I don't know much about baseball, but my feeling that if the normal
process of competition were to occur in major league baseball, the
Yankees would accumulate so much power that they'd win lot of the
"world" series championships, perhaps more than they already do. What
restrictions does major league baseball put on competition to avoid
having the Yankees hog all the good players, etc.? is there a tax that
redistributes funds to the weaker teams?
IMO, it would depend enormously by what you mean by a "normal process of
competition" :-). Baseball has more "restrictions" than any other business
and the restrictions have impacts from opposite angles (but always help the
owners, natch). And it all gets very speculative since market regulation
is a quirky field (lots of unforeseen consequences) and baseball is a
quirky game.
1) For example, allowing competition in the creation/placement of
teams might well result in the return to the NYC metro area of a 3rd team,
maybe a 4th. Building a stadium in New Jersey, across from Yankee Stadium,
is often discussed and would end the Yankees' market size
advantage. Conversely some Yankee competitors would get stronger if there
was a market size consolidation (e.g. Chicago's market would grow if
Milwaukee became a Triple A city).
BUT, right now, the owners themselves make all the rules. Baseball has
been exempt from all Federal anti-trust laws since the early '20s (by a
seemingly contrived decision of the Supreme Court, i.e. not
Congress). Baseball's exemption is more sweeping than any other sport
(and was critical in forcing most localities into huge subsidizes of the
owners' new stadiums). John Conyers and Paul Wellstone among others have
tried to modify this sweeping exemption, but without result.
2) As you point out Baseball has several financial arrangements that
redistribute money. Some were worked out in tough negotiations among
owners, but others also required negotiations and lockouts against the
players unions. BUT, it is MUCH disputed exactly how much these
redistribute player talent vs. encourage low payroll/rent seeking behavior.
I believe the big financial redistributions are:
- Revenue sharing from the profits (but with creative accounting
and deductions for things like new stadium costs).
- The a relatively new "luxury tax" on total payrolls (paid
almost exclusively by the Yankees). - The common sharing of
"non-traditional" revenue such as the national TV contracts (ESPN, Fox,
etc), as all merchandise (jerseys, etc) with the "MLB" logo, all revenue
from internet viewing, international contracts, etc.
3) There is also the leveling way players are assigned to teams (to
the detriment of their salaries). Until the early 1970's baseball had the
"reserve clause" - once a young player signed a contract he was bound to
that team (or the team to whom he was traded) practically for his
career. Although wealthier teams could offer larger initial contracts to
promising players, young baseball talent is less reliably forecast than in
other sports, so this arrangement has had a strong leveling effect (there
was also a lot of collusion by the owners in the absence of any legal
prohibitions).
In 1965 this arrangement was topped up with a draft for almost all
U.S. players thus reducing the possibility of even the initial
negotiations. Although it obviously helped lower salary costs, the draft
was promoted to the public as an anti-Yankee measure (given the Yankee
domination of that period and since the Yankees subsequently did poorly for
a decade popular lore retains this idea; many baseball people think
otherwise). [Foreign players are exempt from the draft (like defecting
Cubans if they don't come first to the U.S.) and this is a growing loophole.]
The year the draft began the players organized a union, calling in
a veteran leader from the United Steel Workers. Obviously the partly
successful union revolt of the early 1970's establishing free agency (for
those who have played at least 6 years at the major league level and have
an expired contract) now leaves a complicated hybrid system with details
subject to collective bargaining. A typical major league player might
spend 4 years in the minor leagues, 6 years in a complicated regulated
contract, and have his declining 5 years in free agency.
4) Too often overlooked are the rules that reverse the redistribution
of players (from poor to rich) through the trading that happens mid and
late season (often these are disguised salary dumps or the "rental" of
players who will be free agents at the end of the season).
Paul
