San Jose, Seeking Stadium, Tests Baseball’s Antitrust Exemption

     SAN JOSE (CN) – In a challenge to Major League Baseball’s antitrust exemptions, San Jose claims the Commissioner of Baseball is illegally preventing the Oakland A’s from moving to a new stadium in San Jose.
     The city claims Commissioner Bud Selig conspired to prevent the A’s from moving, and challenges the league’s antitrust exemption, and the San Francisco Giants’ claim to territorial rights in the South San Francisco Bay Area, which includes San Jose.
     San Jose accuses the commissioner’s office of a “blatant conspiracy” to “prevent the Athletics Baseball Club from moving to San Jose. For years, MLB has unlawfully conspired to control the location and relocation of major league men’s professional baseball clubs under the guise of an ‘antitrust exemption’ applied to the business of baseball.”
     The antitrust exemption gives Major League Baseball control over broadcast rights, apparel, stadium vendors, team locations and other aspects of the cash cows that is professional baseball. The exemption, which the U.S. Supreme Court upheld in 1922, found that baseball games are local affairs and not interstate commerce.
     San Jose disagrees: “Baseball is big business in the United States, with combined 2012 annual revenue of $7.5 billion. Whereas baseball may have started as a local affair, modern baseball is squarely within the realm of interstate commerce. MLB Clubs ply their wares nationwide; games are broadcast throughout the country on satellite TV and radio, as well as cable channels; and MLB clubs have fan bases that span from coast to coast.”
     San Jose claims that a “dark side” of Major League Baseball is the requirement that three-quarters of the 30 teams in the league have moved at one time or another.
     The city accuses the league of “excluding competition and restraining trade in that market [in the United States and Canada] through the application of unreasonable restrictions in its Constitution which are preventing the City of San Jose from competing with the City of Oakland for the Athletics Baseball Club. The MLB Constitution expired in December 2012 and no new Constitution has been posted on its website.”
     Joseph Cotchett, attorney for San Jose, told the San Francisco Chronicle that “Major League Baseball is going to be significantly affected by the loss of the antitrust exemption, and I think this case will be the case to challenge it.”
     The lawsuit challenges rule 4.3 of the Major League Baseball Constitution, which grants each of the 30 clubs “absolute veto power over the relocation of a competitive team within its ‘operating territory.'”
     In exchange for anticompetitive protections in their home markets, San Jose claims, clubs agree not to compete in other clubs’ exclusive territories.
     “The stated purpose of these policies is to create regional monopolies that protect the clubs from competition in their respective local areas,” the city says in its complaint.
     In 1990, former Athletics owner Walter Haas gave his consent to the San Francisco Giants planned move to San Jose for no money. The MLB Constitution was amended to provide that the Giants hold territorial rights to the County of Santa Clara, which includes San Jose. Though the Giants were unsuccessful in their attempts to move to San Jose and eventually built a privately funded stadium in San Francisco, the San Jose claims that “the Giants continued to claim the territorial rights to the County of Santa Clara.”
     San Jose says it has an agreement with the Athletics to build a stadium, and that by “refusing to allow the Oakland A’s Club to locate to the City of San Jose, defendants are interfering with this contract.”
     The A’s have been trying to move out of their stadium for years, including a failed attempt to move to Fremont, about 25 miles south of Oakland, in Alameda County.
     The A’s play in the O.co Coliseum in Oakland, which opened in 1966. A sewer system backup at the stadium on June 16 caused raw sewage to flow into locker rooms, forcing the A’s and visiting Seattle Mariners to use the Oakland Raiders’ clubhouse for post-game showers.
     The Raiders use the stadium along with the A’s. It the only stadium shared between a Major League Baseball team and a National Football League team.
     Athletics managing general partner Lew Wolff told the Chronicle that he was not aware of the lawsuit until Tuesday, and that he was “not in favor of legal actions or legal threats to solve business issues.”
     Wolff said that San Jose had threatened to file suit in the past and the “city has to make its own decisions.”
     San Jose alleges tortious interference with contractual advantage and prospective economic advantage, violation of California’s unfair competition law and violations of the Cartwright Act and Sherman Act.
     Attorney Cotchett is a partner with Cotchett, Pitre & McCarthy, of Burlingame.
     Congressionally approved antitrust exemptions gave Major League Baseball ownership of players until Curt Flood sued the league, telling it in a letter: “I do not feel I am a piece of property to be bought and sold irrespective of my wishes. I believe that any system which produces that result violates my basic rights as a citizen and is inconsistent with the laws of the United States and of the several States.”
     The U.S. Supreme Court ruled for the league, but Flood’s lawsuit led to major changes, and ultimately, the free agent system, which boosted players’ salaries astronomically.
     Flood, however, a center fielder, became a pariah to owners, despite his .293 career batting average, seven .300 seasons, seven consecutive Gold Glove awards, and 1,861 hits.

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