BSLW6604 Lecture Notes - Lecture 12: Reserve Clause, Curt Flood, Nap Lajoie
8 Jun 2018
School
Department
Course
Professor
1. Antitrust Law & Sports
a. In General
i. Virtually all antitrust suits against leagues by the players revolve around
deflating salaries
ii. Players are primarily not concerned about the impact of such antitrust practices
on consumer welfares: prices that fans pay for tickets or that the networks charge
for broadcasting rights, or the quality of the product
b. Player Restraints: mobility, eligibility, discipline
i. Players are sellers of a factor of production (their labor) to a league that is usually
the only employer in a particular sport. Players associations object to four main
areas because it limits players’ options to a single team:
1. Reserve clause: unilateral right to renew a player’s contract
2. Draft
3. Compensation System
4. Right of first refusal: allows a player’s prior team to match competing
offers
ii. Leagues argue pro-competitive benefits outweighs anti-competitive effects
c. Monopolization & Rival Leagues: Interleague competition
d. Inter-sport competition and cross-ownership bans
e. Intra-league restraints
i. Ownership
ii. League membership
iii. Sale of broadcast and sponsorship rights
iv. Franchise relocation
2. Antirust Law & Baseball
a. Reserve Clause
i. When professional baseball first began players could move freely from team to
team after the expiration of their one year contracts
ii. In 1879, to control their players, owner’s created a “gentleman’s agreement”
amongst themselves to permit each team to reserve five of their own players
iii. By the end of the 1880s every player had a “reserve clause” in their contracts
restricting their rights to leave their current team. If a player tried to leave for
another team courts were willing to grant negative injunctions: Nap Lajoie
1. Even if the team didn’t sign the player, no other team would sign him
b. Baseball Leagues
i. Prior to the merger, the AL and NL operated under a “National Agreement”. The
Agreement provided that each league would honor the player contracts executed
by the other. The leagues wanted to stop the raiding of players
ii. In 1913 the Federal League organized professional games with players not under
contract to AL or NL teams. When the Federal League tried to join the “National
Agreement”, the AL and NL refused to make them a party to the agreement
iii. As such, the FL began to induce teams to jump to their league and signed players
who were subject to the “reserve clause”
iv. Seeking official sanctions of its actions, the FL went to court claiming that the
National Agreement was a violation of the Sherman Act. If they prevailed all
contracts with AL and NL players would have been voided so the AL and NL
owners reached an agreement with the owners of the teams in the Federal League
whereby each owner would money for the suit to be dropped
1. Everyone agreed except the owner of Baltimore club in the FL, thus
Federal Club of Baltimore v. NL of Professional Baseball Clubs
c. Defenses to Antitrust Challenges
find more resources at oneclass.com
find more resources at oneclass.com
