Baseball, New York, New York .......... 23 Fehr, Donald M., Executive Director and General Counsel, Major League Baseball Players Association, New York, New York ......................................... 29 Nelson, Hon. Bill, a U.S. Senator from the State of Florida ................................ 20 Swanson, Lori R., Deputy Attorney General of Minnesota, St. Paul, Min- nesota .................................................................................................................... 9 Wellstone, Hon. Paul D., a U.S. Senator from the State of Minnesota ............... 14 QUESTIONS AND ANSWERS Responses of Stanley M. Brand to questions submitted by Senator Leahy ........ 67 Responses of Stanley M. Brand to questions submitted by Senator Hatch ........ 70 Responses of Robert A. Butterworth to questions submitted by Senator Leahy 73 Responses of Robert A. Butterworth to questions submitted by Senator Hatch 74 Responses of Robert A. DuPuy to questions submitted by Senator Leahy ......... 76 Responses of Robert A. DuPuy to questions submitted by Senator Hatch ......... 78 Responses of Robert A. DuPuy to questions submitted by Senator Sessions ..... 83 Responses of Lori R. Swanson to questions submitted by Senator Leahy .......... 85 Responses of Lori R. Swanson to questions submitted by Senator Hatch .......... 84 SUBMISSION FOR THE RECORD Wolff, Miles, Commissioner of Northern League Baseball ................................... 89 (III) VerDate Feb 1 2002 12:33 May 20, 2002 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 C:\HEARINGS\79393.TXT SJUD4 PsN: CMORC VerDate Feb 1 2002 12:33 May 20, 2002 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 C:\HEARINGS\79393.TXT SJUD4 PsN: CMORC THE APPLICATION OF FEDERAL ANTITRUST LAWS TO MAJOR LEAGUE BASEBALL WEDNESDAY, FEBRUARY 13, 2002 U.S. SENATE, COMMITTEE ON THE JUDICIARY, Washington, DC. The Committee met, pursuant to notice, at 10:12 a.m., in room SD–226, Dirksen Senate Office Building, Hon. Patrick J. Leahy, Chairman of the Committee, presiding. Present: Senators Leahy, Feinstein, Hatch, Specter, DeWine, Sessions, and Brownback. OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE STATE OF VERMONT Chairman LEAHY. The Judiciary Committee is starting a little late, and I do not know if they have explained why all the lights are going on. There is a series of roll call votes, and it is going to require a rotating panel up here, but we will try to do it in a way that accommodates the witnesses as well as possible. I see Mrs. Kaludi in the audience, and she is more aware of how these lights work than anybody else here and can explain it to any- body who needs an explanation. Senator Hatch is on his way, and he suggested that we begin, so I will. This week, spring training begins for the major league baseball teams. This winter, besides the usual discussion about players’ trades and signings and team prospects for the coming season, baseball fans in Minnesota, Florida, Montreal, and many other communities have been on a rollercoaster ride that began with the baseball commissioner’s November 6 announcement that two unnamed teams would not be playing this year. In 1998, Congress culminated decades of hearing on labor strife and other problems in major league baseball when we enacted the Curt Flood Act. Senator Hatch was the lead sponsor of that meas- ure, and I was the principal cosponsor. It was a bipartisan effort to clarify the law. The principal purpose of the law was to make sure that Federal antitrust laws apply to the relationships between major league baseball owners, teams, and players. Clarifying the law was intended to contribute to an atmosphere in which team owners and players would resolve their differences through collective bargaining. Whether the parties are successful in reaching a negotiated agreement remains an open question as we meet today. (1) VerDate Feb 1 2002 12:33 May 20, 2002 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\HEARINGS\79393.TXT SJUD4 PsN: CMORC 2 In 1997 and 1998, I observed that the stops and starts of the leg- islative journey toward passage of the Curt Flood Act would have tried the patience of Job, and I complimented the then Chairman for staying the course and getting the job done. The statute, the Curt Flood Act, uses language suggested, as I recall, by the major league team owners to make clear that the Act did not ‘‘change the application of the antitrust laws’’ to any other aspect of major league baseball. I thought then and I think now that it was appropriate to adopt that provision and begin with the assumption that no industry, no company, and no person is above the law. The Curt Flood Act did not create or confirm any Federal anti- trust immunity but was written in terms of Federal antitrust laws in fact applying to major league baseball. Major league baseball’s claim to a unique antitrust exemption arose not from an act of Congress but from a decision by the United States Supreme Court 80 years ago that has since been dis- credited. In the subsequent case of Flood versus Kuhn, the Su- preme Court explicitly limited its holding to the reserve system and reserved an antitrust law exemption for that reserve system rely- ing as justification on the judicial doctrine of stare decisis, the prin- ciple that judicial decisions once made should be respected and upheld. Justice Blackmun noted that the Supreme Court had invited Congress to pass a statute to change the law if it chose, that Con- gress had not acted and that Congress had, by its ‘‘positive inac- tion,’’ acquiesced in what he described as a legal anomaly and aber- ration. It was against this judicial backdrop that in 1998 Congress fi- nally did act and eliminated the judicially created exception pre- served in limited form by Justice Blackmun in the Flood case. It was appropriate that we did it in a law named for the player who sacrificed his career to raise the issue. Our bill did not question that the antitrust laws apply to major league baseball just as they apply to professional football, basket- ball, ice hockey, soccer, and all professional sports. Professional sports are a business, and the laws that apply to other businesses apply to them. There is no longer any basis in the law for some general, free-floating baseball antitrust exemption, nor has such a special antitrust exemption been justified. When the Committee was engaged in hearings in 1995 that led to passage of the Curt Flood Act, after the work stoppage in 1994 and the lamentable and historic cancellation of the World Series, David Cone, an outstanding major league pitcher, testified and asked this question: If baseball were coming to Congress today to ask us to provide a statutory antitrust exemption, would we? That is the question I repeat today. Does anybody anywhere in this country think that if baseball was coming in and raising for the first time an antitrust exemption that this Congress or any Congress would grant it for them? Of course not. What about major league baseball, as distinct from other profes- sional sports and businesses, entitles it to special rules of law? I cannot think of it. VerDate Feb 1 2002 12:33 May 20, 2002 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\HEARINGS\79393.TXT SJUD4 PsN: CMORC 3 In my view, the heavy burden of justifying any exception from the rule of law is and should be squarely on the proponents of any antitrust exemption. I will ask the representative of major league baseball who are with us today, their general counsel, to explain precisely what such an exemption would permit and precisely why it is necessary. There has been a fair amount of public outcry over the actions of the owners in unilaterally announcing the end of baseball in at least two cities within 2 days of the end of the World Series, and less than 2 months after the tragic attacks of September 11. More recently, they have suggested four teams, not just two, need to be eliminated. In the meantime, we have seen owners approve a merry-go-round of ownership swaps, with the owner of the Montreal Expos being approved to buy the Florida Marlins, while the owner of the Mar- lins and a former owner of the Padres were approved to buy the Boston Red Sox, and the other owners joining together to buy and operate the Expos and prepared to pay the owner of the Minnesota Twins a hefty fee to kill that team’s existence. To an outsider, it seems that the major league baseball team owners take care of each other pretty well. We will hear today how major league baseball owners continue to ask courts to create special legal exceptions and immunities for them and how they hold themselves above not only Federal anti- trust law, but also the power of State law enforcement officers. Once having been a State law enforcement officer, I always worry when some suggest that there are areas where the Federal law su- persedes, and we will talk about that. We will also hear some discussion of pending legislative pro- posals by Senator Wellstone and Representative Conyers, which would codify the ruling in some decisions by expressly providing in law that the Federal antitrust laws apply to major league baseball franchise relocation. So I think this hearing will give us the opportunity to explore these issues of law and the State of the law as they apply to major league baseball. I thank each of our witnesses for being with us today. Another vote has begun, and I am going to go to this vote and come back, and we will start with the first witness. [Recess.] Senator FEINSTEIN. [Presiding.] The Chairman will be returning to the Committee forthwith. As he may well have said, we have a number of votes, and he has asked me to begin this hearing, so we will begin with the public witnesses. And as they are taking their seats, I will begin the introductions. First is the honorable Bob Butterworth, Attorney General of Florida. Mr. Butterworth has served as Attorney General of Florida since 1986. He has previously held positions within the Broward County judicial system and served as Broward County sheriff. We will begin our testimony with you, General Butterworth. Wel- come and thank you for being here. Sorry for the delay. VerDate Feb 1 2002 12:33 May 20, 2002 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\HEARINGS\79393.TXT SJUD4 PsN: CMORC 4 STATEMENT OF HON. ROBERT A. BUTTERWORTH, ATTORNEY GENERAL OF FLORIDA, TALLAHASSEE, FLORIDA Mr. BUTTERWORTH. Senator, thank you so very much for this op- portunity. Baseball began as a simple game played by amateurs in pastures of rural America. Today it is a major commercial enterprise con- ducted in big city board rooms and multi-million-dollar stadiums. I believe the time has come to treat baseball as the very big busi- ness it has evolved into. The time may have also come to recognize a sad irony, namely, that while baseball remains America’s pastime, its big league version is acting in a very un-American manner. In the 1990’s, my State became the home of two major league teams. Today, less than a decade since the first team arrived, there is a strong possibility that Florida could lose one or both of our teams. Obviously, such a move would mean the loss of millions of dollars for communities where those teams are located. But beyond dollars, there is the emotional impact. Countless fans have welcomed these teams into their hearts. Fan loyalty is not as easily quantified as team profit but it every bit as worthy of consid- eration. If Florida loses one or both of its teams, it will not be because of the fans. It will be because the powers that be, the major league team owners and their commissioner, have deemed it the finan- cially prudent move to make in order to increase their profits. And when they make that decision, it will be made behind closed doors. That was made clear last November 6, when major league owners met behind closed doors and voted to reduce the number of teams by two. We are led to believe that the two teams on the chopping block are the Twins and the Expos, but Commissioner Bud Selig has done everything humanly possible to dodge questions about the fu- ture of specific teams. He was not so reluctant, though, to talk last year, when he en- tered the fray over a proposal before the Florida legislature to au- thorize funding for a new stadium in downtown Miami. In a letter to a State Senator which is being put up on the board, Commis- sioner Selig said that unless funding was secured, the Marlins would be a prime candidate for contraction or relocation. The letter goes further. This statement could be viewed in only one way—that is, as a threat. And rest assured, that threat was still in our minds when the owners voted to contract on November 6. It was within this atmosphere that I moved to protect the inter- ests of the people of the State of Florida. I issued investigatory sub- poenas. I did so under the authority of Florida’s antitrust law, bol- stered by a Florida Supreme Court decision. That ruling made it clear that the baseball exemption applies only to the reserve sys- tem and does not extend to team relocation matters. Major league baseball successfully, unfortunately, urged a Fed- eral district judge to block my investigation, rejecting the Florida Supreme Court ruling. The Federal judge said the exemption ap- plied to all—all—all aspects of business of baseball. The bottom line of that ruling was to prevent me as attorney general from carrying out my Constitutional responsibilities. VerDate Feb 1 2002 12:33 May 20, 2002 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\HEARINGS\79393.TXT SJUD4 PsN: CMORC 5 Whatever Florida antitrust law was actually violated during that meeting, I have no idea. That remains totally, totally unknown. As State Attorney General, however, I must have the authority to find out. Toward that end, we of course have appealed. There is, of course, another forum in which this matter can be resolved—namely, right here in the U.S. Congress. You have it within your power to clearly delineate those areas in which major league baseball is exempt from antitrust law and those in which it is not. And certainly one area in which it should not be exempt is in how it determines the fate of team franchises and the commu- nities that support them. I for one believe that it is time for the big leagues to play by the same rules as other multi-billion-dollar industries and other profes- sional sports, and it just may be that the only way it will happen is through firm and decisive action on your part. Thank you very much, Madam Chair. Senator FEINSTEIN. Thanks very much, General Butterworth. [The prepared statement of Mr. Butterworth follows:] STATEMENTOFHON. ROBERTA. BUTTERWORTH, ATTORNEYGENERALOFFLORIDA, TALLAHASSEE, FLORIDA Chairman Leahy and Senators, thank you for this opportunity. I am here today at your invitation and because of a federal district court’s inter- pretation of baseball’s antitrust exemption which prevents me from carrying out my responsibilities to the people of Florida as their Attorney General. Specifically, the district court has barred the State of Florida from conducting an antitrust investigation into Major League Baseball’s handling of matters that could severely impact Florida’s status in the major leagues and cause untold economic harm. I believe it is incumbent upon this Congress to exercise its authority and make it clear that Major League Baseball must abide by the same rules of fair play as any other multi-billion dollar industry operating in America. Were he alive today, Abner Doubleday would likely be astonished at how dras- tically the sport he is largely credited with inventing has been transformed. What began as a simple game played in the pastures of rural America has become a major commercial enterprise conducted in big city boardrooms and multi-million dollar stadiums. As much as we would like to cling to an idealized, ‘‘Field of Dreams’’ vision of baseball, it is time to face facts. Baseball, at least as it pertains to the major leagues, is more than just a game... ...it is a very, very big business. The time has come to treat it as such. The time also may have come to recognize a sad irony about the nature of the game. a Namely, that while baseball remains America’s pastime, its big league version is acting in a very un-American manner. In the 1990s, my state became the proud home of two major league baseball teams, the Florida Marlins and the Tampa Bay Devil Rays. Today, less than a decade since the first team arrived, there is the possibility that Florida could lose one or both of those teams in the not-too-distant future. Such a move would of course have a significant, negative impact on the economies of the communities those teams represent and Florida as a whole. For instance, our own internal estimates based upon publicly available informa- tion show that the annual economic impact of the Florida Marlins on the South Florida economy is approximately $193 million. For Tampa Bay/St. Petersburg, which also has a 27-year lease arrangement with the Devil Rays, the estimated annual economic impact of the club is approximately $178 million. As the nation’s premier spring training site, our state could also suffer from the elimination of non-Florida teams that train here and generate millions of dollars in revenues. VerDate Feb 1 2002 12:33 May 20, 2002 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6621 C:\HEARINGS\79393.TXT SJUD4 PsN: CMORC 6 Not to mention the financial harm that could come from the elimination of minor league squads in Florida. If we do lose such valuable assets, it will not be because the people have decided they no longer want major league baseball in their state. It will be because the powers that be—the major league team owners and their commissioner—have deemed it the financially prudent move to make. And when and if they make that decision, it will almost certainly be made behind closed doors. While the game of major league baseball is a spectator sport, the business of major league baseball is anything but. Recent meetings of major league owners made that fact abundantly clear. Last November 6th, a closed-door meeting resulted in a vote to reduce the number of major league teams from 30 to 28. We are led to believe the two teams on the chopping block are the Minnesota Twins and the Montreal Expos, but Major League Baseball continues to hold its cards close to the vest. Commissioner Bud Selig in particular has done everything humanly possible to dodge questions about the future of specific teams. He was not so reluctant to talk last year, however, when he entered the fray over a proposal before the Florida Legislature to authorize funding for a new stadium in downtown Miami. In a letter to Senator J. Alex Villalobos dated April 25, 2001, Commissioner Selig said that unless funding was secured, the Marlins would be a prime candidate for contraction or relocation. That letter said in part: ‘‘Relocation of Clubs and contraction of the number of Clubs in Major League Baseball are two options that are in fact being actively re- viewed as part of a global plan of economic reorganization. In the event the Marlins and the local community do not succeed in securing the necessary funding sources the Marlins will be a very likely candidate for each of those options. We recognize that relocation and contraction are very significant actions. Should the Marlins fail to secure legislation necessary to implement its funding plan, however, we believe such steps will be warranted. Bluntly, the Marlins cannot and will not survive in South Florida without a new stadium.’’ This statement could only be viewed as a threat. And rest assured, that threat was still in our minds when the owners voted on November 6th to contract. It was within this atmosphere that I asserted my powers as Florida’s attorney general. About a week after the November 6th meeting, my office issued investigative sub- poenas to the league, Commissioner Selig and Florida’s two teams. We did so armed with a Florida Supreme Court decision giving us clear authority to investigative potential antitrust violations by baseball under state antitrust law, Butterworth vs. National League of Professional Baseball Clubs. In its ruling, the court made it clear that Major League Baseball’s exemption is limited to the reserve system and does not extend to team relocation matters. The goal of our proposed investigation was to obtain the answers to some fairly simple questions. They included whether the Marlins or Devil Rays were to be eliminated and what the financial condition of each team actually was. Three days before their response was due, the league filed an action in Tallahas- see federal district court to block our investigation. The judge granted the league’s request to quash our antitrust subpoenas. In his ruling, he cited the baseball antitrust exemption, a judicial anomaly created in 1922 by the U.S. Supreme Court. Rejecting the Florida Supreme Court decision, the district court judge said that exemption applied to all aspects of the business of baseball, including team location. That view, however, is not universally held within the federal judiciary. Most notably, a Pennsylvania federal court in Piazza vs. Major League Baseball ruled that the application of the baseball exemption is more narrowly limited to the league’s player reserve system. In other words, it exempts the league from antitrust law in its dealings with team members, but not in its dealings with the communities where those team members play. We believe that well-reasoned decision is correct, and it is our hope that the U.S. Supreme Court will settle this matter once and for all by confirming it. VerDate Feb 1 2002 12:33 May 20, 2002 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6621 C:\HEARINGS\79393.TXT SJUD4 PsN: CMORC