Detroit Lions T-Shirts

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Detroit Lions T-Shirts

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Mets Money Mishap May Make MLB A Monopoly After All

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What’s the difference between the mob and Major League Baseball (MLB)? You know, that’s a really good question.

Writers were gleefully typing away last week, with the New York Post reporting the $25 million bailout by MLB of the New York Mets and owner Fred Wilpon. Wilpon and his team have been embroiled in the Bernard Madoff ponzi scheme. The trustee for the Madoff victims, Irving Picard, sued Wilpon trying to recover nearly a billion dollars from him and the Mets. Picard said that Wilpon and his team should have known that Madoff’s inflated returns were too good to be true.

Yet no one seemed to be asking the obvious question:

Where does the league, not the teams, get that kind of jack? What allows Bud Selig, who, as Commissioner, is supposed to be there primarily to uphold the ethical standards of the game, to act as the Don Vito Corleone of baseball, and dole out that kind of money on behalf of the individual owners? To get its exemption from antitrust law, baseball was defined as a bunch of separate businesses. Do they meet that standard today?

Having read baseball’s antiquated rule book from cover to cover, there is no explicit authorization that I can find in the establishment of the Commissioner’s office that gives Selig broad and sweeping fiscal powers, or that allow him to operate that office as a national center for financial policy that would invalidate the premise of baseball’s antitrust deal with the government.

According to the Post, not only did Selig authorize the latest $25 million bailout of the Mets, but the team is on the hook to MLB for $75 million, which means that this latest bailout was added to $50 million already owed the league. This isn’t the first time this has happened, either. Selig bailed out the Texas Rangers when their fiscal prairie schooner hit the rocks.

The mob makes up its own rules as it goes along, and strong men rule by muscling their way into power. The MLB is likewise an old-boy, back-room institution run by fiefdoms of power brokers who do as they will. The difference is that the MLB holds one very big card in their hand: No fear of U.S. antitrust laws.

The MLB is the only business entity that has a federal exemption from the same anti-competitive monopoly laws that 99.99% of other American businesses must abide by.

The United States Senate Judiciary committee, in a web article, explains how this came to pass:

In years prior, a number of laws such as the Sherman Antitrust Act, the Clayton Antitrust Act, and the Celler-Kefauver Act were enacted to prevent companies from illegally forming or maintaining a monopoly in a particular market. Baseball, however, had routinely escaped federal antitrust scrutiny, as courts ruled that organized baseball did not qualify as “interstate trade or commerce,” as defined by antitrust laws. The issue required clarification by the Supreme Court, and, in 1922, the Court heard arguments in Federal Baseball Club v. National League. The Court, including former college baseball player and then-Chief Justice Howard Taft, decided unanimously that the Sherman Antitrust Act did not apply to Major League Baseball because the “business [of] giving exhibitions of baseball” did not constitute interstate commerce. That opinion was delivered by a former amateur baseball player, Justice Oliver Wendell Holmes.

Congress heaped on to that decision in 1961, when they passed the Sports Broadcasting Act. It allowed the nation’s professional teams engaged in baseball, basketball, football, and hockey to negotiate single network agreements for national broadcasting rights for their respective leagues. The precedent for the legislation, though, still hinges around the Supreme Court decision of 1922.

MLB’s Far-Flung Empire

MLB’s owners have expanded their centralized operations since the 1960s by creating a whole host of limited liability partnerships and corporate entities outside of the main MLB framework that control everything from merchandise licensing to ticketing to money management to media ownership. These businesses serve MLB, and often work at its direction, whether directly or indirectly, as the same owners make up the majority of the limited partnership interests in these supposed “side” businesses.

It is these side businesses that bring in the lion’s share of revenue that keeps baseball teams funded and help pay astronomical player salaries and fat paydays for all of the owners in towns great and small.

Media Control

Over the last decade, MLB Advanced Media, L.P. (MLB.com) solidified its control over news on the sport. Owners view the all of the news of baseball as “content,” an extension of the entertainment product which they put out on the field. The owners, no longer content with the revenue from rebroadcast of the games themselves, wanted a piece of the sizable market for chattering about baseball, showing highlights, and reporting the events of the day in the sport.

MLB.com, owned by the largely the same owners who own the news source MLB, competes with every major and minor news publication in print, on the web, and on television in the country.

They know that media is moving to the Internet. By establishing a huge, dominant television and Internet presence, it gives their authorized media arm huge advantage over other media outlets.

Already MLB.com has its own priority news space at events like the Winter Meetings, and first access to everything from press releases to access to players and coaches, owners, and power brokers in the game. The only companies which are granted similar access to MLB.com for their reporters and videographers are big outlets like ESPN and Fox, who pay hefty annual access fees, estimated in the millions to obtain the access that MLB.com has. It has been impossible to get MLB.com to answer the question as to whether they pay any fees to MLB for such access. Calls in the past for an answer to that question have always been deflected or deferred.

To make sure that these fees for journalists to exercise the First Amendment on MLB fields are paid, new policies for media access were enacted a year or so ago that now limit media credentials as well.

Images and video gathered at MLB parks and events have been limited to 72 hours on the Internet. This discourages smaller publications from competing with MLB.com on the web by having any substantial content libraries beyond a day or two. It even keeps giants like Sports Illustrated, which run monthly images, and have an enormous library, off the web unless they pay the hefty rights fees.

MLB.com took over Minor League Baseball’s Internet & television operations as well. Over the last decade, MLB attendance has kind of flat-lined unless a steroid-induced athlete is chasing a record, but Minor League Baseball (MiLB) attendance soared more than 11 million. So MLB pushed MiLB to join its web empire, picking up millions in managing websites, advertising revenues, additional ticketing fees, and the opportunity to sell major league TV packages to hundreds of thousands who would probably not have otherwise been targeted.

MLB, as a news-maker, adopts rules for media credentials which support the owners’ competing news business with rules that favor MLB.com. This is exactly the kind of insider corporate behavior that antitrust laws were designed to combat.

Merchandise & Ticket Sales

Major League Baseball Properties, Inc., their merchandising arm charges high licensing fees, and would seem to negotiate as one entity rather than as a collective of the separate teams. By way of MLB.com’s store online, they aggressively market to their email lists of site users and tv package subscribers, encouraging them to shop at MLB.com’s online store first and foremost.

MLB, through another deal, bought Tickets.com in 2005 to go toe-to-toe with Ticketmaster. Teams, particularly in the minors, were continually arm-twisted to join the Tickets.com network.

The more independent minor league owners initially bucked the back-door increase in charges for their ticketing that the owners were taking out of their pockets, but jeopardizing the relationship which brings the players, trainers, and coaches delivered to their doors in the farm system at virtually no cost is a powerful disincentive to complaining about it.

Federal Blessing

The owners’ Kobe beef cash cow is perpetuated by your federal government, which, back when baseball was actually the national pastime, responded to their lobbying and the mania for the game that Americans held in the 1920s with a level of protectionism that even the well-fed oil lobby has to look at with humble awe.

The owners would like to tell you that there is no monopoly, because all of their limited partnerships are run separately from MLB.

In theory, perhaps, but in practice, everyone tacitly understands that the league makes rules like the 72 hour photo/video use rule to protect its side businesses which reap in the millions that they need to make record profits and pay out ever-increasing salary demands even as the major league game has flat-lined for attendance in any year other than the steroids-laced home run records chases of Bonds, McGwire, and Sosa.

The only David that has had the deep enough pockets to face the Goliath sports leagues is a hat and garment manufacturer, American Needle.

Their lawsuit against the National Football League (NFL) delivered a huge victory last May when the U.S. Supreme Court by a 9-0 vote overturned the ruling in favor of the NFL in a 2008 decision in the 7th Circuit of the federal appeals courts. The case is now being re-evaluated by the appeals courts in light of the Supreme Court’s new direction.

Stan Brand, Vice President of MiLB, said as much in remarks in 2009 at the Winter Meetings a few months prior to the decision. His take on its impact was significant:

“In the event that the Court validates the lower court ruling and the single entity theory, we should be prepared to ensure that any legislative initiatives that may be undertaken do nothing to undermine the significant protections achieved in the Curt Flood Act. And we should be ready, which I have no doubt we will be, to explain to our fans, the Congress and the public why baseball’s antitrust protection has served the public interest and the communities in which we play for almost nine decades.”

It would be hard to sell Baseball’s antitrust exemption as a benefit to consumers. It cuts down competition in what they buy to wear, what they read, and what they watch. It has cost fans and the taxpayers millions, between markups passed along by advertisers who help companies like ESPN eat the millions in rights fees, and the many government bond deals that power the stadium building wave that has hit both major and minor league baseball over the last decade.

Their dominance of merchandising and ticketing has driven the costs of the game to unsustainable levels. The Yankees debuted their brand new stadium to empty seats behind home plate because they were simply too costly for even large corporations to pony up for them.

The game has suffered as well. Players from the days before free agency, who played for a fraction of the scratch that big-dollar athletes are paid today played far better ball on a regimen of beer, cigarettes, and women, than today’s overpaid, often-juiced athletes.

Congressmen took an interest in MLB when the Mitchell Report revealed the rampant performance-enhancing substance abuse that mars the game. It was short-lived, high-profile, and probably not under their jurisdiction anyway.

The business practices of the owners of MLB and their various businesses are though. It is high time that, in this era of increased accountability, the Congress revisit the trust-bending deals struck by the Supreme Court in the 1920s, and the 1961 session.