What's Next in Fight to Protect Minor League Baseball?

The Government Accountability Office may get involved in the possible contraction of Minor League Baseball.
Author:
Publish date:

On Wednesday, members of the House Committee on Oversight and Reform are scheduled to consider H.R. 6020. If ultimately adopted, H.R. 6020 would require the Government Accountability Office to issue a “report on the social, economic, and historic contributions that Minor League Baseball has made to American life and culture.” Congresswoman Lori Trahan, who along with Congressman David McKinley lead a bipartisan Congressional effort to protect minor league teams, introduced H.R. 6020 last week.

A report by the GAO would likely become an influential document in negotiations between MLB and MiLB on a new professional agreement. Their current agreement is set to expire in September. MLB demands sizable changes to the economic relationship between the big leagues and the minor leagues. The most controversial of those changes would involve the severing of affiliations between MLB clubs and 42 minor league teams. While this severing wouldn’t force affected teams to fold, their expulsion from MLB-affiliated minor leagues, along with losses of financial support and MLB branding, would jeopardize their survival.

The economics of minor league clubs have a number of components, but player development contracts (PDCs) are a crucial ingredient. PDCs dictate the contractual affiliation between MLB teams and minor league affiliates. In general, PDCs call for MLB teams to pay the salaries of minor league players and staff. Meanwhile, owners of minor league teams typically cover expenditures for field upkeep, equipment, uniforms and other non-personnel operations. MLB officials are dissatisfied with this current arrangement. They have expressed a number of complaints, including that some minor league teams rely on dated facilities and are located far from their MLB parents. A number of targeted MiLB teams reject the relevance of those lines of critique.

Depending on its findings and recommendations, a GAO report could make it more difficult for MLB to justify sweeping changes. The report would be authoritative, objective and credible. This reflects the nature of the GAO, a unique entity in Washington D.C. The GAO is an independent, nonpartisan agency that provides evaluations and analyses for Congress. It is thus different from an executive agency, such as the Justice Department or the State Department, since it doesn’t report to the President. The nonpartisan quality of the GAO is also important. Neither the agency nor its leaders are beholden to the Speaker of the House, the Senate Majority Leader or the President. The fact that the GAO’s leader, the Comptroller General, serves a 15-year term illustrates that dynamic: he or she remains in office past the terms of multiple presidents and Congressional leaders.

If H.R. 6020 became law, the GAO would analyze the varied types of contributions of minor league baseball. This analysis would entail GAO staff meetings with experts and stakeholders and reviewing data. This would likely last about three months, during which time members of Congress and their staffs would have access to the ongoing project. After analysis and review, the GAO would draft a report and it would be made public. To illustrate a GAO report that delves into the sports industry, check out the 2018 report titled “Event Ticket Sales: Market Characteristics and Consumer Protection Issues”.

The GAO would be guided by a series of declarations expressed in H.R. 6020. They include the following six:

1) More than 40 million people have attended MiLB games each season for 15 consecutive years.

2) In 2018, MiLB clubs donated over $45 million in cash and in-kind gifts to their local communities and completed over 15,000 volunteer hours.

3) The economic stimulus and development provided by MiLB clubs extends beyond the cities and towns where it is played, to geographic areas comprising 80% of the nation’s population.

4) MiLB is committed to promoting diversity and inclusion.

5) Congress has enacted statutory exemptions and immunities “to preserve and sustain a system for MiLB and its relationship with MLB.”

6) An “abandonment of 42 MiLB clubs by MLB would devastate communities, bond purchasers, and other stakeholders that rely on the economic stimulus these clubs provide.”

Collectively, these declarations make the case that minor league teams have contributed greatly to the nation’s interests and therefore the loss of 42 of 160 minor league teams would adversely impact national, state and local interests. Whether the GAO would confirm or refute those points remains to be seen.

In addition, a GAO report could address other relevant perspectives—including salaries of minor league players. MLB recently announced that MiLB player salaries would increase between 38% and 72%. This is a massive percentage jump, though many players’ salaries will remain low relative to the U.S. median household income of $63,179. To that point, the minimum weekly pay for Triple A players will climb from $502 to $700, or $2,800 a month. Given that the Triple A season lasts roughly six months, some players, especially those with families, take on other jobs in the offseason to supplement in-season wages.

MLB’s favorable legal status could be examined by Congress

A GAO report on the minors would likely bring about Congressional hearings on the relationship between MLB and MiLB. Hearings, which would involve the testimonies of MLB and MiLB officials and various experts, would likely delve into the appropriateness of the “statutory exemptions and immunities” referenced in H.R. 6020.

MLB enjoys exemptions from different areas of law. The Sports Broadcasting Act of 1961 (SBA) furnishes one of those exemptions. It permits MLB, the NFL, the NBA, the NHL and those leagues’ respective franchises to enter into national TV contracts that would otherwise run afoul of Section I of the Sherman Antitrust Act. Leagues rely on the SBA to thwart consumer lawsuits that challenge broadcasting rights and subscription fees (a topic in an ongoing federal litigation over DirecTV’s NFL Sunday Ticket). Section I is an intimidating area of law: it instructs that a liable defendant pay treble damages (meaning three times the amount of money the court finds the defendant owes the plaintiff).

Further, MLB continues to profit from a historical antitrust exemption that, though narrowed by the Curt Flood Act of 1998, remains in effect for otherwise anti-competitive collaborations related to franchise relocations, the amateur draft and minor league baseball. The exemption prevents minor league ballplayers from credibly suing MLB—and its competing franchises that join hands to restrain their salaries—on antitrust grounds. MLB also enjoys the fruits of the Save America’s Pastime Act of 2018, which exempts minor league players from minimum wage and overtime pay protections they might otherwise obtain from the Fair Labor Standards Act.

Exemptions are valuable in both obvious and subtle ways. They permit defendants to engage in conduct that would otherwise be deemed illegal. MLB and its competing clubs can thus act in arguably anti-competitive ways that, for example, competing video game publishers and rival soft drink companies cannot. An exemption also supplies the best legal defense around—this law doesn’t apply to us!—and thus diminishes legal costs and attorneys’ fees.

Take MLB’s antitrust exemptions. Antitrust cases tend to be expensive, fact intensive and long. Even if MLB felt confident that it could convince a court that its treatment of minor league teams satisfies antitrust scrutiny, MLB would prefer to avoid having to go to court altogether. That is why an exemption from the law is so valuable: it extinguishes the need to litigate a controversy and obviates the financial costs and reputational risks of having to supply sworn statements and disclose sensitive documents in pretrial discovery.

Sports Illustrated will keep you posted on H.R. 6020 and its potential ramifications.

Michael McCann is SI’s Legal Analyst. He is also an attorney and the Director of the Sports and Entertainment Law Institute at the University of New Hampshire Franklin Pierce School of Law.