October 17, 2021

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How Government Devastated Minor League Baseball – Reason.com

How Government Devastated Minor League Baseball – Reason.com

How Government Devastated Minor League Baseball – Reason.com

Information about How Government Devastated Minor League Baseball – Reason.com

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It’s family Sunday FunDay here at Coney Island’s Maimonides Park, home of the Brooklyn Cyclones. For the low price of $18, enjoy the up-close views of future New York Mets stars and between-innings fan contests involving potato sacks. If the kids don’t wilt in the mid-July swelter, they can run the bases on the field after the game. It’s minor league baseball at its corny, affordable best.

Seven miles away as the seagull flies over the mouth of New York Harbor, the scene at Richmond County Bank Ballpark is considerably bleaker. Gawky weeds shoot up through the neglected infield dirt and mangy outfield grass where the Staten Island Yankees once roamed. Just over the chain-link fence in right field sits an overflowing dumpster. The sliver of real estate past left field was supposed to be a walkway to a billion-dollar Ferris wheel; now it’s a shady homeless camp dotted with flattened cardboard. “Let’s not eat here,” a mom says to her picnic-impatient 6-year-old.

The divergent fate of New York City’s two minor league ballparks, like too much of life in the five boroughs, is a cautionary tale about what happens when government and business promiscuously canoodle. The city spent $71 million on a picturesque stadium on the Staten Island waterfront (Maimonides cost $55 million) that after a two-decade run now stands empty, and it’s reacting to that calamity by throwing a fresh new $8 million toward cleanup costs in the hopes of luring baseball back.

Not for the first or even hundredth time, people elected to be caretakers of taxpayer money are discovering the ironic lie behind the most famous line derived from the overly nostalgic baseball film Field of Dreams: “If you build it, they will come.” In fact, when governments become landlords, sports businesses, no matter how deep their pockets, start acting like tenants: always eyeing the exits for a potentially better deal. If you build it, they will leave.

This particular fable, though, transcends Gotham and the eternal ribbon-cutting temptations of local politics. The Staten Island Yankees were one of 40 minor league clubs—25 percent of the nationwide total—that were cut off overnight from their major league affiliates in December 2020. Local governments were suddenly on the hook for a quarter-billion dollars’ worth of investment in event spaces that no longer held events. Though the main culprit was a cost-cutting Major League Baseball (MLB), the federal government and the judiciary had their fingerprints all over the murder weapon.

Through a mix of obfuscating patriotism, congressional camera hogging, and legal reasoning more twisted than a kosher Cyclones pretzel, Washington over the past century-plus has granted latitude to MLB that no other professional sport enjoys. Baseball’s preeminent global league has not only blocked all halfway serious competition to its legally protected North American monopoly; it can dictate the most fundamental of operational details—employee salaries, game rules, even existence—to the once-independently owned professional teams and leagues that groom talented young men in the vast expanses between school and The Show.

“It’s about controlling the industry,” a bitter Jeff Katofsky, owner of Utah’s Orem Owlz, told ESPN after learning of MLB’s proposal to cull his team. “It’s all about money and power.”

Those who hold legislative power are proposing to fill the bush-league void with still more money, via the bipartisan $550 million Minor League Baseball Relief Act introduced in June 2021. That would be one way to extend the cycle of federal codependency.

But two other developments this season herald a potential break in the pattern. Republican senators, outraged by MLB’s hasty decision to relocate the annual All-Star game from Atlanta in protest over Georgia’s new GOP-written election law, introduced legislation in April that would punitively remove some of baseball’s legal carve-outs. More plausibly, a unanimous Supreme Court in June signaled a willingness to revisit the antitrust exemption that former 9th Circuit Court Judge Alex Kozinski once characterized as “one of federal law’s most enduring anomalies.”

Those are a couple of tentative paths out of this corporatist game of pickle. But there are lessons of broader application to be gleaned from retracing the policy missteps that squandered taxpayer billions while making the minor leagues unfree.

Playing the Senate Like a String Quartet

In early 2018, MLB Commissioner Rob Manfred put the squeeze on the owners of the 160 minor league baseball teams: Go lobby Congress to pass the unsubtly named Save America’s Pastime Act, or face potentially dire consequences.

“We were told very clearly if we didn’t get that thing passed, we would be staring down the barrel of contraction,” multi-franchise owner Dave Heller recalled to ESPN. “So we were all supremely motivated to help MLB pass that legislation.” (Two of Heller’s four franchises lost their MLB affiliations in the December 2020 downsizing.)

The press release from sponsor Rep. Brett Guthrie (R–Ky.) announcing the 2016 bill warned that if it wasn’t passed, “the costs to support local teams would likely increase dramatically and usher in significant cuts across the league, threatening the primary pathway to the Majors and putting teams at risk.”

The Save America’s Pastime Act amended the 1938 Fair Labor Standards Act to carve out an exemption for minor league baseball players so that they would not be paid overtime during the season or any money at all during pre- and post-season team workouts. Instead of paying players the federal minimum wage, franchises could retain them for as low as $1,100 a month for three to five months.

This was sold to legislators by minor league owners as a way to keep community ties alive in non–major metro areas like Charleston, West Virginia, and Burlington, Vermont. But in fact it was a penny-squeezing power play by MLB owners in the country’s largest markets. To understand why requires a brief historical explanation about the relationship between the major and minor leagues.

Baseball as we know it derives from ball-and-bat game variations developed in the mid–19th century in Philadelphia, Connecticut, Massachusetts, and especially New York City. There were clubs of varying degrees of formality, temporary travel teams, and eventually leagues. The eight-team National League was born in 1876 and quickly developed a reputation as the best in organized ball; an eight-team American League upstart came along in 1901; the two formed an organizational truce and held an annual World Series, and that (with a couple of brief detours) is pretty much what Major League Baseball looked like for a half-century.

But the “minor leagues” during that span changed so dramatically they are unrecognizable. “The minor leagues did not start out as what they are,” author Bill James wrote in The New Bill James Historical Baseball Abstract. “By a long series of actions and agreements, inducements and rewards, the minor leagues were reduced in tiny degrees from entirely independent sovereignties into vassal states, existing only to serve the needs of major league baseball.”

Some early leagues and teams jealously held onto players that were every bit as good as an American League or National League all-star. Hall of Famer Lefty Grove, before becoming MLB’s best starting pitcher in the late 1920s, dominated the International League through his age-24 season. Joe DiMaggio arrived at the New York Yankees fully formed as one of the sport’s best players at age 21; he had already been playing at a high level for three years for the Pacific Coast League’s San Francisco Seals.

James in his book keeps a decade-by-decade tally of how “free” and “unfree” the minors were vis-à-vis the big leagues. In the 1870s and 1880s they were 100 percent free, and in the 1900s the free/unfree tilt was still 90/10. But by the 1930s the minors were just 30 percent free, and it was all over by the 1970s, when they were “100 percent slaves to the majors.” The “critical years” for the transformation, James observed, were “1915 to 1925.”

What happened then? Competition, the snuffing out thereof, and the Supreme Court, in that order.

In a unanimous 1922 decision written by Justice Oliver Wendell Holmes, the high court in Federal Base Ball Club of Baltimore, Inc. v. National League of Professional Base Ball Clubs, et al. held that Major League Baseball was exempt from the Sherman Antitrust Act of 1890—and therefore legally free to buy out half of the upstart 1914–15 Federal League, then shut the whole operation down—because the business of holding baseball contests between teams from different states somehow did not qualify as interstate commerce.

Set aside for now the theoretical case against antitrust and consider the practical effects of that handwritten exemption: Independent minor leagues, and even ambitious international efforts such as the Mexican League, which attempted after World War II to poach high-quality MLB talent, knew that any organizational behavior perceived to be threatening to the monopoly or even deviant from its desires could be met with severe consequences. (Players who jumped to the Mexican League, for example, were automatically banned from MLB for five years, a policy that brought forth still more litigation that strengthened the antitrust exemption.) Minor league players in professional sports that do not enjoy an antitrust exemption, such as the National Hockey League, are able to unionize, giving them much better salaries and working conditions.

For a half-century before the December 2020 minor league contraction, the basic organizational relationship between the minors and the majors was this: Each of the 30 MLB franchises was aligned with five or six minor league affiliates of various levels that would develop and manage the not-ready-for-prime-time players that the big clubs had acquired via trade, free agent signing, or amateur draft. Those affiliates, which operated on multiyear contracts, were usually owned independently. But the personnel decisions—and, relevant to the Save America’s Pastime Act, the salaries—were determined and covered by the parent MLB club.

So when minor league team owners were giving sob stories on Capitol Hill about needing to constrain payroll costs lest their teams disappear, they were lobbying on behalf of MLB franchises who that year earned on average $330 million in revenue. Congress was being asked to intervene so that minor league salaries would remain within a band of $4,000 to $14,000 per year; meanwhile, the owners actually signing those checks were paying out minimum MLB salaries of a half-million dollars.

The federal legislative process being what it is, the Save America’s Pastime Act, with zero fanfare, was tacked onto page 780 of an 891-page, $1.3 trillion omnibus spending bill that was passed by Congress and signed into law by President Donald Trump in March 2018.

America’s pastime, alas, did not long stay saved. MLB, having frogmarched minor league owners under threat of contraction to warn legislators that minor league teams would die if salaries weren’t capped, took all of seven months to begin leaking lists of teams it would soon kill off anyway. “In retrospect,” Clinton (Iowa) LumberKings general manager Ted Tornow told ESPN in 2020, “MLB played the Senate like a string quartet.”

Instruments do not always enjoy being exposed as tools. Sen. Chuck Schumer (D–N.Y.) had been critical in getting the Save America’s Pastime Act inserted into the omnibus, only to watch the hatchet fall on multiple New York minor league teams two years later. “They can’t just pick up and walk away,” Schumer complained in late 2020. Au contraire, Chuck.

The Gorsuch Opening

“There are good arguments for getting rid of baseball’s long-standing exemption from antitrust laws,” wrote antitrust scholar Herbert Hovenkamp at Pro Market, a website run by the University of Chicago’s Stigler Center, in May. “But the reason cited by Republican Senators angry at MLB’s response to Georgia’s new voting laws isn’t one of them.”

In early April, to protest the state of Georgia controversially changing its voting laws in the name of “election integrity,” Major League Baseball announced that it was moving its long-planned mid-summer All-Star game out of Atlanta. Conservatives were irked by what they saw as a noxious combination of media hysteria, cancel culture, and the flexing of progressive muscle over big business. As he can be counted on to do in such situations, Sen. Ted Cruz (R–Texas), stepped up to the plate, or at least the microphone.

“Major League Baseball asks for your ID when you pick up tickets at will-call, but they have made it clear they oppose photo ID requirements to vote,” Cruz said while introducing the Competition in Professional Baseball Act two weeks later. “If Major League Baseball is going to act dishonestly and spread lies about Georgia’s voting rights bill to favor one party against the other, they shouldn’t expect to continue to receive special benefits from Congress.”

There is something both unseemly and unsurprising about a modern politician using legislation as a tool to punish the political behavior of a corporate entity. Nevertheless, the generally more serious Sen. Mike Lee (R–Utah), another co-sponsor of the bill, was on firmer footing when he asserted at the same press conference that MLB “has used its judicially fabricated antitrust immunity to suppress wages and divide up markets for decades—conduct that is plainly illegal, and sometimes criminal, in any other industry.”

The case against using antitrust law on baseball is the general case against antitrust itself, which has been debated in the pages of this magazine for 52 years. Antitrust is too often determined politically, too often applied to non-monopolies, too often solicited and gamed by regulated entities to cement their market share. None of these critiques maps very well onto the past century of Major League Baseball; better to make the purely philosophical argument that the government has no business meddling in the affairs of monopolists.

The case for the MLB exemption from antitrust, on the other hand, is so flimsy that few bother making it. Even the Supreme Court has been distancing itself from the precedent.

Near the end of its 2020–21 term, SCOTUS ruled 9–0 that the National Collegiate Athletic Association (NCAA) could no longer prohibit universities from compensating their sometimes highly revenue-generating athletes. The NCAA had argued that its price fixing of student-athlete labor should be exempt from the Sherman Antitrust Act due to its “societally important non-commercial objective” of upholding “amateurism.”

Justice Neil Gorsuch in his majority opinion made the nonroutine step of quoting from an amicus brief, one submitted by a nonprofit called Advocates for Minor Leaguers, which had urged the Supreme Court to think of the example of baseball while rejecting “a judge-made exemption from the antitrust laws for a group of thousands of workers based on an anachronistic understanding of their workplace.”

“To be sure,” Gorsuch wrote, “this Court once dallied with something that looks a bit like an antitrust exemption for professional baseball. In [the Federal Baseball case] the Court reasoned that ‘exhibitions’ of ‘base ball’ did not implicate the Sherman Act because they did not involve interstate trade or commerce—even though teams regularly crossed state lines (as they do today) to make money and enhance their commercial success….But this Court has refused to extend Federal Baseball‘s reasoning to other sports leagues—and has even acknowledged criticisms of the decision as ‘unrealistic’ and ‘inconsistent’ and ‘aberration[al].'”

In addition to spotlighting the shakiness of the MLB precedent, Gorsuch suggested that it may soon be vulnerable to challenge: “Whether an antitrust violation exists necessarily depends on a careful analysis of market realities….If those market realities change, so may the legal analysis.”

Harry Marino, executive director of Advocates for Minor Leaguers, responded jubilantly: “I think that today’s opinion signals that the current composition of the Supreme Court has a significant skepticism about baseball’s antitrust exemption. I read their segment of the opinion about the antitrust opinion as an invitation to litigants to raise the issue in front of the court.”

Senne v. MLB, a 2014 class action lawsuit seeking back wages for minor league players, could yet provide a challenge to the exemption. In October 2020, it survived an MLB attempt to get the Supreme Court to decertify the litigating class.

Independence Day

In the meantime, some minor league team owners are beginning to take their first tentative steps toward independence from the MLB Borg. The first modern independent circuit in the minors, the Atlantic League, was founded in 1998 as a smaller-market repository for big-league washouts, injury comeback stories, and other misfits. Since the MLB’s forced contraction process, the Atlantic League has doubled from four to eight teams by absorbing some abandoned franchises; an investment group on Staten Island is hoping to make Richmond County Bank Ballpark home of Team No. 9.

Following the Atlantic League’s independent trail were the Pecos League (founded in 2011), the Pacific Association (2013), the Empire Professional Baseball League (2016), and the United Shore Professional Baseball League (2016). All have fattened on the stranded teams. Meanwhile, three other former minor league baseball groupings (the Pioneer League, the Frontier League, and the American Association) have gone independent, though they maintain a general partnership with MLB for things like experimental rule changes.

Will there be a market for small-city baseball, unaffiliated with MLB franchises, featuring a caliber of play higher than the NCAA but lower than Yankee Stadium? Who knows! One thing for certain is that government financial assistance is not going to speed the discovery process.

The Minor League Baseball Relief Act, like so much of government intervention into business, would mostly serve to benefit incumbents: Its $550 million would go to the 120 minor league teams still affiliated with deep-pocketed MLB franchises, as well as the 40 that were disaffiliated in December 2020. Longstanding independent teams and leagues would be at a comparative disadvantage.

The single most important thing lawmakers could do to promote baseball is to stop forcing non–baseball fans to subsidize the sport. The MLB commissioner stated explicitly while pulling the plug on minor league franchises that the now-smaller number of affiliation agreements will be reevaluated with an eye toward making sure that stadium facilities are maximally modern. By creating artificial scarcity, Manfred hopes to spur cities to compete with each other via taxpayer-financed stadium building and maintenance, thus preempting any need for MLB owners to pay their own freight. He should be invited to choke on a churro.

Study after study has shown that sports facility subsidies do not pay off through increased tax revenue. And as both the Los Angeles Rams football team and MLB’s San Francisco Giants demonstrate, professional teams that pay for their own stadiums tend to have the most beautiful ones, along with a built-in incentive to stick around and improve the neighborhood.

So let us, if we are so disposed, cheer on the minor leagues as they tilt the scales back toward living or dying on their own terms. Maybe one or more of the independent leagues, freed from both the mandates of MLB and the meddling of Chuck Schumer, will become so competitively successful that they’ll capture local or even national attention, creating an incentive for commercially successful owners to invest in their own damned stadiums. If they build it, they might just stay.

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