Vanderbilt Journal of Entertainment & Technology Law Volume 7 Issue 3 Issue 3 - Summer 2005 Article 8 2005 Revenue Sharing in Major League Baseball: Are Cuba's Political Managers on Their Way over Too? Matthew R. McCarthy Follow this and additional works at: https://scholarship.law.vanderbilt.edu/jetlaw Part of the Antitrust and Trade Regulation Commons Recommended Citation Matthew R. McCarthy, Revenue Sharing in Major League Baseball: Are Cuba's Political Managers on Their Way over Too?, 7 Vanderbilt Journal of Entertainment and Technology Law 555 (2020) Available at: https://scholarship.law.vanderbilt.edu/jetlaw/vol7/iss3/8 This Note is brought to you for free and open access by Scholarship@Vanderbilt Law. It has been accepted for inclusion in Vanderbilt Journal of Entertainment & Technology Law by an authorized editor of Scholarship@Vanderbilt Law. For more information, please contact [email protected]. R,:evenue Sharing in Major League Baseball: Are Cuba's Political Managers on Their Way over Too? [By Matthew Ryan McCarthy* ] ery cap following the tragic events of Sep- Baseball ("MLB") season marked tember 11, 2001. 4 The patch honored the the end of a dramatic era, both memory of the victims and heroes who died for the he close ofsport the 2001and Majorthe nation.League in the attacks.' Moreover, the flag also rep- T Louis Gonzalez's ninth inning resented the ideals and principles of a nation single drove in the winning run, threatened by terrorist forces on that tragic closing the 2001 World Series be- day.6 "[The Flag is] a symbol of a living thing tween the New York Yankees and the nascent ...[a] 225-year experiment in liberty and the Arizona Diamondbacks, who were an expan- people, the values and institutions that have "The smaller market teams claim that they cannot compete because they have less revenue than the bigger teams, and less revenue translates to an inability to pay for high priced players and state-of-the-art facilities. 1 sion team only four years earlier. The 2001 ...made it work."7 The disappearance of this World Series was notable for many reasons, important symbol of American ideology from including the fact that 2001 was the last time the players' uniforms eerily coincides with a the American flag adorned the uniform of rising threat to the economic ideals and prin- 2 major league ballplayers. The flag's brief ap- ciples that govern our national pastime-a pearance only lasted for the balance of the threat greater than the designated hitter, baseball season marred by the tragic events Astroturf, or inter-league play. of the terrorist attacks.3 Old Glory appeared as a patch on the back of every uniform and on the side of ev- SPORTS L Introduction willing to make into a team. Finally, MLB In response to a growing disparity should expand the postseason, allowing six amongst the league's best and worst teams, fans, teams from each league to reach the playoffs reporters, and even some players have pro- and adding a first round bye for the top two posed various plans designed to share revenues teams from each league. amongst owners and level the economic play- ing field.8 The smaller market teams claim they cannot compete because they have less revenue II. Labor, Management, and the than the bigger teams, which translates to an Collective Bargaining Agreement inability to pay for high priced players and state-of-the-art facilities.9 In response to this A. Baseball's Antitrust Ex- perceived problem, owners have proposed and emption: A Fragile House of Cards implemented some limited forms of revenue Beginning next season, the Montreal sharing and a competitive balance tax.10 The Expos will no longer play in Montreal. 14 Ateam competitive balance tax collects revenue from that was on the verge of extinction just a few MLB's wealthiest teams and redistributes it years ago 15 is hoping to start a new life in Wash- evenly to poorer teams in smaller markets for ington.16 Team relocation and contraction are their expenses and development." Owners issues beyond the scope of this Note, but the remain free to either reinvest the money re- Expos' exodus from Montreal for greener pas- ceived from the competitive balance tax in the tures is illustrative of MLB's control over the team and stadium or to pocket the money as market for professional baseball. The federal profit.12 As such, the redistribution may not courts and federal legislature created MLB's have the desired effect on competition, if it has market and the thriving cartel of MLB owners any effect at all.' 3 In addition, there are a num- that oversees it. The twenty-nine major league ber of antitrust issues to consider under any owners' ability to collectively purchase one of proposed expansion of the competitive balance their existing competitors and relocate the team tax or other form of revenue sharing plan agreed from its home stems from MLB's operation to by players and owners in a MLB Collective outside traditional federal and state antitrust Bargaining Agreement ("CBA"). law. Essentially, MLB's antitrust exemption al- Part II of this Note examines the history lows cooperation and collusion amongst its 7 of professional baseball's exemption from tra- owner members. ditional antitrust regulations and the struggle Traditionally, "[e]very contract combi- between the players and owners to reach labor nation in form of trust or otherwise, or con- agreements that encourage competition among spiracy, in restraint of trade or teams and fairly compensates players. It de- commerce.. .is... declared to be illegal." 8 Con- tails the history of the various CBAs between gress passed the Antitrust Act of July 2, 1890 players and owners and considers what rem- ("Sherman Antitrust Act") 19 to stem a tide of edy owners opposed to sharing revenue might unfair cooperation amongst trusts formed in have in federal court against revenue sharing industries such as oil, steel, and the railroads, plans implemented through a CBA. and to encourage fair trade through competi- Part III analyzes the current controversy tion in the free market. 20 Since the passage of over the level of competition in MLB. It criti- the Sherman Antitrust Act, the predominant cizes the owners' solutions and examines the form of antitrust enforcement against busi- difficulties these solutions faced. Finally, Part nesses that harm others through price fixing, IV proposes that MLB should encourage parity and other forms of anticompetitive cooperation, in the traditional way: the free market. The has been the private antitrust suit.2' The United league should create incentives to return own- States Supreme Court and Congress have taken ership of every team's minor league teams to steps to exempt professional baseball from the the owners of the big club. In the alternative, if reach of private antitrust suits. 22 This anomaly MLB implements another revenue sharing plan, in antitrust regulation is the result of Congres- free of antitrust concerns, shared funds should sional inaction, the effect of which is the pres- match the degree of investment an owner is ervation of three United States Supreme Court Summer 2005 556 Revenue Sharing in Major League Baseball decisions that considered antitrust challenges The final case in baseball's infamous antitrust to professional baseball's operations creating the trilogy, Flood v. Kuhn,31 involved a challenge of exemption. professional baseball's reserve system.3 2 The Professional baseball's infamous anti- Supreme Court reaffirmed baseball's exemp- trust trilogy 23 begins with Federal Baseball Club tion from federal and state antitrust law.33 The v. National League, which considered a treble Supreme Court's decision relied upon the opin- damages suit filed by the Federal Baseball Club ions of Federal Baseball Club and Toolson, tak- alleging antitrust violations. 24 In Federal Base- ing judicial notice of Congress' acquiescence to ball Club, the plaintiff alleged unfair coopera- the Court's rulings by its silence on the subject, tion amongst the individual clubs in the Na- and an explicit Congressional refusal to extend tional and American Leagues to share gate re- baseball's exemption to other organized profes- ceipts and establish a monopoly through inter- sional sports. 4 The Flood Court observed, "the state commerce, which was an alleged viola- orderly way to eliminate error or discrimina- tion of federal antitrust law.25 Justice Holmes, tion [from the existing exemption], if any there 3 5 writing for the majority, opined that profes- be, is by legislation and not by court decision." sional baseball is immune from federal antitrust Congress finally took action to limit the regulations.26 He reasoned that the federal law scope of baseball's antitrust exemption when it did not apply to the baseball teams, and held passed the 1998 Curt Flood Act.36 Although it that players playing games for their respective was a dramatic step, the legislative effect of the teams outside their home states is not unlike a Curt Flood Act was not a complete repeal of 3 firm of lawyers sending attorneys outside its baseball's exemption. 1 Instead, the Curt Flood r "Thelegislature federal created courts MLB's and market,federal L and the thriving cartel of MLB owners that oversees it." home state's boundaries to argue a case, or a Act was a rather small strike against it, remov- lecturer traveling the lecture circuit, and thus ing labor agreements between players and own- not interstate commerce.27 ers from coverage by baseball's infamous anti- The Supreme Court confronted the trust exemption. 8 Arguably, the Curt Flood question of professional baseball and antitrust Act may cause a long-standing exemption for again in 1953 in Toolson v.