The Tribune Company’s opening day
announcement that it would divest itself of the Chicago Cubs began the
process of what could be the most scrutinized sale of a professional
sports team in history. While the prospect of a change in ownership
has been the subject of speculation ever since the team’s off-season
spending spree and the parent company’s decision to put itself up for
sale, the news that one of Major League Baseball’s (MLB's) marquis
franchises would change hands by early 2008 made waves throughout
sports and business communities.[1] Forbes Magazine estimates the
value of the Cubs to be $592 million, a substantial appreciation from
the $21 million the Tribune Company paid for the team in 1981.[2] As
further enticement to potential investors, the sale will also include Wrigley Field and the team’s twenty-five percent stake in the
Comcast sports channel in Chicago.[3] To date, much of the attention
has been focused on the list of high-profile bidders, fueling
speculation that the sale price could exceed one billion dollars.[4]
Despite the possibility of a bidding war, MLB’s procedural rules for
the sale of a franchise ensures that dollars alone will not be the
decisive factor in determining who will be the next owner of the Cubs.
Unlike the seller in a typical commercial transaction, the Tribune
Company has very little authority in determining who will purchase its
franchise. Control rests in the hands of MLB Commissioner Bud Selig,
to whom potential ownership groups must submit an application.[5] Upon
Selig’s appraisal of the applicants and bids, MLB requires the approval of seventy-five percent of the thirty team owners before
announcing the winning group.[6] While the bid price plays a factor,
MLB gives heavy consideration to the overall strength of an ownership
team and its ties to the city.[7] For example, when billionaire
commodities trader John Henry bought the Boston Red Sox in 2002, the
$660 million price he paid was not the highest among the competing
bids.[8]
A similar outcome may arise in the sale of the Cubs. Cubs
players praise announced bidder Mark Cuban, the controversial owner of
the National Basketball Association’s (NBA's) Dallas Mavericks, as a
potential owner.[9] However, Chicago Tribune business columnist
Michael Oneal characterizes him as an underdog, stating, “While Internet
billionaire Mark Cuban . . . has expressed interest in the Cubs, most
observers think MLB would balk at a potential owner as unpredictable
and outspoken as Cuban.”[10] The presumed frontrunner in the bidding
process is Selig’s longtime friend and business partner John Canning,
who would have to sell his eleven percent interest in Milwaukee Brewers
in order to assume ownership of the Cubs.[11] In addition to his
connection to Selig, Canning has put together an investment team of
over 20 members of Chicago’s so-called business elite.[12] As a result, despite
Cuban’s deep pockets, well-known desire to win at all costs, and the
Tribune’s presumed intent to sell as high as possible, Cuban is thought
to be an underdog in this contest when compared to Canning.
In addition to the aforementioned candidates, Chicago Wolves
owner Donald Levin and investment broker Joe Ricketts are known
bidders, while Chicago native and sports executive Jerry Colangelo has
expressed interest as well.[13] In addition to the economic allure of
acquiring the team and its related assets, bidders are also vying for
the prestige of owning one of the premier franchises in sports.[14]
This incentive, coupled with the opportunity to bring the team its
first championship in nearly 100 years, could trigger a bidding war
that exceeds one billion dollars.[15]
While it is Selig’s duty to act in the best interests of
baseball, Cubs fans might feel a bit uneasy about his control over the
process. Selig ascended to his position after serving as the owner of
the division rival Milwaukee Brewers.[16] Furthermore, Selig’s closest
ally amongst team owners is Chicago White Sox Chairman Jerry
Reinsdorf.[17] Thus, fans must face the reality that the future of the
Cubs is in the hands of the team’s past and present adversaries. Fans
must also be aware of the disposition of the other twenty-eight
owners. As compared with their counterparts in the National Football
League (NFL) and NBA, baseball owners are thought to be a very
conservative group, a factor that may adversely impact an applicant
such as Cuban.[18] Selig, likely aware of the perception that
Canning’s connections give him the upper hand, promises a fair and open
bidding process.[19] Yet Reinsdorf, who also owns the NBA’s Chicago
Bulls, publicly reminds everyone that he was the lone vote against
Cuban’s purchase of the Mavericks when that sale came before NBA owners
in 2000.[20]
MLB’s broad power to control the process of team sales stems in part from its
antitrust exemption, a benefit not bestowed upon the other major
sports. The Supreme Court created the exemption in 1922 in Federal
Club of Baltimore, Inc. v. National Baseball Clubs.[21] In Baltimore,
the city’s independent league team tried to sue MLB’s predecessor under
antitrust law for allegedly causing the ruin of its league.[22] In
preventing the plaintiff from availing itself of antitrust law, Justice
Oliver Wendell Holmes stated that baseball games are intrastate
affairs, and the fact that some people travel across state lines is not
essential to the business.[23] Thus, the federal government cannot use
antitrust law to regulate baseball under the Commerce Clause of the
U.S. Constitution. MLB’s antitrust exemption affords the league vast
control over its teams’ ability to sell or relocate, among other
things.[24] The Supreme Court has subsequently acknowledged that
baseball does engage in interstate commerce and that its antitrust
exemption is an anomaly, though the Court decided to defer to Congress
to alter the long-established status of the sport.[25] The Court’s
lukewarm assessment of the antitrust status, coupled with several legal
challenges and legislative attempts to weaken the scope of the
exemption, indicate that the antitrust issue may come before the courts
again in the future.[26]
Regardless of the outcome of the sale of the Cubs, close
scrutiny will accompany the process. The transaction could initiate a
renewed review of baseball’s antitrust exemption, and MLB is no doubt
aware of the intense speculation surrounding this sale and its
potential consequences. As the Cubs sale proceeds forward, the sports, business, and legal communities will continue to monitor both the quantitative and qualitative standards MLB sets forth in this unique business transaction.
Sources
[1] Dave Carpenter, Cubs Sale Process Moves Slowly; Well-Heeled Investors Line Up, Chi. Tribune, Sept. 4, 2007, available at http://www.chicagotribune.com/news/local/illinois/chi-ap-bbn-cubs-sale,0,4783367.story.
[2] The Business of Baseball, Forbes, available at http://www.forbes.com/lists/2007/33/07mlb_Chicago-Cubs_335092.html.
[3] Carpenter, supra note 1.
[4] Chicago Cubs Draw Bidders; Deal Could Top $1 Billion: Source, CNBC.Com, July 23, 2007, http://today.msnbc.msn.com/id/19917391 (last visited Sept. 14, 2007).
[5] Carpenter, supra note 1.
[6] Id.
[7] Id.
[8] Id.
[9] Carrie Muskrat, Cuban Submits Application To Buy Cubs, Cubs.Com, July 13, 2007, http://chicago.cubs.mlb.com/news/article.jsp?ymd=20070713&content_id=2084097&vkey=news_chc&fext=.jsp&c_id=chc (last visited Sept. 14, 2007).
[10] Michael Oneal, Roster of Cubs Bidders Expands, Chi. Tribune, July 12, 2007, § 3, at 1.
[11] Carpenter, supra note 1.
[12] Id.
[13] Id.
[14] Id.
[15] Id.
[16] Allan H. "Bud" Selig, MLB.Com, http://mlb.mlb.com/mlb/history/mlb_history_people.jsp?story=com_bio_9 (last visited Sept. 14, 2007).
[17] Thomas Boswell, In A Pinch, Reinsdorf Ready to Start Swinging, Wash. Post, Sept. 23, 2004, available at http://www.washingtonpost.com/wp-dyn/articles/A43200-2004Sep22.html.
[18] Rick Morrissey, Cuban In The Mix For Cubs, But Does MLB Want Him?, Chi. Tribune, July 13, 2007, available at http://chicagosports.chicagotribune.com/sports/columnists/cs-070712morrissey,1,4894875.column.
[19] Carpenter, supra note 1.
[20] David Greising, Cubs For Sale, But Is Wrigley Field?, Chi. Tribune, April 3, 2007, available at http://www.chicagotribune.com/business/chi-0704030231apr03,1,1771661,full.story?coll=chi-news-hed.
[21] Ronald Blum, Why Is The Antitrust Exemption Important?, USA Today, Dec. 6, 2001, available at http://www.usatoday.com/sports/baseball/stories/2001-12-05-antitrust-explanation.htm.
[22] Fed. Baseball Club. of Balt., Inc. v. Nat'l League of Prof'l Baseball Clubs, 259 U.S. 200, 207 (1922).
[23] Id. at 208-209.
[24] Blum, supra note 21.
[25] Flood v. Kuhn, 407, U.S. 258, 282 (1972).
[26] Darren Rovell, Baseball's Antitrust Exemption: Q & A, ESPN.Com, .
http://espn.go.com/mlb/s/2001/1205/1290707.html (last visited Sept. 12, 2007).