Congressional complicity in the baseball antitrust exemption: analysing senate voting patterns

This article examines a key congressional vote on preserving baseball's antitrust exemption. It finds that the most important factor influencing a legislator's vote was whether there was a Major League Baseball (MLB) team in the legislator's constituency. This supports the notion that the professional sports industry has been effective in 'capturing' their political overseers.

Major League Baseball (MLB) is unique within American industry, in that it has an explicit exemption from antitrust laws. This exemption emanates from a 1922 Supreme Court decision, which ruled that baseball was not involved in 'interstate commerce', and hence was not subject to federal antitrust laws. Economists have long studied the efficiency and redistributional implications of baseball's antitrust exemption, and more broadly, of the impacts of professional sports leagues operating as unregulated monopolies.[1] In fact, much of the (now voluminous) literature on the economics of sport that has developed over the past half-century has, in one form or another, pertained to the monopoly status of the industry.

However, the specific role of Congress in preserving this exemption has generally been unexplored by economists, at least in any rigorous empirical way. Congress is important to the issue, because it could have chosen at any time to remove this exemption, but never did so, thus continuing to provide baseball with a privilege not enjoyed by any other American firm/industry. In fact, in a 1953 Supreme Court case (Toolson versus New York Yankees) that upheld the 1922 ruling, the Court noted that the exemption seemingly had no legal basis for support, but argued that it was Congress's responsibility, and not the Court's, to remove the exemption.

In this context, the purpose of this article is to more rigorously analyse Congress's role in preserving the exemption. The analysis takes a standard public choice approach; legislators are modelled as rational and self-interested, seeking not only to maximize their probability of re-election by serving constituent interests but also to indulge their own personal ideological preferences on issues. This stream of literature has focused largely on congressional roll-call voting as the measure of legislator behaviour, because such behaviour can be directly observed and reliably measured. Empirical analyses have examined a wide range of specific policy issues, from environmental policy (Kalt and Zupan, [4]) to abortion rights (Brady and Schwartz, [1]).

However, for the purposes of this study a problem arises in that there have been almost no recorded votes in congressional history on the baseball antitrust issue. As Zimbalist ([5]) observed, although there have been dozens of congressional investigations into baseball, it is extremely rare for bills to even make it out of the Committee stage for consideration by the House or Senate as a whole. Even on those infrequent occasions when casting of votes have occurred in these chambers, they have generally been 'voice' votes, as opposed to recorded votes, and hence do not allow for any analytics. However, there is one Senate vote, from June 1960, that we believe does allow for empirical testing – not only was it a recorded vote, but its narrow and focused nature forced legislators to unequivocally reveal their position on the exemption. This article analyses this vote to determine the various mix of factors that influenced legislators' votes. Analysing this vote is not only important in an historical sense, in that its outcome effectively allowed the exemption to continue to this day, but also may be important to better understanding current congressional motives with respect to sport, and ultimately whether the exemption might be removed in the future.

Senator Estes Kefauver (Tennessee), chair of the Judiciary, Antitrust, and Monopoly Subcommittee of the Senate Judiciary Committee, and a long-time critic of baseball's monopolistic practices, sponsored a bill in 1960 that was intended to facilitate the formation of the Continental League. The Continental League was set to begin play in 1961 as a competitor to the long-established National and American Leagues, and was to have franchises in eight cities. However, a significant barrier to the successful launching of the Continental League was gaining access to players; MLB was highly vertically integrated, with each team controlling (perpetually) hundreds of players through its extensive minor league systems. Given baseball's antitrust exemption, this control over the input market effectively eliminated any potential competitor league from emerging. Although the Kefauver bill did give baseball (along with football, basketball and hockey) a general antitrust exemption, it explicitly forbade MLB from interfering with the formation of a third major league, making such actions a violation of antitrust law. The Kefauver bill also prohibited MLB teams from controlling the contracts of more than 100 players. In Senate hearings, the battle lines were clear-cut, with the Continental League supporting the bill, saying its success was largely dependent on the bill passing, and MLB and the minor leagues both opposing the bill; the latter's opposition was rooted in the view that MLB teams would no longer control enough players to staff minor league teams.

The Kefauver bill never came to a Senate vote. Instead, it was amended by Senator Alexander Wiley (Wisconsin), a known supporter of the existing professional leagues. The amendment struck from the bill the special requirements for baseball, and gave baseball the same broad antitrust protection as the other three sports. Senate supporters of the original Kefauver bill opposed the amendment, saying it defeated the purpose of the original bill. The Wiley amendment went to a roll-call vote, and was approved by a 45–41 margin (Congressional Quarterly Almanac, [2]). In our view, this vote on the Wiley amendment is perhaps the purest and most revealing test in congressional history of legislator preferences with respect to the exemption.

To analyse the factors that impacted this vote, we employ a logit estimation technique and regress a senator's vote (1 = in favour of the Wiley amendment) on a series of independent variables related to both constituent interests and legislator characteristics. With the constituent interest variables, it is assumed that legislators respond to well-organized interest groups who are able to extract concentrated benefits for themselves, rather than to the mass of unorganized, and often uninformed, group of constituents as a whole. In this context, MLB, the Continental League and minor league baseball were all well-organized groups who made presentations at Senate hearings. To capture these effects, MLB is a dummy variable equalling 1 if there was an MLB team in the state at the time of the vote, and 0 otherwise; CONTIN is a dummy variable equalling 1 if the state was scheduled to receive one of the eight franchises in the new league, and MINOR measures the total number of minor league franchises in the state across all classes (AAA, AA, A, B and C) combined. One would expect the sign on both MLB and MINOR to be positive, and the sign on CONTIN to be negative. To gain further insights into the possible influence of the most dominant group of these three interest groups, that is, MLB, an interaction variable (MLB × ATTEND) was also added, where ATTEND was the team's average per game attendance over the previous five seasons. This recognizes that not all MLB teams may have equal influence with their senators, and that better-supported teams may hold more political power than those that are less well supported. If this were true, then the sign on MLB × ATTEND should be positive. Finally, a variable to capture the possible regional influences of MLB was also included. REGION is set equal to 1 if a state does not have an MLB team of its own, but borders on another that does have an MLB team.

Added to this interest group variables were two variables related to ideology – one measuring legislator ideology (LEG_IDEOL) and the other measuring constituent ideology (CONSTIT_IDEOL). Both measures are derived from scores developed by the liberal interest group called the Americans for Democratic Action (ADA). Each year, the ADA selects a series of congressional votes across a wide range of issues that it feels best reveal a legislator's 'liberalness' – a legislator's score can range from 1.00 (always voting the liberal position) to 0 (never voting the liberal position). However, as Kalt and Zupan ([4]) argued, these scores are influenced by the liberalness of the constituency that the legislator represents, and hence these latter influences must be removed from the ADA score if a pure measure of legislator ideology is to be obtained. Kalt and Zupan's approach, and the approach followed here, is to regress senator ADA scores on a series of demographic variables proxying constituent ideological interests (results not shown in the article, but available on request). Under this approach, the 'fitted' portion of the ADA score is the constituency's ideology measure, whereas the residual is the senator's personal ideology measures. For both portions, higher values indicate a greater degree of liberalness. As a final independent variable, the senator's party is included; this picks up any ideology not already captured in LEG_IDEOL, and/or the effects of party discipline.

The results are reported in Table 1 and indicate that voting was significantly driven by basic interest group pressures – the coefficients on MLB, CONTIN, REGION and MINOR were all significant and of the correct sign. In examining the magnitude of the coefficients, the lobbying influence of MLB teams in supporting the Wiley amendment was greater than the influences of Continental League teams in opposing the amendment, presumably reflecting that political power is greater for the established league as opposed to the upstart league.

Table 1. Logit regression of senate vote on Wiley amendment

With respect to ideology, the senator-specific portion of ADA scores was significantly and negatively related to a vote in favour of the Wiley amendment – indicating that more liberal senators were less likely to vote in favour of the antitrust exemption. Finally, the positive and significant coefficient on PARTY indicates that Republicans were more likely to vote in favour of the antitrust exemption – this effect may be picking up ideological views not already captured in LEG_IDEOL, or may be reflecting a type of party discipline in effect.

The results may provide a perspective on why Congress has not overturned the antitrust exemption in almost 100 years. The presence of an existing MLB team in a legislator's constituency seems to exert a strong pressure on that legislator. This is likely because of some type of political 'capturing' of these legislators by MLB teams. Conversely, legislators representing constituencies without teams are more willing to challenge these leagues; presumably, however, this willingness to challenge diminishes once that constituency obtains a team. A more recent example can be found in the late 1980s, when senators Tim Wirth of Colorado and Connie Mack of Florida led hearings into the reluctance of MLB to expand. As Zimbalist ([5]) observes, these senators went quiet after their home states were awarded expansion franchises in 1991.

Although senator ideology did matter in the analysis, its overall impact on voting behaviour was relatively small, compared with the impact exerted by the presence of an MLB team. With MLB since having expanded to 30 teams, and thus having political influence in even more states than ever, the prospects of congressional action on removing the exemption seem remote.