Congressional study urges competition

January 24, 1995|By New York Times News Service

As a Senate subcommittee draws closer to holding hearings on baseball's exemption from antitrust laws, members of Congress have received a nonpartisan economic report that questions whether the exemption "serves a useful public purpose."

The 22-page report, compiled by the Congressional Research Service of the Library of Congress, also shows how the salary cap the clubs have implemented would benefit the owners in an overwhelming economic way and suggests the novel step of placing new franchises in existing large-revenue markets like New York, Chicago and Los Angeles as a way of leveling revenues between high-revenue and low-revenue clubs.

"In industries operating under competitive conditions," the report says, "the existence of businesses with exceptional profits like the New York Yankees would attract new firms into the location, which would capture some of those profits."

The owners have linked their revenue-sharing plan to the system that places a cap on club payrolls. But Dennis Zimmerman and William Cox, the economists who wrote the "CRS Report for Congress," conclude that "revenues to be shared with financially weak franchises might be raised from the income of financially strong franchises rather than from the salaries of the players."

The established clubs would not like the idea of being used "to finance a solution to the problem," the economists note. "But," they write, "one might ask why this loss would be more unfair than asking players to forgo part of the value of their own talent and skill [their human capital] to solve the problem."

Zimmerman and Cox write that the exemption might have encouraged the owners "not to seek a settlement that players would accept and to prefer an impasse," adding that the exemption reduces the owners' potential losses from an impasse and unilateral implementation of a cap.

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