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[Senate Hearing 107-427]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 107-427
 
   THE APPLICATION OF FEDERAL ANTITRUST LAWS TO MAJOR LEAGUE BASEBALL
=======================================================================

                                HEARING

                               before the

                       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                       WASHINGTON : 2002
____________________________________________________________________________
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                       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

                            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, 
  Minnesota......................................................     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

 
   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 anybody 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 measure, 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.
    In 1997 and 1998, I observed that the stops and starts of 
the legislative 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 
antitrust 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 discredited. In the subsequent case of Flood versus Kuhn, 
the Supreme Court explicitly limited its holding to the reserve 
system and reserved an antitrust law exemption for that reserve 
system relying as justification on the judicial doctrine of 
stare decisis, the principle 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 
Congress had not acted and that Congress had, by its ``positive 
inaction,'' acquiesced in what he described as a legal anomaly 
and aberration.
    It was against this judicial backdrop that in 1998 Congress 
finally did act and eliminated the judicially created exception 
preserved 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, basketball, 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 
professional sports and businesses, entitles it to special 
rules of law? I cannot think of it.
    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 Marlins 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 antitrust 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 supersedes, and we will talk about that.
    We will also hear some discussion of pending legislative 
proposals 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. 
Welcome and thank you for being here. Sorry for the delay.

 STATEMENT OF HON. ROBERT A. BUTTERWORTH, ATTORNEY GENERAL OF 
                 FLORIDA, TALLAHASSEE, FLORIDA

    Mr. Butterworth. Senator, thank you so very much for this 
opportunity.
    Baseball began as a simple game played by amateurs in 
pastures of rural America. Today it is a major commercial 
enterprise conducted in big city board rooms and multi-million-
dollar stadiums. I believe the time has come to treat baseball 
as the very big business 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 consideration.
    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 financially 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 future of specific teams.
    He was not so reluctant, though, to talk last year, 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 a State Senator which is being put up on the board, 
Commissioner 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 
interests of the people of the State of Florida. I issued 
investigatory subpoenas. I did so under the authority of 
Florida's antitrust law, bolstered by a Florida Supreme Court 
decision. That ruling made it clear that the baseball exemption 
applies only to the reserve system and does not extend to team 
relocation matters.
    Major league baseball successfully, unfortunately, urged a 
Federal district judge to block my investigation, rejecting the 
Florida Supreme Court ruling. The Federal judge said the 
exemption applied 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.
    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 communities 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 professional 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:]

 Statement of Hon. Robert A. Butterworth, Attorney General of Florida, 
                          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 interpretation 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 drastically 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 information 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.
    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 reviewed 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 subpoenas 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 Tallahassee 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.
    Toward that end, we have appealed the Florida federal district 
court ruling to the circuit court in Atlanta.
    There is, of course, another forum in which this matter can be 
resolved.
    Namely, right here in the United State 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 communities that 
support them.
    Congress took a step in the right direction with the Curt Flood Act 
of 1998 with members of this committee even confirming that the passage 
of the act had no effect on the authority of state attorneys general to 
investigate baseball under state antitrust laws.
    That point was made clear in the following exchange between 
Senators Wellstone, Hatch and Leahy:

    Mr. Wellstone. Mr. President, late last night (July 30, 1998), the 
Senate passed by unanimous consent S. 53. I have been contacted by the 
Attorney General of my State, Hubert H. Humphrey III, and asked to try 
to clarify a technical legal point about the effect of this 
legislation.
    The State of Minnesota, through the office of Attorney General, and 
the Minnesota Twins are currently involved in an antitrust related 
investigation. It is my understanding that S. 53 will have no impact on 
this investigation or any litigation arising out of the investigation.
    Mr. Hatch. That is correct. The bill simply makes it clear that 
major league baseball players have the same rights under the antitrust 
laws as do other professional athletes. The bill does not change 
current law in any other context or with respect to any other person or 
entity.
    Mr. Wellstone. Thank you for that clarification. I also note that 
several lower courts have recently found that baseball currently enjoys 
only a narrow exemption from antitrust laws and that this exemption 
applies only to the reserve system.
    For example, the Florida Supreme Court in Butterworth v. National 
League, 644 So.2d 1021 (Fla. 1994), the U.S. District Court in 
Pennsylvania in Piazza v. Major League Baseball, 831 F. Supp. 420 (E.D. 
Pa. 1993) and a Minnesota State court in a case involving the Twins 
have all held the baseball exemption from antitrust laws is now limited 
only to the reserve system.
    It is my understanding that S. 53 will have no effect on the 
courts' ultimate resolution of the scope of the antitrust exemption on 
matters beyond those related to owner-player relations at the major 
league level.
    Mr. Hatch. That is correct. S. 53 is intended to have no effect 
other than to clarify the status of major league players under the 
antitrust laws.
    With regard to all other context or other persons or entities, the 
law will be the same after passage of the Act as it is today.
    Mr. Leahy. I concur with the satement [sic] of the Chairman of the 
Committee.
    The bill affects no pending or decided cases except to the extent 
that courts have exempted major league baseball clubs from the 
antitrust laws in their dealings with major league players.
    In fact, Section 3 of the legislation makes clear that the law is 
unchanged with regard to issues such as relocation.
    The bill has no impact on the recent decisions in federal andstate 
courts in Florida, Pennsylvania and Minnesota concerningbaseball's 
status under the antitrust laws.
    Mr. Wellstone. I thank the Senator. I call to my colleagues 
attention the decision in Minnesota Twins v. State by Humphrey, No. 62-
CX-98-568 (Minn. dist. Court, 2d Judicial dist., Ramsey County April 
20, 1998) reprinted in 1998-1 Trade Cases (CCH) 72,136.
    Cong. Rec. H9945 (daily ed. Oct. 7, 1998) (statement of Senators 
Hatch, Leahy, and Wellstone).

    The consequences of decisions to contract the major leagues or 
relocate teams are too important to the people of Florida for them to 
be made without proper checks that protect their interests.
    The same can be said in relation to the people of any state where 
Major League Baseball is a vital part of the local economy.
    For example, such has already been the case in Massachusetts, where 
the state attorney general was forced to intervene in the sale of the 
Boston Red Sox.
    In that case, Major League Baseball was poised to accept a lower 
offer of $700 million for the purchase of the team despite two other 
higher bids.
    The impact of that action would have been the deprivation of tens 
of millions of dollars for charities which would have benefitted from 
the trust that holds a majority share of the team.
    Fortunately, the Massachusetts attorney general's action resulted 
in $30 million more for the charities.
    In Florida, Major League Baseball came to us full of promises, 
including to directly or indirectly infuse millions of dollars into the 
surrounding economies.
    In the process, it took advantage of remarkable tax benefits and 
local financial support from the host cities.
    That same pattern has been followed throughout the country.
    It is nothing less than a betrayal of the public trust to now 
conspire behind closed doors about the future of baseball in those 
communities that welcomed the major leagues.
    The November 6 vote was akin to General Motors, Ford and every 
other car maker in America meeting to vote to shut down all Daimler-
Chrysler factories so that they could sell more cars and make more 
profit.
    This typically would be characterized as a concerted agreement to 
restrict output, which would be illegal in just about any other 
circumstance but baseball.
    I for one believe it is time for the big leagues to play by the 
same rules as other multi-billion dollar industries.
    And it just may be that the only way that will happen is through 
firm and decisive action on your part.
    Unfortunately, the only game the major leagues seem to understand 
is hardball.
    Finally, it bears repeating that every other professional sport in 
this country has done quite well without an antitrust exemption and on 
revenues that are far less than that of Major League Baseball.
    Indeed, none of these sports suffer from Baseball's woes.
    While the antitrust laws apply to these sports, the reality is that 
established antitrust analysis will require a balancing test of the 
pro-competitive versus anti-competitive effects of the conduct before 
it can be determined if that conduct violates the antitrust laws.
    This analysis is known as the ``rule of reason'' analysis.
    Even the Reagan Administration, which was not known for its 
antitrust activism, concluded that the ``rule of reason'' analysis 
required in most cases to determine whether the antitrust laws have 
been violated was sufficient protection for Major League Baseball to 
justify doing away with the exemption.
    In a 1982 Congressional hearing, Deputy Assistant Attorney General 
Abbott B. Lipsky, Jr. of the Reagan Justice Department testified:
    ``It has been the position of the Antitrust Division for some time 
that baseball's exemption is an anachronism and should be eliminated.
    I know of no economic data or other persuasive justification for 
continuing to treat baseball differently from the other professional 
team sports, all of which are now clearly subject to the antitrust 
laws.
    As I stated earlier, antitrust courts have sufficient flexibility 
in the rule of reason analysis to take into account any special 
considerations that may be found to exist in baseball.''
    H.R. Rep. No. 103-871 (1994).
    President Reagan's Justice Department was right.
    Today, Congress has the opportunity to affirm that position and 
undo the travesty that is the baseball antitrust exemption.
    Once again, I want to express my appreciation for allowing me to 
speak with you today.
    I hope my comments have been helpful.
    I also hope you will call on me or my staff for any further 
information you may need.
    We stand ready to assist, and look forward to working with you any 
way we can to protect the people's interests.
    Thank you.

    Senator Feinstein. The next witness is Lori Swanson. She is 
Deputy Attorney General in the office of Minnesota Attorney 
General Mike Hatch and has been there since January 1999. She 
oversees the civil enforcement work of Minnesota's Attorney 
General's office and has handled antitrust, consumer, commerce, 
and charities matters.
    Welcome, Ms. Swanson.

   STATEMENT OF LORI R. SWANSON, DEPUTY ATTORNEY GENERAL OF 
                 MINNESOTA, ST. PAUL, MINNESOTA

    Ms. Swanson. Madam Chair, thank you for the introduction.
    I have been asked by Attorney General Mike Hatch of our 
State of Minnesota to come before the Committee today and 
represent the views of the Minnesota Attorney General's office 
and represent the people of Minnesota as it relates to these 
issues of baseball and antitrust. It is a privilege to appear 
before you today to talk about these issues.
    As we have heard, the Minnesota Twins have been the focus 
of a lot of attention this off-season. Last November multi-
millionaire owners of 30 independent businesses brazenly and 
openly got together in Chicago and voted to, through concerted 
action, eliminate two of their own in order to benefit the 
remaining teams.
    It is hard to imagine, frankly, any other industry in 
America where all of the competitors could get together behind 
closed doors, away from public view, away from public scrutiny, 
and collectively decide that two of them should go out of 
business, reducing supply, so that the others could make more 
money and remain more profitable.
    This is not the first time this issue of contraction of 
teams has been an issue before the people of Minnesota or that 
the people of Minnesota have been threatened on these issues, 
or frankly, people around other parts of the country as well.
    In 1997, the Minnesota Twins signed a letter of intent to 
sell their team to investors in North Carolina if the Minnesota 
legislature did not publicly finance a new stadium, and major 
league baseball, similar to Florida's instance, indicated that 
they would approve that sale if the Minnesota legislature did 
not publicly finance the stadium. They also said that if the 
Minnesota legislature did not do so, no other team would be 
allowed to play in the Metrodome stadium, which is our local 
baseball stadium in Minnesota. Again, this was concerted 
activity, a boycott situation that frankly would be hard to 
imagine any other industry doing.
    And the transaction made no economic sense. At the time, 
the Minnesota media market was the 14th largest in the country, 
and North Carolina was 47th, and North Carolina had no stadium, 
either. So it did not seem to make a lot of economic sense.
    Our office served the request for information on baseball, 
attempting to investigate whether this could be a concerted 
illegal boycott and, frankly, a pretext to hold the people of 
Minnesota hostage, and we ran smack dab into the so-called 
antitrust exemption.
    The others of major league baseball believe that unlike 
these other businesses, including other professional sports 
leagues, they are not subject to the antitrust laws. We 
disagree with major league baseball. We think that some of 
those cases took place in an era where both baseball and 
antitrust were different, and in fact, the exemption has been 
narrowed by the Court so that this type of contraction would 
not necessarily be immune to challenge.
    However, there is obviously disagreement among the courts, 
and we think it is appropriate--the Attorney General's office 
in Minnesota--that these issues be clarified by Congress.
    It is interesting--the league contends that contraction is 
necessary because certain so-called small market teams like the 
Twins do not generate enough revenue to satisfy the league, 
even though public reports show that the Twins in fact made a 
profit last year when other teams did not.
    What is very interesting is that looking at baseball's 
rationale over the last 15 years for keeping the exemption, it 
seems to be in extreme contrast with their public statements 
today.
    In the past, Commissioner Selig of major league baseball 
has made certain representations to Congress about what major 
league baseball would do if the so-called exemption were 
allowed to remain in place. For instance, in 1993, Commissioner 
Selig testified before Congress that ``Congress has often 
looked at baseball's position with respect to the antitrust 
laws, and it has always reaffirmed baseball's antitrust status, 
because baseball's conduct has always been consistent with the 
public interest.'' He said it has always been consistent with 
the public interest.
    He went on to say that ``Baseball has continued to uphold 
its unique covenant with its fans and it deserves to retain its 
current status under the antitrust laws.'' Why? Because he said 
baseball has upheld its unique status and has kept its 
commitment to the public.
    Similarly in a 1993 appearance before a Subcommittee of the 
House Judiciary Committee, Commissioner Selig asserted that: 
``The most immediate consequence of the elimination of 
baseball's antitrust exemption would be that a number of teams 
in small markets would attempt to abandon some of baseball's 
existing cities for what they think are better economic 
conditions elsewhere.''
    Again in 1993, when Commissioner Selig invoked baseball's 
antitrust exemption to prevent the San Francisco Giants from 
moving to Florida, he testified that: ``The national league's 
decision to keep the Giants in San Francisco where they have 
successfully operated with loyal support from millions of fans 
for the past 35 years was simply a reaffirmation of baseball's 
longstanding policy against the relocation of franchises that 
have not been abandoned by their local communities.''
    Now, though, the league seems to be doing something 
different. The league would use its supposed exemption to 
eliminate a franchise, the Minnesota Twins, that has enjoyed 
support from the people of Minnesota for over 40 years. The 
Twins were the first American League team to draw more than 3 
million fans in a single season. To say that the community, the 
people of Minnesota, have abandoned the Twins ignores the fact 
that the team drew over 1.75 million fans last season.
    Commissioner Selig himself recognizes the trauma that can 
be caused communities when teams are relocated in this way. He 
talks about how he was ``personally heartbroken'' when the 
Graves left Milwaukee after the 1965 season. He said: ``The 
city of Milwaukee and the State of Wisconsin were traumatized 
by the loss of that franchise. The people in my home State felt 
hostility, bitterness, and a deep sense of betrayal toward 
major league baseball for allowing the Braves to abandon us.''
    I am running out of time, but we would support any efforts. 
We think that the claims in the past on the antitrust exemption 
have not been followed.
    [The prepared statement of Ms. Swanson follows:]

 Statement of Lori R. Swanson, Deputy Attorney General of the State of 
                               Minnesota

                            I. Introduction
    Mr. Chairman, members of the committee, it is a privilege to be 
asked to appear before you to discuss baseball and antitrust. As you 
know, the Minnesota Twins have been the focus of a lot of attention 
this offseason, and it has not been because of the team's young talent 
that some predict could win the American League Central Division this 
year. Rather, ever since Major League Baseball's owners gathered 
together in Chicago last November and decided to eliminate two of their 
own, the future existence of this team--along with that of the Montreal 
Expos--has been in doubt. While the League says in public that it has 
not settled on which teams would be targeted for contraction under its 
plan, recent media stories indicate that in fact consideration has not 
been given to contracting any team other than the Twins or Expos. And 
from day one, the Twins and Major League Baseball have been fighting 
tooth and nail to get out of the team's lease in the Metrodome for the 
2002 season. That is not the conduct one would expect from a team 
planning on being around much longer.
    After a series of battles in the Minnesota state courts, the Twins 
will continue to play through the 2002 season. But after that, the 
team's continued existence remains up in the air.
    How is it that multi-millionaire owners of thirty independent 
businesses--and mind you, these are big businesses--could so brazenly 
and openly get together and eliminate two of their own in order to 
benefit the remaining teams? How can they threaten the existence of a 
franchise that has a forty-plus year history in Minnesota (and a one-
hundred year history overall) and deprive millions of fans in Minnesota 
of their toeam, just for their own profit? The answer is that the 
owners believe that unlike other businesses--including all of the other 
professional sports leagues--they are not subject to the antitrust 
laws.
    We disagree with Major League Baseball and believe that the 
baseball antitrust exemption, created by the U.S. Supreme Court back in 
a different era--both of baseball and of antitrust law--has since been 
narrowed by the courts so that the owners' contraction ploy is not 
immune from challenge under the antitrust laws. That said, there is 
some disagreement among courts as to whether that is in fact the case. 
Just recently, for example, a federal court in Florida agreed with the 
League that contraction fell within the scope of the antitrust 
exemption. But Major League Baseball's recent contraction plans 
demonstrate that, if the League does in fact have an exemption, it no 
longer can be entrusted with that privilege. If Major League Baseball 
wants to conduct itself as just another for-profit business, in total 
disregard for the game and its fans, then it should not be treated 
differently under the antitrust laws than any other private business. 
Therefore, I would support legislation clarifying that issues such as 
franchise contraction are subject to scrutiny under the Sherman Act.
 II. Major League Baseball's Narrow Antitrust Exemption Post-Flood v. 
                                 Kuhn.
    Major League Baseball's antitrust exemption originates in the so-
called ``baseball trilogy,'' three U.S. Supreme Court decisions dating 
back to 1922. In Federal Baseball,\1\ the first of these cases, the 
Supreme Court decided that the business of giving exhibitions of 
baseball did not amount to interstate commerce. Rather, the Court said, 
baseball was a purely state affair, notwithstanding the fact that in 
order to put on these exhibitions teams regularly crossed states lines. 
Because baseball was not interstate commerce, the Sherman Act did not 
apply to the sport.
---------------------------------------------------------------------------
    \1\ Federal Baseball Club of Baltimore v. National League, 259 U.S. 
200 (1922).
---------------------------------------------------------------------------
    By the time the Supreme Court last considered Major League 
Baseball's antitrust exemption, in the 1972 Flood v. Kuhn \2\ case, the 
Court's take on interstate commerce had changed significantly, 
expanding to encompass a much broader range of economic activities. 
Furthermore, the game of baseball itself had changed, becoming less a 
pastime and more a business. The Supreme Court at last recognized the 
obvious in Flood--that baseball by the early 1970's was engaged in 
interstate commerce.
---------------------------------------------------------------------------
    \2\ Flood v. Kuhn, 407 U.S. 258 (1972).
---------------------------------------------------------------------------
    What was left of Major League Baseball's antitrust exemption after 
Flood v. Kuhn? Not much, we believe. And at least one federal district 
court agrees with this position. In a case known as Piazza v. Major 
League Baseball League Baseball,\3\ an investment group challenged 
Major League Baseball's refusal to allow it to buy the San Francisco 
Giants and move the team to Florida. The League argued that decisions 
concerning franchise relocations were exempt from the antitrust laws. 
The district court conducted an extremely thorough analysis of the 
origins and evolution of the antitrust exemption and concluded that the 
Supreme Court's decision in Flood effectively limited the exemption to 
the so-called reserve clause. The district court reasoned--correctly we 
believe--that because Flood rejected Federal Baseball's rationale that 
Major League Baseball was not engaged in interstate commerce, the 
proper application of stare decisis meant that the only aspect of 
Federal Baseball that remained to be followed was its result, which was 
the exemption of the reserve system from the antitrust laws.
---------------------------------------------------------------------------
    \3\ Piazza v. Major League Baseball League Baseball, 831 F. Supp. 
420 (E.D. Pa. 1993).
---------------------------------------------------------------------------
    Obviously, Major League Baseball disagrees with us as to the scope 
of the antitrust exemption. If the League didn't, I doubt the owners 
would be engaging in coordinated conduct that, in almost any other 
industry, would at least raise some eyebrows. And unfortunately, a 
federal judge in Florida recently agreed with Major League Baseball 
that contraction falls within the scope of their antitrust exemption. 
Given these different interpretations about the scope of the exemption, 
particularly concerning contraction, clarification by Congress is in 
order.
  III. Major League Baseball does not Deserve any Exemption from the 
                             Antitrust Laws
    Whatever the present scope of the exemption, Major League Baseball 
has proven that it is undeserving of any privileged status under the 
antitrust laws. If the League wants to conduct itself simply as a for-
profit business in disregard for the game and its fans, then it should 
not be treated any differently under the antitrust laws than any other 
private enterprise.
    The League isn't shy about acknowledging the reasons motivating its 
push for contraction. It openly contends that contraction is necessary 
because certain ``small market'' teams like the Twins do not generate 
enough revenue to satisfy the League. And Major League Baseball is now 
using its antitrust exemption as a shield to accomplish the elimination 
of franchises with impunity. This is quite a turnaround from the past, 
when Major League Baseball has come before Congress to state its case 
for retaining whatever exemption it might have from the antitrust laws 
and argued that the exemption allows the League to protect small market 
franchises.
    In a 1993 appearance before a subcommittee of the House Judiciary 
Committee, Commissioner Selig asserted that ``the most immediate 
consequence of the elimination of Baseball's antitrust exemption would 
be that a number of teams in small markets would attempt to abandon 
some of Baseball's existing cities for what they think are better 
economic conditions elsewhere.'' \4\ But now Major League Baseball 
would use it supposed antitrust exemption (as the League would have it) 
to abandon at least two cities. Commissioner Selig, in announcing the 
postponement of contraction until the 2003 season, reiterated that as 
many as four cities might be abandoned as a result of the League's 
contraction plans.
---------------------------------------------------------------------------
    \4\ Hearing Before the Subcommittee on Economic and Commercial law 
of the House Comm. on the Judiciary, 103rd Cong. 57-58 (1993) 
(statement of Allan H. Selig, President of the Milwaukee Brewers 
Baseball Club).
---------------------------------------------------------------------------
    When Commissioner Selig invoked Baseball's antitrust exemption to 
prevent the San Francisco Giants from moving to Florida, he testified 
that ``the National League's decision to keep the Giants in San 
Francisco, where they have successfully operated with loyal support 
from millions of fans for the past 35 years, was simply a reaffirmation 
of Baseball's longstanding policy against the relocation of franschises 
that have not been abandoned by their local communities.\5\ Now, 
though, the the League would use its supposed exemption to teliminate a 
franchise that has enjoyed loyal support from the people of Minnesota 
for over forty years. In fact, the Twins were the first American League 
team to drawmore than 3 millions fans in a single season. And to say 
that the community has abandoned the team ignores the fact that the 
team drew over 1.7 million fans last season. And to say that the 
community has abandoned the team ignores the fact that the team drew 
over 1.7 million fans last season, more than attended home games for 
five other teams.
---------------------------------------------------------------------------
    \5\ Id. at.51.
---------------------------------------------------------------------------
    During the 2001 World Series, Commissioner Selig declared in a 
message to fans: ``[B]aseball is an important social institution and a 
part of our national fabric. Baseball has a responsibility to those who 
look to the game not only for fun and entertainment, but also for a 
responsibility to those who look to the game not only for fun and 
entertainment, but also for a sense of stability and unification.'' \6\ 
Major League Baseball has used this imagery to justify whatever 
antitrust execption it might have. The Commissioner, for example, has 
testified: ``Congress has often looked at Basall's position with 
respect to the antitrust laws and it has always reaffirmed Baseball's 
antitrust status because Baseball's conduct has always been consistent 
with the public interest.'' \7\ He went on to say: ``Baseball has 
continued to uphold its unique covenant with its fans and it deserves 
to retain its current status under the antitrust laws.\8\ Contraction, 
however, has nothing to do with the public interest; rather, it has 
only to do with the owners' bottom lines.
---------------------------------------------------------------------------
    \6\ ``From the Commissioner,'' World Series 2001 Program, p.8 
(Exhibit A).
    \7\ Statement of Allan H. Selig, supra note 4, at 58.
    \8\ Id. at 59.
---------------------------------------------------------------------------
    I cannot conceive of any greater breach of Baseball's ``unique 
covenant with its fans,'' as the Commissioner put it, than to forsake 
the people of Minnesota, who have supported their team for so long. 
Commissioner Selig himself has eloquently described the blow a 
community feels when it is abandoned and how he was ``personally 
heartbroken'' when the Braves left Milwaukee after the 1965 season. As 
the Commissioner recalls: ``The city of Milwaukee and the state of 
Wisconsin were traumatized by the loss of that franchise. The people in 
my home town felt hostility, bitterness and a deep sense of betrayal 
towards Major League Baseball for allowing the Braves to abandon us. 
The years of drawing more than 2 million fans per season were 
forgotten.'' \9\ Commissioner Selig referred to there being a ``void'' 
in the community after the Braves' departure. And I am certain that the 
same void and sense of betrayal would be felt in Minnesota and any 
other community Major League Baseball targets for contraction. If Major 
League Baseball can so callously abandon communities in the name of 
profits--and do so just days after piously proclaiming Baseball's role 
``in the recovery of our nation'' \10\--then there is no longer any 
``unique covenant'' to justify a privileged status under the antitrust 
laws.
---------------------------------------------------------------------------
    \9\ Id. at 53.
    \10\ ``From the Commissioner,'' supra note 6.
---------------------------------------------------------------------------
    According Major League Baseball favored treatment under the 
antitrust laws also means entrusting the League with a weighty 
responsibility to make certain that its privileged status is not 
abused. Revelations that have occurred since contraction was announced 
last November, though, raise serious doubts as to whether Major League 
Baseball is deserving of that trust. As many of you are probably aware, 
it came to light recently that Commissioner Selig had arranged a $3 
million loan for the Milwaukee Brewers from a financial institution 
controlled by Carl Pohlad, the owner of the Minnesota Twins. In 
addition to the Brewers loan, there have been reports of a Pohlad loan 
to Colorado Rockies owner Jerry McMorris. Major League Rule 20 (c) 
prohibits loans made directly or indirectly between owners without the 
approval of other owners, and according to press reports neither loan 
was approved by the other owners. Mr. Selig's reported response to a 
question as to why the possible violation of League rules was not 
discussed at a recent owners' meeting: ``We decided it was an 
antiquated rule.'' Well, the baseball antitrust exemption is also an 
``antiquated rule'' from a time when Major League Baseball was more a 
pastime, not just a business. If the owners are willing to ignore their 
own internal governance structure when an ``antiquated'' rule gets in 
the way of doing business, that certainly calls into question whether 
Major League Baseball can be trusted to conduct itself in a responsible 
manner with an antiquated antitrust exemption (if such an exemption 
exists).
                             IV. Conclusion
    The baseball antitrust exemption has been described as ``a derelict 
in the stream of the law.'' \11\ The Supreme Court itself has 
acknowledged that the exemption is ``unrealistic, inconsistent and 
illogical.'' \12\ It is, to borrow Commissioner Selig's words, 
antiquated. Modern antitrust doctrine can deal with issues like 
contraction without throwing professional sports leagues into chaos, 
contrary to what Major League Baseball suggests would happen if it lost 
whatever antitrust exemption it might currently have. And given that 
the League, through its contraction scheme, has broken whatever 
``covenant'' it may have had with its fans, there is certainly no basis 
to allow it to enjoy a privileged status under the antitrust laws. The 
notion that the Major League Baseball is deserving of any exemption is 
far more antiquated than any of the League's own rules that the owners 
refuse to follow.
---------------------------------------------------------------------------
    \11\ Flood, 407 U.S. at 286 (Douglas, J., dissenting).
    \12\ Radovich v. National Football League, 352 U.S. 445, 452 
(1957).
---------------------------------------------------------------------------
    I thank you for the opportunity to appear before you today.

    Senator Feinstein. Very good. Thanks very much, Ms. 
Swanson.
    We were going to spell each other, and I know that Senator 
Leahy was on his way back, but I am going to have to recess 
now, because we are down to about 1 minute, so I am going to 
race to do the vote and then come right back.
    Thank you.
    [Recess.]
    Senator Feinstein. I am going to call the hearing to order 
and ask the panel of witnesses to please take their seats.
    Because we have two colleagues that I know of who have come 
back and forth from votes now three times, I am going to ask 
the witnesses' patience and allow the Senators to make their 
statements at this time.
    So we will begin with Senator Wellstone and go right down 
the line.
    Senator?

 STATEMENT OF HON. PAUL D. WELLSTONE, A U.S. SENATOR FROM THE 
                       STATE OF MINNESOTA

    Senator Wellstone. Thank you, Madam Chair, and let me 
apologize to the panelists. This is an unusual situation where 
we have the votes scheduled at the same time.
    I would like to thank all of you for being here, and I want 
to thank Lori Swanson for her superb testimony. I am sorry that 
I was not here to hear you directly, Lori, but thank you for 
representing Minnesota so well.
    I am honored to be here with my colleagues, Senator Dayton 
from Minnesota and Senator Nelson.
    Madam Chair, I want to thank you and Senator Leahy and the 
Committee for holding these hearings on S. 1704, which is the 
Fairness in Antitrust in National Sports (FANS) Act of 2001, 
which I introduced at the end of last session with Senators 
Dayton and Harkin.
    The goal of the legislation is to limit major league 
baseball's antitrust exemption as it relates to decisions to 
eliminate or relocate a major league baseball team. This is an 
important bill, made necessary by major league baseball owners' 
unfortunate decision last fall to eliminate two teams.
    As you know, the Minnesota Twins were prominently mentioned 
as one of the two teams, along with the Montreal Expos, to be 
eliminated.
    Thankfully, team elimination will not happen this season. 
Frankly, I think the major league baseball owners did not 
anticipate the hailstorm of criticism they received for the so-
called ``contraction'' decision. The owners failed to perceive 
the public sense of betrayal at the hands of owners willing to 
put their own profits before loyalty to fans and their 
communities. The decision to abandon contraction at least for 
now was good news for the Minnesota Twins fans and anyone who 
believes in this great American pastime.
    But unfortunately, the battle is not over. The owners have 
made it eminently clear that they intend to pursue team 
elimination and/or relocation next year. So Mr. Chairman, while 
we may have stepped back from the brink, it is only temporary. 
We must remain vigilant, and we need the full protection of the 
antitrust laws in doing so.
    Mr. Chairman and Senator Feinstein--I will abbreviate 
this--let me just tell you a little bit, although I could tell 
you a lot, about the Minnesota Twins team and the community 
that has been threatened by the owners' apparent desire to 
eliminate some of their competitors.
    The Minnesota Twins are a vibrant, vital team, a team that 
strikes incredible loyalty in the hearts of Minnesota fans--
indeed, of fans all over the Upper Midwest.
    To be sure, Minnesota is a so-called ``smart market'' team, 
but nonetheless it is a team that has thrived and is thriving 
now. Since 1961, they have played in three World Series and won 
two. Three Minnesota players have been inducted into the Hall 
of Fame--Harmon Killebrew, Rod Carew, and Kirby Puckett. 
Minnesota was the first American League team to draw 3 million 
in attendance over a season; that happened in 1988. Last 
season, we fielded a team that finished second in their 
division and drew 1.8 million fans.
    The 2001 season that just ended was a phenomenal one for 
the Minnesota Twins. And the list goes on and on, but just 
quickly, they had 46 crowds of 20,000-plus in 2001; they had 15 
crowds of 30,000-plus in 2001; they had increased attendance of 
723,211, which ranked first in the American League and second 
only to the Milwaukee Brewers in major league baseball; they 
finished the season with an average attendance of 22,287, the 
team's highest average attendance figure since 1994. The list 
goes on.
    This is a team that the owners want to eliminate? I think 
not.
    Mr. Chairman and members of the committee, our country has 
a lot of urgent priorities, and you have a lot of urgent 
priorities--the war against terrorism, economic security in our 
own country--there are many pressing priorities. We should not 
in the midst of these urgent priorities have to be concerned 
about protecting our fans and communities from unilateral, 
self-serving decisions by major league baseball owners.
    Unfortunately, however, in light of the owners' announced 
intentions to pursue team elimination next season, we have no 
choice but to urge quick consideration of this legislation. We 
must act as soon as possible to hold major league baseball 
owners accountable for their decisions.
    Last fall, Senator Dayton and I wrote to the President, 
asking for his help. I think it is terribly important that he 
weigh in, and we certainly will need his support.
    There are two specific issues that I want to conclude with 
in respect to S. 1704, since I have authored this bill, that I 
would like to discuss.
    First, we have heard concerns that despite clear language 
to the contrary, the bill would be interpreted as applying to 
minor league baseball teams. That was not our intent in 
drafting S. 1704, and I would be more than happy to work with 
the minor league baseball owners on specific language to 
clarify this point and would urge members of the Committee to 
join me in this effort as well.
    Second, major league owners and their economists will tell 
you that lifting major league baseball owners' antitrust 
exemption will promote league instability by fostering team 
relocation. I challenge such a conclusion. The National 
Football League--fully subject to the antitrust laws--was able 
to negotiate guidelines with the Conference of Mayors providing 
for community input on relocation decisions. I think this is 
the operative language of the final point I want to make, Mr. 
Chairman and members of the committee.
    The application of the antitrust laws does not prevent a 
league from working to keep a team in a city, but insulating 
that league from the antitrust laws absolutely prevents cities, 
fans, and other interested parties from challenging a league 
decision to move a team. I think that is really the crucial 
point.
    Again, Mr. Chairman, I want to emphasize to you that I 
think relying on the ``good will'' of major league baseball to 
protect Minnesota's interests with respect to relocation would 
be foolhardy. I think that our State, our communities, fans 
across the country need to have the right to challenge these 
decisions. They ought to be able to challenge anticompetitive 
practices when it looks like it is just a cartel that has 
gotten together.
    Mr. Chairman, members of the committee, I want to thank you 
for holding these hearings so promptly. I look forward to 
working with you and the Committee on this important 
legislation. Initially, when I introduced this legislation, I 
thought it was a shot across the bow, but I actually believe 
there is growing disillusionment with the owners and the high-
handedness and the way in which they have approached these 
decisions, and I think there is more support than there has 
been before for ending this antitrust exemption, and I am 
committed to this fight.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Wellstone follows:]

 Statement of Hon. Paul D. Wellstone, a U.S. Senator from the State of 
                               Minnesota

    ``Fairness in Antitrust in National Sports (FANS) Act of 2001''
    Mr. Chairman and Members of the Committee, I want to thank you for 
so promptly holding hearings on S. 1704, the ``Fairness in Antitrust in 
National Sports (FANS) Act of 2001, `` which I introduced at the end of 
last session along with Senators Dayton and Harkin.
    The goal of this legislation is to limit major league baseball's 
antitrust exemption as it relates to decisions to eliminate or relocate 
a major league baseball team. This is an important bill, made necessary 
by major league baseball owners' unfortunate decision last fall to 
eliminate two teams. As you know, the Minnesota Twins were prominently 
mentioned as one of the two teams, along with the Montreal Expos, to be 
eliminated.
    Thankfully, team elimination will not happen this season. Frankly, 
I think major league baseball did not anticipate the hailstorm of 
criticism it received for its so-called ``contraction'' decision. The 
owners failed to perceive the public sense of betrayal at the hands of 
owners willing to put their own profits before loyalty to fans and 
their communities. The decision to abandon contraction at least for now 
was good news for the Minnesota Twins' fans and anyone who believes in 
the great American pastime.
    But unfortunately the battle is not over. The owners have made 
eminently clear that they intend to pursue team elimination and/or 
relocation next year. So, Mr. Chairman, while we may have stepped back 
from the brink, it is only temporary. We must remain vigilant. And we 
need the full protection of the antitrust laws in doing so.
    Mr. Chairman, let me tell you a little about the team and the 
community that had been threatened by the owners' apparent desire to 
eliminate some of their competitors. The Minnesota Twins are a vibrant, 
vital team a team that strikes incredible loyalty in the hearts of 
Minnesota fans--indeed of fans all over the Upper Midwest.
    To be sure, Minnesota is a so-called ``small market'' team. But 
nonetheless it is a team that has thrived and is thriving now:

        Since 1961, the Minnesota Twins have played in 3 world series 
        and won two
        Three Minnesota players have been inducted into the Hall of 
        Fame: Harmon Killebrew, Rod Carew, and Kirby Puckett
        Minnesota was the first American League team to draw 3 million 
        in attendance over a season that happened in 1988
        Last season we fielded a team that finished second in their 
        division and drew 1.8 million fans

    The 2001 season that just ended was a phenomenal one for the Twins. 
This past year we:

     Won 85 games, holding or sharing a portion of first place 
in the American League Central division from opening day until mid-
August. Indeed, this upstart team could not be beat right up to the All 
Star Game.
     Finished in the top seven in the American League in all 
major team statistical categories [batting (4th), pitching (7th), and 
fielding (5th)]
     Showed the fifth largest increase in Major League Baseball 
in victories (69 in 2000 to 85 in 2001) while maintaining the league's 
lowest payroll and Major League Baseball's lowest average ticket price 
heading into the 2002 season
     Had 46 crowds of 20,000-plus in 2001 compared with 10 in 
2000
     Had 15 crowds of 30,000-plus in 2001 compared with 5 in 
2000
     Had increased attendance of 723,211 which ranked first in 
the American League and second only to the Milwaukee Brewers in Major 
League Baseball
     Finished the season with an average attendance of 22,287, 
the team's highest average attendance figure since 1994
     Increased cable television ratings by 161%, the largest 
yearly gain of any major league baseball team the highest in team 
history on its licensed regional sports network carrier
     Increased over-the-air television ratings by 105%--our 
highest over-the-air ratings since 1996
    This is a team the owners want to eliminate? I think not.
    Mr. Chairman and Members of the Committee, our country has 
tremendously urgent priorities. We have the war against terrorism, our 
struggle to help working families in the midst of a severe economic 
down turn, and other pressing domestic priorities providing adequate 
resources to educate our children, adequate health care for working 
families, prescription drug benefits, particularly for the elderly. We 
should not in the midst of these urgent priorities have to be concerned 
about protecting our fans and communities from unilateral, self-serving 
decisions by major league baseball owners.
    Unfortunately, however, in light of the owners' announced 
intentions to pursue team elimination next season, we have no choice 
but to urge quick consideration of this legislation. We must act as 
soon as possible to hold major league baseball owners accountable for 
their decisions.
    Last fall Senator Dayton and I wrote to the President asking for 
his help. We noted that achieving Congressional action on this 
legislation will be exceedingly difficult in view of other urgent 
legislative issues facing Congress and the Administration. We urged 
him, therefore, to weigh in on this. With the help of the 
Administration, I trust we can push this measure forward and give the 
owners some pause about what they are doing.
    Mr. Chairman there are two specific issues with respect to S. 1704 
that I would like to address. First, we have heard concerns that, 
despite clear language to the contrary, the bill could be interpreted 
as applying to minor league baseball teams. That was not our intent in 
drafting S. 1704. I would me more than happy to work with the minor 
league baseball owners on specific language to clarify this point and 
would urge members of the Committee to join us in that effort as well.
    Second, major league owners and their economists will tell you that 
lifting major league baseball owners' antitrust exemption will promote 
league instability by fostering team relocation. I challenge such a 
conclusion. The National Football League fully subject to the antitrust 
laws was able to negotiate guidelines with the Conference of Mayors 
providing for community input on relocation decisions. The application 
of the antitrust laws does not prevent a league from working to keep a 
team in a city. But insulating that league from the antitrust laws 
absolutely prevents cities, fans, and other interested parties from 
challenging a league decision to move a team. And Mr. Chairman, when it 
comes to the interests of Minnesota fans there's not a whole lot of 
difference between contraction and relocation. The team would still be 
gone--and the fans and communities of our state would still be harmed. 
Frankly, relying on the ``good will'' of Major League Baseball to 
protect Minnesota's interests with respect to relocation would be 
foolhardy.
    Again, Mr. Chairman. I want to thank you again for holding these 
hearings so promptly. I look forward to working with you and the 
Committee on this important legislation.

    Chairman Leahy. Thank you.
    I want to thank Senator Feinstein for coming over and 
filling in. As I mentioned earlier to the panel, we did not 
anticipate a whole series of fairly close roll call votes, 
which held up a number of us, and I apologize for that. It is 
one of the reasons why we are running so far behind.
    I see Senator Dayton and Senator Nelson here, who also wish 
to make statements.
    Senator Dayton?

STATEMENT OF HON. MARK DAYTON, A U.S. SENATOR FROM THE STATE OF 
                           MINNESOTA

    Senator Dayton. Thank you, Mr. Chairman, and thank you very 
much, Mr. Chairman, for arranging this hearing to swiftly in 
the midst of all the other demands on this committee. And I 
want to thank Senator Feinstein for accommodating our insertion 
into the middle of the first panel, and I want to apologize to 
the panel for the interruption. Thank you very much for your 
forbearance.
    Mr. Chairman and members, it is no coincidence that both of 
Minnesota's Senators are testifying on behalf of this 
legislation today, Senator Wellstone as its author and I as an 
original cosponsor.
    Like thousands of Minnesota Twins fans throughout not only 
Minnesota but the entire Upper Midwest region, we were stunned 
last November when major league baseball suddenly announced 
plans to ``contract,'' that is, to eliminate two teams before 
the start of the 2002 season. One of those teams was widely 
rumored to be our Minnesota Twins.
    Fortunately for us, a Minnesota judge ruled that the Twins 
are contractually obligated by a 1-year least that the team 
signed only last October to play this season in Minnesota, and 
the Minnesota Court of Appeals has upheld that decision. 
Commissioner Selig has now announced that major league baseball 
will not eliminate any teams for this 2002 season, so Minnesota 
Twins fans and their elected leaders have a brief reprieve.
    I am cosponsor this legislation because it would 
importantly clarify that major league baseball does not enjoy a 
status different from any other sports league relating to the 
elimination or relocation of a team franchise.
    Nevertheless, as Senator Wellstone pointed out, in past 
year, numerous teams in the NFL, NBA and NHL have been moved by 
their owners to different cities. Federal courts have upheld 
owners' rights to do so, and they have rejected league attempts 
to prevent these moves as violations of the Sherman Antitrust 
Act--for example, Los Angeles Memorial Coliseum Commission 
versus the National Football League in 1984.
    So even if this legislation is passed by Congress and then 
signed into law by a former baseball team owner, or even if it 
were law today, it would not--it could not--prevent a Minnesota 
Twins owner from moving that team out of our State.
    What the Wellstone bill would do, however, is to prevent a 
scheme such as major league baseball recently concocted for its 
so-called ``contraction.'' Without claiming an antitrust 
exemption, major league baseball could not have planned and 
then proclaimed that two teams would be eliminated by the 
league and taken away from their cities and their fans. Without 
such an exemption, the owners of 28 baseball businesses could 
not act in concert to buy out the owners of the other two 
franchises for their expected future financial gains.
    The league-coordinated ``contraction'' is very different 
from an individual owner's decision to sell or move a single 
franchise. In that situation, while one city and its citizens 
lose their team--and I deplore when those occasions occur--at 
least another city and its citizens gain it. With contraction, 
only the owners gain. Fifty players lose jobs, and their 
association loses financial leverage. Two cities lose their 
teams; two other cities lose their chances to gain teams.
    Baseball's claimed antitrust exemption also allows the 
owner of an existing team to prevent another team from being 
moved to a nearby city where it might ``compete in its 
market.'' One owner wins while depriving, for example, 
thousands of fans in a city like Washington who want a team and 
have a willing buyer.
    This restraint of competition is precisely the abuse which 
antitrust legislation is meant to stop. Major league baseball's 
``contraction'' demonstrates clearly the tight control which 
the league exercises over the actions of the businesses which 
comprise it.
    Please remember that in its landmark decision, Curt Flood 
versus Kuhn, in 1972, the U.S. Supreme Court stated 
unequivocally that ``professional baseball is a business 
engaged in interstate commerce.'' Senator Wellstone's bill 
applies to those businesses the same rules which apply to other 
pro sports businesses.
    Let me conclude by saying again to my constituents in 
Minnesota: Congress cannot save the Twins for Minnesota. Only 
Minnesota can save the Twins for Minnesota. As much as I detest 
the financial excesses in pro sports today, I believe that the 
Twins need revenues from a new baseball stadium to be viable 
financially. More importantly for Twins fans, they need those 
new stadium revenues to field winning teams, with marquee 
players who can win league pennants and World Series. In both 
1987 and 1991, we in Minnesota found out how exciting and fun 
that can be.
    Like the Metrodome, this new stadium can be built without 
costing a single taxpayer dollar. However, if the Minnesota 
legislature fails to approve the project this year, they may 
not get another chance.
    So I urge the Committee to move forward the Wellstone 
legislation which is important to the Nation, and I urge the 
Minnesota legislature to act in ways that are so important to 
Minnesota.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Dayton follows:]

    Statement of Hon. Mark Dayton, a U.S. Senator from the State of 
                               Minnesota

    It is no coincidence that both Minnesota Senators are testifying on 
behalf of this legislation today, Senator Wellstone as its author, and 
I as an original cosponsor. We, like thousands of Minnesota Twins fans 
throughout not only Minnesota but also the entire Upper Midwest region, 
were stunned last November, when Major League Baseball suddenly 
announced plans to ``contract'': to eliminate two teams before the 
start of the 2002 season. One of those teams was widely rumored to be 
our Minnesota Twins.
    Fortunately for us, a Minnesota judge ruled that the Twins are 
contractually obligated by a one-year lease the team signed only last 
October to play this season in Minnesota; and the Minnesota Court of 
Appeals has upheld that decision. Commissioner Selig has now announced 
that Major League Baseball will not eliminate any teams for this 2002 
season. So, Minnesota Twins fans and their elected leaders have a brief 
reprieve.
    I am cosponsoring this legislation, because it would importantly 
clarify that Major League Baseball does not enjoy a status different 
from any other sports league, relating to the elimination or relocation 
of a team franchise.
    Nevertheless, in past years, numerous teams in the NFL, NBA, and 
NHL have been moved by their owners to different cities. Federal courts 
have upheld owners' rights to do so, and they have rejected league 
attempts to prevent these moves as violations of the Sherman Anti- 
Trust Act (eq. Los Angeles Memorial Coliseum Commission vs. the 
National Football League in 1984).
    So even if this legislation is passed by Congress and signed into 
law by a former baseball owner, or even if it were law today, it would 
not it could not prevent a Minnesota Twins owner from moving the team 
out of our state.
    What the Wellstone Bill would do, however, is prevent a scheme such 
as Major League Baseball recently concocted for its ``contraction.'' 
Without claiming an antitrust exemption, Major League Baseball could 
not have planned, then proclaimed, that two teams would be eliminated 
by the League from their cities and from their fans. Without such an 
exemption, the owners of 28 baseball businesses could not act in 
concert to buy out the owners of the other two franchises, for their 
expected future financial benefits.
    This league-coordinated ``contraction'' is very different from an 
individual owner's decision to sell or move a single franchise. In that 
situation, while one city and its citizens lose their team, another 
city and its citizens gain it. With contraction, only the owners gain. 
Fifty players lose jobs, and their Association loses financial 
leverage. Two cities lose their teams; two other cities lose their 
chances to gain teams.
    Baseball's claimed antitrust exemption also allows the owner of an 
existing team to prevent another team from being moved to a nearby 
city, where it might ``compete in its market.'' One owner wins while 
depriving thousands of fans in a city like Washington, who want a team 
and have a willing buyer. This restraint of competition is precisely 
the abuse which antitrust legislation is meant to stop. Major League 
Baseball's ``contraction'' demonstrates clearly the tight control which 
the League exercises over the actions of the 30 businesses which 
comprise it. Please remember that in its landmark decision, Curt Flood 
vs. Kuhn, 1972, the U.S. Supreme Court stated unequivocally that 
``professional baseball is a business engaged in interstate commerce.'' 
Senator Wellstone's bill applies to those businesses the same rules 
which apply to other pro sports businesses.
    Let me conclude by saying again, to my constituents: Congress 
cannot save the Twins for Minnesota. Only Minnesota can save the Twins 
for Minnesota. Much as I detest the financial excesses in pro sports 
today, I believe that the Twins need revenues from a new baseball 
stadium to be viable financially. More importantly for Twins fans, they 
need those new stadium revenues to field winning teams, with marquee 
players, who can win league pennants and World Series. In both 1987 and 
1991, we found out how exciting and fun that can be.
    Like the Metrodome, this new stadium can be built without costing a 
single taxpayer dollar. However, if the Minnesota Legislature fails to 
approve the project this year, they may not get another chance.

    Chairman Leahy. Thank you.
    Normally, we go to the ranking member, but he has asked me 
to recognize Senator Nelson next, so I will call on Senator 
Nelson, and then we will go to the ranking member.

STATEMENT OF HON. BILL NELSON, A U.S. SENATOR FROM THE STATE OF 
                            FLORIDA

    Senator Nelson. Thank you, Mr. Chairman.
    Mr. Chairman, I am here to shake things up. I am joining 
with my attorney general from Florida because we see eye-to-eye 
on this situation. He of course has one of the greatest 
reputations and is one of the longest-standing attorneys 
general in the country.
    But I want to approach this from a different perspective. I 
want to give you two examples of why the issue before us is 
very important to us in Florida.
    I believe that Commissioner Selig tried to do the right 
thing in recognizing that a number of the old Negro League 
players had not been properly treated or adequately 
compensated. So a few years ago, an effort was made to give 
some compensation in the form of a pension to some of the Negro 
League players, and it was a good step in the right direction, 
but it stopped way short of the fair compensation that those 
Negro League players should have had.
    The criterion that was used by major league baseball said 
in essence that the major leagues were integrated in 1947 when 
the color barrier was broken. The color barrier was broken in 
1947, but they were not integrated until late in the decade of 
the 1950's. As a matter of fact, I think the last team was in 
about 1959, and it was the Boston Red Sox before they were 
integrated.
    So there was a fiction that major league baseball was 
integrated, and on the basis of that fiction, players who 
remained in the Negro Leagues were not eligible, then, for the 
pension that had been set down.
    That is wrong, and I think that that should be corrected, 
and I want to commend Commissioner Selig for his first step. I 
have been trying to have a meeting with him since early 
December, when I met with a number of these Negro League 
players in Florida who are now retired, and I am still waiting 
to have my meeting, so when this hearing came up, I chose to go 
ahead and make this a public statement and would urge upon the 
commissioner to please follow through. I think he is stepping 
in the right direction.
    But when you look back, baseball used its antitrust 
exemption to unfairly compete against the Negro Leagues and 
then systematically discriminated against most of those Negro 
League players for many years after 1947. That is one thing I 
wanted to get across.
    The second concern that I have about the antitrust 
exemption is based on the owners' decisions that they are going 
to contract the league, constrict, lower. And of the four teams 
that they are looking at, two of them are in Florida. Well, of 
course, that would be devastating to us. We have a whole 
infrastructure in Florida--in Miami, the Florida Marlins; in 
Tampa Bay, the Devil Rays.
    But even if it were Minnesota and Montreal, that has an 
effect upon us, because we have something known as minor 
leagues in the State of Florida and also the wonderful renewal 
of the year each year with spring training, which is just about 
to occur. And both of those teams, Montreal and Minnesota, have 
spring training facilities, and all the host of economic 
activities that accrue therefrom would be severely affected.
    So Mr. Chairman, I wanted to add my two bits, and I will 
continue to speak out both publicly and privately on behalf of 
these old Negro Leaguers--and by the way, in meeting with a 
number of them, now in their eighties, I said, ``Now, tell me 
what it was really like--what was your talent back in those 
days?''
    And they said, ``We could pitch and win games, and we would 
pitch all nine innings.''
    Thank you, Mr. Chairman.
    Chairman Leahy. Thank you.
    I would love to hear some of those stories, and I 
appreciate what you said about Attorney General Butterworth. I 
think we are very fortunate to have both attorneys general 
here, both Attorney General Butterworth and Deputy Attorney 
General Swanson. I am sure members of this Committee are well 
aware of their accomplishments and activities.
    Thank you.
    Senator Hatch, who, as I said in my earlier statement, was 
the chief sponsor of the Curt Flood Act, has joined us, and I 
will now yield to Senator Hatch.

STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE 
                            OF UTAH

    Senator Hatch. Thank you, Mr. Chairman. I will not take too 
long, but for quite some time now, I have been concerned about 
the health of baseball, both in its role as our National 
pastime with millions of fans and as a multi-billion-dollar 
industry that in one way or anther affects financially hundreds 
of thousands, if not millions, of Americans.
    I am pleased that the Committee has decided to continue to 
examine whether and how the Federal antitrust laws may be 
contributing to baseball's problems, as well as how the 
antitrust laws might be used to fix some of these problems. 
Having sponsored and cosponsored, as the distinguished Chairman 
has said, legislation to limit baseball's antitrust exemption, 
I have a particular interest in today's hearing and welcome the 
testimony and opinions that will be offered by our 
distinguished witnesses.
    As many of those participating today may recall, I 
sponsored legislation in the 103d Congress that would have made 
clear that antitrust laws apply to major league baseball with 
regard to labor relations.
    I the 105th Congress, I again along with several others, 
including Senators Leahy and Thurmond, introduced legislation 
to clarify how and to what extent the Federal antitrust laws 
apply to baseball. This legislation, enacted as the Curt Flood 
Act of 1998, made clear that major league baseball, like all 
other professional sports, is subject to our Nation's antitrust 
laws except with regard to a few areas such as team relocation, 
the minor leagues, and sports broadcasting.
    Major league baseball continues to face serious and 
controversial problems and issues, including the alleged need 
for contraction, the potential relocations advocated by some, 
substantial increases in player salaries coupled with reported 
operating losses, and finally, the systemic competitive 
imbalance that practically ensures that only the teams which 
can affords to spend significantly more on payrolls than their 
competitors have any realistic chance of reaching, let alone 
winning, the World Series.
    As demonstrated by my past support for narrowing the 
exemption, I am not opposed to redefining or even repealing 
baseball's exemption if the arguments and evidence presented 
indicate the need for such action. At this time, however, I 
personally am not convinced that the limited antitrust 
exemption is, as some claim, the root cause of the problems 
identified by opponents of the exemption. In this vein, I think 
it is advisable for this Committee to work to compile a factual 
record sufficient to support a reasoned and fully supported 
decision on what, if anything, to do with the antitrust 
exemption.
    In the hopes of encouraging the kind of testimony and 
debate that I believe will be most valuable for the compilation 
of such a record, I suggest that two basic questions need to be 
addressed at this hearing, and I would ask each of today's 
witnesses to comment on them with as much specificity as 
possible.
    First, in what specific ways do the antitrust laws and 
baseball's limited exemption from these laws actually affect or 
contribute to the problems that have been repeatedly identified 
by industry participants and commentators?
    Second, how would legislative action modifying or 
clarifying baseball's exemption ameliorate or even eliminate 
some of these problems?
    In conclusion, I want to restate that I come to this 
hearing with an open mind. I look forward to the testimony that 
will be offered here today, and I sincerely hope that this 
hearing will hope to elucidate with some specificity how the 
current application of the antitrust laws affects baseball, 
both as a sport and as an industry, and what further action, if 
any, is warranted with respect to major league baseball's 
antitrust exemption.
    So I look forward to the hearing. I can only be here for 
part of the time, but I appreciate your holding it, Mr. 
Chairman, and thank you for allowing me to say these few words.
    Chairman Leahy. Thank you very much, Senator Hatch.
    Mr. DuPuy has been Executive Vice President and Chief Legal 
Officer of the Major League Baseball Players Association since 
1998. He also serves as Chairman of the board of Central 
Baseball, which oversees all of major league baseball's 
interactive media and internet rights.
    Mr. DuPuy, you have been very patient, and we are pleased 
that you could be here with us.
    Please go ahead.
    Senator Wellstone. Mr. Chairman, can I thank you again, and 
I thank the panelists for your forbearance. I appreciate it.

  STATEMENT OF ROBERT A. DUPUY, EXECUTIVE VICE PRESIDENT AND 
CHIEF LEGAL OFFICER, OFFICE OF THE COMMISSIONER OF MAJOR LEAGUE 
                  BASEBALL, NEW YORK, NEW YORK

    Mr. DuPuy. Mr. Chairman and members of the committee, thank 
you.
    I appreciate the opportunity to testify before the 
Committee today on the bill introduced by Senator Wellstone. 
Baseball's exemption has been of great importance to the growth 
and stability of all of professional baseball for 80 years. It 
has not created problems; it has helped to solve them.
    Major league baseball has not abused its exemption but 
instead has used it to benefit the sport and its fans. One of 
the most important of those benefits is the ability to promote 
franchise stability.
    The last time a major league franchise relocated was prior 
to the 1972 season. That record over the last 30 years most 
certainly would not have been possible without the antitrust 
exemption. Indeed, during that same period of time, the other 
three major sports have had a total of 22 relocations. Again, 
baseball has had zero, and it is not a coincidence that 
baseball is the only sport with an exemption.
    With due respect to the testimony of Senator Wellstone, 
Minnesota has a baseball team today because of the antitrust 
exemption. Minnesota, a hockey hotbed, lots its hockey team to 
a Southern city because the NHL did not have an exemption and 
stands at risk of losing its football team because the NFL does 
not have an exemption.
    Baseball has used the exemption to promote franchise 
stability and to keep the Twins in Minnesota to date.
    The exemption also protects and supports baseball's 
extensive minor league system, which provides professional 
baseball to 160 small and medium-sized communities throughout 
the country. Major league baseball invests $150 million per 
year in the minor leagues.
    Without the protections afforded us by the exemption, a 
less costly yet certainly less accessible system would no doubt 
be developed.
    We understand that the current bill was introduced by 
Senator Wellstone in response to baseball's vote to reduce the 
number of major league teams by two. Let me be clear. No one 
desires contraction. No one wants to deprive even a single fan 
of major league baseball. Commissioner Selig was one of the 
last to be convinced of contraction's necessity.
    But given the current economic structure of baseball, there 
are markets which have demonstrated over time that they cannot 
support a major league baseball team, let along a competitive 
major league team.
    Contraction is an attempt to face up to the economic 
realities of the industry so as to deliver a competitively 
balanced product at the highest level to as many fans as 
possible.
    Commissioner Selig and the owners are compelled to confront 
the current imbalance in the game. Without a competitive 
product on the field, interest in the game will erode. With 
more and more entertainment options available, fans will turn 
to other more competitive sports. It is far preferable that 
baseball attempt to solve its problems in a coordinated, 
limited, and carefully managed process than to have a number of 
teams file bankruptcy, perhaps even in the middle of the 
season, with the resultant chaos that would inevitably ensue.
    Contraction is not intended to be punitive. It is clearly 
heart-rending for those fans and club employees who might lose 
their team, but it is intended to advance consumer welfare in 
the end, to protect competition, not competitors, and to allow 
28 teams to improve their competitive posture and economic 
stability and allow major league baseball to be affordable to 
the fans--all objectives consistent with the tenets of the 
antitrust laws.
    For example, in one instance, a contraction candidate 
receives 80 percent of its revenues from Central Baseball; 
another receives more than 55 percent. That almost $100 million 
a year subsidy borne by the other 28 clubs at some point must 
inevitably lead to higher ticket prices across the entire 
industry.
    The industry's financial results that led the clubs to the 
decision to contract have been widely reported. The blue ribbon 
panel consisting of Paul Volcker, George Mitchell, Richard 
Levin, and George Will issued their report in July of 2000 and 
made several recommendations for dealing with the issue of 
competitive imbalance. The 2001 update to that report clearly 
demonstrates that since the first report, both the economics of 
the game and the competitive balance of the game have further 
deteriorated. Additionally, not a single recommendation of the 
panel has been achieved at the bargaining table.
    The competitive imbalance problem is apparent even to the 
most casual fan who watches only the playoffs and sees the same 
teams win year in and year out. Since 1995, no World Series 
game has been won by a team outside the top quartile of teams, 
and only 5 of 224 playoff games have been won by teams from the 
bottom half--a mere 2 percent.
    Returning to the current bill, in 1997 and 1998, the 
commissioner's office and the players worked very closely with 
this Committee to craft a carefully worded change to our 
exemption. That legislation, the Curt Flood Act, provides major 
league players with the same rights under the antitrust laws in 
the area of labor relations as all professional athletes have. 
We continue to stand by that agreement and believe that no 
further changes are necessary or appropriate.
    S. 1704 would open baseball to attack in areas in which 
baseball has worked hardest and achieved the most for the 
benefit of fans at all levels. For that reason, we oppose the 
passage of S. 1704.
    Thank you, Mr. Chairman, for the opportunity to testify, 
and I ask that my full remarks be made a part of the record of 
this committee.
    [The prepared statement of Mr. DuPuy follows:]
    [Additional material is being retained in the Committee 
files.]

Statement of Robert A. DuPuy, Executive Vice President and Chief Legal 
Officer, Office of the Commissioner of Major League Baseball, New York, 
                                New York

    Mr. Chairman, my name is Robert A. DuPuy. I serve as Executive Vice 
President, Administration, and Chief Legal Officer for Major League 
Baseball. I have held this position since 1998, and prior to that 
served as outside counsel to the Commissioner and the Major League 
Executive Council. I appreciate the opportunity to testify before the 
Committee today on S.1704, introduced by Senator Wellstone, and more 
generally about baseball's antitrust exemption.
    Let me first address baseball's exemption. That exemption has been 
of great importance to all of professional baseball for 80 years. As 
the Committee knows, the United States Supreme Court found the business 
of baseball to be exempt from the antitrust laws in 1922. That finding 
was reaffirmed in 1953 and then again in 1972, and over the years it 
has been applied by numerous federal district courts and circuit 
courts, including only a few weeks ago by the federal district court in 
Tallahassee, Florida.
    Major League Baseball has not abused its exemption, but instead has 
used it to benefit the sport and its fans. One of the most important of 
those benefits is the ability to control franchise movement. Baseball 
has long had a policy of franchise stability, and we have made great 
efforts over the last several decades to prevent teams from abandoning 
their communities. Those efforts have been an unqualified success. The 
last time a franchise relocated was prior to the 1972 season. That 
record over the last 30 years most certainly would not have been 
possible without our antitrust exemption. Indeed, during that same 
period of time the National Football League has had seven franchise 
relocations, the National Basketball Association eleven and the 
National Hockey League eight, a total of 26 in the other major sports. 
Again, baseball has had zero, and it is not a coincidence that baseball 
is the only sport with an exemption.
    The exemption also protects and supports baseball's extensive minor 
league system, which provides for the training and development of 
future major league players and also provides professional baseball to 
160 small and medium-size communities throughout the country. A number 
of aspects of that extensive system would be exposed to attack under 
the antitrust laws without the exemption, thereby greatly increasing 
the likelihood of a different type of player development system with 
fewer players, fewer teams and fewer locations for fans to watch 
professional baseball. Major League Baseball invests $150 million per 
year in the minor leagues. Without the protections afforded us by the 
exemption, a less costly yet less accessible system would no doubt be 
developed and perhaps millions of the 35 million fans who attended 
games this past year could lose the opportunity.
    Many other matters in baseball would be subject to challenge 
without the exemption, such as regulation of certain ownership 
requirements, the Commissioner's disciplinary authority over clubs, 
equipment standards and others. If the exemption were removed, based on 
the experiences of other sports, baseball would almost certainly have 
to defend a large number of antitrust lawsuits. But unlike the 
experiences of other sports, we would have to defend these suits after 
being allowed for 80 years to develop with our exemption in place. With 
the possibility of treble damages in every case, no one could predict 
with any degree of certainty what baseball would be like after that 
onslaught of litigation.
    We understand that S. 1704 was introduced by Senator Wellstone in 
response to baseball's vote to reduce the number of major league teams 
by two for the 2002 season. Let me be clear: no one desires 
contraction, no one wants to deprive even a single fan of Major League 
Baseball. Commissioner Selig was one of the last to be convinced of 
contraction's necessity. But the unassailable truth is that given the 
current economic structure of baseball, there are markets which have 
demonstrated over time that they cannot support a major league team, 
let alone a competitive major league team. Contraction is an attempt to 
face up to the economic realities facing the industry, so as to deliver 
a competitive product at the highest level to as many fans as possible.
    Contraction is not intended to be punitive. It is clearly 
heartrending for those fans and clubemployees who might lose their 
teams. But it is intended to advance consumer welfare in the end, to 
protect competition (not competitors) and to allow twenty-eight teams 
to improve their competitive posture and economic stability and to 
allow Major League Baseball to be affordable to the fans, all 
objectives consistent with the tenets of antitrust law. For example, in 
one instance, a contraction candidate receives 80% of its total 
revenues from central baseball, while another receives in excess of 
50%. That $100 million a year subsidy borne by the other twenty-eight 
clubs at some point must inevitably lead to higher ticket prices across 
the entire industry, while the communities at issue continue not to 
support their teams.
    No legitimate public policy is served by legislation that would 
force baseball to constantly defend before antitrust juries the 
reasonableness of its efforts to promote franchise stability and 
competitive balance.
    I understand that the Committee has requested testimony on the role 
that baseball's antitrust exemption has played in the recent litigation 
in Minnesota and Florida. The exemption played no role in the Minnesota 
litigation. That case concerned only the Minnesota Twins' Metrodome 
lease for the 2002 season. In Florida, Attorney General Butterworth 
issued civil investigative demands against baseball, seeking to 
investigate possible antitrust violations in the state of Florida. 
Judge Robert Hinkle of the United States District Court for the 
Northern District of Florida, Tallahassee Division, applied baseball's 
exemption to prohibit that investigation. The case is on appeal to the 
Eleventh Circuit Court of Appeals, which has had occasion to uphold 
baseball's exemption in the past. Although we expect the preliminary 
injunction to be affirmed and made permanent, the case provides a vivid 
example of an attempt by a local official to use the antitrust laws to 
advance local interests in a way that might be in direct conflict with 
the interests of fans in one or more other states.
    Ironically, the presence of Attorney General Butterworth from 
Florida underscores this very issue. In 1992, the Florida Attorney 
General sued baseball to try to force the relocation of the San 
Francisco Giants to Tampa. Baseball resisted moving the Giants and then 
Chairman of the Executive Council Selig came before Congress for three 
hearings, including one in St. Petersburg, Florida before a very 
hostile gallery. Baseball stayed in San Francisco, although the owner 
was forced to take $15 million less than Tampa was prepared to pay for 
the franchise, because now-Commissioner Selig and members of the 
Executive Council believed San Francisco deserved to keep its team. 
Today the Giants play before sellouts in one of baseball's premiere 
facilities and the fans of San Francisco had the thrill of watching 
Barry Bonds set the home run record this past season.
    Since then, Florida has gotten two teams, and Attorney General 
Butterworth is attempting to invoke the same principles he used to try 
to force the Giants to Tampa to prevent the Marlins or Devil Rays from 
relocating or being contracted. Imagine if the Twins had in fact 
pursued relocation to Orlando as was discussed at one point. The 
Florida Attorney General and the Minnesota Attorney General would be 
here on opposite sides of the same issue.
    Federal Judge Hinkle recently wrote ``It is difficult to conceive 
of a decision more integral to the business of Major League Baseball 
than the number of clubs that will be allowed to compete.''\1\ Baseball 
has not abused its exemption, it has acted in the fans' best interests, 
it deserves to retain the exemption. In some respects, contraction is 
less subject to review than relocation. Relocation often involves an 
owner choosing to leave one market for perceived greener pastures. 
Baseball has not allowed that in more than thirty years. Contraction is 
a decision that one or more markets cannot be viable. While the impact 
on the fans in thatlocation is the same, the element of economic 
instability on the part of the club is even more compelling.
---------------------------------------------------------------------------
    \1\ Major League Baseball v. Butterworth, No. 4:Olcv-RH, 2001,--
F.Supp--, 2001 WL 1690202 at *13 (N.D. Fla. Dec 27, 2001)
---------------------------------------------------------------------------
    The industry's financial results that led the clubs to the decision 
to contract have been widely reported. The independent Blue Ribbon 
Panel, consisting of former Federal Reserve Chairman Paul Volcker, 
former Senate Majority Leader George Mitchell, Yale President Richard 
Levin and noted commentator George Will, issued their report in July 
2000, and made several recommendations for dealing with the issue of 
competitive imbalance. The report and an update to that report have 
been provided to the Committee and will be available again at the time 
of the hearing. The update clearly demonstrates that since the first 
report was issued, both the economics of the game and the competitive 
balance of the game have further deteriorated. None of the 
recommendations of the Panel has been achieved at the bargaining table. 
Instead the union has, as it did in 1996 with highly-respected mediator 
Bill Usery, chosen instead to attack the credibility of the report and 
the members of the Panel.
    The losses of the industry are real; the competitive imbalance 
problem is apparent even to the most casual fan who watches only the 
playoffs and sees the same teams win year in and year out. Those who 
would put up obstacles to the legitimate attempts to deal with 
baseball's core economic issues, whether by legislation, litigation or 
grievance, are only forestalling and perhaps exacerbating the 
inevitable correction which will have to occur if fans are to have 
faith and hope that their teams can compete. The status quo is not 
working and is not acceptable.
    In 1997-98, the Commissioner's Office and the union worked closely 
with this Committee to craft a carefully worded change to our 
exemption. After much discussion, all parties agreed to the wording of 
legislation that was signed into law by the President in October 1998. 
That legislation, the Curt Flood Act, provides Major League players the 
same rights under the antitrust laws in the area of labor relations as 
other professional athletes have. All parties at the time believed the 
change created the right balance for the exemption. We continue to 
stand by the agreement and believe that no further changes are 
necessary or appropriate.
    S.1704, introduced by Senator Wellstone, would open baseball to 
attack in areas in which baseball has worked hardest and achieved the 
most for the benefit of fans at all levels. In particular, baseball's 
admirable record of franchise stability would be threatened, creating 
the distinct possibility of teams moving, uncontrolled, from city to 
city. Our extensive minor league system would be in jeopardy, and any 
player development system taking its place would undoubtedly be 
consolidated and involve fewer communities. The legislation would spawn 
many lawsuits in local courts with conflicting objectives and 
inconsistent rulings, all of which would change the face of baseball 
unpredictably and damage the sport irreparably. Such results cannot be 
in the best interests of baseball or its millions of fans.
    For all of the above reasons, we urge in the strongest terms that 
S.1704 not be enacted.
    Thank you, again, Mr. Chairman, for the opportunity to testify 
before you today, and I ask that my full statement be made part of the 
record of this proceeding.

    Chairman Leahy. Thank you very much.
    I have a statement by the Senator from Wisconsin, Senator 
Feingold, and that will be placed in the record at the 
appropriate place.
    [The statement of Senator Feingold follows:]

Statement of Hon. Russell D. Feingold, a U.S. Senator from the State of 
                               Wisconsin

    Mr. Chairman, I want to thank you for scheduling this hearing. 
Everyone in this room is concerned about the operation of baseball and 
how best to maintain its existence through changing financial and 
organizational circumstances. Thank you to the witnesses for appearing 
today.
    Baseball has provided us with decades of entertainment, diversion, 
and history. As Americans struggled with the concept of integrating 
schools and communities, Jackie Robinson in 1947 broke color barriers 
by becoming the first African American to play major league baseball in 
the 20th century. We've watched unbreakable records break, and teams go 
from worst to first. We've seen perfect games and no-hitters, 23-inning 
marathons, and, most recently, a thrilling 7-game World Series.
    I recognize that baseball, like all long-running businesses, must 
evolve as circumstances dictate. I also acknowledge the argument that 
the antitrust exemption has helped maintain the unique nature of minor 
league baseball. There are many towns and communities across the 
country that benefit economically and otherwise through the existence 
of minor league franchises. I am certainly a supporter of these clubs, 
and I know that Wisconsinites have long enjoyed watching the Wisconsin 
Timber Rattlers and the Beloit Snappers.
    I have some concerns, however, about Major League Baseball's recent 
proposal to contract two teams as a right of baseball's long-enjoyed 
antitrust exemption. I wonder, as I'm sure many of us have, if 
contraction is the best solution to baseball's financial problems. I 
don't necessarily think that a franchise's inability to generate local 
revenue for a stadium should justify folding a team, nor do I think 
such a momentus decision should be undertaken by team owners alone.
    Baseball's antitrust exemption is a privilege unknown to all other 
American businesses. The exemption allows team owners to make decisions 
collectively regarding the sport's economic operation without the input 
of the players or other interested parties. The original purposes of 
the antitrust laws are sound and have proven to be good for the economy 
of this nation over a very long period of time. I hesitate to extend 
unrestricted power to any business or industry through an exemption to 
these laws.
    I am not wholly convinced that team contraction falls within the 
range of the baseball's antitrust exemption. I am eager to hear the 
testimony of today's witnesses as to the legality of contraction in 
light of the narrowing of the antitrust immunity caused by past 
legislation such as the Curt Flood Act of 1998. It is, of course, of 
concern when the owners of several independent businesses collectively 
elect to eliminate two of their own for the betterment of the remaining 
businesses. If the antitrust immunity allows this action as an industry 
practice, it should be closely reexamined.
    Furthermore, while as I said before, there is a plausible argument 
that minor league baseball has flourished as a result of the exemption, 
I am concerned about the minor league affiliates of the Montreal Expos 
and the Minnesota Twins, should these teams be contracted. Several 
minor league teams in Connecticut, Florida, Iowa, Tennessee, 
Pennsylvania and Vermont face an uncertain future as a result of 
contraction. I look forward to hearing from today's witnesses what 
plan, if any, Major League Baseball and Minor League Baseball have in 
place for these teams and their communities.
    Abuse of baseball's antitrust immunity is what puts its maintenance 
in the most danger. Contraction must not simply be a quick fix to a 
complex problem, and then justified by an eighty year old antitrust 
exemption granted in a Supreme Court decision that most scholars 
believe was wrong.
    Finally, I want to recognize the strong feelings of baseball fans, 
who loyally follow their teams through good times and bad. No 
discussion of baseball would be complete without acknowledging their 
important role.
    Again, I thank the Chairman for scheduling today's hearing, and 
thank you to the witnesses for appearing today before the Committee to 
help shed some light on this important issue.

    Chairman Leahy. Donald Fehr is Executive Director and 
General Counsel for the Major League Baseball Players 
Association. He joined the Major League Baseball Players 
Association as General Counsel in 1977, if I am correct, and 
was named Executive Director in 1985.
    Mr. Fehr, we are glad to have you. You are no stranger to 
this Committee room. Please go ahead.

  STATEMENT OF DONALD M. FEHR, EXECUTIVE DIRECTOR AND GENERAL 
 COUNSEL, MAJOR LEAGUE BASEBALL PLAYERS ASSOCIATION, NEW YORK, 
                            NEW YORK

    Mr. Fehr. Thank you, Mr. Chairman.
    I appreciate the committee's invitation to appear here 
today and was happy to respond to it. I am glad to convey my 
views on the status of the law in the industry as relevant to 
the pending situation.
    Before beginning, I also want to thank the other Senators 
who are here and have been here and will be coming in and out 
for their courtesy, and most specifically Senator Hatch, for 
the work that he put in along with the Chairman in connection 
with the Curt Flood Act 4 years ago.
    First of all, Mr. Chairman, my views on the baseball 
antitrust exemption as it relates to matters concerning the 
number and location of franchises are well-known. I have 
testified before this Committee any number of times going back, 
I believe, over a period of 20 years, and I do not want to 
repeat that now.
    I will simply make the point that where you have a 
circumstance in which you have cities competing for teams 
rather than two or more entities of teams competing for cities, 
you have stress, and the power is with those who control access 
to the teams; it is not with the cities. And that is a 
difficult issue. It is not the kind of issue which is foreign 
to garden-variety antitrust considerations. Those kinds of 
market power and control issues are the reasons why we have the 
antitrust laws.
    Secondly, there is no doubt why we are here today. We are 
not here because the Players Association stirred up the pot; we 
are not here because the Committee felt on its own that the 
Curt Flood Act was a needed revision. We are here because a 
contraction announcement was made. We are here because an 
announcement was made to reduce the number of teams--something 
which before the last 12 months would not have even been 
conceived of, much less taken seriously.
    In that regard, what we had, of course, was a decision 
which was made by the 30 owners acting together, privately, 
without input from the outside, without standards imposed by 
law or, so far as I know, imposed by their own internal rules, 
with no possibility if the exemption exists--there is some 
question about that--but no possibility of even having the 
matter investigated to find out what the motives were, how the 
decisions were made and all the rest of it, and with no forum 
under which that decision can be reviewed for compliance with 
any set of standards.
    I think that if you gauge the reaction of major league 
baseball to the various matters which have been initiated, one 
of the things which strikes me is that they seem to be offended 
that questions are asked or the suggestion that there be some 
standard that their conduct can be reviewed against, even 
though the antitrust standard, of course, is the basic standard 
against which concerted activity by all businesses is reviewed 
in the United States.
    In connection with the number and location of franchises, 
it is certainly accurate that no team has been relocated since 
1972. That was not the case previously, as people know, 
beginning with the fabled move of the Dodgers and the Giants to 
the West Coast.
    But I suggest that that is not really the issue. The issue 
is a more fundamental one, and that is, is there an exemption, 
what is the basis for it, and what does it mean. And I want to 
further suggest that this is a matter of significantly broader 
public interest than as relates to players. Players believe 
that the subject of contraction is a mandatory subject of 
bargaining; the clubs do not. If there is going to be 
contraction pursued, that issue will b resolved in one fashion 
or another. But the point I want to make is that if the clubs 
are right, then antitrust issues to the side, whether there 
will be contraction is not an issue of bargaining, only the 
effect.
    If the players are right, then it would be a matter of 
collective bargaining, but we would be compelled and would 
bargain in good faith about that issue.
    We do not, however, represent the broader community 
interest. The Players Association of course represents and is 
authorized to represent only its own membership.
    The practical effect of having no standards is what I would 
ask the members of the Committee to focus on. It means that the 
question of whether the major league owners are acting in what 
would otherwise be considered an unreasonably anticompetitive 
manner may not even be asked. The inquiry cannot be made. There 
is no standard against which the conduct is weighed, no forum 
in which the facts can be ascertained, no judge or jury before 
whom a complaint can be heard.
    Moreover, if there is an exemption, and if it is undefined 
or blanket--except in the area with respect to players or as 
governed by the Sports Broadcasting Act--what that means is 
that any conduct is exempt from the antitrust laws, regardless 
of its effect, regardless of its purpose, regardless of its 
motive.
    We do not know what the scope of the exemption is, and 
that, I suggest, is an odd basis upon which public policy ought 
to be formulated. If there is going to be an exemption, we 
ought to know what it is.
    I will make just one other comment--I know my time is 
running out--and would then be pleased to respond to questions 
when the opportunity presents itself.
    Mr. DuPuy makes a compelling case--although without 
examination of it--that baseball needs to do what it is doing. 
With all due respect, that is exactly what everyone about whose 
conduct questions are raised under the antitrust laws does. It 
says ``My conduct is reasonable. It is not unreasonably 
anticompetitive.'' That is not a reason not to have the 
antitrust laws. That is a defense.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Fehr follows:]

Statement of Donald M. Fehr, Executive Director, Major League Baseball 
                Players Association, New York, New York

    Mr. Chairman, Senator Hatch and Members of the Committee:
    My name is Donald Fehr, and I serve as the Executive Director of 
the Major League Baseball Players Association (MLBPA), a position I 
have been privileged to hold for more than a decade and a half. Quite 
frankly, given the passage of the Curt Flood Act of 1 998--for which I 
again thank the Committee for its considerable time and effort--I did 
not expect to be invited again to testify on the subject of the 
antitrust exemption allegedly enjoyed by Major League Baseball (MLB) 
this soon, if at all. Nevertheless, since the Committee is once more 
hearing testimony on this issue, I thank you for permitting me to 
express the views of the MLBPA. I appreciate the opportunity to be 
here.
    As I understand it, the question under consideration is whether, as 
a matter of sound public policy, it is appropriate for Major League 
Baseball to enjoy an exemption from the antitrust laws for any purposes 
other than those served by the Sports Broadcasting Act, 15 U.S.C. Sec 
1291. My views on the appropriateness of any antitrust exemption for 
Major League Baseball have been set forth many times in prior testimony 
before this and other Committees, and need no extensive review here. 
Accordingly, I will make only a few brief comments, respond to any 
questions put by members of the Committee at the hearing, and then 
supplement the record following the hearing to the extent appropriate 
and desired by members of the Committee.
    As set forth in my written testimony to the House Judiciary 
Committee on 6 December 2001 (copy attached), in 1979 the National 
Commission for the Review of Antitrust Laws and Procedures made the 
following recommendations with respect to antitrust immunities:

        1. Free market competition, protected by the antitrust laws, 
        should continue to be the general organizing principle for our 
        economy.
        2. Exceptions from this general principle should only be made 
        when there is compelling evidence of the unworkability of 
        competition or a clearly paramount social purpose.
        3. Where such an exception is required, the least 
        anticompetitive method of achieving the regulatory objective 
        should be employed.
        4. Existing antitrust immunities should be reexamined.

    Moreover, the Commission went on to make clear that those seeking 
to create or maintain an antitrust exemption have the burden of proof 
``to show a convincing public interest rationale'' for the exemption, 
and that ``[T]he defects in the marketplace necessary to justify an 
antitrust exemption must be substantial and clear''. (Emphasis 
supplied.)
    Simply put, I know of no compelling evidence which demonstrates the 
unworkability of competition in MLB, much less a clearly paramount 
social purpose to be served by an antitrust exemption; nor am I aware 
that any defects in the marketplace sufficient to warrant an exemption 
have been demonstrated by substantial and clear evidence. Absent such 
evidence and such a demonstration, it is difficult to see how granting 
an exemption in favor of baseball's owners--for that is whom the 
exemption runs to--represents sound public policy. This conclusion is 
buttressed by the experience of the other professional team sports, 
most notably the National Football League (NFL) and the National 
Basketball Association (NBA), both of which operate successfully, but 
operate subject to the antitrust laws.
    The so-called baseball exemption did not come about because the 
Congress concluded that an exemption should be granted. Rather, the 
exemption came about because the Supreme Court in Federal Baseball, in 
1922, found the exhibitions of baseball games to be ``purely state 
affairs''. Had the case been heard a few years later, that same finding 
would clearly have been inconsistent with the emerging concept of 
interstate commerce, and we would likely not be here today. This is not 
a case in which a public policy rationale for an antitrust exemption 
has been articulated.
    Obviously, there is no remaining question about professional 
baseball's status with respect to interstate commerce. The fact that it 
is in interstate commerce is undeniable; the Supreme Court in Flood so 
held, and the industry itself admits it. MLB has gone so far as to 
invoke the Constitution's Commerce Clause for protection against state 
enforcement actions! \1\
---------------------------------------------------------------------------
    \1\ As indicated in papers filed by appellants in the recent 
Minnesota Sports Facilities case.
---------------------------------------------------------------------------
    So what precisely is it about the organization or operation of 
Major League Baseball that justifies its belief that its conduct, even 
if conceded to be unreasonably anticompetitive, should nonetheless be 
shielded from judicial review under the antitrust laws? Surely, if MLB 
is to enjoy special status under the antitrust laws, its current 
owners, which include some of the largest and most successful 
corporations in the world, should be able to specifically articulate 
those practices in which they engage or may wish to engage which would 
otherwise violate the antitrust laws. But it is not enough to simply 
articulate what practices would constitute an antitrust violation in 
order to make the case for an exemption; more is required. It is up to 
MLB to demonstrate in a compelling way why it is in the public interest 
for the practices it feels would be unreasonably anticompetitive to 
nevertheless be permitted. Remember that a showing that certain conduct 
is, in fact, reasonable (e.g., that ``contraction'' under the current 
facts is not unreasonably anticompetitive) does not justify an 
exemption from the antitrust laws; rather, such a showing would 
demonstrate that the conduct was not violative of the antitrust laws in 
the first place, and would therefore not support the case for damages.
    This goes to the very heart of the matter. In practical effect, an 
exemption means that the question of whether MLB is acting in an 
unreasonably anticompetitive manner may not be asked; the inquiry may 
not be made. There is no standard against which the conduct may be 
weighed; there is no forum in which the facts can be ascertained; there 
is no judge or jury before whom a complaint may be heard. Moreover, if 
there is to be an exemption, an undefined or blanket exemption means 
that any conduct not specifically covered by the antitrust laws, 
whether or not foreseeable, may be claimed to be exempt; one does not 
know what the extent of the exemption is or might be. The question 
which then arises is whether this is a sound basis upon which to 
formulate public policy.
    What, then, should our public policy be? Should baseball be treated 
differently than other businesses, than other sports? For what 
purposes? To what extent? It is apparently the position of baseball's 
owners that, with the exception of the Curt Flood Act, the holding in 
Federal Baseball means that any and all of its other actions are immune 
from antitrust scrutiny. Thus, in their view, no one in Minnesota may 
even ask if the actions or motives of the decision to contract the 
Twins were in furtherance of an objective forbidden by the antitrust 
laws, nor may the Attorney General of Florida even investigate the 
facts with respect to the Florida teams. What public policy underlies 
this result? Is the doctrine of stare decisis being served at the 
expense of sound policy and equal justice?
    In my view, the reading of the cases that makes the most sense in 
the context of public policy is the opinion of Judge Padova in Piazza 
(a copy of which is attached), which was endorsed by the Florida 
Supreme Court. When the ``Curt Flood Act of 1998'' (CFA) was enacted, 
it was my view that the combination of Piazza and the CFA would 
virtually eliminate any special immunity for MLB, leaving it with only 
those statutory immunities Congress has or will deem appropriate for 
major league sports, such as the non-statutory exemption provided by 
labor law. (See the ``Sports Broadcasting Act of 1961'' \2\, which 
expressly grants immunity to Baseball and the other professional team 
sports for its collective actions in selling national broadcasting 
rights.) However, subsequently, the Minnesota Supreme Court, and, 
recently, a federal district court in Florida have gone the other way. 
Thus, it is unclear what the status of the law is. I expect that 
uncertainty to remain until the Supreme Court again considers the 
question for the first time in a case not about the reserve system--or 
until the Congress clarifies the law.
---------------------------------------------------------------------------
    \2\ 15 U.S.C. 1291, et seq.
---------------------------------------------------------------------------
    Everyone understands that this Committee is holding this hearing, 
as the House Judiciary Committee did two months ago, because of the 
decision by MLB's owners to eliminate, or ``contract'' two franchises, 
rather than attempt to sell or relocate them. The question then becomes 
whether the Congress should consider legislation to clarify the law, so 
as to make it clear that such decisions either must comply with the 
antitrust laws, or that the owners have an exemption in this respect. 
While there is no doubt of my position, given my testimony in hearings 
before this Committee and others over nearly two decades, I believe 
that it is in the public interest to clarify the law, even if that 
clarification is that there is, in fact, a compelling public policy 
interest such that baseball's owners should enjoy an exemption from the 
antitrust laws. And the case is there to be argued. On the one hand, 
MLB can be asked to demonstrate why it is in the public interest for an 
exemption to be had; alternatively, the people of Minnesota and 
elsewhere should have the opportunity to demonstrate why it is in the 
public interest for unreasonably anticompetitive actions with respect 
to the number and location of franchises to be subject to appropriate 
sanction (and at the very least, investigation) under the antitrust 
laws.
    In a very real sense, the entire debate about the number and 
location of franchises simply comes down to whether such decisions 
should be made by owners free from the public policy standard 
established by the antitrust laws or some other standard established by 
the Congress, or whether the owners of major league teams should be 
required to conform their actions to conduct not unreasonably 
anticompetitive. Should the public policy of the United States be that 
that the owners have unlimited discretion--regardless of the action 
taken or the motive behind it--or should such decisions be made against 
the backdrop of the antitrust laws, with the courts able to ascertain 
the facts and determine whether the conduct passes muster?
    I thank the Committee for the opportunity to submit my views, and I 
will be happy to answer any questions.

    Chairman Leahy. Thank you.
    Senator DeWine is a former Chairman and currently the 
ranking Republican on the Antitrust Subcommittee, so I am going 
to go somewhat out of our procedure now that he is here and 
recognize him, and then we will go next to Mr. Brand.

STATEMENT OF HON. MIKE DEWINE, A U.S. SENATOR FROM THE STATE OF 
                              OHIO

    Senator DeWine. I thank the Chairman for your courtesy.
    Let me thank you, Mr. Chairman, for holding this timely 
hearing on the application of our Federal antitrust laws to 
major league baseball. The Judiciary Committee has maintained 
historically a longstanding interest in this area, so this is 
one in a long line of hearings on this particular issue.
    Now is a critical time for major league baseball. There is 
no long-term labor agreement. Controversy is raging about 
potential contraction. And baseball today, quite simply, is a 
sport of haves and have-nots, a game where the teams with the 
biggest bucks can buy the best players.
    The simple fact is this. There is a direct relationship 
between the levels of revenue that teams bring in and their 
ability to compete on the field. If you want to win 
consistently, you have to spend a lot of money, year after year 
after year. Most teams simply cannot afford to do that, and 
therefore, most teams simply cannot in reality compete.
    This is an issue that I raised well over a year ago when I 
chaired an Antitrust Subcommittee hearing to examine and 
highlight revenue imbalance. Since that hearing, have things 
improved? The answer we all know: Not at all. In fact, things 
just keep getting worse.
    The revenue gap between the richest and the poorest clubs 
has expanded from $130 million in 1999 to $152 million in 
2001--and heaven knows what it will be in 2002. As a direct 
result, the payroll gap is of course exploding. Every year, the 
top few teams spend more and more money on premium players, and 
every year it becomes harder and harder for other franchises to 
compete. Last year, the Yankee payroll was $121 million; this 
year, it is estimated that it will be $130 million, maybe even 
higher than that.
    In contrast to the Yankees' $130 million, last year, the 
Cincinnati Reds spend about $42.5 million on players, and the 
Pittsburgh Pirates spent about $41.5 million on players. And we 
do not expect that either one will go up very much this year.
    These are two great, traditional baseball franchises with 
long histories and a very solid fan base. Pittsburgh has a 
beautiful, brand new ballpark to generate extra revenue, and 
the Reds will have a new ballpark in the year 2003. But even 
when you combine these two teams' payrolls, they are not even 
close to the Yankees'. That is why it is crucial that we 
examine once again how baseball is managing itself and whether 
it is time for baseball to operate under the same laws 
currently applied to other sports leagues.
    Accordingly, we must focus on whether the antitrust 
exemption helps or hurts baseball--not whether the exemption 
helps the players, and not whether it helps the owners, but 
whether it helps the sport itself, and ultimately, therefore, 
the fans.
    Realistically, how can teams compete year after year when 
they cannot afford to pay for the best players? The answer is 
simple: They cannot. Everybody understands it. Everybody gets 
it. The fans get it. They complain to me whenever I am back in 
Ohio and we talk about baseball.
    The owners get it. In 2000, the Commissioner's Blue Ribbon 
Panel report called for measures to solve baseball's revenue 
disparity problems.
    And the players get it. Baseball Weekly published a survey 
of major league baseball players in May 2000. In response to 
questions about the biggest problem facing the game of 
baseball, the players--the players--said it was competitive 
balance.
    So everyone agrees. But here is what bothers me. If 
everyone understands that there is a significant revenue 
imbalance, why can't the players and the owners just sit down 
and fix it? As I said already, I chaired a hearing specifically 
on this subject a year ago. We discussed a lot; a lot of 
important issues were raised. But the problem is still not 
fixed, and quite candidly, I do not see any indication that 
anyone is serious about getting it fixed. It is getting worse.
    The way I see it, today we have another opportunity to look 
at this problem in the context today of the antitrust 
exemption.
    The blue ribbon panel suggested a number of measures 
including enhanced revenue-sharing, enhanced competitive 
balance taxes, minimum payrolls, and many others, up to and 
including contraction and franchise relocation. There has been 
a great deal of dispute about a number of these 
recommendations, so today, I think we need to examine the 
impact of these possible actions and whether the antitrust 
exemption affects the ability of the league to implement these 
measures.
    And I would like to find out specifically from our 
witnesses on the panel today what impact baseball's antitrust 
exemption is having on efforts to decrease the revenue 
disparity. In other words, to put it bluntly, does having the 
antitrust exemption help or hurt? To me, the biggest question 
that is facing major league baseball and the thing that I think 
fans are the most concerned about is the terrible disparity in 
income.
    As a Senator, a member of the Judiciary Committee, and the 
Ranking Member of the Antitrust Subcommittee, I want to know 
what the owners and the players are doing to fix this problem. 
As a fan, I want a solution to this problem so that every year, 
I can look forward to spring training with a realistic hope 
that the Indians and the Reds both have a shot at winning the 
pennant.
    Senator Feinstein. I would like to recognize Mr. Brand. Mr. 
Brand is the Vice President of Minor League Baseball. We want 
to welcome you here. Please proceed.

  STATEMENT OF STANLEY M. BRAND, VICE PRESIDENT, MINOR LEAGUE 
                   BASEBALL, WASHINGTON, D.C.

    Mr. Brand. Madam Chair, Senator Hatch, members of the 
committee, thank you. I appreciate the invitation to be here 
today.
    Minor league baseball is comprised of is comprised of 206 
teams and 18 leagues playing professional baseball in the 
United States, Canada, and Mexico at the AAA, AA, A, and rookie 
levels. Last year, minor league baseball drew almost 39 million 
fans.
    Repeal or alteration of the exemption is a serious threat 
to the survival of minor league baseball, particularly at the A 
and rookie levels. Last year, MLB spent over $130 million on 
direct player development costs, including minor league 
salaries, and another $90 million on signing bonuses and 
scouting.
    This subsidy underwrites the presence of minor league 
baseball in over 100 small markets. Repeal or alteration of the 
exemption would inevitably affect the incentive that MLB has to 
continue its investment in minor league player development.
    At the core of the incentive is the minor league player 
draft and reserve clause which permits MLB to retain the 
services of minor league players long enough to bring them to 
the major leagues. If MLB determines that the antitrust laws 
make it too risky to draft and then reserve players for 6 
years, they can expect to spend money on many fewer players. 
Subjecting the minor league draft and reserve class to 
challenge as illegal restraints of trade under the antitrust 
law not only affects the major league's incentive to invest, 
but the cost of facing these challenges could overwhelm us in 
the minor leagues.
    We do not have any TV revenue, and ticket sales and fence 
sign advertising would not allow us to mount a successful 
defense to these suits.
    That is why we and the Members of Congress representing the 
communities that we play in fought hard to include a clear and 
comprehensive carve-out for the minors during enactment of the 
Curt Flood Act.
    When we examined S. 1704, the bill introduced by Senator 
Wellstone, and its companion in the House, we were alarmed to 
find that it deleted key provisions of the Curt Flood Act, 
including the section protecting the core incentive for major 
league baseball organizations to pay for minor league players, 
the minor league player draft and reserve clause.
    This was particularly puzzling since the only stated 
purpose of the bill was to remove the antitrust protection for 
decisions to eliminate or relocate major league clubs.
    The potential for using the absence of all the language 
contained in the Curt Flood Act to imply that the antitrust 
immunity no longer applies to minor league player/umpire/
franchise issues is not insubstantial, and it would certainly 
encourage potential plaintiffs to file lawsuits that might 
raise this question, cause us crippling expense, and possibly 
produce holdings that would be very damaging to our long-term 
interests.
    It is particularly troubling that this language is omitted 
given the long and arduous efforts we made to have it included 
in the final version of the Curt Flood Act--language, I would 
add, that was facilitated by the efforts of then Chairman Hatch 
and Ranking Member Leahy to obtain agreement among the parties 
on this issue.
    Why the bill so glaringly omits the agreed-upon Curt Flood 
language is a mystery to us. I can tell you this. On April 10, 
1994, Mr. Fehr was quoted in The Los Angeles Times as stating: 
``Too much money is being wasted in the minor leagues.''
    Since that time, the Players Association has been the 
principal proponent of total and outright repeal of the 
antitrust exemption. During consideration of the Curt Flood 
Act, the players' representatives resisted adding language to 
this legislation, making clear to the protection to the minor 
leagues. I can only conclude that the Players Association seeks 
repeal in order to diminish minor league baseball so that they 
can lay claim to the money they say is wasted on the minors and 
divert it to major league players.
    Beyond the deletion of specific protections for the Minor 
Leagues in the Curt Flood Act--and I appreciate Senator 
Wellstone's comments about not intending to harm the minor 
leagues--the erosion of the immunity for yet another aspect of 
the business of baseball represents a troubling precedent. It 
accelerates what we believe is an unjustified momentum begun 
with the Curt Flood Act, of piecemeal repeals of aspects of the 
immunity whenever MLB makes a difficult or unpopular business 
decision.
    Finally, I have been asked to address the impact of 
contraction at the major league level upon minor league 
baseball. As I look up on the dais I see minor league baseball 
represented in each and every one of your States, in some 
places more than one place.
    As the president of minor league baseball, Mike Moore, 
stated on November 6 last year: ``We plan on baseball being 
played by all of our franchises next season. Commissioner Selig 
has indicated to me that following any definitive decisions on 
contraction, we will work closely on formulating solutions 
pertaining to the minor leagues. The commissioner has been a 
strong supporter and ally of minor league baseball, and we will 
continue to work together toward our common goals.''
    Indeed, Commissioner Selig, testifying last December before 
the House Judiciary Committee, stated that it was not 
necessarily the case that the minor league clubs would be 
contracted even if their affiliated major league clubs cease to 
exist.
    There are a number of ways that this can be addressed, 
including pooled arrangements under so-called cooperatively run 
minor leagues, or assumption by major league affiliates of 
additional minor league clubs.
    Suffice it to say we will be working very diligently to 
preserve viable minor league clubs in the event of major league 
contractions.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Brand follows:]

  Statement of Stanley M. Brand, Vice President, Minor League Baseball

    Mr. Chairman and Members of the Judiciary Committee, I appreciate 
the invitation you have extended to me as Vice President of Minor 
League Baseball TM to participate in the hearing today on 
the application of federal antitrust laws to baseball. In the almost 10 
years that I have served as Vice-President of Minor League Baseball 
TM, this is the first opportunity I have had to directly 
address this Committee on this important subject even though the issue 
of baseball's antitrust exemption has been actively debated in and 
acted upon by Congress during that time period.
    The recent interest in Congress in baseball's antitrust exemption 
was generated by the decision by Major League Baseball (``MLB'') 
announced by Commissioner Selig on November 6, 2001 to eliminate two 
major league clubs for the 2002 season. Discussions to shrink baseball 
at the Major League level had been previously reported, but the 
official announcement predictably triggered a host of congressional 
reactions, including introduction of a bill by Senator Wellstone, (D-
MN), the purpose of which was stated to be repeal of baseball's 
immunity with respect to the elimination or relocation of Major League 
teams.
    This bill produced considerable, and in our view, justifiable alarm 
throughout Minor League Baseball TM which had worked 
diligently in 1998 to insure that the Curt Flood Act of 1998 included 
protection for the minor leagues. We believed then, and we still 
believe today, that further attempts to limit or change baseball's 
antitrust immunity represents a threat to Minor League Baseball 
TM, is not justified by any compelling public policy and 
will not achieve the goals for which it is proffered.
    Minor League Baseball TM is comprised of 206 teams in 18 
leagues playing professional baseball in the United States, Canada and 
Mexico at the AAA, AA, A and rookie levels and consists of 
approximately 5548 active players. Last year, Minor League Baseba 
TM drew almost 39 million fans during the championship 
season. Repeal of baseball's antitrust exemption would inevitably 
affect one important incentive that MLB has to continue its investment 
in minor league player development, which in turn could result in the 
elimination of many minor league teams, particularly at the Rookie and 
A levels.
    Last year, MLB spent over $130 million on direct minor league 
development costs (including minor league player salaries) and another 
$90 million on player bonuses and scouting as a means of developing 
talent for the Major Leagues. It is this subsidy that assists in 
underwriting the presence of Minor League Baseball TM in 
small towns and rural America.
    In the event of repeal, the minor league player draft and reserve 
clause might be challenged as illegal restraints of trade under Sec. 1 
of the Sherman Act. Mackey v. NFL, 543 F.2d 606 (8th Cir. 
1976); Smith v. Pro Football, Inc., 593 F.2d 1173 (D.C. Cir. 1977). In 
addition, the Professional Baseball Agreement between the Majors and 
Minors, which ensures competitive balance among MLB teams in player 
acquisition and retention, also might be challenged as illegal under 
Sec. Sec. 1 or 2 of the Sherman Act. Philadelphia World Hockey Club v. 
Philadelphia Hockey Club, 351 F.Supp. 462 (E.D. Pa. 1972). NAPBL 
leagues banding together to affiliate with MLB on uniform terms in the 
absence of the PBA may likewise be challenged under Sec. 1 of the 
Sherman Act. FTC v. Superior Court Trial Lawyers Association, 493 U.S. 
411 (1990). Although we are hopeful that Minor League baseball would 
prevail against such challenges, the cost of facing them would be 
enormous and would itself threaten our survival. The upshot is that 
minor league player development will be stripped of the stability 
created by the player draft, reserve clause and the PBA. The Minors 
have virtually no TV revenue, and their ticket sales and fence sign 
advertising does not generate the kind of cash flow that can support a 
legion of lawyers.
    If MLB determines that the antitrust laws make it too risky to 
draft and then reserve players for six years, the nature of MLB's 
investment in minor league players could change dramatically. Without 
the reserve clause, MLB can be expected to spend money on many fewer 
minor league players. MLB will not spend money signing prospects in the 
hope that they develop only to have them subject to being acquired by 
other teams due to their short-term contracts. With the signing of few 
minor league players overall, there will naturally be fewer minor 
league teams. This loss of teams would adversely affect numerous player 
development investments in facilities. The loss to consumers of 
affordable, intimate and wholesome entertainment provided by minor 
league clubs could be extensive, particularly in smaller communities 
and markets.
    Such reduced output is of course antithetical to the policy 
underlying the antitrust laws to increase--rather than decrease--
product. One can speculate that even in the absence of an agreement to 
sign players to uniform contracts with renewal options, major league 
organizations individually have superior bargaining power that will 
permit them to sign hundreds of lower level players to the same kind of 
one-year agreements with successive yearly options that are now 
required. If the antitrust laws are applicable, how will MLB clubs 
assess the risk that such a pattern will be challenged as being 
illegally collusive? Isn't it likely they will attempt to avoid that 
risk (and reduce their expenses) by trying to shift the risk and burden 
of employing the players to the minor league teams (which the minor 
leagues can ill afford)?
    A number of academics have suggested that the first year player 
draft could be upheld under a ``rule of reason'' analysis. NCAA v. Bd. 
of Regents of the University of Oklahoma, 468 U.S. 85 (1984). However, 
the minor league draft certainly will be subject to challenge since 
minor league players, unlike players in the NBA and NFL, are not part 
of any collective bargaining unit and therefore the minor league player 
draft is not covered by the labor antitrust exemption. This is an 
important difference from other professional sports; unlike the NBA and 
NFL, baseball's draft extends to players who will never be part of the 
``major league'' team and the bargaining agent that represents them.
    For all of the foregoing reasons, we, and the Members of Congress 
representing our clubs and their communities, fought hard to include a 
clear and comprehensive ``carve out'' for the minor leagues during 
enactment of the Curt Flood Act of 1998. The ``carve out'' was hammered 
out among representatives of Major League Baseball, the Players 
Association and Minor League Baseball TM and incorporated as 
agreed to by these entities into the final legislation. When we 
examined closely the provisions of S. 1704, the bill introduced by 
Senator Wellstone, we were surprised to find that while the bill was 
purportedly drafted to parallel the language contained in the Curt 
Flood Act of 1998, with only language changes to reflect that this bill 
would lift baseball's antitrust immunity with respect to contraction 
and franchise relocation rather than major league player matters (the 
subject of the 1998 Act), the actual language of the current bill has 
deleted some language from the Curt Flood Act that is unrelated to 
contraction and franchise relocation. This puzzling deletion of 
language from the Curt Flood Act has the potential to be argued to a 
court as having some substantive significance, despite the limited 
stated purpose of the bill, and thus might lead to unintended 
consequences damaging to baseball and particularly Minor League 
Baseball.
    The most glaring example of this failure to track the language in 
the Curt Flood Act is in the express list of matters not affected by 
the bill in subsection 3(b). The Curt Flood Act had six items in its 
list of unaffected matters. To accomplish the lifting of the antitrust 
immunity only for Major League franchise contraction and relocation, 
the only change in wording in this list should be the removal from item 
#3 of the words ``franchise . . . relocation.'' However, S. 1704 omits 
far more language than just these two words.
    First, the bill omits entirely all of what were items #1 and #5 in 
subsection 3(b) of the Curt Flood Act. Those two items stated:

        (1) any conduct, acts, practices, or agreements of persons 
        engaging in, conducting or participating in the business of 
        organized professional baseball relating to or affecting 
        employment to play baseball at the minor league level, any 
        organized professional baseball amateur or first-year player 
        draft, or any reserve clause as applied to minor league 
        players;
        (5) the relationship between persons in the business of 
        organized professional baseball and umpires or other 
        individuals who are employed in the business of organized 
        professional baseball by such persons;

    In addition, the Curt Flood Act's item #3 in the list of unaffected 
matters (which in the proposed bill is now item #2) has been edited in 
the proposed bill by deleting the words ``franchise expansion, 
location, and relocation,'' even though the stated purpose of the bill 
is to lift the immunity only as to contraction and relocation and only 
with respect to maior league franchises. If the bill's stated purpose 
is accurate, issues of major league expansion or location that do not 
involve relocation, and all franchise issues at the minor league level, 
should still be covered by the immunity and thus specifically referred 
to in item #3 (now #2).
    These deletions in the proposed bill are very troubling and hold 
enormous potential mischief for Minor League Baseball. This is 
particularly so for the deletion of item #1 specifically identifying 
employment matters at the minor league level, the amateur or first-year 
player draft, or any reserve clause as applied to minor league players. 
As stated earlier, together the first year player draft and minor 
league reserve clause constitute the core incentive for Major League 
organizations to pay for the development of these players and any 
change in its foundation could wreak havoc on minor league economic 
stability. Also, taking out the item referring to umpires has potential 
implications for the minor leagues. And perhaps most troubling, the 
deletion in item #3 (#2 in the proposed bill) of the reference to all 
franchise expansion, location, or relocation matters removes from the 
bill the express protection for the minor leagues with respect to these 
types of franchising issues, putting at potential risk all of the minor 
league rules dealing with territories and territorial rights that 
protect the viability of all minor league teams, particularly at the 
lower classification levels in many smaller and rural markets across 
the country.
    Furthermore, in subsection d(1) of the Curt Flood Act, it states in 
the second sentence: ``As used in this section, the National 
Association of Professional Baseball Leagues, its member leagues and 
the clubs of those leagues, are not 'in the business of organized 
professional major league baseball'.'' This language has been deleted 
from the proposed bill. Again, the reason for the deletion is not at 
all clear, but its absence when compared with the Curt Flood Act--is 
striking and might well be misinterpreted by a court some day as a 
deliberate statement of congressional purpose that could subject the 
minor leagues to significant antitrust risk.
    The potential for using the absence of all of the language 
contained in the Curt Flood Act to imply that the antitrust immunity no 
longer applies to minor league player, umpire, or franchise issues is 
not insubstantial, and it would certainly encourage potential 
plaintiffs to file lawsuits that might test this question, cause the 
minor leagues crippling expense, and possibly produce holdings that 
would be very damaging to Minor League Baseball. It is particularly 
troubling that this language was omitted given the long and arduous 
efforts we made to have it included in the final version of the Curt 
Flood Act.
    Beyond the impact of deleting these paragraphs from the Curt Flood 
Act, there are two more indirect ways in which it might have serious 
long term detrimental effects, especially to the extent the bill lifts 
the immunity for major league franchise relocation instead of just 
contraction.
    First, the bill apparently would subject Major League Baseball to 
potential treble damage antitrust liability for any action relating to 
franchise relocation. As we have seen in other sports, particularly 
football, this has caused such an in terrorem effect on leagues that 
individual franchises are now essentially free to relocate without any 
league oversight. In other sports, this has created the phenomenon of 
teams essentially putting themselves up for auction to the highest 
bidding community and forcing taxpayers in many communities to provide 
hundreds of millions of dollars in direct and indirect subsidies to 
teams in order to attract or avoid losing a team. It is puzzling why, 
in response to Major League Baseball's announced efforts to contract by 
two teams, Congress would want to pass legislation lifting the 
antitrust immunity for both contraction and relocation. The historic 
baseball antitrust immunity has had an obvious restraining effect on 
relocations at the major league level and has served the public 
interest well by reducing the ability of teams to force huge public 
subsidies out of local communities. Denying immunity for relocation 
decisions could also create disruption in certain AAA minor league 
markets as well by subjecting those cities to uncertainties for the 
future of their AAA clubs, and bidding wars to attract major league 
clubs. Lifting the immunity with respect to contraction is one thing; 
lifting it with respect to relocation is entirely another that is not 
at all justified or even suggested by the current efforts of Major 
League Baseball to eliminate two teams.
    How did we get from the carefully crafted and agreed upon 
provisions of the Curt Flood Act to the reduced and inadequate minor 
league protections of S. 1704. Sponsors of this legislation--and the 
Major League Players Association--have cavalierly and falsely asserted 
that the minor league exemption on ``carve out'' remains intact. I 
cannot explain why S. 1704 is drafted in this manner but I can tell you 
this: On April 10, 1994, Don Fehr stated in the L.A. Times that ``[t]oo 
much money is being wasted in the minor leagues.'' Since that time, the 
MLBPA has been the principal and relentless proponent of total and 
outright repeal of the antitrust exemption. During consideration of the 
Curt Flood Act, the union steadfastly resisted adding language to the 
legislation making clear the protection of the minor leagues, and only 
relented under pressure from its own congressional allies when it 
became apparent no legislation could be passed without such language 
and the support of the minor leagues.
    I can only conclude that the Players Association seeks total repeal 
in order to destroy minor league baseball so that Mr. Fehr can lay 
claim to the money ``wasted'' on the minors and divert it to his 
players.
    Beyond the deletion of key protections for the minor leagues, the 
legislation would erode baseball's immunity for another aspect of its 
business without any demonstration that it will solve the problems for 
which it is advanced. It accelerates the unjustified momentum begun 
with the Curt Flood Act of lifting aspects of the antitrust immunity on 
a piecemeal basis whenever baseball makes a difficult or unpopular 
decision. Rather than deal directly with the event that generated 
concern (planned contraction), the bill, like the Curt Flood Act, 
erodes a long-standing legal principle that has served the public well. 
This in turn makes it politically easier to lift the immunity even 
further when the next problem arises, a trend that will undoubtedly 
have adverse affects on Minor League baseball. It's bad public policy 
and could hasten the demise of grassroots baseball with no assurance 
that it will achieve its desired result.
    There has been much discussion concerning the lack of competitive 
balance at the Major League level and the economic remedies available 
to restore healthy on-field competition to baseball. What is seldom 
discussed is the role of the exemption in buttressing competition at 
the Major League level through minor league player development. In the 
event of repeal, major and minor league teams will presumably be free 
to compete openly for the signing of baseball player prospects. Players 
signed by major league teams could presumably be placed either on the 
major league roster (currently 40 players) or assigned to minor league 
teams for further development. Free of standardized player contracts 
with fixed salaries and reserve periods, major league teams would 
compete for the top prospects. Minor League Baseball TM 
believes this competition will upset the competitive balance that is 
essential for Baseball's viability. The wealthier teams would be in a 
position to outbid smaller market teams for available first year draft 
talent. This can only exacerbate the competitive problems detailed in 
the Report of the Independent Members of the Commissioner's Blue Ribbon 
Panel on Baseball Economics (July, 2000).
    If repeal triggers unbridled competition in the payment of salaries 
for minor league players, Minor League Baseball TM believes 
the rich will simply get richer at the expense of less prosperous 
clubs. This scenario is identical to that of the 1940's-50's when 
Branch Rickey of the St. Louis Cardinals purchased a large number of 
minor league teams from which he could stock the major league 
Cardinals. It was this very practice, which led to the player draft, 
which was designed to ensure balance in the hiring of players.
    While professional football and basketball look to college for 
developing professional players, there exists grave doubt that colleges 
could--or should--fill the void likely to be created by the reduction 
in minor league clubs that will result from repeal of the baseball 
antitrust exemption.
    As colleges currently organize their baseball programs, there is 
little prospect colleges could train baseball players as effectively as 
do the minor leagues. Baseball is played primarily during the summer 
when colleges are closed. The NCAA will not permit students to play in 
the minor leagues without forfeiting their college baseball 
eligibility. Some have argued that the ``summer leagues,'' such as the 
Alaskan and the Cape Code leagues, may fill the gap during the summer 
months when colleges are closed. However, in the view of baseball 
experts, such leagues are simply not competitive enough and their 
seasons not long enough to develop the talent as well as traditional 
minor leagues. It's problematic too whether even their existing caliber 
of play could be preserved if summer leagues were expanded as needed if 
minor league teams fail.
    In addition, as a general rule, minor league teams have better 
coaches, facilities and competition than is found in college ranks. 
Colleges are still not likely to develop players as effectively as do 
the minor leagues. In college, students may play baseball at most 3 to 
4 times per week for three months. And yet, baseball is an extremely 
difficult sport requiring considerable skill and finesse. These skills 
can best be developed only in the minor leagues where players play 
every day, 6 to 7 months of the year. Only then can prospects advance 
to the major leagues in, on average, 3 to 4 years' time. As it is, 
college baseball players usually require 2 to 3 years' additional 
development before they are prepared to play in the major leagues. 
College AllAmericans frequently languish in Rookie League baseball 
before quitting the game altogether.
    We have serious doubts that the NCAA would permit MLB to invest in 
college baseball programs on terms that are acceptable to MLB. Surely 
the NCAA would require that all of the hundreds of NCAA baseball 
programs be treated alike, all receiving the same level of financial 
support from MLB teams. The logistics of financing such a system would 
in our view be insurmountable, not to mention the chaos likely to be 
created by mixing professional and amateur sports programs and their 
respective purposes and goals.
    Minor League Baseball TM believes it is inadvisable to 
create an alternative player development system that merges, or at 
least commingles, professionalism and education. We believe that our 
colleges ought to concentrate on developing major league doctors, 
scientists and educators, not major league ballplayers. We cannot 
foresee how creating greater reliance on college baseball, as a player 
development system will do anything but expose baseball to the scandals 
that have blemished other college athletics.
    Finally, I have been asked to address the impact of contraction at 
the Major League level upon Minor League Baseball TM As the 
President of Minor League Baseball TM, Mike Moore, stated on 
November 6, 2001:

        We plan on baseball being played by all of our franchises next 
        season. Commissioner Selig has indicated to me that following 
        any definitive decisions on contraction, we will work closely 
        in formulating solutions pertaining to the Minor Leagues. The 
        Commissioner has been a strong supporter and ally of Minor 
        League Baseball TM and we will continue to work 
        together toward our common goals.

    Indeed, Commissioner Selig in testifying last December before the 
House Judiciary Committee stated that it was not necessarily the case 
that minor league clubs would be contracted if their affiliated Major 
League club ceased to exist. There are a number of ways in which this 
issue can be addressed, including: 1) assumption by other Major League 
clubs of the contracted clubs minor league professional development 
agreements; or 2) maintenance of the contracted minor league clubs 
player development contract on a ``cooperative'' or shared basis among 
several Major League clubs. Suffice it to say that we will be working 
cooperatively to preserve our viable minor league clubs in the event of 
Major League contraction.

    Chairman Leahy. Thank you very much.
    Mr. DuPuy, there was a report in The Washington Post by 
Mark Asher which I am sure you have seen that says that major 
league baseball wanted to keep its plans for contraction a 
secret until after the World Series. And you are quoted as 
explaining that major league baseball owners initially decided 
not to identify the teams targeted for elimination because it 
was a fluid situation--nobody wanted to jump the gun and cause 
any more grief and heartbreak than was necessary.
    In what way was the situation so fluid that baseball 
decided to keep fans of more than two teams at risk and 
guessing?
    Mr. DuPuy. Senator, as the commissioner has repeatedly 
stated, no final vote has been taken on the identification of 
the two teams. Contraction was a process that was discussed 
over the course of some--
    Chairman Leahy. It was not a question of the vote. You were 
quoted as saying that they decided not to identify the teams 
because it was a fluid situation.
    Mr. DuPuy. Well, Senator, given what was going on with 
regard to the season, with regard to the World Series, and in 
the aftermath of September 11, the commissioner and the owners 
decided that they did not want to disrupt the season, they did 
not want to disrupt the post-season. The commissioner indicated 
that he would turn his attention to the economic ills of 
baseball as soon as the season was over. The season ended on 
November 4, and on November 6, he announced that the clubs had 
voted to contract. It was an effort to protect the season, 
Senator.
    Chairman Leahy. At that time, was there any discussion--are 
you aware, directly or indirectly, of any discussion among the 
owners of trying to leverage the threat of contraction into 
more public financing of stadium facilities?
    Mr. DuPuy. Absolutely not. In fact, quite the opposite--
contraction is an acknowledgement that the owners have been 
unable to succeed in those locations in getting venues 
necessary to support the game in the current economic 
environment. It is just quite the opposite.
    Chairman Leahy. I am not sure that that is necessarily so. 
Sometimes the threat of it might raise the possibility of more 
public financing. But it is your testimony here before the 
Senate that at no time whatsoever to your knowledge was there 
any discussion among the owners that the threat of contraction 
could possibly lever into financing more public facilities?
    Mr. DuPuy. That is most certainly my testimony.
    Chairman Leahy. Thank you.
    Mr. DuPuy. Contraction was a decision made based on the 
economics of the game. It was not a threat, it was a decision.
    Chairman Leahy. If Governor Ventura and the people of 
Minnesota had given in to the demands for a publicly financed 
facility, was major league baseball set to make one of the 
Florida teams a contraction candidate, as you refer to teams 
slated for elimination?
    Mr. DuPuy. Senator, we have a number of teams that are in 
trouble. In Minnesota, there have been something like 40 
different stadium initiatives. The last one, the owner agreed 
to pay 83 percent of the cost of the stadium himself. So I 
cannot speculate as to what might have happened, but--
    Chairman Leahy. That was not precisely my question. Had he 
gone along with the publicly financed facility--and there had 
to be alternatives being discussed by you and the owners as you 
went along--was a Florida team a contraction candidate at that 
point?
    Mr. DuPuy. There were a number of teams that were 
contraction candidates, including teams from the State of 
Florida, yes, sir.
    Chairman Leahy. Thank you.
    Mr. Brand, your testimony ends with a matter of great 
interest to me--whether minor league clubs would be contracted 
if their affiliated major league teams cease to exist. There 
would never be the possibility of any parochialism to come out 
of Members of the Senate--
    Mr. Brand. We are in favor of parochialism, Senator.
    Chairman Leahy. But we do have the Vermont Expos, a great 
team. Do you consider the Vermont Expos ``a viable minor league 
club,'' to use the words in your testimony? Is there any 
assurance that the Vermont Expos will continue to exist within 
the baseball minor leagues beyond 2 years?
    Mr. Brand. Absolutely we consider it viable. That is why 
that team was moved there several years ago.
    From every perspective we have, that would be one of the 
several locations that we would want to fight to preserve. In 
fact, I cannot imagine--while I cannot speak for major league 
baseball--I cannot imagine that that would be a market that 
they would want to see dissolved. And as I said, there are a 
number of ways to keep that club alive, including cooperative 
arrangements or, again, additional clubs for other major league 
affiliates. But certainly that would be our intention.
    Chairman Leahy. I have other questions, but I have gone 8 
seconds over, and I will stop at this point--and of course, 
would greatly encourage everybody else to do the same.
    Senator Hatch.
    Senator Hatch. Let me just ask one question, and I will 
submit other questions in writing. As you know, these are areas 
that really do concern me, and I see answers on both sides, and 
I just want to do what is right.
    Mr. DuPuy, according to financial industry estimates, the 
value of all baseball franchises increased from $3.1 billion in 
1996 to over $7.9 billion, almost $8 billion, in 2001, or about 
18 percent each year. According to these same estimates, each 
of baseball's 28 franchises that existed in 1996 is worth more 
today than in 1996--and that is good. But moreover, each of the 
three franchises sold in recent weeks, Boston, Florida, and 
Montreal, sold for at least 30 percent more than those 
financial industry estimates as I understand it.
    If baseball is losing as much money as you say, why do its 
assets continue to appreciate so rapidly?
    Mr. DuPuy. Senator, the numbers that you accurately state 
were estimates. In fact, the Blue Ribbon Panel report which has 
been provided to the Committee at Table 15 showed the rate of 
return on the last 13 clubs that were sold, and in five 
instances, those clubs had a negative rate of return based on 
their operating losses. In four instances, they essentially 
broke even, and in four instances, they did have a good rate of 
return, but three of those four had new stadiums.
    With respect to the clubs you just mentioned, there was one 
buyer for Florida. Florida sold for exactly the same amount 
that Mr. Henry purchased Florida for 3 years ago, and Mr. Henry 
incurred approximately $40 million in losses over the 3 years, 
so he had a negative rate of return.
    The Boston Red Sox is one of our flagship franchises, but 
as you also know, the sale of the Red Sox included 80 percent 
of the New England Sports Network, which is an extraordinarily 
valuable property; it included Fenway Park, which is an 
extraordinarily valuable property; and it included adjacent 
real estate. So that number, given that the franchise had been 
held for so long by the Yockey Foundation is very hard to 
estimate in terms of the rate of return there.
    With regard to Montreal, Senator, we have no buyer. We had 
no buyer, and we have no buyers. There was no one interested in 
operating Montreal, there was no one interested in buying 
Montreal, and we ended up having to buy the franchise.
    Senator Hatch. Attorney General Butterworth, in your 
testimony, you state that in the process of enacting the Curt 
Flood Act, members of this Committee ``confirmed that the 
passage of the Act had no effect on the authority of State 
attorneys general to investigate baseball under State antitrust 
laws.'' In fact, you quote a statement that I made in response 
to the question from Senator Wellstone regarding whether the 
Act would overturn the Piazza and Butterworth cases. I replied 
that the Act would ``simply make clear that major league 
baseball players have the same rights under the antitrust laws 
as do other professional athletes'' and that the Act ``does not 
change current law in any other context.''
    Would you explain in detail if you would what relevance, if 
any, you believe the Curt Flood Act and the statements you 
quote have regarding the validity of the holdings of both 
Piazza and the Butterworth decisions?
    Mr. Butterworth. Yes, Senator. Thank you very much, and 
thank you very much for sponsoring the Curt Flood Act with 
Chairman Leahy.
    Senator Wellstone put those comments into the record 
because of the request of his attorney general, Skip Humphrey, 
from the standpoint of not changing whatever the law was on 
antitrust. It was our position that the Piazza case was correct 
and that Butterworth versus National League was correct. And in 
fact, in the chairman's initial comments that he made, his 
comments were such that he believed that the only antitrust 
exemption that was there with Supreme Court cases was with the 
reserve clause. That was it, period.
    And the Florida Supreme Court, when I filed antitrust 
subpoenas against the National League for not allowing them to 
come into Tampa, the Florida Supreme Court ruled that the 
antitrust exemption only applies to the reserve clause. So the 
particular comments that we have, we just wanted to make sure 
that there was no change in the law pursuant to the Curt Flood 
Act as it pertains to the Butterworth case or the Piazza case.
    Senator Hatch. Mr. Brand, let me ask you a question. As I 
understand it, the current contract between major league 
baseball and minor league baseball will expire at the end of 
2003, that season.
    Mr. Brand. Yes, sir.
    Senator Hatch. So far, as I understand it, Commissioner 
Selig has refused to provide any guarantees of the current 
number of minor league clubs after that time. So isn't it 
possible that if a contraction at the major league level is 
carried out, that at that time there will be a corresponding 
contraction in the minor league world as well?
    Mr. Brand. It is theoretically possible, but as I said, he 
did state in the House Judiciary Committee that it was not 
necessarily the case that that would be so.
    The nature of our negotiations over the PBA over the last 9 
years has been excellent, and we have been able to cooperate on 
a number of issues and work them out, and I cannot imagine that 
there would be an interest on the other side in doing anything 
but maintaining through some mechanism the very few but viable 
minor league clubs that would be affected by major league 
contractions.
    Senator Hatch. May I, Madam Chairwoman, just ask Mr. Fehr 
one question?
    Senator Feinstein. [Presiding.] Yes. Please go ahead.
    Senator Hatch. Mr. Fehr, do you have any comment--I have 
more questions, but I will have to submit them in writing--do 
you have any comments you would care to make?
    Mr. Fehr. Just a couple of brief comments. First of all, at 
the time the Curt Flood Act was passed, the most recent 
decision of law was in fact the Piazza case and the Butterworth 
case. My recollection of the discussions to which Mr. Brand 
referred was that the Committee wanted to make certain that the 
Curt Flood Act was not deemed to change the law other than in 
the areas in which it specifically addressed it, without 
commenting on what that law was. But those were the last two 
decisions.
    There has subsequently been a decision of the Minnesota 
Supreme Court and then, recently, of a Federal district court 
in Florida, which have not adopted the rationale of those 
cases, so there is uncertainty, and that may be part of the 
desire to clarify the situation.
    Secondly, with respect to the number of minor league teams, 
I have not looked at the documents specifically, but I believe 
that the guarantee of the number of minor league teams 
contained in the professional baseball agreement is in fact 
less than the number of minor league teams currently playing. 
And while it is certainly conceivable, as Mr. Brand says, that 
we could have a situation in which we have more AAA teams and 
more AA teams than we have major league teams, that has never 
happened before. They have always been the same.
    Senator Hatch. Yes, I understand that.
    Mr. Fehr. So I would expect that that would be an unlikely 
result. For purposes of the legislation, however, for purposes 
of public policy, the question would be not would it end up 
that way, but perhaps however it ends up, can there be a 
judgment made as to whether that was the result of unreasonably 
anticompetitive activity. That seems to me to be the issue. We 
cannot resolve that here; that takes a full investigation and a 
proceeding.
    Senator Hatch. Thank you.
    My time is up. I appreciate all the testimony.
    Senator Feinstein. Thanks very much, Senator Hatch.
    Mr. DuPuy, I have always been a staunch supporter of the 
antitrust exemption, and it really goes back to my days as 
mayor, negotiating with Mr. Lurey and the Giants, and trying to 
do a new stadium when the Giants were in play. It was really 
the antitrust exemption that saved the Giants for San 
Francisco, and I am acutely aware of that.
    So I watched with some interest when Peter McGowan came 
along and, instead of requesting public money, built a stadium 
on his own. And I happen to think that that is the way to go 
with respect to professional sports, that these are private 
franchises, and why should the people pay.
    I am really concerned about this one, because I think that 
if you eliminate the smaller markets from having baseball 
teams, you essentially end up destroying baseball as we know it 
today as the national pastime. That is what I think this is 
doing.
    I think there is a very interesting paragraph on page 16 of 
the report that goes on to say that eventually what we are 
going to have is the larger markets prevailing because of all 
the advantages of naming and all the accessories that come 
along with a larger market as opposed to a smaller market. If 
that happens, it will be tragic.
    So as I see it, your league is in a pickle because you are 
going to have to make some substantial changes. Revenues are 
not declining, they are increasing. Yet we have these 
exorbitant salaries to pay.
    So if I am going to continue to support an antitrust 
exemption, it cannot be at the risk of losing all smaller 
market teams, which is the way I see this thing going.
    Could you respond to that, please?
    Mr. DuPuy. I would like to respond to that, Senator, and I 
appreciate your comments about the efforts that we made to 
protect the San Francisco Giants, who now play in one of our 
premier facilities, and the fans of San Francisco had the 
thrill of watching Barry Bond set the home run record this 
year.
    The irony of the panel today is that as you know, Attorney 
General Butterworth in fact sued under the antitrust laws to 
try to force the Giants to move to Tampa, and now he is here 
today indicating that he wants to sue to prevent the teams from 
moving out of Florida. And that in fact is one of the purposes 
of--
    Senator Feinstein. He has had a conversion.
    Mr. DuPuy. He has had a conversion.
    Mr. Butterworth. We will trade the Marlins for the San 
Francisco Giants.
    Mr. DuPuy. But Senator, you underscore something that is 
very accurate. In certain indices, baseball actually is doing 
well. As the Blue Ribbon Panel report indicates, revenues have 
grown from $1.3 billion to $3.5 billion. We have 18 new or 
under construction stadiums in which teams play that have 
become destination points, as PACBEL has become. WE have 35 
million fans attending minor league games. We had 70 million 
fans in each of the last 3 years attending major league games.
    The exemption in fact has served all of those purposes very 
well. It has promoted franchise stability, and it has promoted 
the minor leagues. But I would submit that the reason we are 
here does not have to do with the exemption, and the reason why 
we are not thriving economically like the other leagues has 
nothing to do with the exemption, because in the areas covered 
by the exemption we do do better than the other leagues. We 
have not had relocations, where the other leagues have had 22 
relocations.
    Why we are here is an inability to get a labor deal that 
works. The NFL has a salary cap. It works. The NBA has some 
form of salary cap. It works. We have been unable to achieve a 
labor deal, and that has nothing to do with the exemption, 
because we repealed the labor protections in the exemption.
    Senator Feinstein. That is correct.
    Mr. DuPuy. So what it has to do with is an inability to 
achieve a labor deal that has an appropriate blend of revenue 
sharing and some form of salary restraint. And the commissioner 
and the owners have indicated that they are ready to do 
substantially more revenue sharing. The Players Association has 
balked to that, in response to Senator DeWine's comments. The 
owners are serious about doing revenue sharing. The owners are 
serious about the recommendations made by some of the most 
distinguished people in America, and we have been unable to 
achieve that.
    But I do not think that ties to the exemption. I agree--we 
would like to have major league baseball in as many communities 
as possible.
    Senator Feinstein. Well, I have to agree with you.
    Let me just take on Mr. Fehr for a moment on this subject. 
Mr. Fehr, I remember Willie Mays in San Francisco. He lived in 
the city, he put his divot back, he helped young people. It was 
wonderful. Now there is talk of putting his memorabilia in a 
museum in San Francisco.
    But baseball has changed now. Most players do not live in 
their communities; they do not do what they used to do. And 
their salaries are exorbitant, particularly the big stars. I 
adore Barry Bond because he hits a home run over into the water 
in San Francisco Bay, and it is great. On the other hand, these 
salaries are astronomical, and they are changing the nature of 
baseball.
    What do you have to say about that?
    Mr. Fehr. Let me respond to both the question you asked me 
and the question you asked Mr. DuPuy, and let me begin by 
suggesting that one of the dangers that you get into in a 
discussion is oversimplifying.
    Let me begin with the question of the San Francisco Giants. 
We were faced in bargaining in 1990 with the suggestion that 
something had to be done because under no conditions could we 
maintain two teams in the Bay area. At the same time, the State 
of Florida was told, as it had been told for all of the last 
century until 1993, that under no conditions could it have a 
major league baseball team. It is sort of a class case of a 
vacant market. And I understand that as Mayor of San Francisco, 
dealing there, you do not want the team to leave. Certainly you 
understand that someone in Florida would ask why is it that we 
are faced with a monopoly that says no team may play here. You 
cannot startup a business. The barriers to entry in major 
league baseball are not high--they are absolute. You must be 
voted in. So you have competing considerations which need to be 
weighed.
    Secondly, there is the suggestion that the number of teams 
that have difficulties is static. In fact, if we had been 
discussing contraction in 1990 or in 1989, what teams would 
have been at the top of the list? Atlanta, Cleveland, Seattle, 
and certainly San Francisco. Those teams are now regularly four 
of the top six or seven revenue producers in America. Seattle 
and San Francisco grossed, I believe, in local revenues the 
second and third highest of anyone. Now, what does that 
suggest?
    Senator Feinstein. But they are not making money. Only 
three teams, if I understand this report correctly, have made 
money.
    Mr. Fehr. Let me come to that, Senator. As I indicated, 
this unfortunately takes a little explanation, so I hope you 
will bear with me, and I will be glad to submit further answers 
or to speak with you separate about that.
    The point is how did that turn--what happened? Well, the 
management of those clubs began doing things differently than 
they had before.
    Now, when we come to salary issues and whether salaries are 
exorbitant, one of the things which perplexes me is that most 
people would think the major league baseball players are 
management's dream union. Why is that? We say that we do not 
want to negotiate salaries. All we ask is that you do not 
conspire about setting them. We want people to have reasonable 
opportunities to seek work with other employers just like 
everyone else does. It is a right that everyone else takes for 
granted. And even with the free agency that we have, major 
league baseball players still cannot pick up and move; they are 
limited in matters that we have agreed to--and I do not suspect 
they will be substantially different in the next agreement--to 
wait until 6 years in the major leagues before they can become 
a free agent, which is usually 10 or 12 years, that is to say, 
the overwhelming majority of their career.
    Why do players not live in their communities as much as 
they used to? There is a very simple reason--because they now 
work out year-around, and therefore they need to live in warm 
weather climates. That is why fewer of them do.
    In terms of salaries, we have been able now to track 
aggregate salary levels as a percentage of revenues going back 
over 20 years--
    Senator Feinstein. Excuse me. Are you saying they do not 
live there because of climate?
    Mr. Fehr. What I am saying is that players tend more often 
to want to work out in the winter time, and as a result of 
that, they tend to want to live in more warm weather climates.
    Senator Feinstein. I thought Florida had a pretty good warm 
weather climate.
    Mr. Fehr. I am not familiar with what the weather situation 
is in San Francisco specifically. But the majority of players 
in the off season live in California, Arizona, and Florida.
    On salaries--and then I will conclude; I know time is 
restricted here, and this will take substantially more 
discussion--we have been able to track salaries. Aggregate 
salary levels are more or less the same percentage of revenues 
now that they were in 1980 or 1985 or 1990 or 1994. Salaries 
increase because revenues have increased. As Mr. DuPuy quite 
correctly indicated, baseball's revenues went from 
approximately $1.3 billion in 1990 to approximately $3.5 
billion or slightly more than that, as constantly reported in 
2001.
    You would expect, then, that salaries in terms of rate of 
growth would more or less reflect the rate of revenue growth in 
a free market, because the players' contribution to the 
product, you would expect in economic terms to be more or less 
the same. That has in fact happened. Players' salaries are a 
product of the revenue they produce, just like a worker's 
contribution is most places that that takes place.
    I would be glad to have further discussions with you about 
this or to respond in another forum. I know that time is 
limited today, and I suspect there may be more questions.
    Thank you.
    Senator Feinstein. Thanks, Mr. Fehr.
    I know that Senator DeWine has more questions, but I would 
like to ask Mr. DuPuy if I may to respond to that, because this 
is sort of the heart of the argument between the league and the 
players.
    How do you respond to that? It has been going on for years 
now. How are you going to break through it? I do not want to 
see these communities lose their teams.
    Mr. DuPuy. Let me respond with the easiest example given 
the time constraints. First of all, salaries grew from 50 
percent of revenue to 60 percent of revenue since 1980, so 
there has been a substantially larger portion of revenues 
devoted to salaries. But I did not hear Mr. Fehr respond, in 
response to your question, to the inquiry with regard to 
revenue sharing--why the Players Association will not allow the 
clubs to share more revenues so that the small markets can 
compete, so that some small markets can get into the playoffs, 
so that some small markets can occasionally get into the World 
Series.
    Senator Feinstein. Let us get an answer to that.
    Mr. Fehr?
    Mr. Fehr. Thank you.
    In 1994, the proposal that produced the strike was 
evaluated by the Congressional Research Service--I believe that 
is the right name; it is the arm of the Library of Commerce. 
They wrote a report on it, and they said that the revenue 
sharing proposal there which was combined with a salary cap was 
designed to benefit principally the largest-income clubs. It 
had been effects on players, too, and we opposed it.
    Coming out of that labor dispute, we ended up with an 
agreement which provided for revenue sharing by agreement. 
Although there was a lot of work done on it, it was done 
pursuant to a conceptual framework that I think we had put 
forward initially. And vastly more revenue is shared now than 
was shared back in 1994 and certainly previous to that.
    In these negotiations, we understand and expect that 
revenue sharing--
    Senator Feinstein. ``These'' being which?
    Mr. Fehr. Current negotiations. I am sorry. I apologize. We 
would expect that revenue sharing would be the single largest 
issue that is on the table, and certainly the clubs have put it 
on the table.
    We had discussions that took place over a period of about 
10 weeks in April, May, and June. Those discussions were 
interrupted by the decision of the commissioner to do so, in 
retrospect, it appears clear, because contraction was out 
there. And one of the things that makes it difficult to discuss 
revenue sharing is if you do not know how many teams you have 
and who they are, it is pretty difficult to try to come to 
concrete circumstances.
    Senator Feinstein. Let me ask Mr. DuPuy this question, 
then. In exchange for revenue sharing, would you forget 
contraction?
    Mr. DuPuy. Senator, I do not have a vote. The clubs vote on 
contraction based on the recommendation of the commissioner and 
his staff. But I will tell you--and you still did not hear an 
answer--the commissioner recommended 50 percent local revenue 
sharing. The players made a proposal in the summer that had $20 
or $30 million more being shared. That is not nearly enough.
    The problems are so pervasive that under this structure, 
there are markets that cannot support major league teams. I 
wish that were not the case. I wish I could tell you we could 
have 50 teams. But we cannot have 50 teams. We cannot support 
30. There is no magic to 30. Major league baseball expanded 
from 16 to 30 over 35 years and now wants to contract back to 
28--but it wants to do so in a viable, stable economic 
environment where teams can compete.
    In certain circumstances, could we avoid contraction? 
Perhaps. But our 30 years of bargaining history suggest that we 
are not going to get a salary cap. We are not going to get 50 
percent revenue sharing. We are not going to get anywhere close 
to that. And without that, it is impossible for me to sit here 
and by Pollyanna-ish about the prospects of avoiding 
contraction.
    Mr. Fehr. Senator, if I could just fill in a gap, the 
assumption I made--
    Senator Feinstein. I think we have the nucleus of a 
solution right here.
    Mr. Fehr. The assumption that I made, Senator, given the 
events, was that the clubs made a deliberate decision not to 
have contraction be an issue that would be part of an overall 
agreement, and it would be a matter that would be accomplished, 
and we would bargain later. That is a matter of choice that 
they engaged in.
    I do not, however, want to leave the Committee with the 
impression that I or Bob or I suspect any of us involved in the 
process can be prepared to predict the results of bargaining. 
We are just getting back to it. We all know there is going to 
be more revenue sharing. We have some differences as to how and 
when to do it and what the appropriate way is.
    The only way we are going to solve that problem is to get 
back and bargain it out. The season is going to start on time. 
I assume we will be having meetings heating up on a much more 
regular basis in the near future. But that is where the issue 
is going to have to be resolved.
    Senator Feinstein. Thank you both.
    Senator DeWine?
    Senator DeWine. Madam Chair, thank you very much.
    Mr. DuPuy, you testified that there were no bids for the 
Expos, but weren't there bids received from people who wanted 
to move the Expos?
    Mr. DuPuy. There have been inquiries received from 
individuals or groups who are interested in buying and 
relocating the Expos, yes, sir.
    Senator DeWine. I have been told--and this may not be 
right--that both the Virginia and D.C. organizations that want 
to bring a ball club to this part of the country, the Nation's 
Capital area, submitted bids of $160 million for the Expos; I 
am also told that that was more than major league baseball paid 
for the club.
    Mr. DuPuy. The latter point, I concede. I am not sure what 
the details were of the offer, so I cannot comment on that. But 
there were letter inquiries about acquiring the Expos and 
moving them, yes, sir.
    Senator DeWine. Certainly, you would think that that would 
raise possible antitrust concerns if major league baseball is 
stifling competitive bids to preserve these clubs. If you could 
bring a club to a viable market and keep going, it seems to me 
that that is a concern. That is a public policy issue. That is 
what we get down to here. Some people may ask why is Congress 
having these hearings, why is Congress talking about these 
issues. But it is the exemption that enables you to make what 
many would consider to be an arbitrary decision when you have a 
bidder out there who has money, who can bid, who can bring a 
team to a viable market--at least, what most people think is a 
viable market--and you stifle that and say, no, we are not 
going to do that; instead, we are going to basically est out on 
a path to contract this club.
    You understand why there is a concern, a public policy 
concern, that goes beyond the issue that I raised in my opening 
statement when I was talking about what I see as a fan and the 
competitive problems of baseball.
    Mr. DuPuy. And again, Senator, the purpose of the 
contraction decision was to improve the competitive product. If 
the product that baseball produces is a competitive baseball 
game, the contraction decision was an attempt to do that.
    The commissioner has indicated more receptivity to 
relocation than at any time in the past 30 years. He has also 
made public comments about Washington and Northern Virginia 
being probably the most likely or the most prominent relocation 
candidates. But he has also said that until we fix the economic 
system, merely moving a team from one location to another, all 
that does is ensure the failure of the new market. He has 
indicated that relocation is on baseball's horizon, done in a 
carefully managed way, but only after the economic system is 
fixed. The system right now cannot support--
    Senator DeWine. As you have heard and as you know, Mr. 
DuPuy, there is no stronger advocate for revenue sharing and 
for fixing the current system than Mike DeWine.
    Mr. DuPuy. I appreciate that, Senator.
    Senator DeWine. But I do not know too many people who think 
that a moved Expos team in the Washington, D.C. area could not 
survive. I just do not know too many people who can look you in 
the eye and tell you they could not survive in this place, and 
that people who have put together some viable options and put 
the money together could not move the Montreal Expos to the 
Washington, D.C. area and do just fine and compete just real 
well.
    Mr. DuPuy. Senator, there are other markets, other cities 
the size of Washington, D.C., that are not thriving in the 
current system.
    Senator DeWine. Well, it seems to me, with all due respect, 
that that is a separate issue, which I agree with you on. I am 
not sure that your point--or, that one point makes the other.
    Let me ask a question to Mr. Brand. I want to talk about 
the whole question of whether or not the minor leagues as we 
know them depend on the antitrust exemption. And maybe a better 
question is if you remove the antitrust exemption, what would 
we end up with as far as the minor leagues.
    I understand that the National Hockey League does have a 
minor league system in place, and they do not have the minor 
league exemption, do they?
    Mr. Brand. No, they do not.
    Senator DeWine. What is the difference?
    Mr. Brand. Well, one difference is that if you look at the 
stability of minor league hockey franchises over the last 10 
years, you will find great instability. Those leagues shrink, 
they contract; they do not exist in places the way Indianapolis 
has existed in Indianapolis for 100 years. They do not exist in 
the breadth and reach that the current minor league system 
does.
    So I do not think that hockey is an appropriate analogue, 
because as I say, the franchise stability is nowhere near what 
it has been in baseball.
    Senator DeWine. Mr. Chairman, my time is up. I think we 
have a vote. I have a number of questions that I would like to 
ask, and I would be more than happy to go and vote and come 
back.
    Chairman Leahy. I understand. Let me do this, and it is a 
little bit unusual, but the Senator from Ohio is extremely 
knowledgeable in this subject. I would not mind recessing and 
then having the Senator from Ohio reconvene the hearing. I will 
not be able to come back, but I do not want to cutoff any 
Senator, and the Senator from Alabama has not asked questions 
yet; is that correct?
    Senator Sessions. Yes. If possible, I would like a few 
minutes before we recess.
    Chairman Leahy. Why don't we do this, if this will work for 
both of you. I will put my questions in the record. Because of 
the votes, we have delayed this panel a great deal, and I do 
have a number of questions, especially to the two attorneys 
general, because I am very, very concerned about Federal action 
that cuts out the rights of our States. As a former State 
attorney, I feel that way, and I know that our attorney general 
would feel that way. So I am going to put those questions in 
the record.
    Senator Sessions, why don't you begin your questioning now, 
and Senator DeWine, when you come back, I will leave it in your 
capable hands, and when you have finished, if you would then 
recess the hearing.
    Senator DeWine. Thank you, Mr. Chairman.
    Senator Sessions. Thank you, Mr. Chairman, and I thank 
Senator DeWine; he is certainly a thoughtful and wise person 
when it comes to these issues.
    General Butterworth, it is good to see you. We are glad to 
have you back in Washington. I enjoyed serving with you as 
attorney general.
    It is troubling to me that we have not had a ball team here 
in Washington for over 30 years. We are first in war and first 
in peace, and no place in the American or National Leagues is a 
source of pain in light of the fact that we have football and 
basketball teams.
    And you know, antitrust exemptions are just problems for 
us. I have a little twisted slogan that I made up: Oh, what a 
tangled web we create when we first start to regulate.
    When you get an exemption, you have gotten a privilege, so 
we have to look at that thing and ask if it is being executed 
and carried out in a way that is healthy and positive for the 
public, or is it not.
    I thought over the years, not having been a member of this 
committee, that from the fan point of view--and I am a long-
time baseball fan--the goal was to keep ball players a little 
longer on the same team so they do not get sent everywhere, and 
that we could somehow maintain more stability there. But it 
looks like there are a lot of other forces at work, as I guess 
I should not be surprised.
    So in recent weeks, I had the opportunity to talk to a law 
school classmate of mine, Mr. Don Watkins, who is an African-
American who has done exceedingly well in business and is 
interested in buying a baseball team. And basically, he tells 
me that he has been treated courteously by the league officials 
and feels that they have made some good progress. But if you 
look at the newspapers about moving or buying a franchise, you 
know it is a long and difficult process.
    So I would think that major league baseball would be 
interested in having an African-American owner; he would be the 
first one. But really, I am told that since he first applied to 
buy the Tampa Bay Devil Rays, he has heard nothing from the 
league in nearly a year. His most recent expression of interest 
in the Minnesota Twins was ignored until last December when, at 
a House Judiciary Committee hearing, a Congressman from Alabama 
asked the Twins' president in front of the commissioner why 
nobody had spoken to Donald Watkins, and only then did he 
receive a call about it.
    I also understand that Donald's efforts to inquire into the 
possibility of purchasing the Montreal Expos and moving them to 
Washington was summarily foreclosed as not on the table by 
league officials.
    So to me it is odd, Mr. DuPuy, when you say, as I believe 
you said a little earlier, that there is no interested buyer 
for the Montreal Expos. I am encouraged that he has been 
permitted by the league officials to talk to the Twins and the 
Devil Rays, and I am also encouraged by the recent comments 
from Commissioner Selig after the owners' meeting that 
Washington was the most likely relocation city. These comments 
were understandably confusing to Donald Watkins, who had been 
told by league officials only a week earlier that it would be a 
waste of time to discuss relocation of a team to Washington, 
D.C.
    Mr. Watkins' plan would be to build a privately financed 
stadium with a destination-class museum and hall of fame for 
African-American athletes that would clearly make a major 
contribution to our Capital's large minority population and 
tourist flow. It would seem to make more economic sense to 
locate it here than in Minnesota or Tampa Bay.
    So I think his request to discuss this possibility ought to 
be honored. Would you agree, Mr. DuPuy?
    Mr. DuPuy. I would certainly agree with the latter 
statement, Senator, yes. I have to admit to a little bit of 
confusion in that my understanding from your earlier comments 
was that Mr. Watkins was interested in acquiring the Minnesota 
Twins. He in fact met with the owner of the Minnesota Twins, 
and he met with the president of the Minnesota Twins. He had a 
meeting with Tom Ostertag, our general counsel, and Bill 
Bartholemy, the Chairman of our ownership committee, which is 
not usually done that early in the process, and my 
understanding is that he submitted at least a preliminary offer 
to acquire the Minnesota Twins, and I am now a little surprised 
to hear that he would like to have a team in Washington, D.C. I 
am not sure that that solves the Minnesota attorney general's 
issues.
    But we would be delighted--to go back to your very first 
statement--we would be honored and delighted to have an 
African-American owner of a major league baseball team, and I 
hope it happens sooner rather than later.
    Senator Sessions. Well, why shouldn't he be able to shop 
around? If Montreal is going to be on the market, why shouldn't 
he be able to ask about that one, the Devil Rays, or Minnesota, 
talk to the various owners and make the best deal?
    Mr. DuPuy. He certainly has the right to shop around. We 
have not denied him permission to talk to any team, Senator.
    Chairman Leahy. Well, if I could, Senator Sessions, just 
ask this question--are there any minor league baseball teams--
minor league teams--that have owners from racial minorities?
    Mr. Brand. Yes.
    Chairman Leahy. How many?
    Mr. Brand. There are several and I would have to submit 
that for the record, which I would be happy to do.
    Chairman Leahy. OK. Please do.
    Well, then, Mr. DuPuy, are there any major league baseball 
teams that have owners from racial minorities?
    Mr. DuPuy. I do not know all the members of some of the 
ownership groups. There are a number of teams that are owned by 
very broad ownership groups. But in terms of the principal 
owners, the answer would be no.
    Chairman Leahy. Thank you.
    And Mr. Brand, you understand that I am referring to 
principal owners--
    Mr. Brand. Majority owners. I am not aware of any majority 
owners. There are minority owners representing minorities.
    Chairman Leahy. I just wanted to make sure everybody 
understands, because I think the question raised by the Senator 
from Alabama is a very good one. I just wanted to make sure we 
had that for the record.
    Thank you.
    Senator Sessions. Thank you, Mr. Chairman.
    Mr. DuPuy, my question is this. Has there been an approval 
of Mr. Watkins as a possible owner of a major league baseball 
team, and has he been apprised of all ownership opportunities 
that might exist, and would you apprise him of any ownership 
opportunities that might exist?
    Mr. DuPuy. Answering your third question first, absolutely. 
Answering your second question, I believe he is aware of all of 
them. Answering your first question, he was authorized to begin 
discussions. We do not sell major league teams. The owners sell 
those teams. So he has been authorized to talk to the Tampa Bay 
Devil Rays and authorized to talk to the Minnesota Twins.
    Senator Sessions. But do you have the authority to approve 
him as an owner or not, and do you assert the authority to 
control the ability to talk to a major league team or not?
    Mr. DuPuy. We have very detailed written ownership 
guidelines that I would be happy to discuss with you. The first 
process is that a club indicates to us the desire to sell, and 
we then preliminarily approve anyone who is going to talk to 
those people to avoid early problems. Then, eventually, the 
clubs as a group must approve any transfer of ownership. That 
is a shorthand version of a very detailed process.
    Senator Sessions. So if Mr. Selig has said that it is a 
possibility that you could move the Montreal Expos to 
Washington, D.C., you are telling me that Mr. Watkins would be 
able to be approved for discussions with regard to possibly 
buying that team and moving it here?
    Mr. DuPuy. I was not aware that the commissioner had 
indicated any intent or desire to move the Expos to Washington.
    Senator Sessions. Well, he said it would be the next 
location.
    Mr. DuPuy. Yes, sir.
    Senator Sessions. I guess that is a distinction.
    Mr. DuPuy. Yes, sir.
    Senator Sessions. But still, what we are asking is if you 
have a good location, and you have a buyer who is willing to 
put in a lot of money to buy a stadium and build a center to go 
along with it, they ought to be given a chance to do that, it 
seems to me.
    Mr. DuPuy. Those facts, that hypothetical, absolutely, 
under every circumstance. That is what we want--good locations, 
with good stadiums and competitive teams.
    Chairman Leahy. Senator Sessions, we are going to have to 
recess because we only have about 3 minutes left in the vote.
    We will recess, and Senator DeWine will resume the hearing, 
and of course, you are welcome to come back and ask further 
questions.
    I thank all of you very, very much for being here. We will 
recess for about 10 minutes. It might seem like it has been 
kind of a chopped-up session, but trust me, this hearing has 
been on the internal monitors, and from the emails I have been 
getting since I have been up here, a lot of people in the 
Senate have been watching. So it is a matter of some concern 
here, and it certainly is a matter of great concern to Senator 
Hatch and myself.
    I worry very much that a perceived antitrust exemption--
perceived antitrust exemption--actually ends up hurting 
baseball more than helping it, but we will continue that debate 
as we go on.
    Thank you.
    [Recess.]
    Senator DeWine. [Presiding.] The Committee will reconvene.
    Let me thank the panelists for your patience in putting up 
with the crazy Senate schedule. You have endured this morning, 
now by afternoon, six different roll call votes which have 
disrupted the hearing, so I appreciate your patience.
    Let me start with Mr. Fehr and Mr. DuPuy, a question about 
the status of negotiations. The World Series ended this year 
unusually, in very, very early November, on a very high note, a 
great World Series. I think some of us who follow this closely 
expected that we might see some beginnings of negotiations. I 
take it, though, from comments that both of you have made that, 
really, there has not been much negotiation going on. Is that 
correct?
    Mr. Fehr. Senator, let me respond briefly to that in a 
couple of ways. First, we have made an effort this time on both 
sides not to accompany every negotiating session with a press 
conference, and that may account for some of the feelings that 
people have.
    We did have a sustained interruption in the negotiations, 
and over the last several months on both sides, we have been 
working through the contraction issue. There have been a number 
of meetings, and as a matter of fact, probably the most 
important meeting I will have in the next 2 days is a 
scheduling meeting to tie down a number of dates. I expect that 
we will be back at it with frequency fairly quickly.
    Mr. DuPuy. I would agree with that, Senator. I think the 
absence of agreement does not suggest that the parties are not 
bargaining. We have fundamental serious differences, but we are 
bargaining.
    Senator DeWine. All right. That is good news, so you are 
assuring baseball fans that some negotiations are going on, or 
at least some discussions are going on; is that correct?
    Mr. DuPuy. That is correct.
    Senator DeWine. Is that correct?
    Mr. Fehr. Sure it is.
    Senator DeWine. All right. Let me ask a question for all 
the members of the panel, but maybe I will start with Mr. 
Brand.
    Imagine a world where there is no antitrust exemption for 
baseball, specifically in regard to the minor leagues. Where 
are the teams going to get the players, and what would happen? 
If wiped away tomorrow, the 6-year reserve clause is gone, they 
have to get the players somewhere. What is going to happen? Are 
you telling me that we would see no minor league teams, that we 
would see some minor league teams, that there would be 
different minor league teams?
    Mr. Brand. I think we would see some minor league teams. 
That would depend on the level of economic incentives that the 
major leagues would have to invest as they do now. I do not 
think they would have anything close to that.
    They would be in effect under the same system that they are 
under now at the major league level, which I think would 
significantly reduce the number of minor league players that 
they would be able to sign. I think that would impact most 
critically the smaller markets--Kinston, North Carolina, towns 
and cities that are smaller than 100,000, of which we have 
many, many, many clubs. I am sure they would continue to use 
colleges as some aspect of it and complex baseball centered 
around the spring training sites--but it would look nothing 
like the system that we have now. And I think that in many, 
many, many smaller and rural markets in America--like Oneonta, 
New York, like Kannapolis, North Carolina, like Kane County, 
Illinois--there may not be minor league baseball as we know it. 
It would be some system--I think it would be a lot smaller and 
a lot less diverse geographically.
    Senator DeWine. There are two ways of looking at this. One 
is from the point of view of the public. In Ohio, we have a 
number of minor league baseball teams, as you know, and a 
number of new stadiums, new ball parks, which we are delighted 
to see and are a great asset to our State and to the economic 
development of the downtowns of a number of cities.
    The other way of looking at it, of course, is from the 
point of view of an 18-year-old, a 19-year-old, a 20-year-old, 
or whatever age you want to put on that minor league player.
    So Mr. Brand, from the point of view of that young man, 
would he be better off with the antitrust exemption around or 
not?
    Mr. Brand. Well, from my perspective, I think you are 
better off with it if the idea is that you can sign more 
players and roster them to more places around the country, 
giving you a chance to matriculate to the next level of 
baseball and ultimately around to a 40-man roster. I think that 
would give you more opportunities rather than less.
    Senator DeWine. Understanding that only a small percentage 
make it. That is just the reality, that is life.
    Mr. Brand. Yes. But I think that will be true under any 
system, that a smaller percentage of prospects will make it 
onto a 40-man roster than are drafted.
    Senator DeWine. Mr. Fehr--the same two questions.
    Mr. Fehr. I have a number of responses. First, if you will 
permit me just to say that Mr. Brand referred to a quote 
attributed to me in a Los Angeles paper some 8 years ago about 
wasting money on the minor leagues.
    Senator DeWine. You are kind of slow to respond to that. 
You are usually a little quicker than that.
    Mr. Fehr. Well, there were other questions. But I have no 
memory of that and do not know what it referred to. I want to 
assure everyone that the Players Association has never made 
proposals except in the context of some current issues relating 
to the draft, which I will come to in a second, which would say 
you should dispense with a number of minor league teams, or we 
want you to change funding, or anything like that. We do not 
represent those players.
    There was an issue that troubles us philosophically, and 
that is when we draft vastly more players than we will ever 
have by an order of 9-1/2-to-one, a chance for a substantial 
major league career--
    Senator DeWine. That is what the figures are on the draft?
    Mr. Fehr. Yes. And effectively, what we tell the high 
school players is: ``Do not go to college, play minor league 
baseball,'' knowing that most of them will never make it and 
then will be out of baseball sometime in their mid-twenties 
without a college degree, without any job skills, and without 
any training. That is troubling.
    We have had points made by major league baseball to us in 
prior negotiations that football and basketball have it easier, 
because the colleges do it for them. But we are not out to 
affect the operation of minor league baseball. I do not know 
why the bill on the House side was drafted the way it was, and 
I think Senator Wellstone's comments for the purposes of his 
bill ought to resolve that issue.
    With respect to your specific question, if the antitrust 
exemption was suddenly agreed by everyone to have disappeared, 
what would happen is that a new system would have to be 
developed. I do not think anyone can predict what it would be, 
but the notion that there would be no player restraints and no 
rosters and no set of procedures which would be deemed 
reasonable under the antitrust laws strikes me as a very 
unlikely prospect. I do not think we can predict what it would 
be. Major league baseball still needs to train the players. 
They believe you have to train vastly more than make it in 
order to have the quality to get you to the major leagues, and 
although many more players come out of college than used to, 
you still have large numbers that do not go.
    Senator DeWine. Excuse me. What percentage come out of 
college that make it in the major leagues?
    Mr. Fehr. I do not know that now, but we can certainly 
provide that to you probably by some time next week.
    Senator DeWine. Do you have a guess--just a guess.
    Mr. Fehr. I do not offhand, but my guess is that the number 
of players in the major leagues that have at least some college 
at this point is probably less than 50 percent, but is growing, 
and it is a higher percentage among players who grow up in 
North America as opposed to Latin America.
    We can certainly provide that. That is easily 
ascertainable.
    Senator DeWine. OK. Go ahead. I interrupted you. I am 
sorry.
    Mr. Fehr. The last comment--with respect to the point of 
view of the 18-year-old, it has this principal effect. If a 
player is drafted, he is stuck with the organization that he 
goes into, and if he happens to be a first baseman, and that 
organization is loaded with first basemen, his opportunity to 
advance is going to be retarded as compared to an organization 
that is not.
    From his standpoint, having some choice about where he 
plays would obviously be better.
    Senator DeWine. I am not sure I understand your answer 
about the big picture. I understand your answer, Mr. Fehr, 
about the player, and I appreciate that.
    Can you guess what kind of a world you think we would see? 
Take off your hat as a representative of the players--I mean, 
you have a great deal of experience in baseball--what kind of 
world do you think would evolve?
    Mr. Fehr. You have to remember that the players that are 
contracted now are in most instances not signed by the minor 
league clubs--they are signed by the major league clubs--and I 
think they would have to consider whether or not the current 
system is reasonable or whether it is not--reasonable in an 
antitrust sense--or whether it is not, and if so, they would 
have to make some modifications.
    I find it difficult to believe that major league baseball 
would still not want to operate a very substantial minor league 
system. I think it is probably likely if that happens that 
there would be a renewed interest in exploring whether or not 
the current rules under which the major colleagues play by 
could in some fashion be amended so that you could have more 
college baseball than there now is, even during the summer when 
the colleges are not in session.
    But if you really want me to speculate about that, I would 
prefer to think about it a little more before I respond. It is 
not a subject that I have thought about precisely before.
    Senator DeWine. OK.
    Mr. DuPuy?
    Mr. DuPuy. Senator, I think it is clear that the major 
league would not run the risk of making a decision on whether 
something is reasonable or not and then be subjected to 9-1/2-
to-one times in terms of the number of players seeking treble 
damages under the antitrust laws. While I cannot speculate as 
to what would happen, I agree with Mr. Brand that the 
likelihood is that places like Columbus and Toledo would 
probably survive and have teams either because there would need 
to be places for the highly developed athletes just before they 
reached the major leagues, or because some competitor would 
spring up. But I think the much more likely result in terms of 
the Mahoning Valleys of the world is that we would have 
development camps in the Florida and Arizona areas, in the 
spring training sites; we would run people through development 
camps, and eventually, they might be signed to professional 
contracts rather than run the risk.
    So I think there is a very likely chance that it would have 
a significant negative impact on the number of communities that 
have minor league ball.
    Senator DeWine. Do you want to take on the question of the 
18-year-old? Is it in my interest to have the antitrust 
exemption?
    Mr. DuPuy. I think it is in your interest to be found in a 
development system that operates and treats everyone equally 
and gives them equal opportunity. I think there is more 
opportunity in that system.
    If we go to the few ``haves''--it would be the same as the 
major league clubs who can now afford to sign foreign players. 
There are only a few. And now you have the opportunity where 
you can end up playing for any of 30. Under that system, 
certain clubs can only sign so many young kids, and I think 
some of the other kids would fall by the wayside.
    Senator DeWine. General Swanson or General Butterworth, do 
either of you want to respond?
    Mr. Butterworth. Senator, I am not sure what effect it 
would have. I would assume, since baseball is in the business 
of baseball, and they have to train their players, they are 
going to train their players, whether it be through the minor 
league program which is working right now, or what I like is 
the idea of what I am hearing today, that is, that if in fact 
we have young athletes in this country who are being told do 
not go to college, and your chances are 2 percent in order to 
make it in the major leagues, and you end up staying there 5 
years, you get married, have a couple kids, and then you are 
out there with nothing--to me, that is something that we should 
not be allowing to happen.
    On the 18-year-old, I am sure that anyone who believes that 
he has a talent, and a team is interested in him, the team will 
be able to sign him, if they still can, for a term of years 
anyway. So I do not think it would have that much of an effect.
    But what I am hearing here today really discourages me, 
Senator, with all due respect. If these leagues are telling our 
talented youngsters that ``You are going to be a star,'' when 
only one or 2 percent of them might even make it, in essence, 
ruining their lives and their chance for an education, I think 
that is flat out wrong. We should be encouraging those young 
athletes, if they are eligible, to go into colleges. Florid has 
a lot of good colleges. They have a lot of good baseball teams. 
We have seven college teams right now that could probably beat 
one of our Florida pro teams.
    Mr. DuPuy. Senator, could I respond just on the last point?
    Senator DeWine. Certainly.
    Mr. DuPuy. We do have a college scholarship program for 
minor leaguers to the tune of about $10 million a year. I do 
not want the attorney general to leave here believing that we 
are not trying to see these kids finish school. We do fund a 
college scholarship program.
    Mr. Butterworth. This is the first time I have heard this, 
Senator.
    Senator DeWine. Mr. Brand?
    Mr. Brand. If I might, these people are not conscripted; 
they are paid, and they are also paid $90 million a year in 
signing bonuses. We do not tell them not to go to college.
    Senator DeWine. Now, Mr. Brand, the average player for--
pick a team--and I am not here in any way to criticize the 
minor league system, and I have not taken a position on whether 
we should do away with the antitrust exemption or not, and we 
are asking questions about what impact it would have on minor 
league baseball, and I think I have already said that minor 
league baseball is very important to Ohio--but I find your 
statement a little misleading. There are a number of players 
who do not make very much money who play in minor league 
baseball, and we know statistically that the majority of them 
will not make it to the major leagues. Are those two statements 
I just made not true?
    Mr. Brand. They are paid at a level based on 
classification, and they are paid signing bonuses, some of 
which total up to several million dollars.
    Senator DeWine. But the average player does not get a 
signing bonus of several million dollars.
    Mr. Brand. I do not know what the average signing bonus is. 
I know that down into the draft, that can be into the several 
hundreds of thousands of dollars, down into several rounds of 
the draft.
    My point is--
    Senator DeWine. Would you supply us with that information?
    Mr. Brand. Absolutely.
    Senator DeWine. Again, our job here is not to make this 
decision on that basis, but I think that your implication that 
every kid who is playing in the minor leagues is doing very 
well, I do not think is true. Now, if I am wrong on the 
statistics, you let me know.
    Mr. Brand. No. My point was simply that they do that under 
their free will for a chance--
    Senator DeWine. Oh, absolutely.
    Mr. Brand. For a chance to make it into the major leagues, 
and sometimes with the addition of a substantial signing bonus. 
That is my point, and I have submitted for the record the 
reason why, for a lot of practical reasons, I do not think the 
college system presents an alternative player development 
system.
    Senator DeWine. Why don't you elaborate on that for a 
moment, since that has been raised as an issue?
    Mr. Brand. First, the college schedule is significantly 
reduced. The NCAA has rules about how much can be spent on 
baseball. There are any number of reasons why I do not think 
that system could take the place of the current minor league 
system.
    I think the fact that in most minor league classifications, 
you are playing a 70- to 144-game schedule, a professional 
player is playing baseball and not going to college, a college 
student is studying to be a professional of a different sort. 
So I do not see that as an alternative. I certainly recognizer 
the responsibility that baseball has to remunerate its players, 
and I will supply those for the committee.
    Senator DeWine. Thank you very much.
    Mr. Fehr and Mr. DuPuy, as I noted in my opening comments, 
I believe that baseball's biggest problem is the ever 
increasing level of revenue disparity. The Blue Ribbon Panel 
recommendations, which I have here and which you have both 
obviously spent a lot of time looking at, makes a number of 
recommendations about how to address this problem.
    I would like to ask both of you to tell us first what is 
the status of these proposals--and you got into that a little 
bit a moment ago--do you think these proposals will help 
address revenue disparity?
    Does the antitrust exemption or the possible repeal of it 
impact on the ability of baseball to implement these proposals?
    Specifically, I would like to hear your comments on the 
impact of the antitrust exemption on baseball's ability to 
implement greater revenue sharing and more extensive 
competitive balance tax, minimum club payroll, draft reform, 
unequal distribution of central fund revenues.
    I would also like to ask the panel to comment on the impact 
of the antitrust exemption with regard to franchise relocation 
and contraction.
    Let me go through these one by one, and I know I was going 
fast, and I did not expect you all to take notes, but let me go 
through these, Mr. Fehr and Mr. DuPuy, one by one, just a 
summary of the recommendations, and give us some indication--
two questions--does antitrust impact the ability to achieve 
this, and second, what is your opinion about this--and I 
assume, Mr. DuPuy, you like it because it is part of the 
recommendation. I do not know that, but you can tell us if you 
do not like it. And Mr. Fehr, tell us whether this is something 
that is viable.
    I understand, Mr. Fehr, that this is something that is 
subject to negotiation, and I also understand that your 
position on one issue may affect your position on another, and 
I understand how bargaining goes. But give us some indication 
of whether any of these are totally out of the ball park or 
whether they can at least be discussed and what your opinion is 
of them.
    Let me start with the first recommendation, that major 
league baseball should share at least 40 percent and perhaps as 
much as 50 percent of all local revenues after local ball park 
expenses are deducted under a straight pool plan.
    Why don't we start with you, Mr. Fehr?
    Mr. Fehr. Let me make a couple of preliminary comments, 
Senator. The Blue Ribbon report is an interesting document; I 
want the record to be sure to reflect the following, however. 
Its members were selected by the major league owners. All of 
them had prior or existing relationships with the major league 
owners. The deliberations of the Blue Ribbon Panel to the 
extent they were conducted with anyone were not conducted with 
representatives of the players, with the exception of one 
proceeding which took less than an hour, most of which was 
taken up in pleasantries.
    We tended to look at that when it came out, I suspect, much 
as you might if your Democratic colleagues on an issue selected 
a blue ribbon panel of people they were familiar with and came 
out with conclusions and said, ``Let us go with it.''
    Second, hopefully, we will not be engaged in bargaining by 
public relations, but one can argue that the release of the 
report and so on was designed principally to affect bargaining, 
because the recommendations that you referred to, which are the 
core of the report, constitute in the main bargainable issues.
    With that said, when you look at how these matters should 
be addressed in bargaining, in the discharge of my 
responsibilities, we do two things. We do look at the issues 
separately, but what we attempt to look at is the combined 
effect of whatever series of procedures you have in place on 
two things--the entrepreneurial activity of the clubs, how does 
it affect what they do with players and otherwise. We all know 
that things like tax rates affect behavior; that is why you 
have so many debates about that kind of thing in this body.
    Secondly, we try to ask what do we think is the likely 
effect on players; and then, third, we say that regardless of 
how we view these things in the abstract, we understand that we 
have an obligation to bargain in good faith about them. The 
club puts it on the table, as they do with proposals we make, 
and we would.
    On the 40 percent or perhaps 50 percent revenue sharing, in 
our view, there are two issues there outside of what additional 
revenue sharing or similar-type measures might compound the 
difficulty of understanding what the effects would be.
    The first one is we believe there ought to be additional 
revenue sharing. We made a proposal in that regard. It was--and 
I do not think I will compromise the bargaining process by 
suggesting it was an initial proposal. We hoped to get a 
response back which moved in our direction; it has not happened 
yet.
    But there is no doubt in my mind there will be significant 
additional revenue sharing of one type or another.
    There is a phrase in there, though, called ``straight 
pool'' which I also want to comment on. We have in the current 
agreement what is known as a ``split pool,'' and in 
oversimplified shorthand, what that means is that we have a 
revenue sharing pool put together--and obviously, the clubs 
with higher revenues contribute vastly more than the clubs with 
less revenue--and then, what we do is we split a part of that 
out which goes exclusively to the recipient clubs and most of 
it to the clubs at the bottom, and then we divide the rest of 
it equally. That is why it is called a ``split pool.''
    When you go to a ``straight pool,'' that changes. What 
happens is instead of splitting a part out for the clubs that 
are the recipient clubs and the ones that need it the most at 
the bottom, you divide it all equally without splitting that 
out and then divide the rest of it equally. That has the 
effect, at whatever amount of revenue sharing you have, of 
diverting money from the clubs at the bottom and giving it to 
the clubs in the middle.
    So the question we have asked about that is why do you want 
to divert money from the clubs at the bottom and give it to the 
clubs that have higher incomes in the middle--at whatever level 
of revenue sharing, that is the effect.
    The only answer I can come to is that there are more votes 
in the middle of clubs. That is a problem we have because when 
you come to issues like contraction and the issues we have to 
bargain with, anything which operates in that way as compared 
to a split pool makes the pressures on the clubs that have less 
income more rather than less severe.
    Senator DeWine. Mr. DuPuy?
    Mr. DuPuy. I did not really hear an answer whether Mr. Fehr 
liked it or did not like it, but if that is your question, we 
do like it. And the comments about the Blue Ribbon Panel 
report--
    Senator DeWine. Excuse me.
    Mr. Fehr, did you say you liked it or did not like it?
    Mr. Fehr. I said that there would have to be additional 
revenue sharing, and it has to be negotiated.
    Senator DeWine. So you are for the concept of additional 
revenues.
    Mr. Fehr. Additional revenues--yes.
    Senator DeWine. OK.
    Mr. DuPuy. In terms of the effect of the antitrust laws, in 
terms of across the table, Senator, I think the antitrust laws 
have no place. In terms of the collective bargaining agreement, 
we have a different statutory framework, the National Labor 
Relations Act. But in terms of the ability to--
    Senator DeWine. It has no impact, you say?
    Mr. DuPuy. In terms of the negotiations between the players 
and the club.
    Senator DeWine. Right--a labor issue, right?
    Mr. DuPuy. Right. But in terms of the ability to implement 
that within the club network, it has a most certain impact.
    Senator DeWine. What does that mean?
    Mr. DuPuy. Because theoretically -let us take a team, the 
Biloxi Senators, who happen to be the major revenue producer in 
major league baseball--and the clubs would vote to have 50 
percent straight pool revenue sharing, let us say. But the 
Biloxi Senators might be unhappy about that. They might in turn 
file an antitrust suit against the other owners in baseball. In 
that respect, in my view, the antitrust exemption is very 
useful in terms of operating as we believe we should be 
treated, as a single business.
    Professional sports leagues, as you know, are a unique 
blend of cooperation and competition. You cannot have a league 
with one team--it is like one hand clapping. And you cannot 
have a team without a league; otherwise, you have the Harlem 
Globetrotters barnstorming. We need a league. We need a league 
of competitive teams, and the antitrust exemption helps within 
that framework, but not in terms of the bargaining process, I 
concede. The bargaining process is covered by the National 
Labor Relations Act.
    Senator DeWine. Do you want to comment on the issue of 
going to a ``straight pool''? You heard Mr. Fehr's comment, and 
I want to know if you want to comment on that.
    Mr. DuPuy. The club votes are the commissioner's business, 
frankly, and not Mr. Fehr's. The commissioner has indicated 
that he has the votes for the Blue Ribbon Panel report; he 
recommended the Blue Ribbon Panel report, and we are prepared 
to negotiate the Blue Ribbon Panel report. We have attempted to 
negotiate the Blue Ribbon Panel report, and the preference is 
for the ``straight pool'' plan, which the commissioner and the 
clubs believe is a fairer method of allocating.
    Senator DeWine. Would you like to respond to that at all, 
Mr. Fehr?
    Mr. Fehr. I guess just a couple of things. The club's 
bargaining position certainly has been as Mr. DuPuy has just 
suggested. But when we look at this, again, we look at two 
things. We have an obligation to the membership to try to 
ascertain how clubs will behave differently and what the effect 
on players will be, and without getting into the issue of 
individual club votes, although there are some very interesting 
and fascinating issues there, we think that the ``split pool'' 
on balance is a better approach because of the factors that I 
described before.
    The only other comment I would make is to harken back to 
the first testimony I ever gave before this committee. Clubs 
and leagues want to describe themselves as single businesses, 
single entities. There is a lot of debate about whether they 
are or are not. But the central premise of the antitrust laws 
is that if you have a single entity in a market, and it is the 
only entity, you have a problem.
    Senator DeWine. Mr. DuPuy, on the issue of the Biloxi 
Senators, just to clarify, isn't it true that even if you did 
not have the antitrust exemption, you would be under basically 
a rule of reason--if it is a reasonable effort to share 
revenue, it is OK. In the NFL, the NBA, that is how they have 
to operate; true?
    Mr. DuPuy. Absolutely.
    Senator DeWine. They do it.
    Mr. DuPuy. Absolutely.
    Senator DeWine. Let me ask if anybody else on the panel 
wants to comment on anything that has been said about this 
proposal before I move to the next proposal. Does anybody want 
to jump in?
    [No response.]
    Senator DeWine. OK, good. The second proposal is that major 
league baseball should levy a 50 percent competitive balance 
tax on club payrolls that are above $84 million.
    Mr. Fehr?
    Mr. Fehr. There are two things about that. First of all, 
the proposal we got from the clubs, in fairness, was not at $84 
million; it was at $98 million, the difference essentially 
reflecting the increase in league revenues from the time the 
blue ribbon report was written until the time of bargaining.
    Secondly, as we approach this, we look at it in two ways--
what is the combined effect of what they call a ``competitive 
balance tax''--I think they have a good PR person to call it 
that; it used to be called a ``luxury tax''--but what it is in 
effect is a procedure which says that we will penalize someone 
financially for hiring an employee. That, you will understand 
and I think everyone will appreciate, is a difficult problem 
for people who represent employees. We do not think players are 
luxuries, et cetera.
    We had a luxury tax in the early years of the agreement 
which just expired. It went away as the level of revenue 
sharing increased. Our position has been as follows and remains 
that we do not like luxury taxes, we do not think they are 
necessary. If you are going to have one, this particular 
vehicle does not strike us as an appropriate way to go, and we 
think that these matters can be resolved with revenue sharing.
    In any event, it looks like revenue sharing and that 
discussion ought to follow the revenue sharing discussion.
    Senator DeWine. Mr. DuPuy?
    Mr. DuPuy. Senator, the teams like the luxury tax--frankly, 
the teams would prefer a salary tax like the NFL has, like the 
NBA has. They recognize, based on the history of negotiation, 
that they could not achieve a salary cap in baseball without a 
devastating and perhaps lengthy work stoppage. No one wants a 
work stoppage. So the clubs proposed something that the players 
lived with under the earlier agreement, lived with under the 
last agreement, without apparently any appreciable impact on 
the rising salaries. This is an attempt to bring payrolls back 
together, to make payrolls closer and therefore give more money 
to distribute to the other clubs, to the Cincinnatis of the 
world, so as to allow them to sign players.
    The idea that this will act as a restraint on the Biloxi 
Senators--if the Biloxi Senators are in a pennant race, and 
they want to acquire a player in September to help them over 
the hump, they will do so whether they have to pay a $2 million 
luxury tax or a $1 million luxury tax, or competitive balance 
tax, or a $500,000 competitive balance tax. It is the same 
principle that allows people to buy homes. If you ever look at 
what you pay in total in terms of the interest you pay on your 
house when you acquire your house, you would never buy a house. 
But the teams will continue to acquire players to win pennants.
    Senator DeWine. Let me move to the third proposal--and 
again, any of the panel members can jump in if you have a 
comment about any of this, but we need to keep moving. The 
third proposal is that major league baseball should use unequal 
distribution of new central fund revenue to improve competitive 
balance, creating a commissioner's pool that is allocated to 
assist low-revenue clubs in meeting a minimum club payroll of 
$40 million.
    Mr. Fehr?
    Mr. Fehr. With respect to that, I think the initial 
proposal for uneven distribution of central fund revenue was 
probably ours about 10 years ago, or maybe a little less long 
ago than that.
    It is an issue that is open for discussion. We have made 
proposals on it, and they have made some. I would expect it to 
be discussed. I cannot tell you whether it will be part of the 
eventual agreement, but it is a subject which has been 
discussed.
    Obviously, you get into the magnitude of it, the 
circumstances under which it is distributed, what does it mean 
when you say ``unequal distribution'' and all the rest.
    Senator DeWine. Mr. DuPuy?
    Mr. DuPuy. We are for it.
    Senator DeWine. The next proposal is that major league 
baseball should conduct an annual competitive balance draft of 
players.
    Mr. Fehr. In that case, that was not part of the initial 
suggestions made by the clubs to us. We recently asked them 
about that, and they indicated to us that that was something 
that they would be willing to consider. I expect we will have 
further discussions about it.
    In that regard, I should point out that we view things like 
moving draft choices around, moving players around on rosters, 
as an item which could be in many respects a significant aid to 
clubs that need it, not as an add-on to everything else, but 
perhaps in substitution for part of the other things. I expect 
that we will continue discussing that.
    Senator DeWine. Mr. DuPuy?
    Mr. DuPuy. We did not include it in our original proposal 
because we thought it was objectionable to the players. Given 
their more recent statement of receptivity, we are revisiting 
that issue.
    Senator DeWine. The next proposal is that major league 
baseball should reform the Rule 4 draft process.
    Mr. Fehr?
    Mr. Fehr. The Rule 4 draft is the so-called amateur draft. 
That is an issue about which the parties have had very 
substantial discussions, and I would expect those to be 
ongoing.
    It is one which is a little bit of a tricky bag, however, 
and I want to just indicate one reason why. In baseball, we 
sometimes talk about things that are a little bit peculiar from 
the outside, but in this set of circumstances, we would be 
talking about reforming an amateur draft which would affect 
principally individuals who will never become members of our 
bargaining unit. That makes the process a little difficult. But 
I do expect those discussions to continue.
    Senator DeWine. Mr. DuPuy?
    Mr. DuPuy. The purpose is to get all eligible players 
available to all teams so as, again, to help the competitive 
imbalance problem. So we are for it.
    Senator DeWine. The next item is that major league baseball 
should utilize strategic franchise relocations when necessary 
to address the competitive issues facing the game.
    I think we have probably exhausted that issue by now, 
unless someone wants to add anything more to that.
    [No response.]
    Senator DeWine. Finally, major league baseball should 
expand its initiatives to develop and promote the game 
domestically and internationally, and I assume everybody is for 
that.
    Mr. Fehr. Yes.
    Mr. DuPuy. Yes.
    Senator DeWine. Let me ask the members of the panel if 
anyone has any additional closing comments that they want to 
make--I am sure you are all ready to go and have lunch.
    Mr. Butterworth. If I could make one quick comment, 
Senator.
    Senator DeWine. Yes, General Butterworth.
    Mr. Butterworth. What happened here started in 1922 when 
one branch of Government decided they wanted to legislate. Our 
Founding Fathers probably would never have allowed the United 
States Supreme Court to do what they did, but I think the U.S. 
Supreme Court did what they thought was right under the 
circumstances of baseball at that particular point in time in 
order to put some integrity into the sport. Then, when Congress 
looks at it later and says, well, it is so obvious that they 
messed up, we are not going to take any action--in fact, when 
you look at it, if in fact they do have an exemption, 
professional baseball is the only industry in the United States 
that is exempt from the antitrust laws without being subject to 
alternative regulatory supervision. Congress decided that, 
``This is such a slam-dunk, we are going to let the United 
States Supreme Court decide it again,'' and the United States 
Supreme Court decided it again. They said, ``Congress, you 
really should decide this.''
    Those of us like Lori and myself who are in the trenches in 
Minnesota and in Florida--I have a Florida Supreme Court that 
says the antitrust exemption is only a reserve clause. Lori's 
Supreme Court says no--it is everything. I have a Federal court 
judge who says no--now it is everything. Lori has a district 
court judge that is going with her.
    So, please, we need help.
    Senator DeWine. Anyone else?
    Mr. Fehr?
    Mr. Fehr. Only, Mr. Chairman, that it does seem to me that 
to the extent there are public/private policy issues sufficient 
to attract the attention of the Congress, if there is to be an 
exemption, someone ought to articulate what it is, be satisfied 
that the appropriate demonstration of need has been made, so 
that we do not have these kinds of uncertainties.
    Senator DeWine. I think the testimony has been very 
helpful, and I thank you all very much.
    Let me just make one final comment. I believe that all the 
problems that we have discussed today--and we have discussed 
many problems--that the bulk of the problems of organized 
baseball will in fact be solved if you solve the disparity in 
income problem.
    I believe that baseball will never be truly healthy, will 
never be truly competitive, will never truly be the sport that 
we all love so much and that we know it can be again, unless we 
solve this competitive problem.
    So, Mr. DuPuy and Mr. Fehr, I think you have a big 
responsibility, and it is a responsibility, quite candidly, 
that goes beyond your responsibility to your respective 
parties, beyond your responsibility to the owners, beyond your 
responsibility to the players. I think that is the great 
tradition of baseball and the history of baseball, and I 
believe some obligation--a compelling obligation--to the fans.
    So we wish you well. Thank you.
    Mr. Fehr. Thank you, Senator.
    Mr. DuPuy. Thank you.
    Senator DeWine. The hearing is adjourned.
    [Whereupon, at 1:40 p.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]

                         QUESTIONS AND ANSWERS

 Responses of Stanley M. Brand to questions submitted by Senator Leahy

    Question 1. In your testimony you contend that professional 
baseball continues to enjoy antitrust immunity and that minor league 
baseball is likewise immune from federal antitrust law. On what do you 
base your contention that minor league baseball is immune from federal 
antitrust laws? In your view, when did minor league baseball first gain 
immunity from federal antitrust laws?
    Answer. Minor League Baseball is exempt from the antitrust laws 
based on the rationale of the Supreme Court's various decisions on the 
subject, the decisions of lower federal courts, and Congressional 
action. This ``immunity'' or ``exemption'' dates back to the Supreme 
Court's 1922 decision in Federal Baseball Club of Baltimore, Inc. v. 
National League of Professional Baseball Clubs, 259 U.S. 200 (1922). 
The rationale for the decision of the Supreme Court in Federal Baseball 
was not limited to the Major Leagues but applied generally to the 
``business of baseball.'' Federal Baseball Club of Baltimore, Inc. v. 
National League of Professional Baseball Clubs, 259 U.S. 200 (1922). In 
1946, a federal district court in the state of Washington observed in 
dicta in a case involving claims against a minor league baseball club 
that ``professional baseball did not constitute commerce in the 
commonly-accepted use of those words,'' relying on the Supreme Court's 
1922 decision. Niemiec v. Seattle Rainier Baseball Clubs, Inc., 67 F. 
Supp. 705, 712 (W.D. Wash. 1946). Since that time other federal courts 
have specifically held that the baseball antitrust exemption applies to 
minor league baseball. See, e.g., Portland Baseball Club, Inc. v. Kuhn, 
368 F. Supp. 1004 (D.Or. 1971), affd, 491 F.2d 1101 (9th Cir. 1974) 
(per curiam); Moore v. National Association of Professional Baseball 
Clubs, No. C78-351 (N.D. Ohio 1976); New Orleans Pelicans Baseball, 
Inc. v. National Association of Professional Baseball Leagues, Inc., 
No. 93-253 (E.D. La. March 1, 1994). When Congress has in the past 
taken up the subject of the baseball antitrust exemption, it 
specifically examined ``Organized Baseball,'' referring to the 
combination of the two major leagues (the National and American) and 
the 17 minor leagues represented by the National Association of 
Professional Baseball Leagues that have, for over 90 years, contracted 
with one another to abide by certain rules and regulations. See 
Organized Baseball: H.R. Rep. No. 2002, 82 Cong., 1st Sess. 12-43 
(1952).
    This record of judicial and legislative recognition of the 
antitrust immunity afforded minor league baseball creates a strong 
reliance interest recognized by the Supreme Court in its 1957 decision 
in Radovich v. National Football League, 352 U.S. 445, 450-451, reh'g 
denied, 353 U.S. 931:

        ``. . .vast efforts had gone into the development and 
        organization of baseball since that [Federal Baseball] decision 
        and enormous capital had been invested in reliance on its 
        permanence.

    Congress had chosen to make no change. All this, combined with the 
flood of litigation that would follow its repudiation, the harassment 
that would ensue, and the retroactive effect of such a decision, led 
the Court to the practical result that it should sustain the 
unequivocal line of authority reaching over many years.'' 352 U.S. at 
450-451.

    Question 2. You testified that you consider the Vermont Expos a 
``viable minor league club,'' and that you believed it was only 
``theoretically'' possible that the club would be eliminated after the 
expiration of the current contract in 2003. What concrete assurances 
can you provide that the Vermont Expos will continue to exist within 
the baseball minor leagues beyond two years? Do the minor leagues have 
to gain the approval of the major league owners to continue a minor 
league team in existence?
    Answer. It is only ``theoretically possible'' that a minor league 
club such as the Vermont Expos would be eliminated as no longer viable 
after the Professional Baseball Agreement expires in the sense that the 
major leagues might try to reduce their support for the minor leagues, 
especially if the antitrust laws are changed. I consider that to be 
``theoretical'' or speculative because the parties have, especially in 
recent years, worked well together to assure that Minor League Baseball 
receives the necessary support to continue in viable markets. The minor 
leagues do not have to gain approval of major league owners to continue 
a minor league team in existence.

    Question 3. In 1997 we heard testimony from a former minor league 
player who played with affiliated minor league teams and with the St. 
Paul Saints of the independent Northern League. He indicated that under 
the standard minor league player contract, a player was required to 
waive all rights to appeal any action by the team in State or federal 
court and that the only avenue of appeal is to the Commissioner of 
baseball. Is that accurate? What does the player contract for minor 
league players provide with respect to player's rights, the reserve 
clause and compensation? That player questioned why Congress would want 
to ``create a new federal law exempting the owners' actions in the 
minors from the antitrust laws.'' He asked:
    ``What are the laws [owners] must be able to break in order to run 
minor league teams? How much more power do they need when bargaining 
with an 18-year old kid whom they own for 7 years, and what minor 
league player is going to jeopardize his career by challenging the 
system?'' Since no minor league player testified this year, I ask them 
of you on their behalf.
    Answer. A copy of the current uniform Minor League player contract 
is attached. As with a growing number of employment agreements in many 
industries, it contains alternative dispute resolution (``ADR '') 
language. The Supreme Court has endorsed ADR, even to resolve statutory 
discrimination claims, most recently in Circuit City Stores, Inc. v. 
Adams,-- U.S.----, 149 L. Ed. 2d 234, 121 S. Ct. 1302 (2001).
    In answer to the former minor league player's questions, Minor 
League Baseball is not requesting a change in the law but a 
continuation of baseball's status as excluded from the antitrust laws. 
Actually, minor league prospects have a good deal of leverage in 
bargaining with Major League teams, as indicated by the burgeoning 
signing bonuses paid to drafted players and their ability to decline to 
sign with the club that drafts them and re-entering the draft pool. 
Recent examples abound of players declining to sign and playing clubs 
off one another to bid up signing bonuses. The magnitude of the signing 
bonuses and the number of players who receive significant bonuses 
indicate bargaining power that players entering baseball have acquired.
    Several players or their agents have used these strategies to 
significantly increase their economic well-being and the reality of the 
power of players is no longer as portrayed by the minor league player 
referred to in your question, if that was ever the case.

    Question 4. If you were to suggest language for a statutory federal 
antitrust exemption for minor league baseball, what would it say?
    Answer. Minor League Baseball believes that the Supreme Court 
decisions creating the baseball exemption are clear and that statutory 
language is therefore not necessary. If this were to be confirmed by 
Congress, we suggest that appropriate language would make it clear that 
federal and state antitrust laws do not apply to the business of major 
league and minor league baseball, including but not limited to all of 
the areas listed in subsection (b) of the Curt Flood Act.

    Question 5. I am uncertain from your testimony whether you believe 
that the minor league draft for players, the minor league reserve 
clause, and the Professional Baseball Agreement between major league 
teams and the National Association of Professional Baseball Leagues 
would withstand federal antitrust scrutiny if challenged. For each of 
these aspects of the minor leagues about which you testified, do you 
believe that would be upheld as reasonable if challenged as contrary to 
federal antitrust law?
    Answer. I believe each of the aspects of baseball's operations is 
reasonable given the unique nature of sports leagues which require 
cooperation to produce on-field competition. But after having been 
permitted and encouraged to develop for 80 years without the risk and 
expense associated with such challenge, Minor League Baseball's future 
should not now be gambled in countless courtrooms.

    Question 6. You note that because minor league players are not part 
of any collective bargaining unit and that the minor league player 
draft is not protected by the labor antitrust exemption as the result 
of collective bargaining with a labor union. Is one solution to that 
problem collective bargaining with minor league players?
    Answer. Minor League Baseball does not believe that collective 
bargaining at the minor league level is appropriate, or that collective 
bargaining would benefit players, fans or teams.

    Question 7. In 1922, the Supreme Court held that professional 
baseball was personal effort and not a subject of ``commerce'' and 
that, therefore, the actions of the National League, American League 
and individuals in allegedly conspiring to monopolize the business of 
baseball by destroying the Federal League were not to be subject to 
scrutiny under the Sherman Anti-Trust Act. Do you contend that minor 
league baseball is immune from federal antitrust laws on that basis? Do 
you contend that minor league baseball is exempt from federal antitrust 
laws? If so, what is your basis for that contention?
    Answer. Yes, see my answer to question no. 1, above.

    Question 8. Please help us understand the history of the minor 
leagues. (A) Is it true that from 1914 and continuing for 25 years, 
Judge Kennesaw Mountain Landis, while serving as commissioner of 
baseball, on a number of occasions acted to oppose secret agreements 
and handshake deals between major league interests and minor league 
baseball teams and had occasion to declare a number of minor league 
players free agents? Please provide a description of the actions taken 
and basis therefore. (B) Am I correct that in 1914, the National 
Commission that governed the National League and American League had 
prohibited major league teams from owning minor league teams or 
developing a farm system and that minor leagues also acted to prohibit 
major league owners from also owning minor league teams? (C) Is it 
accurate that in 1921, the National Agreement among major league owners 
allowed major league teams to own minor league teams? (D) Is it true 
that in the Cedar Rapids case in 1938, Commissioner Landis made a 
ruling that resulted in as many as 90 minor league players becoming 
free agents? (E) Is it true that in 1939, ``major league baseball 
owners sought legislation to codify relations between big league teams 
and minor league teams,'' as Peter Golenbock writes in The Spirit of 
St. Louis? What was that legislation and what happened to it?
    Answer. I have not been able to confirm the actions of the Baseball 
Commissioner and National Commission between 1914 and 1939 about which 
your question asks.

    Question 10. 1 believe that at least one of the bidders for the 
Boston Red Sox was Miles Prentice, a minor league owner. From his 
experience in connection with the minor leagues, do you have any reason 
to doubt that Mr. Prentice would make an outstanding baseball team 
owner? What is your understanding why Mr. Prentice's bid and the other 
higher bids for the Boston Red Sox were rejected and Mr. Henry's bid 
was preferred by the other major league baseball owners?
    Answer. Based on his minor league experience, I have no reason to 
doubt that Miles Prentice would make an outstanding Major League owner. 
I have no knowledge of the reason why the Major Leagues made their 
decisions concerning the sale of the Boston Red Sox.

    Question 11. Which minor league baseball teams include owners from 
racial minorities, and what percentage of those teams is owned by 
members of a minority group?
    Answer. Minor League Baseball does not ask prospective owners about 
their race or ethnicity and does not keep records of such 
characteristics.

    Question 12. Please provide the Committee with a current copy of 
the Professional Baseball Agreement governing the relationship between 
the major and minor leagues.
    Answer. A copy is attached.

    Question 13. Is it your understanding that the provisions of the 
Curt Flood Act apply to independent 5 minor league teams? Do those 
teams enjoy the exemption from the antitrust laws that you claim for 
the affiliated minor leagues?
    Answer. It is not my understanding that the Curt Flood Act applies 
to so-called independent minor league teams, which are not part of the 
professional baseball system of major league and affiliated minor 
league teams that evolved in reliance on the Supreme Court's 1922 
decision.

    Question 15. We have heard concerns that the major league interests 
and their affiliated minor league have been attempting to prevent or 
discourage the development or expansion of the independent minor 
leagues. Is this true? Are there any restrictions in major or 
affiliated minor league policies, formal or informal, on ownership or 
other types of participation in both affiliated and independent minor 
league teams? Have the geographical divisions of territory of the major 
and affiliated minor leagues been used to discourage the development or 
expansion of independent minor league play? Even if your answer is 
``no,'' please explain those geographical allocations of territory, and 
how they affect the locales in which the independent teams may operate.
    Answer. Minor League Baseball supports the growth of professional 
baseball where it can be viable and not threaten public investments in 
existing facilities. Minor League Baseball restricts members of its 
teams' ownership groups from direct and indirect violations of their 
mutual agreements. Those agreements include provisions that provide 
reasonable recognition to territorial exclusivity. Those provisions are 
included in the National Association Agreement, a copy of which is 
attached.

    Question 16. I understand that time at the hearing was limited, so 
if you would like to expand on any of your own responses, or respond to 
any comments made by other members of the panel, please do so.
    Answer. During the testimony by the panel on February 13, 2002 a 
question was raised about the source of a quote attributed to Mr. Fehr. 
I later corresponded with Mr. Fehr, and a copy of my letter and the 
newspaper article in which he was quoted is attached. I ask that they 
be made a part of the record.

                                

     Responses of Mr. Brand to questions submitted by Senator Hatch

    Question 1. Mr. Brand, as was discussed during the hearing, the 
current contract between Major League Baseball and Minor League 
Baseball will expire at the end of 2003 season. What are the legal 
obligations on Major League Baseball, if any, to support the same 
number of minor league teams in the 2004 season as are playing today? 
Could you please explain the obligation of Major League Baseball to 
support any minor league clubs in 2008. 2012, or 2016?
    Answer. The PBA will not necessarily terminate with the end of the 
2003 season, but is only subject to termination in the event certain 
conditions occur as specified in the PBA. A copy of the PBA is 
attached. Minor League Baseball hopes and expects to renew the PBA 
whenever it expires, and that it will include the same level of support 
for the minor leagues (in large part because MLB's continued support of 
the minor leagues helps to justify the exemption baseball enjoys from 
the antitrust laws).

    Question 2. What is the process by which a minor league team 
becomes a member of one of the leagues of the National Association of 
Professional Baseball Leagues? How does such a team become affiliated 
with a major league club and how is the level of play determined? Once 
a club is affiliated at a certain level, such as at AAA, can it be 
switched to a different league? Have there ever been more AAA teams or 
AA teams than there are major league clubs?
    Answer. The process by which leagues can apply for membership in 
the National Association of Professional Baseball Leagues is spelled 
out in the NAA, a copy of which is attached. Expansion of affiliated 
leagues is governed by the NAA and portions of the Major League Rules 
that are a part of the PBA, a copy of which also is attached. The 
affiliation process and level (``classification '') of play also are 
governed by these same agreements and rules. A club at a classification 
is not switched to a different league, but occasionally clubs may 
relocate to other home cities, either because that city is vacant or 
through a draft of a territory by a league of higher classification. 
Again, the process for such is spelled out in the attached agreements 
and rules.

    Question 3. Has there ever been any communications or direction 
from Major League Baseball to its clubs to ensure that all affiliations 
between major league teams and minor league teams expire at the same 
time or prior to a new round of negotiations between Major League 
Baseball and National Association of Professional Baseball Leagues?
    Answer. Not to my knowledge, except as pursuant to the terms of the 
PBA.

    Question 5. Mr. Brand, has there been any discussion among the 
members of your organization concerning the possibility of contraction 
of minor league clubs and the consequences for current owners?
    Answer. Yes, because of the publicity and attendant speculation.

    Question 6. If Major League Baseball does proceed with its stated 
plans to contract the number of major league clubs, which has ranged 
from two to six according to various news reports, and as a result, the 
number of minor league clubs is reduced after the end of the 2003 
season, what legal alternatives are available to local jurisdictions 
that either lose a team or see their current team replaced with a club 
playing at a lower level, such as AAA team being replaced with a AA or 
A team?
    Answer. See answer to question no. 1 above.

    Question 7. As you indicated during the hearing, the Committee does 
lack some basic information about the status and operation of the minor 
leagues. Consequently, please provide the following information about 
the 206 clubs which belong to your organization:
    A. The number of clubs which play in facilities which were built 
either in total or in part with taxpayer funding;
    Answer. In the United States, the National Association of 
Professional Baseball League clubs in Lexington, Kentucky, Memphis, 
Tennessee and Chattanooga, Tennessee currently play in facilities built 
without taxpayer funding.
    B. The number of minor league clubs with either lease agreements or 
other contractual arrangements with local jurisdictions for terms that 
extend beyond the 2003 season;
    Answer. 97
    C. The number of clubs that, last season, played in a facility that 
was built or remodeled after 1995; and
    Answer. Every National Association of Professional Baseball League 
facility has been remodeled or constructed after 1995.
    D. The number of minor league facilities that were remodeled or 
constructed to comply with the requirements of the current Professional 
Baseball Agreement.
    Answer. All.

    Question 8. Please provide an explanation of the legal alternatives 
open to a local jurisdiction in instances where a major league club 
terminates a minor league club's affiliation and there are still 
outstanding legal agreements with either a governmental entity or 
private companies. Are there any damages that may be recoverable for 
the cost of upgrades, renovations, or new construction of stadia in 
order to comply with the requirements of the Professional Baseball 
Agreement?
    Answer. See answer to question no. 1 above.

    Question 9. Mr. Brand, in your written statement, you indicated 
that one of the benefits of baseball's antitrust exemption is the 
stability that it can bring to both major league and minor league 
franchises. This Committee has received testimony in the past that 
between 1987 and 1993, there were 49 minor league franchise 
relocations. Would you please provide a list of the franchise 
relocations or changes in affiliations that have occurred between 1994 
and 2001?
    Answer. The Minor League Baseball teams that have relocated during 
the six years between 1994 and 2001 are as follows:

 
------------------------------------------------------------------------
            Relocated to                        Relocated From
------------------------------------------------------------------------
  Akron, OH........................                                    Canton, OH
  Lowell, MA.......................                          Elmira, NY
  Salisbury, MD....................                          Albany, GA
  Lancaster, CA....................                         Riverside, CA
  Mobile, AL.......................                       Wilmington, NC
  Jackson, TN......................                         Memphis, TN
  Salem-Keizer, OR.................                      Bellingham, WA
  Pulaski, VA......................                      Huntington, WV
  Myrtle Beach, SC.................                           Durham, NC
  Tucson, AZ.......................                         Phoenix, AZ
                          Fresno, CA                         Tucson, AZ
  Dayton, OH.......................                        Rockford, IL
  Niles, OH........................                            Erie, PA
  Missoula, MT.....................                 Lethbridge, Alberta
  Round Rock, TX...................                         Jackson, MS
  Lakewood, NJ.....................                     Fayetteville, NC
  Staten Island, NY................                       Watertown, NY
  Sacramento, CA...................                        Vancouver, BC
  Orange County, FL................                         Orlando, FL
  Brooklyn, NY.....................                                St. Catharines, Ontario
  Sevierville, TN..................                       Knoxville, TN
  Vancouver, BC....................                         Medford, OR
  Troy, NY.........................                      Pittsfield, MA
  Portland, OR.....................                     Albuquerque, NM
  Pasco, WA........................                        Portland, OR
  Casper, WY.......................                           Butte, MT
  Provo, UT........................                          Helena, MT
------------------------------------------------------------------------

    Some of the relocations listed above occurred because of expansion, 
and resulted in Minor League Baseball being played in an additional 
market. For example, the Durham Single A club relocated to Myrtle Beach 
to permit an expansion AAA club to locate in Durham. Others were 
relocations within the same market (e.g. Knoxville to Sevierville, 
Tennessee).

    Question 10. Would you please describe the average and median 
salaries of players at the AAA level, the AA level, the A level, and 
the rookie level?
    Answer. Major League clubs pay the salaries of these players, who 
are under contract to those clubs, and Minor League Baseball therefore 
does not have the information on player salaries, bonuses, etc. 
necessary to answer this question.

    Question 11. Mr. Brand, in the early 1990s, the President of the 
National Association of Professional Baseball Leagues asked Congress to 
repeal baseball's antitrust exemption. You now assert that the minor 
league clubs are the primary beneficiaries of that exemption. Please 
explain the change in position.
    Answer. To the best of my knowledge and information, no President 
of the National Association of Professional Baseball Leagues has taken 
the position that Congress should repeal baseball's antitrust 
exemption. There has been no change in the organization's position.

    Question 12. Mr. Brand, I have read the standard contract that 
every minor league player is required to sign to play professional 
baseball. Would you please explain the origins or reasons why a player 
is bound to a major league organization in the standard minor league 
contract for a period of seven seasons? Would you also explain why it 
is necessary, in the Minor League Uniform Player Contract, for a player 
to assign to the club all rights involving his likeness for a term that 
exceeds the contractual relationship? I should note that the 
description of the photographs or motion pictures does not appear to be 
limited to those involving baseball.
    Answer. The term of a minor league baseball player's contract (up 
to a maximum of seven seasons) strikes a reasonable balance between the 
player's interest in free agency and a major league club's interest in 
realizing a potential return on its investment in developing a player. 
If the major league clubs paid a player in his early minor league 
years, developed a prospective star, and then had no assurance he would 
be available to play for the major league club for any length of time, 
there would be significantly reduced incentive to provide players for 
the rosters of the many clubs that comprise Minor League Baseball.
    The Minor League Uniform Player's contract specifies that use of a 
player's likeness continues after the contract ends so as to prevent 
disputes about whether the minor league club is liable if it, for 
example, offers as a promotional item in a subsequent season the image 
of a player made while that player was in the minor league club's 
uniform the previous season. Minor league clubs have been subject to 
litigation over precisely that issue, questions about which would 
generate additional litigation and diminish the value of the clubs' 
marks (e.g. logos and designs) which identify players with the club in 
particular and Minor League Baseball in general, identification which 
adds value to a player likeness.

    Question 1. In what specific ways do the antitrust laws--and 
baseball's limited exemption from these laws--actually affect or 
contribute to the problems that have been repeatedly identified by 
industry participants and commentators?
    Answer. We believe that this question is directed to problems at 
the major league level. Minor League Baseball believes that Major 
League Baseball's problems are almost entirely in the areas of 
competitive balance and poor financial performance, and neither the 
antitrust laws nor baseball's exemption contributes to these problems. 
These problems mainly relate to issues that must be bargained 
collectively, and collective bargaining is covered by the labor laws 
and the non-statutory labor exemption. Repeated citations to baseball's 
antitrust exemption as a cause of baseball's problems, particularly 
after the passage of the Curt Flood Act, are simply misplaced.

    Question 2. How, specifically, would legislative action modifying 
or clarifying baseball's exemption ameliorate or eliminate the relevant 
problems?
    Answer. For the reasons given in the answer to question 1, it would 
not. Moreover, changes to baseball's status under the antitrust laws 
would cause significant and unjustifiable harm to Minor League 
Baseball, for the reasons explained in my testimony.

                                

 Responses of Robert A. Butterworth to questions submitted by Senator 
                                 Leahy

    Question 1. Team relocations can raise real concerns in any sport, 
and the United States Conference of Mayors and the National Football 
League crafted a policy several years ago to address those concerns. As 
I understand it, this jointly-developed set of principles governs the 
future relocation of any professional football team, and includes a 
variety of community-sensitive processes and substantive requirements: 
There are public hearings, conversations with local governments and 
stake holders, and a league mandate that the fans be well-served. The 
cooperative effort of the mayors and the league seems well-designed to 
bring some balance to this potentially contentious issue, and the 
procedures they have developed shed real light for the affected public 
on what is actually happening. Do you think that such a mechanism could 
work effectively for baseball as well?
    Answer. Any process governing the relocation of professional sports 
teams that involves the community can be seen as a positive step. 
Oftentimes local community and government interests have little, if 
any, input regarding the relocation of teams that they have come to 
support and subsidize. Procedural safeguards that allow for public 
comment also take into account the issue of ``fairness'' that is not 
currently part of the relocation process. Furthermore, individual clubs 
should take into account, and justify, whether relocation will really 
solve their current problems, assuming their problems do indeed exist. 
Unfortunately, fan loyalty is often unrepresented at the table of 
discussion surrounding relocations of professional sports teams.
    However, it should be stressed that absent a clarification by 
Congress as to the scope of the antitrust exemption, if such an 
exemption exists, any such. procedural or substantive measure would 
largely be meaningless. Major League Baseball operates in the dark, as 
we have seen by its recent contraction proposal. It has no interest in 
being forthcoming with its financial data, or in giving straight 
answers to the public. Therefore, since MLB operates above the law, 
there is no guarantee that it will provide honest public hearings, or 
issue written fact findings that are based on subjective criteria, such 
as fan loyalty. Furthermore, since the owners act in concert with each 
other to the detriment of communities, any individual club's written 
notice of a proposed transfer (as required by the NFL's Policy and 
Procedures for Proposed Franchise Relocations) is largely illusory and 
perfunctory.

    Question 2. The Conference of Mayors and the NFL have also 
developed a stadium financing program, which allows owners to borrow 
money from the league to build new stadia. It thus seems much less 
likely to result in communities being forced to pay the full cost of 
new facilities in order to keep their teams--a situation that many have 
charged prevails in baseball today. Do you think that such an approach 
would foster better community relations with major league baseball, 
were it adopted?
    Answer. The NFL's stadium financing program is a positive step in 
that it recognizes that the league may provide additional funds to 
assist in the financing of stadia. It also implicitly recognizes that 
private parties need to commit funds, instead of relying on public 
entities to fund new stadia with government subsidies that could be 
better spent elsewhere on necessities such as education and hospitals.
    However, by simply describing the stadium financing venture as a 
``public-private partnership,'' it does not expound upon the level of 
commitment that should be expected from private entities. Therefore, 
under MLB's current scheme, a league subsidy agreement would only be 
effective to the extent that individual clubs were committed to funding 
new stadia. Without such a commitment from the individual club, public 
entities will continue to be threatened with contraction or relocation. 
Also, the cartel-like behavior of MLB, including the recently reported 
loan from an owner to the Commissioner, suggests that owners do not 
exercise their independent business judgment in dealing with matters of 
financing new stadia. In at least one instance, Florida has been 
threatened by the Commissioner that ``the Marlins cannot and will not 
survive in South Florida without a new stadium.'' In the current 
climate of extortion, it is unlikely that more involvement from the 
league will be beneficial.

    Question 3. I understand that time at the hearing was limited, so 
if you would like to expand on any of your own responses, or respond to 
any comments made by other members of the panel, please do so.
    Answer. The other points I'd like to make are part of our answers 
to the questions posed by Senator Hatch.

                                

 Responses of Robert A. Butterworth to questions submitted by Senator 
                                 Hatch

    Question 1. In what specific ways do the antitrust laws--and 
baseball's limited exemption from these laws--actually affect or 
contribute to the problems that been repeatedly identified by industry 
participants and commentators?
    Answer. The short answer is that the antitrust laws do not affect 
or contribute to the problems that baseball has experienced but the 
exemption has. Part of the problem is identified by the language of 
your own question. Is the baseball antitrust exemption ``limited?'' No 
one seems to know the scope of the . exemption. A very careful reading 
of the briefs and opinions as well as the Congressional Record suggests 
that the baseball antitrust exemption has always been limited to at 
most the reserve system, but no one seems to know for sure, so, in the 
meantime, baseball acts with impunity.
    This uncertainty as to the scope of the baseball antitrust 
exemption has allowed MLB to claim immunity when its members collude to 
determine what is in their pecuniary interest and the interest of the 
industry as a whole, which means that fans and the communities that 
support MLB are not a top priority. The baseball antitrust exemption 
allows the various owners of MLB clubs to get together, unlike any 
other sport, and vote to do away with two or more of their own members 
so that each remaining member can benefit fmancially from the unlucky 
teams' demise. No other sport can vote to restrict its overall output. 
Indeed, most encourage development of teams and expansion efforts.
    The antitrust laws, if they were allowed to be applied, would level 
the playing field by making MLB more accountable to local communities 
and to fans. With the exemption lifted, the focus would shift from the 
owner's ``what's in it for me'' attitude, which ultimately will be the 
death of baseball, if not checked, to ``how do I compete with the other 
teams or on behalf of my community to make not only a profit but to 
provide real entertainment arid competitive value for the fans in my 
community.''
    At the core of this issue are fundamental notions of fairness and 
equality under the law.
    Exemption from the law promotes lawlessness. The relationship 
between the clubs and its communities is an interdependent partnership, 
where both sides have something to offer the other. When the clubs act 
in concert, the independent judgment of the individual club is gone, 
and all pro-competitive incentives to compete for a city's resources 
are eliminated. The result is an ``all-or-nothing'' approach, where the 
clubs band together and impose demands as a collective, leaving the 
cities powerless. Deals that include terms more favorable to cities are 
certainly frowned upon and discouraged, since another club in a 
different market might have to accept similar terms. The arrogance of 
MLB on this point should not be understated. A Florida state senator's 
receipt of threats from the Commissioner of MLB that ``the Marlins 
cannot and will not survive in South Florida without a new stadium,'' 
suggests that Miami-Dade County is somehow unworthy of a MLB club 
unless it builds a new stadium at the taxpayers' expense. It is our 
belief that in a truly free, competitive market, clubs should be 
competing for some of our great cities, and not the other way around. I 
will also let the greatness of Miami speak for itself as a community 
that is fully capable of supporting a MLB club.
    Another result of MLB's cartel behavior apparently condoned by the 
existence of an antitrust exemption is its dealings with cities without 
clubs. Existing clubs that are not financially sound are prevented 
froze relocating to other locations that could support a club (such as 
the Washington, D.C. area), so that MLB can retain the city as a threat 
against other communities who are reluctant to divert crucial funds for 
local government to the construction of shiny new stadia.
    No other industry is so enigmatically and inextricably exempt from 
the nation's laws against anticompetitive behavior.

    Question 2. How, specifically, would legislative action modifying 
or clarifying baseball's exemption ameliorate or eliminate the relevant 
problems?
    Answer. It is naive to think that bringing MLB under the full realm 
of antitrust law will solve MLB's current woes. There appears to be 
many fundamental management problems, especially since MLB claims that 
only five teams were profitable in 2001, despite the fact that baseball 
had record-breaking revenues. Nonetheless, we in Florida feel strongly 
that many relevant issues could be resolved by clarifying baseball's 
antitrust exemption.
    Clarifying the exemption would create better law. The trilogy of 
Supreme Court decisions (Federal Baseball, Toolson, and Flood) does not 
provide any clear guidance and the current state of the law has created 
a vacuum of enforcement where neither state nor federal authorities can 
apparently investigate MLB's anticompetitive conduct. This result has 
confounded judges on the state and federal levels as to the scope and 
meaning of such an anomalous exemption from the law. This anomaly, 
which was created by the Supreme Court, was left for Congress to 
resolve. Therefore, Congress is apparently tasked with responsibilities 
of interpretation and clarification of the law, which are tasks 
normally reserved for our nation's judiciary. Indeed, Congress has 
laudably taken on this arduous task through numerous hearings. This 
confusion of constitutional roles has allowed MLB to argue conflicting 
positions in different forums, as Flood noted in his 1971 brief before 
the Supreme Court:
    For half a century! Organized Baseball has succeeded in persuading 
one forum after another that `some other forum' is the appropriate one 
to deal with the abuses of the reserve clause. In its brief to this 
Court in 1922, Organized Baseball argued that ` baseball should be 
exempted from federal antitrust regulation because `a state is entirely 
competent to reach and deal with any evil in this field of sport 
requiring legislative remedy.' (Citation omitted) It then told Congress 
that the federal courts were available. In the words of the Cellar 
Subcommittee's 1952 Report, Baseball `represented by eminent counsel, 
has assured the subcommittee that the legality of the reserve clause 
will be tested [in the courts] by the [Sherman Act's] rule of reason.' 
(Citation omitted) Then, in 1953, Baseball successfully- if 
opportunistically--argued to this Court in TooLron that it ought not 
subject the reserve system to the Sherman Act's `rule of reason' 
because Baseball was sufficiently regulated by state law .... But in 
1966, Baseball argued to the Wisconsin state court that only federal 
law could regulate baseball adequately.
    Brief for Petitioner at 19-20, Flood v. Kuhn, 407 U.S. 258 (1972) 
(No.71-32) (emphasis original). As Congress is awarc, the Suprcmc Court 
in Flood determined that baseball's reserve system was exempt from the 
federal antitrust laws, and state antitrust regulation would conflict 
with federal policy, and the burden on interstate commerce was 
outweighed by the state's interests in regulating baseball's reserve 
system. Flood v. Kuhn, 407 U.S. 258, 284 (1972). Eliminating the 
exemption or at least clarifying its scope would allow under the 
appropriate circumstances for an enforcement mechanism which would 
discourage MLB's anticompetitive conduct.
    Currently, communities negatively impacted by MLB's collusive 
conduct have limited legal recourse. Communities can, and have, spent 
millions on stadiums to keep teams from relocating only to learn a few 
short years later that the team may still be relocated for greener 
financial pastures and an even better facility. Threats like these are 
used to extract even more concessions from communities desperate to 
keep their teams from leaving.
    Antitrust laws should therefore be available to these communities 
so that they may have some recourse to take to protect their vast 
investments in attracting and maintaining the team. The existence of 
the antitrust laws as. a potential avenue of relief would hopefully 
give MLB pause when considering business decisions that may benefit the 
industry as a whole but destroy the communities who trusted MLB's 
representations regarding the teams' commitment.
    In this vein, it is important to understand that applying the 
antitrust laws to baseball will not automatically give rise to 
antitrust violations every time MLB acts. More often than not, the rule 
of reason test, will most likely apply to baseball's conduct. That 
test, which requires a balancing of potential procompetitive effects 
against anticompetitive ones would have to be considered before a 
violation of the antitrust laws could be detennined. Consequently, 
lifting the exemption will merely level the playing field; it will not 
bring the rain of litigation the proponents of the exemption fear. 
Rather, the lifting of the exemption should create just enough 
deterrence to ensure that MLB takes into account competitive effects 
before acting in concert, just as the NFL, NHL, and soccer leagues have 
done for years, with minimal litigation resulting.
    Communities win when businesses play fair. Eliminating the 
exemption would create an open and honest dialogue, which is absent 
when owners act in concert. Despite the obviousness of this statement, 
MLB defends its exemption on the ground that it promotes stability. MLB 
has a short memory. One newspaper reporter, commenting on the trial in 
Washington state regarding the 1970 move of the Seattle Pilots to 
Milwaukee, reflected on Seattle's woes:
    It all began, of course, when the American League took the Seattle 
Pilots out of here and shipped them to Milwaukee. Actually, it began 
before that. It began in the late `50s anal through much of the `60s, 
when baseball franchises were moved, from city to city, like so many 
touring road companies. No matter `public confidence,' or any other 
quality, such as fan loyalty, civic pride, or whatever; the national 
game became a financial roadshow. Teams went to better `markets,' to 
communities which `qualified' by offering favorablc rcnts, subsidizcd 
playing sitcs (up to `major lcaguc standards') and `good' concession 
deals.
    Emmett Watson, Baseball on Trial, Seattle Post-Intelligencer, Jan. 
25, 1976.
    It is worthy to mention that the following year after the Pilots 
moved to Milwaukee, the Washington Senators relocated to become the 
Texas Rangers.
    Currently, representatives from the communities of Minnesota and 
Montreal, as well from other communities from teams that are candidates 
for contraction, certainly do not feel that the exemption has created 
any semblance of stability. Rather, it is an illusory game that MLB 
uses to justify its lawlessness. If owners do not decide collectively 
to relocate a club, then communities will still have to fear the 
league's elimination of the team by contraction.
    Elimination of the exemption is good policy. No one should be above 
the law. Congress should strive to discourage cartel-like behavior, and 
force MLB owners to deal directly and honestly with communities. 
Furthermore, MLB has not earned any type of special treatment. If there 
is any question as to whether it has, we would invite Congress to 
convene special hearings with representatives from communities that 
have lost baseball clubs, or are currently being threatened with the 
loss of the club, and ask them if they feel MLB has treated them 
fairly.
    Whatever course Congress decides to take, it must be resolute. MLB 
has a history of settling its disputes in order to maintain its claim 
to special status under the antitrust laws. However, Congress can 
expect these issues to re-surface until this matter is resolved until 
it takes action, or the Supreme Court agrees to revisit this issue.

                                

  Responses of Robert A. DuPuy to questions submitted by Senator Leahy

    Question 1. I asked Mr. Brand during the hearing what assurances he 
could give me concerning the fate of the Vermont Expos after expiration 
of the current contract in 2003. After the hearing, I received your 
letter dated February 14 in which you say we do share the desire to see 
minor league baseball thrive in the state of Vermont. I thank you for 
your letter. In precise terms, what the owners' commitment to minor 
league baseball in Vermont after expiration of the current contract? 
What you intend to do about the minor league teams associated with any 
major league teams that are subject to contraction?
    Answer. Baseball is committed to preserving and supporting the 
Vermont Expos and all affiliated minor league clubs while the current 
Professional Baseball Agreement is in place. After that agreement 
terminates, that issue and many other interrelated matters are subject 
to bilateral negotiations with the minor leagues. We remain committed 
to working with the minor leagues to deliver professional baseball to 
as many communities as possible.

    Question 2. I noted in my opening statement that I will ask you to 
submit language that you and Mr. Selig would support Congress enacting 
in order to provide a statutory antitrust exemption for major league 
baseball. I ask that you do so in writing.
    Answer. Baseball believes that the Supreme Court decisions creating 
the baseball exemption are clear and that statutory language is 
therefore not necessary. For purposes of responding to the question, 
however, we would suggest that any statutory language make clear that 
federal and state antitrust laws do not apply to the business of 
baseball, including but not limited to all of the substantive areas 
listed in subsection (b) of the Curt Flood Act other than Major League 
Baseball player employment matters as described in subsection (a) of 
that act.

    Question 3. You say in your testimony that major league baseball's 
contention that it continues to enjoy an antitrust exemption ``played 
no role in the Minnesota litigation.''
    (A) Did major league baseball or the Twins make arguments to the 
Minnesota state courts based on a theory that issuance of the 
injunction to require the Twins to play this coming season in Minnesota 
would violate the Commerce Clause in the United States Constitution?
    Answer. Yes.
    (B) How is such an argument consistent with major league baseball 
continuing to assert that the justification for it to enjoy exemption 
from federal antitrust laws is the premise that baseball is not 
commerce?
    Answer. Major League Baseball does not assert that justification.

    Question 4. In a recent article by Mark Asher in the Washington 
Post, Mr. DuPuy, you are quoted as saying: ``No one expected the level 
of opposition we received,'' to your plan for contraction. Mr. Selig 
lived through the loss of the Milwaukee Braves to Atlanta after 1965. 
He saw what happened when the Seattle Pilots became his Brewers. And, 
of course, he recalls the landmark relocations of the modern sports 
era, when the Dodgers and the Giants abandoned New York for the west 
coast. Did you proceed down this path without expecting the public and 
public officials to react in opposition to these plans?
    Answer. My statement was not meant to imply that we did not expect 
opposition from all the sources that have generated opposition. What we 
did not expect was the decision in regard to the Metrodome lease by the 
Minnesota courts, which we believe is contrary to Minnesota law.

    Question 5. Since our last hearings, major league baseball has 
modified a number of agreements. Please provide the Committee with 
copies of major league baseball's current governing documents, 
including but not limited to its new Constitution, any bi-laws, 
guidelines, the Professional Baseball Agreement with the minor leagues, 
the rules that govern changes in ownership, the existence and location 
of teams and territorial agreements. We are not asking for the rules 
that govern the playing of the game of baseball but the rules and 
protocols governing the business of baseball.
    Answer. Such documents are attached hereto.

    Question 6. Would you provide copies of the papers filed before 
Judge Hinkle in the recent case and the briefs on behalf of major 
league baseball teams to both the District Court and 11`" Circuit? It 
appears from Judge Hinkle's footnote 16 that you argued that passage of 
the Curt Flood Act constituted ``an endorsement by Congress of the 
exemption of the business of baseball'' from all antitrust laws.
    Answer. Copies of such papers are attached hereto or will be sent 
when they are completed.

    Question 7. 1 have read recent reports that Paul Beeston, who is 
described by Murray Chase in the New York Times as baseball's chief 
operating officer and the clubs' primary negotiator with the players' 
union is stepping down. Who will be replacing Mr. Beeston as baseball's 
eighth lead labor negotiator in the last three decades of labor 
negotiations?
    Answer. Baseball's negotiating team currently consists of Bob 
DuPuy, Rob Manfred, Howard Ganz, Andy MacPhail and Peter Angelos. None 
of those representatives has been designated as lead negotiator.

    Question 8. 1 believe that at least one of the bidders for the 
Boston Red Sox was Miles Prentice, a minor league owner. From his 
experience in connection with the minor leagues do you have any reason 
to doubt that Mr. Prentice would make an outstanding major league 
baseball team owner? Why was Mr. Prentice's bid for the Boston Red Sox 
rejected and Mr. Henry's bid preferred by the other major league 
baseball owners?
    Answer. No.
    Mr. Henry's bid was the only bid presented by the Boston Red Sox to 
the other Major League Baseball owners for approval.

    Question 9. Which, if any, major league baseball teams include 
owners from racial minorities, and what percentage of ownership of each 
of those teams to minority members hold?
    Answer. Due to a variety of factors which include the complexity of 
club organizational structures, the frequency of ownership transfers 
and ownership confidentiality concerns, the Commissioner's Office does 
not compile information regarding the races of equity investors of the 
major league clubs. However, examples of club owners from racial 
minority groups include Hiroshi Yamauchi (Seattle Mariners), Linda and 
Robert Alvarado (Colorado Rockers) and Daniel Manning (Arizona 
Diamondbacks). We believe there are others.

    Question 10. Is it your understanding that the provisions of the 
Curt Flood Act apply to independent minor league teams? Do those teams 
enjoy the exemption from the antitrust laws that you claim for the 
major and affiliated minor leagues?
    Answer. Because of the wording of the Curt Flood Act and that of 
the Supreme Court opinions establishing Baseball's antitrust exemption, 
together with the reliance arguments in the Toolson and Flood opinions, 
we do not believe that the independent minor leagues enjoy the same 
benefits under Baseball's antitrust exemption.

    Question 11. We have heard concerns that the major league interests 
and their affiliated minor league have been attempting to prevent or 
discourage the development or expansion of the independent minor 
leagues. Is this true? Are there any restrictions in major or 
affiliated minor league policies, formal or informal, on ownership or 
other types of participation in both affiliated and independent minor 
league teams? Have the geographical divisions of territory of the major 
and affiliated minor leagues been used to discourage the development or 
expansion of independent minor league play? Even if your answer is 
``no,'' please explain those geographical allocations of territory, and 
how they affect the locales in which the independent teams may operate.
    Answer. At the major league level, there have been no such efforts 
or restrictions and we are not aware of any such effects.

    Question 12. Following up on Senator Nelson's comments at the 
hearing, please explain the major league owners' position on pensions 
due to players in the Negro Baseball League who played in that league 
between 1947 and 1960
    Answer. In 1994, the owners voluntarily and retroactively created a 
pension program for Negro League Players who played prior to the 
integration of Major League Baseball in 1947. The owners had no legal 
obligation to create such a benefit and, in fact, the beneficiaries of 
the program, in many cases, were never employed by a Major League 
Baseball club. Benefits were not made available to Negro League Players 
based on service between 1947 and 1960 because players of all races had 
an opportunity to play in Major League Baseball during that period. 
Although the integration of Baseball was admittedly not complete by 
1947, that year seemed to be an appropriate point of demarcation for 
this voluntary program.

    Question 13. I understand that time at the hearing was limited, so 
if you would like to expand on any of your own responses, or respond to 
any comments made by other members of the panel, please do so.
    Answer. See answer to question 8 from Senator Hatch.

                                

  Responses of Robert A. DuPuy to questions submitted by Senator Hatch

    Question 1. Mr. DuPuy, does Major League Baseball believe that its 
actions with regard to its umpires are not subject to the antitrust 
laws, or does it consider itself bound by the court's decision in 
Postema v. National League of Professional Baseball Clubs, 799 F. Supp. 
1475 (S.D.N.Y. 1992)?
    Answer. Major League Baseball's umpires are members of a collective 
bargaining unit and their relationship with Major League Baseball is 
currently governed by a collective bargaining agreement. Therefore, the 
non-statutory labor antitrust exemption covers that relationship, as 
set out by the United States Supreme Court in the 1996 Brown v. 
National Football League case. Baseball believes the Postema case was 
wrongly decided. The United States Court of Appeals for the Second 
Circuit reached the conclusion, contrary to the one in Postema, that 
baseball's relationship with its umpires was not subject to the 
antitrust laws. Salerno v. American League of Professional Baseball 
Clubs, 429 F.2d 1003 (2d Cir. 1970). See also Moore v. National 
Association of Professional Baseball Leagues, C78-351 (N.D. Ohio, filed 
July 7, 1976), which found baseball's exemption applicable to former 
umpires' claims of antitrust violations following umpires' discharge 
(``It cannot be disputed that professional baseball umpires perform an 
integral function in `the business of baseball' '')

    Question 2. Mr. DuPuy, does Major League Baseball believe that 
issues involving local radio broadcasts are not subject to the 
antitrust laws, or does it consider itself to be bound by the court's 
decision in Henderson Broadcasting Com. v. Houston Sports Ass'n, 541 F. 
Supp. 263 (S.D. Texas 1982)?
    Answer. Major League Baseball respectfully disagrees with the 
opinion in the Henderson case. In fact, there is contrary authority 
even in Texas. In Hale v. Brooklyn Baseball Club, Inc., Civil Action 
No. 1294 (N.D. Tex. 1958), the court held that the television 
broadcasting of baseball games was covered by the exemption. The court 
stated:

        The telecasting simply lifts the horizon, so to speak, and 
        brings in another set of viewers of the same identical game 
        that those present in the grandstand are seeing at the same 
        time, ordinarily, and I believe it's straining realities to 
        suggest that this television business has become a new facet of 
        activity that you can look at apart from the ordinary business 
        of baseball; and I can't follow that because there couldn't be 
        such broadcasting except for the old-fashioned baseball game 
        being played somewhere--the very gist and essence of the 
        baseball business.

    Question 3. During your testimony to the Committee, you indicated 
that baseball's exemption from the antitrust laws has ensured that 
there has been no team relocation in almost three decades. On the other 
hand, there have been approximately twelve separate instances where a 
major league club has indicated that it would have to move unless local 
communities provided some form of public subsidy. Please provide an 
explanation of what steps the Commissioner took, if any, in each of 
these instances to assure the local jurisdictions involved that moving 
a team was not a real option available to the club. If the stadiums or 
the improvements had not been approved, would the teams have been 
permitted to relocate?
    Answer. It cannot be disputed that baseball's antitrust exemption 
has contributed greatly to our franchise stability for the last 30 
years. Baseball's franchise stability policy has never, however, 
completely closed the door to a franchise relocation; we have stated 
publicly on many occasions that major league clubs will not be 
consigned to economic failure due to the absence of public and fan 
support. The question posed is very general and therefore difficult to 
address, but clubs seeking new ballparks have usually urged a joint 
public/private partnership and a degree of local support commensurate 
with the local benefit being created. Commissioners have encouraged 
such progress while hoping also to maintain baseball's franchise 
stability policy. As proud as baseball is of its record of no teams 
relocating over the last thirty years, it is equally proud of its many 
magnificent new ballparks, which the public has, without exception, 
embraced upon their completion.

    Question 4. Mr. DuPuy, as I understand, when every minor league 
player signs with a major league club, he is required to sign the Minor 
League Uniform Player Contract. In that contract, there is a provision 
that requires that any dispute between the club and the player may be 
appealed only to the Commissioner of Baseball and may not be reviewed 
in federal or state court. Would you please explain the extent of this 
legal waiver? Would it, for example, apply to disputes involving rights 
afforded employees under the Fair Labor Standards Act, federal civil 
rights laws, the Americans with Disabilities Act, or federal labor 
laws? Would, for example, disputes involving a player's allegation of 
employment discrimination based upon race be appealed only to the 
Commissioner or could a suit be brought in federal or state court?
    Answer. To perform services for a minor league club affiliated with 
a major league club, a player must sign a Minor League Uniform Player 
Contract. That contract contains a broad dispute resolution procedure 
that requires any ``dispute or claim between [a] player and [a] club 
arising under any of the provisions of [the] Major League Uniform 
Player Contract'' to be resolved in an arbitration proceeding before 
the Commissioner. The argument that claims under certain federal 
statutes would not be covered by this provision has never been raised.

    Question 5. How many disputes involving minor league players have 
been appealed to the Commissioner over the last five years under the 
procedures set forth in the Minor League Uniform Player Contract? In 
addition, would you explain the procedures that are established to 
handle player disputes that are brought to the Commissioner under the 
terms of the contract, including those instances where the commissioner 
would have to recuse himself? Is a player permitted, for example, to be 
represented by counsel during such appeals? On questions of legal 
interpretation, to whom does the Commissioner turn for assistance?
    Answer: There have been approximately nine such appeals. The 
procedure resembles that of an appellate court, and it is a procedure 
that Baseball takes very seriously. The appellant submits in writing 
anything he chooses--a letter, a lengthy brief with enclosures, or 
anything in between. The respondent responds similarly. The appellant 
then has the opportunity to submit a reply brief or other materials. A 
briefing schedule for the submissions is generally set, though 
extensions of time have been liberally granted to accommodate the needs 
of any party. Oral argument is rarely, if ever, requested. There is no 
specific procedure covering recusal, but the Commissioner could recuse 
himself when appropriate. A player is, of course, permitted to be 
represented by counsel during such appeals, and the Commissioner turns 
to one or more lawyers in the Commissioner's Office for assistance on 
questions of legal interpretation.

    Question 6. Mr. DuPuy, during your testimony and the testimony of 
Mr. Selig in the House, you both repeatedly stressed the important role 
that the antitrust exemption played in guaranteeing baseball's 
stability. On the other hand, your representatives indicated to staff 
that contraction was a certainty and, according to press reports 
following the hearing, as many as eighteen teams were considered as 
possible candidates for contraction. How was each team notified that it 
was under consideration for contraction? In addition, please explain 
how contraction is different than relocation to the fans and cities 
that end up losing a team?
    Answer. Within the past twelve to eighteen months, each of the 
thirty teams engaged in a comprehensive review of its financial 
situation and overall status with the Commissioner or his 
representatives and financial experts. When individual Clubs were 
considered as contraction candidates, I and other representatives of 
the Commissioner's Office met specifically with those teams.
    We do not believe that most fans would see any difference between 
losing a team through relocation or contraction.

    Question 7. Mr. DuPuy, since roughly 1985, the Arizona 
Diamondbacks, the Baltimore Orioles, the Chicago White Sox, the 
Cincinnati Reds, the Cleveland Indians, the Colorado Rockies, the 
Detroit Tigers, the Houston Astros, the Milwaukee Brewers, the Seattle 
Mariners, the Texas Rangers, and the Toronto Blue Jays have received an 
estimated $2.5 billion in public subsidies. Would you please explain 
which of these clubs, if any, was considered as a possible candidate 
for contraction and, if so, why?
    Answer. See answer to question 6, above.

    Question 8. Mr. DuPuy, during the hearing, you indicated that no 
one was interested in purchasing the Montreal Expos. Obviously, your 
assessment seems to contradict a variety of reports from individuals in 
Washington, D.C-, who have repeatedly expressed their interest in 
purchasing the Expos and moving them to the Nation's Capital. Would you 
please explain the steps taken by Major League Baseball to determine 
whether there were any potential buyers of the Expos and why the two 
organizations in the Washington, D.C. area did not qualify? Did Major 
League Baseball receive any notification that an offer from Washington, 
D.C. was being made to the Expos, as reported in the media?
    Answer. Baseball did not consider any suggestions that the Montreal 
Expos be sold and relocated, for the reasons given in the answer to 
question 7 from Senator Sessions. I would like to clarify, however, 
that Baseball did receive one or two communications (not offers) in 
regard to a potential purchase of the Expos, purportedly with the 
objective of keeping the Expos in Montreal. Baseball did not pursue 
such possibilities because it was already involved in the complex 
transactions recently completed regarding the Expos, Marlins and Red 
Sox.

    Question 9. Mr. DuPuy, during your testimony, you made several 
references to the considerable losses major league clubs are suffering. 
To better understand the nature of these losses, would you please 
provide the following:
    a) The amount deducted from net income by the major league clubs in 
2001 for franchise amortization?
    Answer. $170.7 million.
    b) The amount of the loss in 2001 that is attributable to teams 
that are owned by individual or limited partnerships?
    Answer. The industry does not accumulate financial data by 
ownership structure.
    c) The amount of the loss in 2001 that is attributable to teams 
that are owned by entities, which also own cable or broadcast companies 
or other businesses that broadcast or carry, televised baseball games?
    Answer. Franchises owned by media corporations and their 2001 
losses from baseball operations are as follows (in millions):

------------------------------------------------------------------------
 
------------------------------------------------------------------------
                  Anaheim/Walt Disney Company               ($ 9.6)
                                   Atlanta/AOL/Time Warner  ($14.4)
                                   Chicago (NL)/Tribune Compan None
                                             Los Angeles/Fo ($45.3)
      Toronto Blue Jays/Rogers Communications               ($52.9)
------------------------------------------------------------------------

    d) The amount of the loss in 2001 that is attributable to interest?
    Answer: $112.5 million, net.
    e) The amount in 2001 of salaries, bonuses, or other management 
related payments, including loans, which the owners paid to themselves?
    Answer. This information has not been accumulated.
    f) The amount in 2001 paid out to players in compensation that was 
treated as loss in prior years but deferred?
    Answer. This information is not available.
    g) The amount of player compensation that was treated as loss in 
2001 but not paid in cash?
    Answer. This information is not available.
    h) The amount in 2001 paid out in cash for signing bonuses to 
amateur and professional players, as compared to the amount actually 
incurred as costs on operating systems?
    Answer. This information is not available.
    i) The amount of the loss in 2001 that reflects the non-cash cost 
incurred for the depreciation of stadia and stadium improvements?
    Answer. This information is not currently available. In 2000, the 
amount was $67.5 million.

    Question 10. In your response to my question about the 18 percent 
annual increase in baseball franchise values, you noted that the Blue 
Ribbon report states that the sale of some clubs does not make enough 
to cover operating losses and still earn a significant return. Doesn't 
your response really underscore the fact that in some instances, 
operating losses, when using normal accounting methods, may not 
accurately reflect the value of an asset like a club?
    Answer. I do not believe that the response referred to in your 
question suggests that ``operating losses, when using normal accounting 
methods, may not accurately reflect the value of an asset like a 
club.'' My comments before the Committee were intended to make the 
point that, even taking into account asset appreciation realized at the 
time of sale, many franchises do not generate market investment returns 
(or in some cases any return) for owners. There can be no debate that 
the ``value'' of a club asset is the price that the asset commands in 
the market. Our analysis indicates that for many clubs, the asset 
appreciation is simply not great enough to offset operating losses 
incurred during the period of ownership.

    Question 11. Would you please explain in further detail why, given 
the significant losses reportedly suffered by almost every single club 
in baseball the value of baseball franchises is still increasing at a 
rate of 18 percent a year?
    Answer. The estimate that franchise values have increased at a rate 
of 18% per year is simply not accurate. In fact, lower revenue 
franchises that continue to suffer significant operating losses or a 
lack of competitiveness on the field have seen little or no asset 
appreciation in recent years.

    Question 12. In your response to my question, you referred to the 
Boston Red Sox as one of the flagship franchises in baseball. In his 
testimony before the House, Mr. Selig referred to the Red Sox as one of 
the ``five'' franchises worth owning. Would you please identify the 
other four?
    Answer: Any answer would include a degree of subjectivity and could 
change over time. Therefore, there is no definitive list of such 
franchises.

    Question 13. In your response to my question, you noted that Mr. 
Henry sold the Marlins for what he paid Mr. Huizenga for them. 
According to published reports, Mr. Henry allowed Mr. Huizenga to 
receive all luxury suite income generated by the Marlins as well as 
other income generated by the Marlins, as well as other income streams 
such as rental payments. What is the role of Major League Baseball in 
reviewing a sale of a team, as in the case of Mr. Henry? If Major 
League Baseball believes that the sale is structured in such a way that 
it will put a new owner in a situation where he or she cannot succeed, 
will the sale be blocked? If so, in the case of Mr. Henry, did Major 
League Baseball believe Mr. Henry would be able to succeed in Florida?
    Answer. Major League Baseball reviews potential sales of teams 
carefully to make judgments about the financial wherewithal of new 
ownership groups, among other reasons, and then to make recommendations 
to the clubs. It is highly unlikely that Major League Baseball would 
recommend club approval in any situation in which we believed that a 
new owner could not succeed. Major League Baseball did believe that Mr. 
Henry would be able to succeed in south Florida and did not anticipate 
the extent of the decrease in fan support together with the ongoing 
lack of support for a new ballpark.

    Question 14. Has Major League Baseball had any discussions with 
club owners other than those of the Twins and Expos regarding the 
prospect of contracting their clubs? Specifically, have their been any 
discussions or contacts concerning contraction between Major League 
Baseball and the current or prospective owners of the Florida Marlins, 
the Tampa Bay Devil Rays, the Kansas City Royals, the Oakland 
Athletics, the Philadelphia Phillies, the Toronto Blue Jays, or the San 
Diego Padres?
    Answer. See answer to question 6, above.

    Question 15. Mr. DuPuy, is it the position of Major League Baseball 
that the operating losses attributed to the Los Angeles Dodgers, the 
Texas Rangers, the Atlanta Braves, and the Toronto Blue Jays have 
nothing to do with the business plans or objectives of the media 
companies which own these clubs? What is Major League Baseball's 
explanation for the unequal concentration of losses among these four 
clubs when compared to the other twenty-six franchises in baseball?
    Answer. Major League Baseball's position is that the operating 
losses of the Los Angeles Dodgers, Texas Rangers, Atlanta Braves and 
Toronto Blue Jays are caused, in large part, by the fundamentally 
flawed economic system that exists in Baseball. In addition, local 
market factors--like the exchange rate that burdens Toronto--play a 
role. It is also important to note that clubs such as the Los Angeles 
Dodgers and the Toronto Blue Jays suffered from a lack of profitability 
even before the acquisition of those clubs by media companies. Since 
the media companies acquired clubs such as the Dodgers and Blue Jays, 
the books of those clubs have been subjected to intense scrutiny to 
insure that all related party transactions yield ``market'' revenues 
for the clubs and that reported losses are not overstated.

    Question 16. In your testimony, you endorsed a proposal to tax all 
franchises at a 50 percent rate on any new incomes they may earn in a 
given season. As I understand, if this proposal is implemented, if the 
income of a struggling franchise increases by one dollar, its share of 
revenue sharing is reduced by 50 cents. This kind of an arrangement 
would appear to create a disincentive for small clubs to take major 
risks to generate new income, the very same kind of growth impediment 
we have seen with high income tax rates. Would you please explain how 
such an arrangement will benefit small franchises?
    Answer. The 50% straight pool plan benefits low revenue clubs by 
significantly reducing revenue disparity. The revenue of high revenue 
clubs is reduced and the revenue of low revenue clubs is augmented. 
This reduction in disparity gives lower revenue clubs a greater 
opportunity to be competitive on the field, which is the key to revenue 
growth in Baseball.
    The alleged disincentive for revenue growth is largely a 
theoretical issue. Most important, with the exception of revenue 
increases associated with new stadium construction, most revenue growth 
in Baseball requires little capital investment. As a result, clubs have 
every incentive to earn more revenue whether they keep 50 cents or 75 
cents of each incremental dollar. Currently, some low revenue clubs 
face a 39% marginal tax rate (as compared to 19% for top revenue 
clubs.) Despite this fact, low revenue clubs have significantly 
increased their revenue in recent years and there is no evidence of any 
disincentive effect. Baseball's current proposal also includes the 
discretionary reallocation of central fund revenues. It is contemplated 
that these reallocations would be used to reward, or to create 
incentives for, revenue growth.
    Finally, the move to the straight pool plan eliminates a 
substantial inequity. As noted above, under the current plan, the 
highest revenue clubs face a marginal tax rate of only 19% compared to 
39% for some lower revenue clubs. The straight pool plan would correct 
this inequity and make all clubs subject to exactly the same growth 
incentives.

    Question 17. One of the proposals made by the Blue Ribbon panel was 
for payroll floors. Given the specificity of some of the 
recommendations, would you please explain what Major League Baseball 
believes would be an appropriate floor for each club? Would there be 
penalties for the clubs that do meet such floors?
    Answer. Baseball's current proposal to the Players Association is 
that a $45 million payroll minimum should be applicable to all clubs. 
The minimum would be enforced by disqualifying a club that fails to 
meet the minimum payroll from any discretionary reallocation of central 
revenues such as those described in the answer to question 16, above.

    Question 18. I was surprised to hear your assertion that both of 
the teams in Florida were under consideration for contraction. As I 
understand, Tampa Bay was required to pay an entry fee in 1998 of $150 
million. What impact do you believe this entry fee has had on Tampa 
Bay's ability to become competitive and, if it is contracted, will some 
portion of the fee be returned?
    Answer. We do not believe that Tampa Bay's performance on the field 
is the result of the expansion fee paid between 1995 and 1997. No 
decisions have been made regarding teams to be contracted or the terms 
of contraction

    Question 19. The prospective move of the Oakland Athletics to Santa 
Clara calls into question whether that township is part of the San 
Francisco Giants franchise rights area. In what year did Santa Clara 
become part of the Giant's franchise area? Why was it made at that time 
and what were the factors considered or the assumptions made that led 
to that determination?
    Answer. 1990.
    The Giants requested the additional territory as part of their 
effort at the time to obtain a new ballpark in Santa Clara.

    Question 20. In your written statement, you indicated that one of 
the benefits of the antitrust exemption is that it permits the league 
to impose uniform equipment rules and requirements. Other major league 
sports are able to institute rules governing uniforms and equipment, 
however, even though they are subject to the antitrust laws. Would you 
please explain why baseball is different and why, unlike the NBA, the 
PGA, or the NFL, Major League Baseball would be unable to ensure 
equipment uniformity without an exemption from the antitrust laws?
    Answer. One must assume that without an antitrust exemption 
baseball would be suddenly subject to litigation relating to the 
various aspects of its business that have been allowed to develop for 
eighty years under the exemption. Among the potential plaintiffs could 
be equipment manufacturers who might attempt to force upon baseball, 
for instance, aluminum bats, claiming that they are used successfully 
in college baseball and almost all other baseball leagues. The PGA has, 
in fact, lost an antitrust lawsuit involving equipment standards and 
had a standard relating to golf clubs forced upon it.

    Question 1. In what specific ways do the antitrust laws--and 
baseball's limited exemption from these laws--actually affect or 
contribute to the problems that have been repeatedly identified by 
industry participants and commentators?
    Answer.
    Baseball's problems are almost entirely in the areas of competitive 
balance and poor financial performance, and neither the antitrust laws 
nor baseball's exemption contributes to these problems. These problems 
mainly relate to issues that must be bargained collectively, and 
collective bargaining is covered by the labor laws and the non-
statutory labor exemption. Constant citations to baseball's antitrust 
exemption as a cause of baseball's problems, particularly after the 
passage of the Curt Flood Act, are simply misplaced.

    Question 2. How, specifically, would legislative action modifying 
or clarifying baseball's exemption ameliorate or eliminate the relevant 
problems?
    Answer.
    For the reasons given in the answer to question 1, it would not.

                                

Responses of Robert A. DuPuy to questions submitted by Senator Sessions

    Question 1. Please explain the process by which Major League 
Baseball reviews and approves candidates to purchase ownership interest 
in Major League Baseball franchises.
    Answer.
    Baseball's ownership guidelines and procedures, which explain the 
process in detail, are enclosed herewith.

    Question 2. Does Major League Baseball intend to eliminate teams 
before the 2003 season? If so, how will these teams be chosen?
    Answer.
    Yes As we have previously stated, the teams will be chosen based on 
the absence of local support and the inability to generate local 
revenues sufficient to produce competitiveness on the field and 
financial stability off the field.

    Question 3. What would happen to the minor league affiliates of any 
teams that are eliminated?
    Answer. Baseball is committed to preserving and supporting 
affiliated minor league clubs while the current Professional Baseball 
Agreement is in place. After that agreement terminates, the issue of 
minor league affiliates and many other interrelated matters are subject 
to bilateral negotiations with the minor leagues. We remain committed 
to working with the minor leagues to deliver professional baseball to 
as many communities as possible.

    Question 4. Does Major League Baseball formally or informally 
recognize areas of exclusivity which prevents relocation of competing 
franchises?
    Answer.
    Although major league clubs do have territories, any major league 
club may relocate anywhere with the vote of three-fourths of all major 
league clubs.

    Question 5. Are Clubs allowed to vote against expansion to prevent 
competition?
    Answer. Expansion also requires a three-fourths vote, and clubs are 
of course allowed to vote for or against expansion.

    Question 6. Has the Baltimore Oriole organization objected to the 
location of a franchise in the Washington, D.C. area?
    Answer.
    The Baltimore Orioles have not made any such formal objection. The 
Orioles have, however, publicly and privately stated the belief that 
the placement of a major league club in Washington, D.C. would have a 
significant negative financial impact on the Orioles.

    Question 7. If the Baltimore Oriole organization did not object, 
would Major League Baseball permit a relocated or new franchise in the 
Washington, D.C. area?
    Answer. Baseball has looked generally at the possibility of 
relocation and has not ruled it out with regard to any city in the near 
future. It is not, however, an immediate answer to the problems we are 
trying to solve. In researching and studying various relocation 
possibilities, it became clear to us that moving a club during this 
past offseason, given our current industry economic environment, would 
merely be substituting one problem for another problem. Although we are 
very proud that no clubs have moved for thirty years, we may well find 
that relocation can become one part of our overall solution in the near 
future. But it is not the answer to any problems we are facing at this 
time.

    Question 8. If a prospective buyer can demonstrate satisfactorily 
their ability to build a privately-financed stadium, would they be 
permitted to purchase the Montreal Expos for relocation to Washington, 
D.C.? If not, why?
    Answer.
    See answer to question 7, above.

                                

  Responses of Lori R. Swanson to questions submitted by Senator Hatch

    Question 1. In what specific ways do the antitrust laws--and 
baseball's limited exemption from these laws--actually affect or 
contribute to the problems that have been repeatedly identified by 
industry participants and commentators?
    Answer. The State of Minnesota, as Senator Hatch's question 
implies, believes that Major League Baseball has a limited antitrust 
exemption, more specifically an exemption limited to Baseball's reserve 
clause. A federal court, the Florida Supreme Court and a lower court in 
Minnesota agreed. The problem is that other courts take a different 
view and have determined that Baseball enjoys a broad exemption. That 
is why Congress should clarify that any exemption does not apply to 
franchise relocation or contraction. Although it is difficult to 
predict with certainty how Major League Baseball would be different if 
there were a clear pronouncement that franchise relocation and 
contraction are--as they are in any other sports league--subject to the 
antitrust laws, it is difficult to see how a truly competitive 
environment could harm the League or local communities. Indeed, state 
and federal governments should be able to investigate abusive, 
anticompetitive practices and get behind Baseball's wall of secrecy. As 
long as some courts construe the exemption broadly, however, such 
investigations are severely constrained.
    As you are aware, the hallmark of an antitrust violation is an 
agreement that has the effect of raising prices, lowering output, or 
rendering output unresponsive to consumer demand. NCAA v. Board of 
Regents of the Univ. of Oklahoma, 468 U.S. 85, 107 (1984). The decision 
by twenty-eight team owners to buy out two other owners and put their 
teams out of business appears, for example, to be such an effort to 
restrict supply. As a consequence, there will be fewer teams available 
to buyers in the market for Major League Baseball franchises, thereby 
driving up the value of the remaining franchises. Furthermore, the cost 
of obtaining a franchise is increased by making certain that there are 
always fewer teams in the League than viable markets that could support 
franchises. By maintaining an artificial scarcity of franchises, cities 
with teams are pit against cities without teams in bidding wars to 
maintain or attract the franchises through public subsidies for stadia 
and other amenities. The exemption--or more accurately, the exemption 
as interpreted in an expansive manner by certain lower courts precludes 
any evaluation of the owners' conduct to inquire whether contraction 
would benefit fans, as consumers of the game, or simply line the 
owners' pockets.

    Question 2. How, specifically, would legislative action modifying 
or clarifying baseball's exemption ameliorate or eliminate the relevant 
problems?
    Answer. As I noted during my testimony, the Minnesota Attorney 
General's Office believes that Major League Baseball's antitrust 
exemption has already been limited post-Flood v. Kuhn so that 
contraction does not fall within the scope of any remaining exemption. 
Nevertheless, lower courts are divided on the issue, and a federal 
district court in the Northern District of Florida has gone so far as 
to find that contraction falls within the antitrust exemption. 
Legislative action clarifying Major League Baseball's antitrust 
exemption would resolve the matter once and for all with respect to 
contraction and franchise relocation, and would ensure that any actions 
by the League in regard to these matters would be subject to the same 
scrutiny they would be in the context of other sports leagues.

                                

  Responses of Lori R. Swanson to questions submitted by Senator Leahy

    Question 1. Team relocations can raise real concerns in any sport, 
and the United States Conference of Mayors and the National Football 
League crafted a policy several years ago to address those concerns. As 
I understand it, the jointly-developed set of principles governs the 
future relocation of any professional football team, and includes a 
variety of community-sensitive processes and substantive requirements: 
There are public hearings, conversations with local governments and 
stake holders, and a league mandate that fans be well-served. The co-
operative effort of the mayors and the league seems well-designed to 
bring some balance to this potentially contentious issue, and the 
procedures they have developed shed real light for the affected public 
on what is actually happening. Do you think that such a mechanism could 
work effectively for baseball as well?
    Answer. The fact that a mechanism to address relocation issues was 
worked out by the National Football League and the Conference of Mayors 
suggests that Major League Baseball's warnings of dire consequences for 
franchise stability should Congress approve the FANS Act are overblown.
    Commissioner Selig has not been shy in earlier testimony about 
asserting that revocation of Major League Baseball's antitrust 
exemption would prevent the League from keeping franchises in smaller 
markets. The Commissioner, in previous testimony before Congress, has 
pointed to the Raiders' example from the NFL in the early 1980's (Los 
Angeles Memorial Coliseum Comm'n v. NFL, 726 F.2d 1381 (9th 
Cir. 1984)) and warned that Baseball would be powerless to prevent 
similar situations from happening.
    While no Major League Baseball franchises have relocated since 
1972, Baseball's position is ironic since the League has used the 
threat of relocation in a number of instances over the years in order 
to extract financial concessions from state and local governments. In 
1997, for instance, the Minnesota Twins threatened to move from the 
Twin Cities to a smaller market in Charlotte, North Carolina in order 
to pressure the Minnesota legislature into funding a new stadium. 
Commissioner Selig's own franchise, the Milwaukee Brewers, also 
threatened to move to Charlotte before the State of Wisconsin provided 
public-funding for a new stadium. According to Professor Stephen Ross 
of the University of Illinois School of Law, seven teams including the 
Twins--had threatened to move to Florida's Tampa-St. Petersburg area 
during a ten year period before an expansion franchise was located 
there. Minneapolis Star Tribune, May 12, 1997.
    Furthermore, the League's dire warnings of franchise instability do 
not account for the fact that modern federal antitrust doctrine allows 
a certain degree of cooperation among sports competitors when that 
cooperation fosters pro-competitive outcomes. Federal courts have held 
that some degree of cooperation among competing teams is essential for 
the existence and functioning of sports leagues. Without commenting on 
the extent of cooperation that might be allowed under the antitrust 
laws, the mechanism implemented by the NFL and the Conference of Mayors 
suggests that Major League Baseball could preserve its stated goal of 
franchise stability while operating within the confines of the Sherman 
Act.

    Question 2. The Conference of Mayors and the NFL have also 
developed a stadium financing program, which allows owners to borrow 
money from the league to build new stadia. It thus seems much less 
likely to result in communities being forced to pay the full cost of 
new facilities in order to keep their teams--a situation that many have 
charged prevails in baseball today. Do you think that such an approach 
would foster better community relations with Major League Baseball, 
were it adopted?
    Answer. The existence of a program crafted by the NFL and the 
Conference of Mayors to deal with stadium funding issues suggests that 
less drastic alternatives than contraction might be available to the 
League to deal with any economic issues it might have. And it stands to 
reason that if the League adopts some sort of creative approach for 
funding of new stadia that does not involve the threat of contraction 
or relocation unless the public funds the facility, relations between 
the League and its host communities might improve.
    Over the past several years--and continuing to the present--teams 
essentially have held cities hostage by threatening to relocate unless 
public funding is provided for new facilities. The Twins' threatened 
move to North Carolina in 1997, for example, is a graphic illustration 
of a decision that did not appear to be in the team's or Major League 
Baseball's best interests (since the team was threatening to move to a 
smaller market) unless the goal was to obtain public money for a new 
stadium for the team--and to serve as an example to other communities 
that they had better fall in line or risk losing their franchises. And 
because of the expansive construction of the Baseball antitrust 
exemption given by a number of courts, the League is able to conduct 
itself in a cartel-like manner out of the reach of law enforcement 
investigations. Baseball should be subject to the same antitrust 
scrutiny as other sports leagues.
    Perhaps if Congress made clear that Baseball is in fact subject to 
the antitrust laws in the context of franchise relocation and 
contraction, the League would be less inclined to engage in boycott-
like behavior to pressure cities to provide public funding for new 
facilities, which in turn might also foster better community relations.

    Question 3. I understand that time at the hearing was limited, so 
if you would like to expand on any of your own responses, or respond to 
any comments made by other members of the panel, please do so.
    Answer. The only additional comment I would like to make for the 
record is to again reiterate our belief that, post-Flood v, Kuhn, Major 
League Baseball's antitrust exemption has been limited to the so-called 
reserve clause. We believe that Major League Baseball's contraction 
plans do not fall within the scope of the exemption as it presently 
exists. Nevertheless, given the split among lower courts concerning the 
extent of the exemption post-Flood v, Kuhn, we would support 
legislation clarifying that the contraction of franchises is subject to 
scrutiny under the antitrust laws.

                                

                       SUBMISSIONS FOR THE RECORD

   Statement of Hon. Jeff Sessions, a U.S. Senator from the State of 
                                Alabama

    The topic of today's hearing is of great interest to many 
Americans. After all baseball is the all-American sport. In the past 
few months I have learned that Major League Baseball's owners have 
decided to contract by two or more teams. This decision is somewhat 
troubling to me. Indeed, the loss of the Minnesota Twins--as the media 
has reported--would be felt not only in Minnesota but in other smaller 
communities throughout the country--in Connecticut, Iowa, Tennessee, 
and Florida--which are home to the Twins' farm teams.
    Though we have no Major League Baseball team in Alabama, we do have 
several minor league teams that are indirectly threatened by agreements 
to contract the operations of Major League Baseball. If there are fewer 
major league clubs because of contraction, it is logical to assume that 
some of the minor league teams they support will be eliminated too. 
This is of great concern for me and the people of Alabama.
    The topic of today's hearing, the application of the antitrust law 
to Major League Baseball, would not require Baseball to maintain 
franchises that are not economically viable. It would, however, apply a 
rule of reason analysis to assure that economic viability is determined 
by market forces, rather than by the internal politics and the self-
interest of a small group of owners. Whether this so-called antitrust 
exemption should continue is a topic that must be studied fully and 
carefully before we draw any conclusions.
    It is troubling to me that Major League Baseball has deprived our 
Nation's Capitol of a franchise for the past 30 years. Especially, 
since every other major league sport is represented in this City. For 
over the past three decades it could be said of Washington, First in 
war, first in peace and nowhere to be found in the American or National 
leagues. It seems to me that it makes good sense for Major League 
Baseball to relocate a struggling team to Washington. One obvious 
example is the Montreal Expos, who for some time have been a huge 
money-losing operation for the league. In an environment governed by 
the antitrust laws either the current owner or a new owner could move 
that team to a more profitable location--most likely Washington. It 
makes no economic sense for the League to buy the Expos as it has 
decided to do and continue to operate it with massive losses in 
Montreal, unless the League's ultimate goal is to eliminate this team. 
What is preventing this team from being relocated to Washington?
    Major League Baseball has chosen to establish a complicated set of 
procedures where the League will control any transaction to purchase or 
sell a franchise. I have learned much about the League's mysterious 
processes from watching and talking to my friend and law school 
classmate Donald Watkins who is attempting to purchase a Major League 
franchise. Though Donald tells me that he has been treated very 
courteously by League officials and feels he is now making good 
progress, you only have to read the newspapers to see that it has been 
a long road.
    For its own good, if for no other reason, I would have thought that 
Major League Baseball long ago would have aggressively recruited an 
individual with the potential to become the first African-American 
owner of a Major League Baseball team. Instead, when Donald first 
applied to buy the Tampa Bay Devil Rays he heard nothing from the 
league for nearly a year. His more recent expression of interest in the 
Minnesota Twins was ignored until last December, when at a House 
Judiciary Committee Hearing a Congressman from Alabama asked the Twins 
President in front of the Commissioner why the team had never spoken to 
Donald. Only then did Donald receive a call. I also understand that 
Donald's effort to inquire into the possibility of purchasing the 
Montreal Expos to move them to Washington was summarily foreclosed as 
``not on the table'' by League officials.
    I am encouraged that Donald has finally been permitted by the 
League to talk with both the Twins and the Devil Rays. I am also 
encouraged by recent comments from Commissioner Selig after the owners' 
meeting that Washington was the most likely relocation city. These 
comments were, understandably, quite confusing to Mr. Watkins, who had 
been told by league officials only a week earlier that it would be a 
waste of time to discuss relocation of a team to Washington, D.C. 
However, Mr. Selig, as numerous columnists have pointed out, has said 
positive things about Washington before and nothing ever seems to 
happen.
    Donald's plan to build a privately-financed stadium with a 
destination class museum and Hall of Fame for African-American athletes 
would clearly make a major contribution to the nation's capital with 
its large minority population and tourist flow from all across the 
country. It also would seem to make more economic sense to locate it 
here than in either Minnesota or Tampa Bay. I would urge Baseball to 
discuss this possibility with him as he has requested.
    Normally, if someone like Mr. Watkins wanted to buy a team in any 
other professional sport, he would be free to call on current owners 
and, subject to financial and fitness qualifications, be allowed to buy 
a team. He would also have some flexibility to move the team under 
appropriate circumstances. Major League Baseball apparently does not 
operate in this way, but instead sees itself as something of an 
exclusive ``private club.'' The unfortunate result could be to deprive 
it of a minority owner who could bring much needed energy, creativity 
and spirit to the sport. This would be a disservice to the fans, the 
sport and the country, and I hope it does not happen.

                                

  Statement of Hon. Strom Thurmond, a U.S. Senator from the State of 
                             South Carolina

    Mr. Chairman:
    Thank you for holding this important hearing on the applicability 
of antitrust laws to Major League Baseball. We have worked together in 
the past on this issue, and I appreciate your commitment to 
establishing a sound public policy that will enable America's pastime 
to flourish.
    We are here today because of the latest development in the 
continuing saga of baseball and its unique treatment under the 
antitrust laws. The Commissioner of Major League Baseball has announced 
that two baseball teams will be eliminated, or contracted, after the 
upcoming baseball season. The Commissioner asserts that contraction is 
a necessity due to the economic conditions facing baseball today. It is 
widely expected that the Minnesota Twins and the Montreal Expos will be 
the teams that are eliminated. In response to the expected dissolution 
of these teams, Senators Wellstone and Dayton have introduced a bill 
that would further reduce the remaining vestiges of baseball's 
antitrust exemption. S.1704, the Fairness in Antitrust in National 
Sports Act of 2001, would make the antitrust laws applicable to the 
elimination or relocation of major league baseball teams. In layman's 
terms, Major League Baseball would no longer be able to shut down an 
existing team or prevent a team from relocating to another city. If 
this bill were to gather significant support, Major League Baseball 
would probably not pursue contraction because the antitrust exemption 
is important to the owners of major league teams.
    Major League Baseball's antitrust exemption was established by the 
case of Federal Baseball Club, Inc. v. National League of Professional 
Baseball Clubs, 259 U.S. 200 (1922). In this case, the Supreme Court 
held that antitrust laws did not apply to ``exhibitions of baseball'' 
because the games did not implicate interstate commerce. The Supreme 
Court eventually rejected the legal basis of the exemption in Flood v. 
Kuhn, 407 U.S. 258 (1972), noting that professional baseball was indeed 
a business that involved interstate commerce. The Court, however, 
refused to overturn the longstanding precedent of Federal Baseball 
Club, stating that it was up to Congress to do away with the antitrust 
exemption.
    In 1998, I worked with the distinguished Chairman and Ranking 
Member to pass the Curt Flood Act, which ensured that antitrust laws 
applied to Major League Baseball. The Act provided antitrust 
protections to major league baseball players and applied only to issues 
of employment between major league owners and players. The Act left 
untouched the state of the law in all other areas where the antitrust 
exemption was applicable, such as matters relating to minor leagues and 
the relocation of baseball franchises.
    Although some courts have also narrowed the antitrust exemption in 
recent years, many experts believe that the exemption has continued 
viability in several areas. Senator Wellstone's bill seeks to chip away 
at one area of exemption, the movement of franchises, presumably in 
hopes of persuading Major League Baseball to retreat from its 
contraction plans.
    As I see it, the Players Association and Major League Baseball are 
playing elaborate games designed to force each other to the bargaining 
table. The real issue is one of economic stability for the game of 
baseball, and the government should intervene once again only if there 
is a compelling need.
    Major League Baseball can help cure its economic ills by increased 
revenue sharing and by the use of salary restraints. Other professional 
sports are thriving today as a result of implementing these measures. 
Revenue sharing and salary restraints enable small-market teams to 
compete with teams from larger cities, thereby encouraging a 
competitive sporting environment. The inability of the Major League 
Baseball Players Association and the owners of major league teams to 
agree on reasonable competitionenhancing measures is ruining the game 
of baseball. I hope that sensible people with the courage to work 
toward a compromise will put an end to the labor unrest that has 
plagued Major League Baseball for years.
    In July of 2000, a Blue Ribbon Panel on Baseball Economics issued a 
report that found revenue disparities were causing a ``chronic 
competitive imbalance.'' As one example of this serious imbalance, one 
club had a payroll equal to the sum of the five lowest payroll clubs in 
1999. In 2000, Minnesota, Florida, and Kansas City had Opening Day 
player payrolls that were less than the combined salaries of two 
players of one club. The panel also found that there was ``a strong 
correlation between high payrolls and success on the field.'' For a 
five-year period between 1995 and 1999, no team in the bottom half of 
payrolls in Major League Baseball won a single postseason game. I 
believe that the panel's findings demonstrate that baseball must find a 
way to make its smaller-market teams competitive. If baseball does not 
reform itself, the public will lose interest in a predictable and 
uncompetitive sport.
    The Blue Ribbon Panel also made recommendations that should be 
given considerable thought. The panel found that Major League Baseball 
should share at least 40 percent of all members clubs' local revenue. 
Although there is limited revenue sharing that takes place currently, 
it may not be enough to overcome the serious disparities that exist. 
The panel also found that a competitive balance tax should be applied 
to club payrolls that are above a fixed amount and encourage all clubs 
to have a minimum payroll amount. A competitive balance tax would 
function much like a salary cap utilized by other professional sports. 
I hope that the owners and the players will seriously consider these 
recommendations for the sake of the survival of baseball.
    I am pleased that we are bringing together representatives of 
baseball and the union today. I will gladly listen to reasonable 
proposals to change current law. However, we have greatly limited the 
antitrust exemption in the past and have provided protections to major 
league baseball players. Before we enter the fray, I want to ensure 
that both management and the players have negotiated in good faith. The 
current trouble with baseball has very little to do with the antitrust 
laws. This is an ancillary issue. Baseball's current troubles are 
economic and should be addressed by the players and the owners through 
constructive negotiations over revenue sharing and salary restraints.

                                

    Statement of Miles Wolff, Commissioner, Northern League Baseball

    In 1993 I founded and assumed the role of Commissioner of the 
Northern League Baseball, the first of the modern independent leagues, 
which presently comprising eighteen teams in twelve states and two 
Canadian provinces. In 2001, I became Commissioner of the Central 
Baseball League, another independent league, comprising eight teams in 
four states. In addition, I own the Quebec Capitales of the Northern 
League, and am the owner of the Burlington Indians of the Appalachian 
League. I was President and publisher of Baseball America, the trade 
publication of professional baseball, for nineteen years and am 
coeditor of the Encyclopedia of Minor League Baseball, most recent 
edition 1996. Over the past twenty years, I have owned six National 
Association teams, including the Durham Bulls during the time the movie 
Bull Durham was filmed.
    The business of professional baseball in the United States is 
comprised of three ownership components Major League Baseball 
(``MLB''), the National Association of Professional Baseball Leagues 
(``NAPBL''), consisting of those minor leagues which are affiliated 
with and subsidized by MLB, and five independent minor leagues which 
are not affiliated with or subsidized by MLB or the NAPBL. There 
currently are more than 50 independent minor league teams in 21 states 
across the country, in addition to two teams which play in Canadian 
cities (Winnipeg and Quebec City). MLB and the NAPBL refer to 
themselves as ``organized baseball'' in that they operate under an 
umbrella agreement called the Professional Baseball Agreement (aPBA'') 
which provides, among other things, for the division among themselves 
of exclusive geographic territories. The scope of these territories are 
extensive and, in many cases, go well beyond the limits of relevant 
market considerations and have had the effect of precluding the ability 
of many American communities to attract professional baseball. It is 
the scope of these exclusive territories which to a significant extent 
resulted in the creation, nearly 1 D years ago, of the independent 
minor leagues.\1\
---------------------------------------------------------------------------
    \1\ It should be noted that MLB and the NAPBL have a significant 
statutory advantage over the independent minor leagues since the latter 
apparently do not enjoy the antitrust exemptions provided MLB and the 
NAPBL under the federal Curt Flood Act of 1998.
---------------------------------------------------------------------------
    The number of NAPBL teams in the United States effectively is 
``capped'' by the PBA, which limits the obligation of MLB to subsidize 
only a specified number of organized baseball affiliates. Thus, as a 
practical matter, the expansion of minor league baseball to additional 
American communities is dependent almost entirely on development of the 
independent minor leagues. As an example, were it not for the 
independent leagues, there would be no professional baseball at this 
time in states such as South Dakota (Sioux Falls) and North Dakota 
(Fargo-Moorhead). In addition, except for the Major League Minnesota 
Twins, the only professional baseball available in the State of 
Minnesota is through the independent minor leagues.
    The calibre of play in the independent leagues generally is strong 
and is represented principally by talented younger players who either 
have been overlooked by the Major League draft system or were signed 
and later released by Major League organizations. Most players view the 
leagues as a ``second chance' opportunity to demonstrate their 
professional talent and, ultimately, have their contracts acquired by 
Major League teams- Many have been able to achieve that goal and a 
number currently are playing in the Major Leagues.
    Although it does not appear that any of the independent teams have 
positioned themselves in a manner that adversely affects the market 
condition of any MLB or NAPBL team, many of them do conduct play within 
the boundaries of the exclusive territories allocated by MLB and the 
NAPBL between themselves. Subsequent to enactment of the Curt Flood Act 
in 1998, which extended statutory privileges of antitrust exemption to 
the NAPBL, that organization actively began exploring means by which it 
could prevent independent teams from entering these exclusive 
territories. One of the tactics utilized by the NAPBL was to implement 
policies designed to punish any individual over whom the NAPBL might 
have jurisdiction or control if they were to ``cooperate'' in any way 
with any other professional league whose ``existence'' conflicted in 
any way with the NA or any of its teams, or which included a team that 
played within any of the territories claimed by the NAPBL or MLB.
    In view of the scope of the exclusive territories allocated by MLB 
and the NAPBL, it is virtually impossible for any independent 
professional baseball league to operate without ``intruding'' on these 
territories. Accordingly, the position of the NAPBL effectively 
prohibits any relationship with any independent professional team. The 
concept of ``cooperation'' has been broadly defined by the NAPBL to 
include not only ownership interests, but virtually any form of 
business or professional service relationship.
    Since the NAPBL for 100 years has effectively controlled the 
industry of minor league baseball in the United States, arid has 
developed extensive resources, vendor and other industry-relevant 
relationships over that period of time, the effect of its blackball of 
persons having relationships with independent professional teams has 
been substantially to limit the business opportunities and investor 
resources available to independent professional baseball, and to 
preclude independent teams from playing in many communities which are 
desirous of attracting professional baseball.
    An example of the influence wielded by the NAPBL involves the 
nation's capital. The exclusive ``organized baseball'' territory which 
includes Washington, D.C. is actually owned at this time by the NAPBL 
(not MLB) for the benefit of one of its teams based in Woodbridge, 
Virginia.\2\ Several years ago, an effort was made by an independent 
professional league to establish a team in Washington. The NAPBL 
promptly responded with threats of punitive action that forced the 
independent team to back away. Similar experiences have been 
encountered in other communities in different parts of the country. 
Given the enormous industry power of the NAPBL, which includes 
political lobbying clout funded by the NAPBL as well as MLB, the NAPBL 
has been a major deterrent factor in the efforts of many American 
communities to attract professional baseball, except to the extent so 
desired by the NAPBL or MLB.
---------------------------------------------------------------------------
    \2\ MLB would be entitled under the PBA to acquire the territory 
but would be required to compensate the NAPBL team and league which 
presently has territorial control over the District.
---------------------------------------------------------------------------
    In some instances, these efforts have been undertaken by the NAPBL 
as agent for MLB- evidenced in an August 1999 resolution adopted by the 
NAPBL Board of Trustees--while, in others, the NAPBL has pursued its 
own territorial interests. In either case, the power and influence of 
the ``organized baseball'' establishment--which represents the only 
components of professional baseball entitled to the exemptions provided 
under the Curt Flood Act--are such that growth of the independent minor 
leagues has been restricted,
    Although these issues may not be directly germane to the pending 
debate regarding MLB contraction (which ultimately would have the 
effect of reducing the number of NAPBL teams) or relocation, they do 
represent clear examples of the abusive manner in which the ``organized 
baseball'' system, including the NAPBL, has claimed the right to decide 
which communities are entitled to professional baseball and which are 
not, without regard to the wishes of local communities or even, in many 
cases, valid market considerations.

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