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This chapter examines the economics of antitrust, with particular emphasis on how antitrust law affects professional team sports. In the late 1800s, Americans worried about the growing concentration of power in the hands of a few producers such as Standard Oil, American Tobacco, and other large firms that consolidated their holds over industries by merging and acquiring other companies. Other industrial leaders sought to fix prices above those obtained under competition. The Sherman Antitrust Act, enacted in 1890, contains provisions addressing “contract,” “conspiracy,” and “trade and commerce.” This chapter first considers how courts applied the Sherman Act to cases involving professional team sports before discussing the characteristics of professional sports leagues, how owners of professional sports teams reported profits and losses, the issue of player salaries and exploitation, and competitive balance and revenue sharing in professional leagues. It also describes franchise relocation and expansion and how television created demand in sports.

This chapter examines one of the most contentious issues in professional sports leagues that were tackled at the Congressional hearings in 1951 and 1957: player rights. The reserve clause and the player draft allowed owners to minimize competition for players and therefore to have salary-setting power over their players, giving them discretion in how much they paid them. Owners and their commissioners employed novel arguments supporting the necessity of having the reserve clause. This chapter first provides an overview of the sorry state of player salaries in professional team sports before considering the owners' explicit use of the reserve clause and how players began challenging it. It concludes with a discussion of Congress's inquiry into player rights, the challenges to the player draft, the formation of players' associations, the outcome of the hearings, and the inquiry's impact on owner-player relations.

This chapter examines the issue of franchise relocation. Legislators had two main concerns throughout the series of hearings: to procure teams for their constituents while avoiding losing teams via relocation. The legislators' concerns were imbued with an element of reality, at least. Cities with multiple Major League Baseball (MLB) teams usually had one team that was struggling, and legislators held a different attitude to such teams relocating than they would with regard to later relocations of prosperous teams. This chapter first considers three options for acquiring a big-league team: purchase an existing team, hope for an expansion team in an established league, or enter a team into a new league. It then discusses the economics of franchise relocations, along with the early histories of franchise turnovers in professional sports leagues, including the National Football League (NFL) and its predecessor, the American Professional Football Association. It also looks at Columbia Broadcasting System's (CBS) purchase of the New York Yankees during the 1964 season that sparked fears of an unfair alliance.

This chapter provides an overview of the hearings conducted by Congress in the wake of player unrest after World War II and growing demand for new baseball franchises. The Congressional hearings began in 1951, when Emanuel Celler (N.Y.), chair of the House Subcommittee on Anti-trust and Monopoly, initiated an inquiry into Major League Baseball (MLB). For the first hearings, Celler told reporters that the committee's purpose was to “help baseball against itself.” During the hearings, few of the legislators impressed with their savvy. Some did not appear to understand the testimony. On occasion a few made dubious comments. The hearings occasionally lapsed into farce. The chapter considers sports owners' reluctance to release their financial records as well as professional sports leagues' search for antitrust exemptions.

This book examines the economics of the antitrust aspects of the three professional sports leagues—Major League Baseball (MLB), the National Football League (NFL), and the National Basketball Association (NBA)—based on the information presented at the hearings conducted by Congress during the 1950s. In the late 1800s, Americans worried about the growing concentration of economic power in the hands of large corporations and big trusts such as oil, railroads, steel, meat packing, and tobacco. In response, Congress passed the Sherman Antitrust Act of 1890. While owners of professional sports teams may not have resembled industrialists, they labored under the same antitrust statutes. This book explores some of the major issues tackled in the Congressional hearings, including mergers between rival football and basketball leagues, player rights, general antitrust exemptions, territorial rights, franchise relocation and sales, franchise expansion, and television policies.

This conclusion discusses the aftermath of the Congressional hearings. During the hearings, the owners' general prerogatives survived essentially intact, although free agency of some sort was imminent in all sports by 1976. Legislators did not repudiate the reserve clause, the reverse-order draft, or territorial rights, despite their qualms regarding these institutions. The legislators and their aides missed some opportunities to subject the team financial data from the 1950s to analysis, which could have shed light on such questions as the effects of revenue sharing. Some fans gained when their hometown landed an expansion or existing franchise, while other fans lost when legislators did not prevent franchise relocation. Congress has held several hearings in the intervening decades since 1989. The professional sports leagues have also evolved. Technology has altered the landscape.

This chapter examines the issues surrounding player draft in professional sports leagues. During the postwar era, baseball officials and players often mentioned free agents. Unlike the free agents of our era, however, these players were talented amateur players. Indeed, high school and college players constituted the remaining vestige of a free market for baseball labor during the postwar era. The owners quickly discovered that this free market for labor was costly and made attempts to curb spending on amateur players, sparking allegations of cheating that led to distrust among them. This chapter first considers the creation of the amateur draft in Major League Baseball (MLB) before discussing the reverse-order draft in the National Football League (NFL) and the player draft in the National Basketball Association (NBA). It concludes with an assessment of the impact of the draft on owners and players.