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Home Pete Toms LWIB: StarCaps & MLB, Poll on Competitive Balance, Credit Facility, World Series Start Times

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Pete Toms Article Archive
Written by Pete Toms   
Monday, 09 November 2009 09:51

Last Week in Bizball by Pete Toms

This week in LWIB, Rob Manfred and Michael Weiner from MLB and the MLBPA testify before Congress concerning “StarCaps”, a new poll reveals widespread concern amongst fans about competitive balance, positive signs for MLB as they negotiate a new “credit facility” and earlier World Series start times yield positive results.

STARCAPS & MLB

LWIB both Rob Manfred, MLB’s Executive Vice President, Labor and Human Resources and Michael Weiner, the MLBPA‘s General Counsel (and soon to be Executive Director) were two of the witnesses to appear before a hearing of The Subcommittee on Commerce, Trade, and Consumer Protection. The subject of the hearing was, "The NFL StarCaps Case: Are Sports' Anti-Doping Programs At A Legal Crossroads?". Why are two of the most important and influential men in MLB labour relations involved in a dispute over the legality of some NFL players testing positive for a banned diuretic (Bumetanide)? The reason is that “StarCaps” has the potential to nullify the drug testing policies in place in all the “stick and ball” leagues.

A quick summary of the history of “StarCaps”: Two Minnesota Vikings players tested positive last season for the aforementioned “Bumetanide” as a result of their consumption of an over the counter weight loss supplement “StarCaps”. (no longer on the market) . The players contested their suspension in Minnesota state court, arguing that it violated state workplace laws. The court sided with the players, who have continued to play amidst a series of ongoing appeals. Last week’s hearing came at the request of the NFL, who argued that Congress should exempt professional sports’ collectively bargained drug testing policies from state labour laws. Northeastern University Law Professor Roger Abrams wrote in July for The Huffington Post:

The resulting litigation has been a sports law professor's dream. It is filled with questions of the supremacy of federal law, collective bargaining, the rights of states to regulate aspects of drug testing, the role of a non-neutral "arbitrator" and that is just for starters.

T.J. Quinn reported on the hearing last week for ESPN:

Their lawsuit against the NFL over their positive drug tests exposed a weakness in the league's antidoping policy -- in all professional American sports' drug policies, for that matter. The leagues knew the loophole was there and hoped no one would try to wriggle through.

AND

Which brings us to Tuesday. The NFL felt the latest court decision is enough of a threat to its drug policy that it asked for a hearing before the House Subcommittee on Commerce, Trade and Consumer Protection, where it asked Congress to pass a law that would exempt sports from state labor laws. The league's point: If a state can pass a law that overrides a collectively bargained drug policy, a player in one state could take drugs that a player in another state couldn't.

John R. Parkinson quoted some of Commissioner Goodell’s testimony in a report on the hearing for ABC News:

"Professional athletes and their collective bargaining representatives should not be permitted to manipulate state statutes as a means to gain a competitive advantage," Goodell told lawmakers. "The professional sports leagues cannot operate properly and maintain even competition on the field if players in one state are subject to rules in this area that vary from state to state."

Rob Manfred, MLB’s Executive Vice President, Labor and Human Resources testified that MLB is supportive of the NFL’s request for Congressional intervention in exempting professional sports’ drug testing policies from state labour laws. Ken Belson quoted Mr. Manfred in a report for the New York Times:

Major League Baseball and other professional sports leagues, as well as the United States Anti-Doping Agency, have stood behind the N.F.L.’s request that Congress amend federal labor laws to prevent challenges in state courts.

Rob Manfred, M.L.B.’s executive vice president for labor relations, told the subcommittee that his league and the baseball players union probably did not “have the legal power to waive in advance state law claims of individual union members.”

As a result, Manfred said, “a narrowly drafted statute could solve the problem faced by professional sports while avoiding undue interference with the prerogatives of the states.”

Cynthia Dizikes quoted some of Mr. Manfred’s remarks in her report on the hearing for The Minnesota Post (HT The Sports Law Blog):

“Uniformity of enforcement is an essential element of any drug testing program in the context of professional sports,” Manfred said in prepared testimony. “The essence of sport is fair competition. The use of performance-enhancing drugs undermines fair competition. In a nation-wide sport such as professional baseball, athletes must be held to a single standard of clean competition.”

MLBPA General Counsel Michael Weiner testified in support of the NFLPA’s stance that congressional intervention is unnecessary. Both NFLPA Executive Director DeMaurice Smith and Mr.Weiner asserted that a resolution to this dispute should and can be negotiated by the PA and the league. Ms. Dizikes also quoted from some of Michael Weiner’s remarks before the hearing:

“Nothing we have seen — in this litigation, or in Minnesota law, or elsewhere — suggests that Congress needs to take such extraordinary action,” Weiner added.

In prepared testimony, Weiner said that such action by Congress could lead to “the unusual proposition that parties to a collective bargaining agreement can contract for that which is illegal under state law.”0

Reaction from Committee members to Commissioner Goodell’s request for government intervention were mixed. Anti-steroid crusader, Rep. Henry Waxman, always vocal on the subject of drug testing in professional sports, was typically overblown. (Mr. Waxman chaired congressional hearings on the use of PEDs in MLB in 2005 and 2008) From the aforementioned report from John R. Parkinson:

Rep. Henry Waxman, D-Calif., the chairman of the House Energy and Commerce committee, warned that if the state laws prevail and trump federal law, the ensuing result would complicate enforcement of suspensions and would threaten progress on steroids in sports at all levels of competition.

"If the rulings are taken to their logical conclusions, players on one team could be allowed to use drugs that would subject players on another team to suspensions and fines," Waxman said. "These new legal interpretations could render the NFL and Major League Baseball drug testing programs unenforceable, loophole-ridden and unacceptably weak and ineffective."

Waxman said if the courts do not rule that collective bargained drug policies can stand against state laws, congressional action could be necessary.

"We should not allow the drug policies that the NFL, Major League Baseball and other sports leagues have put in place to be rendered null and void," Waxman said. "That is an invitation to steroid abuse in professional sports. And it will inevitably lead to more steroid use."

And Cynthia Dizikes also quoted Mr. Waxman in her aforementioned report:

“The federal district court in Minnesota has ruled — and been upheld by the Court of Appeals — that the state laws governing workplace drug testing may trump the collectively bargained agreements of the NFL, Major League Baseball, and other sports leagues,” Rep. Henry Waxman, D-Calif., said today in prepared testimony at a hearing of the Commerce, Trade, and Consumer Protection Subcommittee. “This is a serious problem because some state laws undermine the stringent sanctions established by the sports leagues and their players associations.”

Not all members of the committee were as activist in their reactions as Mr. Waxman. From T.J. Quinn’s aforementioned report:

Subcommittee chairman Bobby Rush, D-Ill., made it clear in Tuesday's hearing that he wants the NFL and the NFL Players Association to work out their differences on their own and that legislation would be a "last resort."

The AP reported that the general mood of the committee during the hearing was rather apathetic:

Tuesday's session was hardly a meaty hearing. At times, no more than three lawmakers were present: Waxman was among those who didn't stick around to question the panel of witnesses.

And again from T.J. Quinn, who speculates that the likelihood of federal intervention is remote:

Federal legislation, though, looks unlikely in the near future, and some observers Tuesday questioned whether the NFL truly even wants it. Once Congress gets involved a little, they said, it might get involved a lot in the league's business.

Gabriel A. Feldman, the director for the Tulane sports law program, testified before the hearing. Mr. Feldman argued that there are a number of alternatives to federal intervention that should be pursued before Congress legislates on this matter. Again from Cynthia Dizikes report:

“It is important to emphasize that the Eighth Circuit did not hold that the NFL [Performance Enhancing Drug] Policy violates Minnesota law,” he said in prepared testimony. “Instead, the court only held that the Williamses may challenge their suspensions in Minnesota state court under state law.”

Thus, Feldman concluded that it was only a “potential” problem. And even if the court did ultimately rule in favor of the Williamses, it was still a “narrow” problem because only three states, including Minnesota, currently have drug-testing laws that might conflict with the NFL policy.

“This narrow potential problem warrants a very narrow solution, and many steps should be taken before Congress intervenes,” said Feldman. “The most appropriate — and simple — solution is for the NFL to litigate the case in state court and convince the court that the Minnesota Laws were not intended to apply to the NFL [Performance Enhancing Drug] Policy and that suspensions do not violate the Minnesota Laws. If that suit is unsuccessful, the NFL should seek an exemption from the state Legislature that makes it clear that the Minnesota Laws do not apply … If that fails, the NFL and the players association should try to bargain around the Minnesota Laws. If that fails, then, only as a last resort, Congress should consider passing a narrow federal law that will protect” the NFL policy.

The NFL’s appeal of the decision of the US Court of Appeals for the Eighth Circuit will be heard in March.

Select Read More to see details on a poll regarding competitive balance, MLB's negotiations for a new “credit facility” and earlier World Series start times yielding positive results

NEW POLL REVEALS FAN CONCERNS OVER COMPETITIVE BALANCE

The New York Yankees World Series victory has exacerbated the debate amongst baseball pundits over the issue of competitive balance in MLB. Maury Brown wrote about the vitriolic response to the Yankees’ championship in a post at his Sports Bash blog. Jeff Passan of Yahoo Sports wrote a column titled “Yankees widen baseball’s chasm”. Peter Gammons of ESPN wrote a column titled “Blame the System, not the Yankees.”

But there is more to the competitive balance issue than the size of the Yankees payroll and how frequently they make the playoffs and win the World Series. While 2009 regular season attendance was down a very respectable 7% (the recession) from 2008, perhaps more important was that attendance declined for 22 of the 30 franchises. Is there a correlation between declining attendance in more than 2/3 of MLB markets and the relative on field dominance of “large payroll“ franchises this season? LWIB, a Seton Hall Sports Poll (read details of the poll - Word Doc) revealed that many fans in small markets are increasingly cynical about the prospects of “their” teams’ ability to field competitive teams. The poll was conducted last week, during the World Series. From the poll:

Sixty percent of Americans who follow sports feel that teams located in bigger markets have an advantage in producing winning seasons…

Seventy percent of fans feel that Major League Baseball should make a bigger effort to equalize revenue for all teams, as the NFL has done.

“While occasionally a small market team like Minnesota or Tampa Bay will break through and win a division or a playoff round, the big markets continue to prevail in the later rounds, and the fans clearly link that success to the ability to generate bigger revenue,” noted Rick Gentile, director of the Seton Hall Sports Poll, conducted by The Sharkey Institute.

Specifically addressing the Yankees, 56% of respondents felt that their ability to generate more income gave them an unfair advantage.

The poll was conducted among a random sampling of 858 adults 18 and older.

Commissioner Selig has acknowledged that the current model in place to promote competitive balance requires “tweaking”. Mr. Selig’s commitment to implementing both mandatory slotting in the amateur draft and expanding the draft internationally are, in part, motivated by the desire to “level the playing field”. Whether or not greater revenue sharing and a more punitive “luxury tax” (both would be opposed by the MLBPA and large revenue franchises) will also be required in order to placate “small revenue” franchises and their fan bases remains to be seen.

MORE GOOD NEWS FOR MLB FROM CREDIT MARKETS

Last week, LWIB reported that Fitch Ratings is very optimistic about the present and future prospects of MLB. LWIB brought more good news for MLB from the credit markets. Daniel Kaplan reported for The SportsBusiness Journal that MLB is close to re-establishing it’s “credit facility” aka “”loan pool” after failing to do so last fall during the worst period of the “credit crisis”. From Mr. Kaplan’s report:

Major League Baseball, less than a year after turmoil in the financial markets prevented the league from refinancing its $1.2 billion loan pool, is back in the market, fully confident it can now obtain better terms.

Baseball’s lead lender, Bank of America, hosted financial institutions at MLB headquarters before Game 2 of the World Series last Thursday and expects to get a new deal done soon, banking sources said.

That would be good news for the 22 teams that borrow from the loan pool, or credit facility, because the inability to refinance last year triggered about $30 million in amortization costs that had not been budgeted for. About $39 million of amortization is scheduled to come due next month, but MLB would eliminate that cost, as well as much steeper bills in future years, with the desired refinancing.

AND

“The more people I talk to now, people are pretty sanguine compared to where they were five or seven years ago on baseball,” said Rob Tilliss, founder of sports financial adviser Inner Circle Sports. “People view it as recession-resistant.”

Last fall, when the credit markets seized up, MLB and the NFL were faced with refinancing their credit facilities. Historically, these pools of loans had been tremendous successes in delivering credit to teams at far cheaper rates than they could have secured on their own. In MLB’s case, it uses its national media contract as collateral and borrows most of the money through short-term markets.

MLB appears to have come through the recession (has it ended?) suffering relatively little damage. Concerns about disparities between large and small markets will likely never be entirely resolved but league wide revenues were stable in 2009 (a notable feat for obvious reasons) and the fundamentals of the industry remain strong.

EARLIER WORLD SERIES START TIMES YIELD POSITIVE RESULTS

By now we should all understand that despite the annual complaining of east coast baseball pundits that postseason games end too late, in fact, TV audiences grow as the evening progresses. Nonetheless, MLB and FOX did implement earlier start times for World Series games this year and the results were positive. Michael Hiestand reported LWIB for USA Today:

There were lots of variables behind this year's World Series boffo TV box office — like having a super-big budget cast in the New York Yankees— but this seems at least pretty clear: Earlier Series start times helped build late-night viewing.

Four of the six Series games started slightly before 8 p.m. ET, which was the earliest start time ever for primetime Series games. Sunday's Game 4 had a slightly later scheduled start — to fit in with Fox's NFL action — while only Saturday's Game 3 started later than scheduled, due to rain delay.

The result: Ratings increases for viewing after 11 p.m. ET.

In the four games that started on schedule, ratings after 11 p.m. ET was 6% higher than viewing before that time. Last year, ratings were 3% lower after 11 p.m. ET.


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