RIGHTS OF PROFESSIONAL ATHLETES TUESDAY, OCTOBER 14, 1975 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON MONOPOLIES AND COMMERCIAL LAW Washington, D.C. The subcommittee met at 11 a.m. in room 2141, Rayburn House Office Building, the Honorable Peter W. Rodino, Jr. [chairman], presiding. Present: Representatives Rodino, Seiberling, Mazzoli, and Cohen. Also present: Earl C. Dudley, Jr., General Counsel; Daniel L. Cohen, counsel; Franklin G. Polk and Kenneth N. Starling, associate counsel. Chairman RODINO. The committee will come to order. For the better part of the 20th century, professional sports activities. have been close to the hearts of millions upon millions of Americans. In 1974 more than 131⁄2 million citizens attended games of the National Football League. Thirty million attended games of major league baseball, and many times even that figure watched these sports and others on television. As the business of professional sports has grown, so too has congressional scrutiny of its activities. This subcommittee alone has conducted four previous inquiries regarding professional sports since 1950. Each time, we have confronted serious antitrust problems that the Supreme Court has persistently asked the Congress to resolve, and each time we have sought to understand those problems and to build a record that would ultimately strengthen these enterprises in the public interest. That has not always been an easy assignment. It is surely not an enviable one in the climate of today. In large measure the major professional sports leagues in this country enjoy a monopoly status. It is a status that has been defended over the years because the health of professional sports, it has been argued, is in the community interest. It is our responsibility to inquire whether those who have enjoyed the monopoly status have always acted with real regard for the communities which support them. More importantly, we must inquire whether any Federal legislation, such as H.R. 2355, may be required. Many professional team owners, of course, contribute mightily to their communities, and many provide a very genuine and publicspirited service. Nonetheless, there are problems which suggest to some, at least, an occasional abuse of the monopoly privilege. Central to our inquiry this morning is the fact that the monopoly status of the professional leagues has permitted contractual arrangements between players and team owners by which_the_owners control (1) a player's right, upon the expiration of his contract, to enter into a subsequent contract with another team in his league. Combined with the common draft method of player selection, these binding arrangements restrict an athlete's economic freedom of choice. Presumably, these arrangements-essentially horizontal agreements between league teams restricting the mobility and competitive position of players, and eliminating intraleague bidding for player services-might under ordinary circumstances constitute classic restraints of trade cognizable under the Sherman Act. Largely because of organized professional baseball's longstanding judicial exemption from the antitrust laws, however, these so-called reserve clause and option clause arrangements, as well as the common draft, have become standard operating procedure in every major professional sports league. Opponents of these practices cite their essentially anticompetitive nature and argue that the restrictive agreements reduce players salaries below the competitive price that might more nearly reflect a player's economic value to his team. At the same time, however, we must weigh the counterargument that these agreements are necessary to the preservation of competitive balance between teams, which is directly related to the entertainment value of the sport and ultimately to the continued viability of the league. We are aware that some of these issues are close to the issues that relate to recent collective-bargaining negotiations between owners and player representatives. We do not, however, care to look at the collective-bargaining issues this morning, since that strikes at another jurisdiction. Our sole concern is with antitrust, and we shall strive and be constrained to keep the hearing within those parameters. In addition, the Chair is particularly sensitive to the fact that ongoing litigation, particularly in the case of organized professional football, is challenging these league agreements in private antitrust action. The subcommittee, therefore, approaches this morning's hearing with an extra caution and vigilance. While the so-called Rozelle Compensation Rule may necessarily be the subject of some discussion today, we intend to steer clear of any dialog that might jeopardize the independence of judicial proceedings. The legislation before us this morning, H.R. 2355 and H.R. 694, would resolve the antitrust issues raised by the league agreements by voiding the standard player contract as anticompetitive. [See appendix at pp. 132, 134 for text of H.R. 2355 and H.R. 694.] Essentially, the bill would create for professional athletes the right to enter into contracts without having to agree to permit an owner to control their right, upon the expiration of the contract, to enter into subsequent contracts with other owners to engage in that sport. The bill also renders unenforceable provisions in contracts violative of the rights granted and contains a provision for criminal penalties. This legislation and the questions we must resolve can only be understood against the background of relevant court decisions regarding the status of professional sports under Federal antitrust law. Baseball, and only baseball of all our professional team sports, enjoys a judicial antitrust exemption. That single exemption stems from a 1922 Supreme Court ruling that baseball was not a subject of commerce and thus not within the purview of the Sherman Act. On several occasions since 1922, however, the Court has ruled that were it considering the baseball question for the first time, it would undoubtedly end the exemption. However, because of its long-standing nature, the inconsistency of that exemption must be remedied not by the judiciary, but by the Congress. Every other major professional sport-football, basketball, hockey, golf, even boxing-has been expressly denied antitrust exemption by the Federal courts, and in the case of football, basketball, and boxing, by the Supreme Court. While the courts have made clear, however, that the threshold question of exemption must be answered against the leagues, it is only very recently that the specifics of particular league agreements have been brought to the test. The reasonableness arguments are still being heard. The central questions in large part still remain. Perhaps an examination of H.R. 2355 will lead to a resolution of what the Supreme Court has called the "baseball anomaly," but it is the more narrow issue of player contracts that we address this morning. In that regard, we are delighted to have with us the distinguished commissioner of the National Football League, as well as respected representatives of the Football Players Association, including their executive director. And of course, present in the room to present this testimony-and it is going to be a very special honor to welcome him back before this subcommittee-is the former chairman of this committee and a distinguished American, our dear friend, Emanuel Celler. Before I recognize the witnesses, I recognize the gentleman from Maine, Mr. Cohen. Mr. COHEN. Thank you, Mr. Chairman. Mr. Chairman, as we begin the hearings on H.R. 2355, a bill designed to enable professional athletes to contract with any professional team, I must confess some uneasiness with the limited issues presented. Although the bill addresses only the problem of player mobility, that issue is inseparable from the complex of legal ambiguities surrounding the status of professional team sports. We consider the merits of this bill without having definitive answers to whether the draft, the agreement by owners that they will all only offer a standard contract, the powers given the commissioner and territorial exclusivity, all found in the football arena from which today's witnesses are drawn, whether they violate antitrust laws. Certainly the asserted needs for organized competition between football teams and the policy of free competition unequivocably written into the Sherman Act are hardly congruent. Mr. Chairman, what makes me uneasy is that the congressional response to the antitrust problems has been piecemeal and generally at the behest of the owners. This is no way to legislate. The applicability of the antitrust laws and of the exemption to those laws given by Congress to specific issues is not settled and as you pointed out is currently the subject of litigation. We are here today because of the piecemeal solutions of the 1960's have raised as many problems as were solved, and it is time to meet those issues seriously or not at all. Although the fate of professional sports is not the foremost national concern, Congress is responsible for fashioning a solution because Congress is responsible for nourishing the problem. I am reminded, Mr. Chairman, of the rule of law that although one is not obligated to volunteer a rescue, a rescuer is obligated to exercise reasonable care, and since Congress has waded in, it cannot now walk away. In resolving the conflict between organized competition and free competition, we must insure a just result. In analyzing the provisions of H.R. 2355, I agree with the report of the Department of Justice that the bill may not be adequate to accomplish its intended result. The subcommittee will, in my opinion, have to write its own bill. In so doing, it is my hope that this time we can do it right once and for all for the owners, the players, and for the fans. Thank you, Mr. Chairman. Chairman RODINO. Thank you, Mr. Cohen. I recognize the gentleman from Ohio, Mr. Seiberling. Mr. Chairman, throughout this year most congressional activity has focused on the economic and energy crisis confronting the Nation, and this subcommittee itself has been conducting an investigation to determine whether the structure and behavior of the energy conglomerates are competitive. But while working on these urgent national issues, Mr. Chairman, Congress must not disregard its normal business. I want to commend you for taking time during the congressional recess to conduct this hearing on a bill that I introduced to prohibit certain rules and practices which I believe are anticompetitive in the business of professional sports. Before being elected to serve in Congress, I worked as an antitrust lawyer for a large rubber company, and my company had a number of competitors, and the industry was generally competitive. But there was no employee draft. Neither the company I worked for nor any of its competitors bought employment contracts from other companies. They did not sell their employees, and they did not trade them. There was no agreement among the tire companies to bind their employees through a standard form contract with a reserve clause. If I was unsatisfied with my salary or with working conditions, I could have sought employment within my profession elsewhere, including from my company's competitors. If I had gone to work for a second company, it would not have had to compensate the first company. There certainly was not any tire and rubber industry czar to determine what was fair compensation for my services. Indeed, professional sports is the only industry in the United States which drafts its employees, buys them, sells them, trades them, refuses to let them negotiate with other employers, and so thoroughly dominates their livelihood and their lives. Mr. Chairman, the Federal antitrust laws prohibit contracts which unreasonably restrain trade or commerce. With the exception of baseball, which was exempt by judicial decision, professional sports are subject to the antitrust laws just the same as any other business. There are, I must note, several restrictions in employment contracts which may be found to be reasonable. An employee may agree that he will not join a competitor for a reasonable period of time after an employment contract is terminated, and this kind of agreement will |