Would Trustbusting Be Good For Baseball?

Curbing the antitrust exemption poses a host of new problems

By any measure, the deal signed by Major League Baseball players and owners last March was a landmark, ending five years of image-battering labor strife. But the pact was historic for another reason: It included a little-noticed clause committing the owners to negotiate a partial end to the antitrust exemption that baseball won in 1922.

Turning that clause into law has not been easy. Despite the March agreement, some owners still dragged their feet--until Senator Orrin G. Hatch (R-Utah) threatened to hold hearings before his Judiciary Committee. Owners quickly agreed on May 16 to a tentative deal to end the exemption's reach into labor negotiations. Now, "players will have another way of resolving disputes besides shutting down the game," says Donald M. Fehr, the players' union president.

Fehr had better not celebrate yet. Most legal experts agree that baseball's antitrust exemption, an anomaly granted by the U.S. Supreme Court, is antiquated. But while its end may resolve old problems, new ones will arise--for players and owners. Players will gain some leverage in negotiating with management, but they may sacrifice other advantages. At the same time, owners who agreed to the limited change could soon find that they have opened the doors for challengers who want wider repeal--including Yankees owner George Steinbrenner.

Under terms of the new agreement, baseball players, like other professional athletes, can sue owners on antitrust grounds. If owners collectively try to restrict free agency when the new agreement expires in 2000, they might risk being charged with collusion, for example, says National Labor Relations Board Chairman William B. Gould IV.

Yet a series of Supreme Court and lower court decisions throughout the 1990s have granted professional sports team owners limited antitrust immunity in collective bargaining, similar to what baseball is losing. So even if the owners give up the 75-year-old exemption, some courts may say it still exists under more recent rulings.

The players also may be jeopardizing their union. A 1996 high court decision decreed that the National Football League players' union must first disband if players want to file an antitrust suit. And some courts have ordered that existing labor agreements must remain in effect until antitrust litigation ends, which can take three to five years. The result? "Ending the exemption is worth far less than it was 10 years ago," says Stanford University economics professor Roger G. Noll.

PLAYERS' ERROR? The minor leagues, moreover, are expected to fight the proposal. Stanley M. Brand, the Washington lawyer-lobbyist who doubles as the vice-president of the 222-member minor league association, says that players could use the antitrust laws to challenge the reserve clause, which binds minor league players to a major league team for up to six years. Without the ability to control minor leaguers' contracts, Brand says, the majors would have little incentive to support the minors--a subsidy that adds up to $150 million a year. "Any attempt to fiddle with the antitrust exemption could destroy" baseball, Brand declares.

Indeed, figuring out what parts of the exemption survive will likely be up to the courts. Harvard University sports law professor Paul C. Weiler says they have been willing to roll back protections such as those that now let baseball owners block teams from relocating and organize player drafts.

The Yankees' Steinbrenner has launched what could be the test case. In May, he slapped an antitrust suit on other owners, who had tried to block his $95 million merchandising contract with Adidas America Inc. "We're not trying to undo the exemption but, rather, limit it," says Steinbrenner lawyer David Boies. But if Steinbrenner wins, baseball owners could be barred from negotiating exclusive contracts to sell merchandise with major-league trademarks. That would really send them to the showers.

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