Category Archives: San Jose

11.12.13
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What could this mean?

The Merc’s John Woolfolk (recently assigned the the City beat), tweeted this about the San Jose-MLB case less than an hour ago.

I’m not going to go so far as to say that there’s a deal in the works, but there has to be a reason for both sides to agree to postpone mediation. Certainly San Jose’s stance has been to get depositions and open the books to make MLB squirm a little. MLB’s desire is to get rid of the lawsuit altogether. Something’s up. The owners’ meetings are happening this week.

Woolfolk responded to this post with another tweet:

If true, well, thanks for trying to get the two sides to hash it out Judge Whyte.

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UPDATE 11/13 1:55 PM – The Coliseum Authority cancelled a previously scheduled Friday meeting. It’s probably related to the ongoing lease negotiations.

In the meantime, San Jose lead attorney Joe Cotchett said this at a San Jose Rotary Club function (courtesy of Merc columnist Sal Pizarro):

More bluster? Or something else?

10.13.13
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Happy Anniversary Shark Tank!

Saturday, September 7 was a fairly ho-hum day at the newly-renamed SAP Center, formerly HP Pavilion, Compaq Center, and San Jose Arena. There was an event, a mariachi festival called Vivafest. Preseason hockey wasn’t scheduled to start for two weeks, the regular season for a month.  It seemed like there wasn’t much to celebrate.

Shortly after the first puck drop on Saturday night at SAP Center

Shortly after the first puck drop on Saturday night vs. Ottawa at SAP Center

Oh, but there was. September 7, 2013 marked the 20th anniversary of the opening of the arena, affectionally known as the Shark Tank (the Sharks would play their first home game on 9/30/93). Though it’s 20 years old, the place still looks nearly new and spiffy, with Sharks ownership and the San Jose Arena Authority committed to maintaining the venue to ensure its place as a premier sports and concert venue, and to keep up with rival franchises. Even though the structure is mostly precast, poured and block concrete, the glass entries and color highlights make the place feel more friendly and inviting than a largely concrete structure should. The steel cladded façade proved to be an aesthetic mistake, though it shimmers nicely at night. I joked shortly after the arena opened to some friends that the City needed to figure out a way to keep the arena in the dark all the time.

Since its opening, the Tank has hosted multiple NCAA basketball men’s regionals, the women’s Final Four, the US Gymnastics and Figure Skating Championships, pro wrestling, boxing, and MMA, and countless concerts. While in my relative youth I had reservations about the publicly-funded nature of the arena, the fact that Sharks ownership (led by the late George Gund at the time) spent a good sum of money upfront to ensure the arena would an industry leader, and the venue has held its place as a highly competitive, well-run NHL arena ever since. Unlike most other arenas, the team ran the venue themselves, parlaying that experience into the acquisition and operation of other venues in the area.

Circulation was always simpler at the Tank than at Oracle Arena thanks to wider concourses.

Circulation was always simpler at the Tank than at Oracle Arena thanks to wider concourses and a simplified layout.

SAP Center didn’t mention the moment on either its Facebook page or Twitter timeline. There was no special event. Maybe this was because the Sharks franchise celebrated its own 20-year anniversary in 2011, which would’ve made this celebration a bit much. Perhaps it’s a mark of the Hasso Plattner’s ownership. Whatever the case, San Jose should’ve celebrated the anniversary. It’s the best thing San Jose’s now shuttered Redevelopment Agency has accomplished. It’s worthy of praise, so I’ll do it here, admittedly in belated manner.

Happy Anniversary, Shark Tank! Here’s to 20 more years of great events at the arena. San Jose wouldn’t be the same without you. Take a bow.

The new SAP Center sign, installed Friday, replaced the HP Pavilion moniker.

The new SAP Center sign, installed Friday, replaced the HP Pavilion moniker.

10.11.13
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Judge partially sides with MLB in antitrust lawsuit, allows San Jose to argue interference claims

UPDATE 2:07 PM – I’ve uploaded a copy of the ruling. It’s worth a read.

Additionally, San Jose Mayor Reed’s office released a statement in reaction to the ruling:

I am pleased that the judge has allowed our case to move forward. Major League Baseball’s unfair and anti-competitive actions are costing San Jose residents millions of dollars in annual tax revenues that could go towards paying for more police officers, firefighters, libraries, road repairs and other critical services.

San Jose filed this lawsuit after waiting patiently for more than four years for a decision from Commissioner Selig. The court’s decision this brings us one step closer to paving the way for San Jose to host a major league ballclub.

Carry on.

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Update from the Merc’s John Woolfolk on San Jose’s antitrust lawsuit against MLB:

And other tweets:

During the hearing last Friday, Judge Ronald Whyte gave indications that he would back MLB based on the standing issue, while allowing San Jose to rework its case and try it in a state court. MLB had pushed for Judge Whyte to dismiss all claims, including those that could be covered by California’s more stringent antitrust laws. San Jose hoped Judge Whyte would rule that the City had standing, which would move the case forward and start a potentially damaging discovery phase for MLB.

Assuming that the tweets above are correct, baseball’s antitrust exemption remains immune to a legal challenge. Instead the case will be about tortious interference, or MLB’s stalling that has prevented San Jose and the A’s from getting a ballpark built. San Jose claimed initially that this amounted to $1.5 million per year in tax revenue, and could be awarded treble damages as a result. Over 30 years that comes to $135 million, not adjusted for inflation.

If San Jose can force discovery into the dealings of its “Blue Ribbon Commission” and other activities related to San Jose and Oakland, it could also force MLB to make a deal since they’re against any kind of opening of their books. There’s a lot more to the TI argument than standing.

A press conference may be in the offing. If it happens I’ll see if I can head out to City Hall.

For now I’ll end with this Bill Shaikin tweet:

Hooray for inertia!

10.05.13
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A’s lease situation looms in the shadows

Lost in all the postgame recriminations from Friday night is an article by the Chronicle’s Will Kane. It’s about the lease extension talks between the A’s and the Coliseum Authority, which to date haven’t yielded a new deal. When we last left off, Lew Wolff indicated that the A’s presented the JPA an offer of a 5-year extension at a higher annual payment, which would cover maintenance and some improvements at the Coliseum. The actual amounts and terms weren’t publicly disclosed. Wolff aimed for an escape clause that would be triggered by the Raiders building a new stadium that would presumably adversely impact the A’s. That was followed by Raiders owner Mark Davis pushing to demolish the old Coliseum and build a new one in its place.

Having this game as one of the last in the Coliseum is surely inconceivable. Right?

Having this game as one of the last in the Coliseum is surely inconceivable. Right?

Oakland City Councilwoman Rebecca Kaplan, who has been touting the potential for Coliseum City since its public unveiling, believes that the two sides are close to a 6-8 year extension. What’s a little disturbing is this message from Kaplan:

And the six- to eight-year window should give Oakland plenty of time to get serious about building a replacement ballpark and luring the A’s to stay, Kaplan said.

Hold a sec. Plenty of time to get serious about building a replacement ballpark? You’ve got to be kidding me with that. I’m sure that Kaplan was merely referring to the idea of shoe-horning a ballpark into the A lot, a secondary item within the overall plan. It’s the tone that’s disturbing. It places doubt on the idea that Victory Court was serious, and it certainly raises questions on the seriousness of inclusion for the A’s in Coliseum City. Just as the A’s aren’t winning back burned fans by talking about leaving, Oakland isn’t going to win the A’s over by considering them an add-on or second/third phase. Plus the idea of 6-8 years should give anyone pause. For all the talk by Kaplan and Mayor Jean Quan about how projects could be fast tracked or don’t need extensive environmental review, 6-8 years is an awful long time to effect change. Especially if both Coliseum City and Howard Terminal are under site control, Oakland’s favorite new catch phrase. Mark Davis lightly admonished Oakland about showing urgency last month. A move like this shows more of the same lack of urgency from Oakland. How are any of the teams supposed to take Oakland pols seriously if the general feel is that they’re making moves to make it look like they’re making moves?

While Kaplan was quick to say that a deal was close, A’s President Michael Crowley doesn’t see it that way.

“We’ve had some discussions, but we still remain far apart,” Crowley said of the lease talks. “I really don’t want to negotiate in the press. We certainly hope to be playing here in 2014.”

We certainly hope to be playing here in 2014? That’s also a pretty bad tell. Wolff has been careful to talk about playing at the Coliseum for years to come, even talking to a fan about it in Anaheim during the last regular season road trip. But this is not a certainty. And if your argument for the A’s staying is simply, They have nowhere to go, think again. Of course they have somewhere else to go. It’s really a question of how much money they’re willing to pay to make it happen – short and long-term.

Consider this game of musical chairs.

  • The A’s Coliseum lease ends at midnight on New Year’s Eve.
  • Same goes for the San Jose Giants at San Jose Municipal Stadium. Obviously the A’s aren’t going to play at Muni, it’s much too small and is older and more dilapidated than the Coliseum.
  • Raley Field is not old and dilapidated. It has 11,093 seats, plus berm seating up to 14,000. I did some measurements of the berm in RF and some of the other areas, and have concluded that if bleachers were installed atop those areas, the capacity could reach 20,000. Without standing room admissions. The A’s would sell that capacity out for 2-3 years straight, the transition time needed to build in San Jose. That capacity isn’t necessarily too small for MLB since there would be a clear transition path, and the A’s have been playing to an average of 20,000 per game for the last three years anyway.
  • What about the River Cats? Well, Lew Wolff would have to call in a favor. The team is owned by Susan Savage, widow of Art Savage. Art Savage was an executive with the Sharks almost 20 years ago, and Wolff called him and his family good friends. Wolff would have to work with the family, who runs the stadium, to compensate them properly and plan Raley’s temporary expansion. The River Cats could continue to play select games there, or…
  • Move temporarily to San Jose, where city leaders would be happy to kick the intransigent High-A Giants to the curb in favor of a AAA team while waiting for the MLB A’s to arrive. As of two weeks ago, there is no movement on a lease extension for the SJ Giants. Sound familiar?
  • That leaves the SJ Giants without a lease, without a home. That will not go over well with long-time SJ Giants fans, some of whom are part of the Stand For San Jose lawsuit. Sucks for them, I guess. If the Giants started looking for a home somewhere else in the Bay Area or NorCal, trust me, there will be no shortage of smaller cities ready to roll out the red carpet for them.
  • When the temporary arrangement ends in 2016 or thereabouts, Raley Field can be restored back to its previous glory. While there would be a big grassroots effort in Sacramento to attract the A’s full time, much of the available political capital has already been spent on the downtown Sacramento Kings’ arena. We already know that, when Raley was under construction, changes had to be made that dropped the possibility of easy vertical expansion. That makes it difficult to envision Raley as anything larger that 20,000 seats, unless someone’s willing to pay to gut it and rebuild the suites and a new upper deck. Besides, after 2-3 years it’ll become readily apparent how much better Raley is suited to being a AAA park than a MLB park. It’s akin to what happened when Bud Adams moved the Oilers out of Houston, Absent a modern stadium, Adams had his team play in the Liberty Bowl in Memphis for a year, followed one season at Vanderbilt Stadium. Adequate, and definitely not permanent.

Is any of this based on inside information? I assure you, it is not. Rather, it’s an example of a well-conceived Plan B, just in case the A’s can’t work out a Coliseum lease extension. It gives the A’s a decent place to play while they wait out the legal drama, while not infringing on T-rights. The way T-rights are written, Santa Clara County can accept any team it wants provided it’s not a MLB franchise. That’s how Wolff, Davis, and Crowley should be thinking. If they aren’t, then they’re not doing their respective jobs.

10.04.13
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Wendy Thurm’s live tweets from antitrust hearing (Update: link to Fangraphs article)

UPDATE 10/5 9:45 AM – Thurm put out an analysis of the hearing and potential steps forward at Fangraphs. I concur with everything she wrote.

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Fangraphs’ Wendy Thurm will have an article on this morning’s hearing soon. For now, this Storify recap will have to do.

My initial thoughts are that Judge Ronald Whyte was very thorough in picking apart arguments from both sides. He raised the lingering issue of standing for the City of San Jose, and openly questioned the purpose and efficacy of MLB’s long-held antitrust exemption. There’s a sense that Whyte may rule to dismiss the lawsuit based on standing, which would force the City to appeal. If the suit is dismissed, Whyte could choose to leave the matter for a state court to decide, or determine that his ruling covers both state and federal courts. A decision could come around the end of the month.

[View the story “San Jose vs. MLB Antitrust Hearing 10/4/2013” on Storify]
09.26.13
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Selig announces retirement and transition plan

This release came in this afternoon from MLB:

Baseball Commissioner Allan H. (Bud) Selig formally announced today that he will retire upon the completion of his current term, which runs through January 24, 2015.

Commissioner Selig said: “It remains my great privilege to serve the game I have loved throughout my life. Baseball is the greatest game ever invented, and I look forward to continuing its extraordinary growth and addressing several significant issues during the remainder of my term.

“I am grateful to the owners throughout Major League Baseball for their unwavering support and for allowing me to lead this great institution. I thank our players, who give me unlimited enthusiasm about the future of our game. Together we have taken this sport to new heights and have positioned our national pastime to thrive for generations to come. Most of all, I would like to thank our fans, who are the heart and soul of our game.”

Commissioner Selig will announce shortly a transition plan in preparation for his retirement, which will reorganize centralized Major League Baseball management.

Selig has led Major League Baseball since September 9, 1992, when, as Chairman of the Major League Executive Council, he became interim Commissioner. He was unanimously elected Baseball’s ninth Commissioner on July 9, 1998.

Last year Selig indicated that his time as Commissioner would cease with the end of the current term. Selig has been extended twice at the request of the owners, who are very comfortable with him at the helm. And why shouldn’t they be? Since the 1994 strike, Selig has presided over more labor peace than the other three big leagues, while overseeing an unprecedented economic expansion (for baseball, at least). If we’re looking at the job Selig has done in terms of protecting The Lodge’s interests, he deserves an A. When it comes to other aspects of the game (drugs, replay and technology, rules), Selig hasn’t fared nearly as well.

Despite being left hanging by Selig on the San Jose matter, Lew Wolff continues to steadfastly support his fraternity brother.

“This is absolute confirmation of what I was hoping might not happen.”

Wolff has been consistent in saying that he prefers to act in the interest of the game first instead of his own (the A’s), a stance that keeps The Lodge out of potential infighting but frustrates A’s fans to no end.

Unlike the NBA and NFL, which had successors to David Stern and Pete Rozelle (Adam Silver and Roger Goodell, respectively) groomed for years, there is no obvious frontrunner to succeed Selig. It could be someone within baseball’s upper echelon, whether it’s Selig’s current right-hand man Rob Manfred or a respected former team executive like John Schierholtz. The selection of a new commissioner will require a 3/4ths vote – just like a franchise move – and any number of candidates could potentially have enough votes against them to prevent approval. As we know from Selig’s previous endeavors, he likes to show unanimity among the owners, but it’s hard to see how that will happen because of their divergent markets and circumstances. Selig could form consensus because he showed neutrality to them, often to the point of indecision in some extreme cases. It’s not clear that any other nominee will do the same, and no owner wants the job.

Selig has indicated that the executive level will undergo a reorganization, which makes sense. During Selig’s tenure more power has been consolidated within his office than at any other time in baseball’s history. In 1999 the league presidents were eliminated, and a few years ago COO Bob DuPuy was unceremoniously let go. If the owners don’t trust Selig’s power with anyone other than Selig, then it may be best to to redistribute those powers among multiple individuals. Plus, if The Lodge wants to go with someone who can be a figurehead for the owners and technocrats inside baseball, then the safest path may be to restructure the job so that not so much power is vested within the Office of the Commissioner.

It would seem that Selig will leave the A’s-Giants mess to his successor, except for some choice quotes from a CBS Radio interview with John Feinstein, in which he called the Coliseum a “pit”:

“It’s a pit,” Selig said. “It reminds me of old County Stadium and Shea Stadium. We need to deal with that. I’ve had a committee working on it for two or three years, and there’s no question we’re going to have to solve that problem.”

But hasn’t the committee been working on it for a long time? What’s the hold-up?

“We have, John, but I’ll tell you it’s far more complex,” Selig said. “Look, you have one team that wants to move and the other team doesn’t want them to move, and it’s a very complicated situation. Before I leave, I’m satisfied we’ll work out something.”

We’ve heard assurances from Selig before, so this one carries little weight. Then again, who knows? Selig’s hallmark is his deliberate nature. If the point is to wait to provide a solution that’s satisfactory to Giants and A’s ownership, then on his way out the door makes sense. That said, there’s an awful lot of inertia in this story. I’d be surprised if Selig had this all settled before the end of his term. He still hasn’t come to a good compromise between the Orioles and Nationals over the latter team’s television rights.

Let’s just say that I’m not holding my breath.

09.21.13
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MLB makes final filing for antitrust hearing, includes ML Constitution

Two weeks ago the City of San Jose made its final filing for the October 4 hearing. Now it’s baseball’s turn to file, making its own submission yesterday. Now that we’ve had the initial filings and the rebuttals, we can see how the two sides are formulating their arguments. Yesterday’s filing continues to assert the antitrust exemption over all, that the Piazza decision was flawed, that the City’s interpretation of the Flood case is too broad, and that MLB can take as much time as it likes to determine where the A’s should or shouldn’t relocate.

The big reveal was that a second document accompanied baseball’s reply brief: the MLB Constitution. PDF links are listed below:

In the City’s original complaint, it argued that MLB’s Constitution expired at the end of last year, which I thought preposterous. Baseball had to approve the Astros’ move to the American League, and some covenant had to reflect that. The new Constitution does show the new divisional arrangement, and continues to show the same territorial assignments as the previous one, with no change in language.

San Francisco Giants: City of San Francisco; and San Francisco, San Mateo, Santa Cruz, Monterey and Marin Counties in California; provided, however, that with respect to all Major League Clubs, Santa Clara County in California shall also be included;

…

Oakland Athletics: Alameda and Contra Costa Counties in California;

If you’re wondering what the shared two-team market definitions look like, here’s an example:

Los Angeles Dodgers: Orange, Ventura and Los Angeles Counties in California; provided, however, that this territory shall be shared with the Los Angeles Angels of Anaheim franchise in the American League;

Los Angeles Angels of Anaheim: Los Angeles, Orange and Ventura Counties in California; provided, however, that this territory shall be shared with the Los Angeles Dodgers franchise in the National League;

Even if City’s tactic was simply to get the Constitution out in the open, it’s a good thing. It’s not like they were going to win or lose the case based on this.

One thing to consider is the three-fourths rule commonly cited when it comes to franchise relocation. 3/4ths of the owners (23) need to approve any franchise move, whether it’s 30 miles or 3,000. Just as important is that 3/4ths of the owners are needed to do any number of other changes:

  • Control person owner change (ex: Lew Wolff for the A’s, Larry Baer for the Giants)
  • Franchise termination – some may associate this with contraction
  • Expansion
  • Realignment
  • Revenue sharing changes for individual clubs

Keep in mind that the A’s future could include any or all of the above remedies. Sure, I’m referring to mostly extreme, batshit crazy possibilities, but at this stage, I suppose anything’s possible. If the pro-Oakland folks want to get a new ownership group in or depose Wolff, 3/4ths. Want to contract and expand the team a la the Expos/Nats? 3/4ths. Got a unique way of compensating the Giants for giving up the South Bay or the A’s for giving up the Bay Area altogether? 3/4ths. Commissioner Bud Selig’s is supposedly retiring, so it’s unlikely he’d take on such difficult machinations during his lame duck senioritis period. He took care of a bunch of to-dos like replay and an expanded drug testing program in the last year.

Chances are that Selig’s successor will inherit this mess. If there is some jockeying for the job instead of a Selig “appointment” it could be interesting to see if the A’s and Giants try to lobby for one individual over another.

09.13.13
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Earthquakes Stadium slips again to 2015

After what has to be considered the most excruciating site excavation ever, the Earthquakes revealed today that their stadium’s opening date is slipping (yet again) to 2015. The stadium was originally supposed to open in 2014 after last year’s groundbreaking ceremony. Then it slipped to midseason as crews encountered difficulties clearing the former defense plant of underground concrete bunkers and various other surprises found on site.

The full scope of the site-related work could only be determined when the work was fully underway, and the site-related work has continued to take longer than expected. Beyond the complications announced in July, there have been additional complexities in connecting the stadium to the city sewer system, and the high water table has slowed the site utility phase.

“Projects of this size and scope often encounter delays, especially with the amount of demolition and site preparation we had to do. What is most important is that we build a great stadium that will stand the test of time for our fans and this community,” Kaval elaborated.

Despite the complications at the site, progress has been made on the project. Demolition and grading are now complete and the site utilities have been installed. Additionally, the footings are currently being placed. The next steps in the process will be the pouring of the foundations for both the stadium and team building, followed by the steel erection. The steel has been ordered through Schuff Steel and is currently being fabricated in Stockton. The team office building is scheduled to be erected in November, followed by the stadium bowl in late December.

Well, at least they’ve ordered the guts of the new stadium. It’s just amazing that the 49ers stadium, which is nearly four times the size and well past ten times as expensive, will open before the Earthquakes’ digs. All because the site was cleaner to start. Beware, all you who think you can build on brownfields quickly. Something lurks beneath the surface.

09.11.13
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Roger Noll declaration

Economist and Stanford Professor Emeritus Roger Noll made a declaration in support of the City of San Jose’s antitrust lawsuit against Major League Baseball. He also provided a (presumably paid for) analysis of the issues at stake. The following is Professor Noll’s complete statement. A PDF version is available here.

DECLARATION OF EXPERT WITNESS ROGER G. NOLL

1. My name is Roger G. Noll. I reside in Palo Alto, California. I am Professor Emeritus of Economics at Stanford University and a Senior Fellow at the Stanford Institute for Economic Policy Research, where I am Co-Director of the Program on Regulatory Policy. My educational background includes a B.S. in mathematics from the California Institute of Technology and a Ph.D. in economics from Harvard University. My complete curriculum vita is attached as Appendix A.

2. My primary area of scholarship is the field of industrial organization economics, which includes antitrust economics and the economics of specific industries. I have taught antitrust economics at both the undergraduate and graduate levels. I am the author, co-author, or editor of thirteen books, and the author or co-author of over 300 articles. Many of these publications deal with antitrust economics. I also have published extensively on the economics of sports, including Sports, Jobs and Taxes, co-edited with Andrew Zimbalist, which deals with the economic impact of sports teams and facilities and for which Professor Zimbalist and I wrote a chapter on the implications of the economic impact of teams and facilities for antitrust policy.

3. I have served as a consultant in antitrust litigation, including matters pertaining to sports. I have served as an economic expert for the players’ association in all major U.S. team sports (baseball, basketball, football, hockey, and soccer) on the economic effects of restrictions on competition in markets for the playing services of professional athletes, including testimony at trial in Freeman McNeil, et al., vs. National Football League (U.S. District Court, Minnesota) and John Mackey vs. National Football League (U.S. district Court, Minnesota). In Bernard Parrish, et al., vs. National Football League Players Association (U. S. District Court, Northern District of California) I testified on behalf of the players’ association about the value of licensing rights for retired NFL players.

4. Other cases in which I have testified at trial in recent years are the following:

• In re Application of MobiTV Related to U.S. vs. ASCAP (U.S. District Court, New York City);

• Reggie White, et al., v. NFL: Lockout Insurance & Lockout Loans (U.S. District Court, Minneapolis);

• SmithKlein Beecham d/b/a GlaxoSmithKline vs. Abbott Laboratories (U.S. District Court, Northern District of California, Oakland);

• Novell vs. Microsoft (U. S. District Court, Salt Lake City);

• DVD CCA vs. Kaleidescape (Superior Court, San Jose); and

• In the Matter of Adjustment of Rates and Terms for Pre-existing Subscription and Satellite Digital Audio Radio Service (Copyright Royalty Board, Washington, D.C.).

5. In addition to the cases in which I have testified at trial, I have submitted expert reports and/or been deposed in numerous matters. I have also testified before the U.S. Congress on antitrust and sports matters on numerous occasions.

ASSIGNMENT

6. Attorneys for Plaintiffs have asked me to analyze Plaintiffs’ allegations in this matter to determine the economic evidence and analysis that would be used to prove liability in support of their claims. In undertaking this task I have read the Complaint, which was filed on June 18, 2013. I also have read Defendants’ Motion to Dismiss, filed on August 7, 2013. Finally, I have made use of information that has been collected from other public sources and my four decades of research on the economics of sports.

7. The purpose of this Declaration is to provide a preliminary analysis of the economic issues in this litigation before discovery has taken place. Hence, I reserve the right to revise my analysis and amend my conclusions on the basis of new information that has not yet become available. In particular, I understand that this Declaration is being submitted in connection with settling of the pleadings and that I am not being asked to opine on the merits of the claims. I would like to have the benefits of the complete discovery record before reaching my conclusions on the merits.

ANALYSIS

8. The objective of an antitrust economics analysis of liability is to determine whether conduct by Defendants caused harm to the competitive process. Ultimately, harm to the competitive process means harm to consumers, in this case sports fans. My main conclusion is that preventing the Oakland Athletics baseball team from moving to San Jose causes harm to competition because relocating to San Jose would substantially increase the potential fan base and attendance of the team.

9. Major League Baseball (“MLB”) is made up of thirty teams. These teams are economic competitors in many markets, including markets for players, coaches, regional television rights, and product licenses. If teams are geographically close, they also compete for attendance among sports fans in a local area. Presently MLB has local teams that compete for attendance in Baltimore-Washington, Chicago, Los Angeles, New York and the Bay Area.

10. Economics research and prior litigation have concluded that each major professional sports league in the U.S., including MLB, possesses market power in the provision of major league games in its sport in North America. Among the ways that MLB exercises its market power is by controlling the number and geographic location of major league baseball teams in North America. MLB has adopted rules that define the “home territory” of each team in the league and that place restrictions on franchise relocation. For now irrelevant historical reasons MLB has placed San Jose in the home territory of the San Francisco Giants, even though a team in San Jose would be less of a direct competitor to the Giants than is a team in Oakland because San Jose is much further than Oakland from the Giants’ home stadium.

11. One domain of competition in MLB as well as other professional sports is competition among cities to attract or to retain a team. Economics research shows that the financial success of a baseball team depends on the economic and demographic characteristics of its home territory, the quality of its home stadium, and the financial terms and other arrangements concerning the stadium. Cities actively compete for baseball teams on the basis of agreements that they offer to a team concerning a home stadium. The alleged anti-competitive conduct in this case is Defendants’ inhibition of competition and restraint of trade through the application of restrictions on team relocation which are preventing the City of San José from competing with the City of Oakland for the Athletics Baseball Club (Athletics).

12. Economists who have studied the location of teams in a league have concluded that in some circumstances a league has a reasonable business justification for restricting relocation. In particular, because the success of a league depends on the financial success of each team, leagues have a valid interest in assuring that each team will enjoy sufficient popularity in its home territory to be financially viable. This pro-competitive justification does not apply to MLB’s refusal to allow the Athletics to move to the City of San José.

13. San Jose is much more attractive than Oakland as a home location for a baseball team for several reasons. First, San Jose has a much larger population base, and so substantially greater potential home attendance for a local team. Second, San Jose is located in the Silicon Valley, which is the corporate home to many of the world’s leading high technology companies. This feature of San Jose is important because an increasingly important component of the revenue of a major league sports team is the sale of luxury boxes and other reserve seating to corporations, law firms, and wealthy individuals. Third, San Jose has identified and made available to the Athletics a location for a new stadium that will be a substantial improvement over the facility and location where the Athletics currently play. For these reasons San Jose is a much more attractive home territory for the Athletics than Oakland. Moreover, relocation to San Jose is financially attractive to the Athletics precisely because it increases total economic output, which in sports is the number of fans in attendance.

14. Competition in the local market for major league baseball would be enhanced if the Athletics relocate to San José. By increasing the potential revenue of the Athletics, relocation to San Jose would increase the financial incentive of the Athletics to field a team of higher quality. Making the Athletics more competitive would intensify competition between the Athletics and the San Francisco Giants, the other Bay Area major league baseball team.

15. MLB has not yet set forth its complete business justifications for preventing the movement of the Athletics to San Jose, so a full analysis of this issue is not feasible at this time. In antitrust economics, a restriction on competition can be justified only if it is reasonably necessary to achieve a pro-competitive objective, which is defined as an improvement in performance that benefits consumers. Given that San Jose is substantially more economically attractive than Oakland as a home location for the Athletics, the only plausible reason for preventing relocation of the Athletics to San Jose is to protect the Giants from more intense competition from the Athletics.

16. Protecting an incumbent firm from losing business to a more efficient competitor is never a reasonable business justification for a restriction on competition. In this instance, such protection is especially unwarranted. Since moving to their new stadium in downtown San Francisco, the Giants are among the most successful teams in MLB. Indeed, the success of the Giants since relocating to a new and much superior stadium illustrates why the quality and location of a stadium is extremely important to the success of a team. While the Giants will experience more intense competition from the Athletics if the latter move into a much better stadium in San Jose, historical experience with stadium improvements demonstrates that increased attendance at home games of the Athletics will not come at the expense of the Giants, just as the Giants’ improved attendance since relocating to downtown San Francisco has not come primarily at the expense of the Athletics.

I declare that the foregoing is true to the best of my knowledge and belief. Executed on September 6, 2013 at Stanford, California.

ROGER G. NOLL

09.07.13
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In final pre-hearing response, San Jose takes full aim at MLB’s antitrust exemption

Friday was the last day that the City of San Jose had to file a response to MLB’s filing from a month ago. And so they did, as Joe Cotchett went after baseball’s antitrust exemption. He also brought renowned sports economist Roger Noll to back him up.

The thrust of Cotchett’s argument is that the ATE is limited to the reserve clause and goes no further, citing the Flood, Piazza, and Federal Baseball cases. Naturally, that runs counter to MLB’s argument back in August that the exemption was enshrined by virtue of its long standing and couldn’t be changed except by an act of Congress. What view Judge Ronald Whyte takes when the first hearing is held October 4 is unclear. I’m eager to find out.

In addition to the attack on the ATE, Cotchett argues that the motion to dismiss the case should be denied, because the plaintiff’s claim is ” ‘plausible’ in light of basic economic principles.” Now remember that the original claim was that MLB colluded to prevent San Jose’s competitive bid to get the A’s. The case essentially rests on this particular argument. If Judge Whyte believes the argument is plausible, the case moves forward. If not, the City goes back to square one.

MLB claimed in its filing that the San Jose’s assertion that California’s Unfair Competition Law wasn’t violated because it the supposed violation was an antitrust violation, but because of the ATE, there is no violation. San Jose countered Friday that this ignores the UCL’s additional definitions of “unfair”. Historically, state courts have had difficulty properly codifying what “unfair” truly means, making this yet another test. It’s that very test that should push the case forward, according to Cotchett. Moreover, a chronology of actions/non-actions that have led up to this point was provided. They outline the various stalling measures MLB and the Commissioner’s office have taken to prevent a timely decision regarding an A’s relocation to San Jose, including Commissioner Bud Selig asking San Jose Mayor Chuck Reed to delay a stadium vote.

Cotchett also brought out California Business and Professions Code section 17204, which especially points out unfair competition against cities whose population is larger than 750,000. Of course, that means the statute only applies to four cities: Los Angeles, San Diego, San Jose, and San Francisco. All other California cities have less than 500k population. Does that mean anything? We’ll see.

Finally, Stanford professor emeritus Roger Noll provided a declaration of support for the lawsuit. While it probably won’t have any material bearing on whether or not the case will go to trial, Noll’s presence could become important as a witness if the case does go to trial. Noll’s quote:

“there is no pro-competitive justification for MLB’s refusal to allow the Athletics to San José…There is no conceivable economic justification for protecting the market for one of MLB’s most successful teams (the San Francisco Giants) at the expense of one of the MLB’s least successful teams (the Athletics).”

Noll is referring to the teams’ off-field and box office success, not their respective on-field exploits. I’d like to see which sports economists MLB brings out to argue for the preservation of the antitrust exemption. Then again, even if the case goes to trial, it seems more likely that MLB will be forced to make a deal, instead of the alternative of airing a bunch of dirty laundry and threatening the ATE in earnest. Whoever wins, I’m excited for October 4. It’s a step, even if it’s a halting one.

Armchair antitrust experts, have at it.