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104th Congress Rept. 104-656
HOUSE OF REPRESENTATIVES
2d Session Part 1
FAN FREEDOM AND COMMUNITY PROTECTION ACT OF 1996
June 27, 1996.--Ordered to be printed
Mr. Hyde, from the Committee on the Judiciary, submitted the following
R E P O R T
[To accompany H.R. 2740]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 2740) to protect sports fans and communities
throughout the Nation, and for other purposes, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
The Amendment.................................................... 2
Purpose and Summary.............................................. 5
Background and Need for Legislation.............................. 6
Antitrust Implications of Franchise Relocations.............. 8
Current Legal Environment................................ 8
Objective Criteria and Procedural Mechanisms............. 9
Sports Leagues as Single Entities........................ 10
Other Sports Antitrust Exemptions........................ 11
The Hyde Amendment in the Nature of a Substitute................. 11
Committee Consideration.......................................... 13
Votes of the Committee........................................... 13
Committee Oversight Findings..................................... 17
Committee on Government Reform and Oversight Findings............ 17
New Budget Authority and Tax Expenditures........................ 17
Congressional Budget Office Estimate............................. 17
Inflationary Impact Statement.................................... 24
Section-by-Section Analysis...................................... 24
Changes in Existing Law Made by the Bill as Reported............. 27
Dissenting Views................................................. 28
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fan Freedom and Community Protection
Act of 1996''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Communities, sports fans, and taxpayers make a
substantial and valuable financial, psychological, and
emotional investment in their professional sports teams.
(2) Professional sports teams promote civic pride, and
generate jobs, revenues, and other local economic development.
(3) Professional sports teams remain in communities for
generations and represent much more than a business.
(4) Current law does not protect the rights of sports fans
nor the interests of communities when a professional sports
team decides to relocate.
(5) Professional sports team owners are positioned to extract
enormous benefits from communities, and they are taking
advantage of these opportunities.
(6) Professional sports teams and leagues have directly
benefited from Federal legislation, including the following:
(A) Public Law 87-331 (15 U.S.C. 1291 et seq.;
commonly referred to as the Sports Antitrust Broadcast
Act of 1961).
(B) Public Law 89-800 (80 Stat. 1508; commonly
referred to as the Football Merger Act of 1966).
(C) Public Law 93-107 (87 Stat. 350; relating to a
prohibition of local television blackouts of network
games which were sold out 72 hours in advance).
(D) Federal tax laws that allow depreciation of
player contracts, capital gains, carryover losses, and
the formation of Subchapter S corporations.
(7) The Court of Appeals for the Ninth Circuit ruled in Los
Angeles Memorial Coliseum Commission v. National Football
League, 726 F.2d 1381 (9th Cir. 1984) (commonly referred to as
``Raiders I''), Los Angeles Memorial Coliseum Commission v.
National Football League, 791 F.2d. 1356 (9th Cir. 1986)
(commonly referred to as ``Raiders II''), and National
Basketball Association v. SDC Basketball Club, Inc., 815 F.2d
562 (9th Cir. 1987) (commonly referred to as ``Clippers'') that
a league has the authority to prevent a professional sports
team from relocating from one community to another community.
SEC. 3. NOTICE OF PROPOSED RELOCATION OF A PROFESSIONAL SPORTS TEAM.
(a) Requirement.--A professional sports team owner seeking to
relocate the team from one community to another shall provide notice of
the proposed relocation to the parties listed in subsection (b) not
later than 180 days before the commencement of the season in which the
professional sports team is to play in the new community.
(b) Parties.--The notice required under subsection (a) shall be
(1) the local government for the community in which the
professional sports team's stadium or arena is located;
(2) the sports authority, or similar entity with jurisdiction
over the stadium or facility in which the professional sports
team is located;
(3) any owner or operator of such stadium or facility; and
(4) the professional sports league and each professional
sports team that is a member of the league for the professional
(c) Additional Requirements.--The notice required under subsection
(1) be delivered in person or by certified mail;
(2) be published in one or more newspapers of general
circulation within the community in which the professional
sports team is located; and
(3) contain an identification of the proposed new location
for the professional sports team, a summary of the reasons for
moving the professional sports team based on the factors listed
in section 5(b), and the date on which the proposed change is
scheduled to become effective.
SEC. 4. REQUIREMENT TO MAKE EXPANSION TEAMS AVAILABLE TO COMMUNITIES
UPON THE FULFILLMENT OF CERTAIN CONDITIONS.
(a) League Requirement To Grant Franchise.--Not later than 12 months
after the submission of the name of an investor under subsection (b) to
a league, the league shall grant to the investor a new expansion
professional sports team franchise from the league at a fee in an
amount no greater than an amount equal to the franchise fee charged by
the league for the last expansion professional sports team franchise
granted by the league, and on financial terms and conditions no less
favorable than those granted to the last expansion professional sports
team franchise granted by the league.
(b) Three-Year Opportunity for Investment.--The requirement of
subsection (a) applies to a league in any case in which--
(1) the league approves the relocation of a professional
sports team from one community to another;
(2) not later than three years after such relocation, the
community in which the team was previously located submits to
the league the name of an investor to be granted a new
professional sports team franchise in such community by the
(3) the investor demonstrates that he is financially able to
purchase and support a team.
(c) Ten-Year Relocation Prohibition.--In the case of a grant of a
professional sports team franchise under subsection (a), the league may
approve a resale of the team, but may not approve a relocation of the
team during the ten-year period beginning on the date of the grant of
the expansion professional sports team franchise, except as provided in
section 5 of this Act.
(d) Exception.--This section shall not apply in the case of a
community with a professional sports team if the team relocates within
25 miles of the community and remains within the State in which the
community is located.
SEC. 5. LEAGUE RELOCATION AUTHORITY AND RELOCATION DETERMINATION
(a) League Authority.--It is not unlawful by reason of the antitrust
laws for a professional sports league to enforce rules or agreements
authorizing the membership of such league to decide whether a
professional sports team that is a member of the league may relocate
from one community to another.
(b) Determination Criteria.--In determining whether to approve or
disapprove the relocation of a professional sports team from one
community to another, a league, after public hearings held in
accordance with the provisions of subsection (c) of this section, shall
make specific written findings regarding--
(1) the adequacy of the stadium in which the team played its
home games in the previous season, and the willingness of the
stadium, arena authority, or the local government to remedy any
deficiencies in such facility;
(2) the extent to which fan loyalty to and support for the
team has been demonstrated during the team's tenure in the
(3) the extent to which the team, directly or indirectly,
received public financial support by means of any publicly
financed playing facility, special tax treatment, or any other
form of public financial support;
(4) the degree to which the owners or managers of the team
have contributed to any circumstances which might demonstrate
the need for the relocation;
(5) whether the team has incurred net operating losses,
exclusive of depreciation and amortization, sufficient to
threaten the continued financial viability of the team;
(6) the degree to which the team has engaged in good faith
negotiations with appropriate persons concerning terms and
conditions under which the team would continue to play its
games in the community;
(7) whether any other team in the league is located in the
community in which the team is currently located;
(8) whether the team proposes to relocate to a community in
which no other team in the league is located;
(9) whether the stadium authority, if public, is not opposed
to such relocation; and
(10) whether there is a bona fide investor who is offering
fair market value for the professional sports team and who will
retain the team in the current community.
(c) Requirement for Public Hearings and Published Findings.--No
decision by a league to permit the relocation of a professional sports
team shall be valid or final until the league has--
(1) conducted at least two public hearings in the community
from which the professional sports team seeks to relocate;
(2) permitted any interested member of the public, including
any representative of the local government of the community
from which the professional sports team seeks to relocate, or
any sports authority, or similar entity with jurisdiction over
the stadium or facility from which the professional sports team
seeks to relocate, to deliver oral comments or file written
comments regarding such relocation;
(3) published, within 30 days of such decision, written
findings in one or more newspapers of general circulation
within the community from which the professional sports team
seeks to relocate setting forth the basis of such decision,
with specific reference to each of the criteria set forth in
subsection (b); and
(4) delivered copies of its written findings to the local
government of the community from which the professional sports
team seeks to relocate and any sports authority, or similar
entity with jurisdiction over the stadium or facility from
which the professional sports team seeks to relocate.
SEC. 6. REQUIREMENT FOR PROFESSIONAL SPORTS TEAM OWNERS WHO RELOCATE TO
NEW PLAYING FACILITIES TO REIMBURSE STATE AND LOCAL
GOVERNMENTS FOR VALUE OF FINANCIAL ASSISTANCE
(a) Reimbursement for Financial Assistance.--In a case in which a
professional sports team owner relocates a professional sports team
from one playing facility to another facility (including a facility
located in the same community in which the previous facility is
located), and in doing so the owner breaches a contract with the State
or local government with respect to use of the previous playing
facility, the professional sports team owner shall, within 30 days
after the team plays its first game in another facility, pay to the
State or local government an amount equal to the value of financial
assistance provided by the State or local government to the team.
(b) Limitation.--The provisions of subsection (a) shall not apply in
a case in which recovery of financial assistance as defined in
subsection (c) is a remedy under the contract.
(c) Definition of Financial Assistance.--For purposes of this
section, the term ``financial assistance'' includes special tax
treatment and financing of a stadium or arena in which a professional
sports team plays.
(d) Penalty.--A professional sports team owner who violates the
requirement of subsection (a) is liable to the State or local
government that provided financial assistance to the team for an amount
equal to three times the value of the financial assistance provided by
the State or local government to the team.
SEC. 7. ENFORCEMENT.
(a) Penalties for Failure To Comply.--A league that violates the
requirement of section 4(a) by failing to grant a new professional
sports team franchise--
(1) is liable to the community in which the team was
previously located for damages equal to three times the
purchase price or market value of the team, whichever is
(2) is subject to the suspension for one season of its
antitrust exemption for pooling the broadcasting rights to
games under Public Law 87-331 (15 U.S.C. 1291 et seq.); and
(3) is subject to the loss of the antitrust exemption under
section 5(a) of this Act for the franchise relocation that led
to the violation of section 4(a).
(b) Enforcement Procedures.--
(1) Declaratory judgment by department of justice.--The
Department of Justice may seek a declaratory judgment and
appropriate injunctive relief in an appropriate Federal
district court with respect to whether a league has complied
with section 4(a) of this Act.
(2) Private right of action by local government.--A private
right of action may be brought in an appropriate Federal
district court to enforce the provisions of sections 3 and 4 of
this Act by--
(A) any local government that has provided, or been
requested to provide, financial assistance, including
tax abatement, to any professional sports team or that
team's existing or proposed stadium facility; or
(B) any local government, sports authority, or other
similar entity in the region or locality in which the
professional sports team's home stadium or facility is
(3) Private right of action by investor.--Any investor whose
name has been submitted under subsection 4(a) of this Act may
seek injunctive relief in an appropriate Federal district court
to enforce the provisions of subsection 4(a).
SEC. 8. INAPPLICABILITY TO CERTAIN MATTERS.
Except as expressly provided in this Act, nothing in this Act shall
be construed to alter, determine, or otherwise affect the applicability
or inapplicability of the antitrust laws, labor laws, or any other
provision of law to any act, contract, agreement, rule, course of
conduct, or other activity by, between, or among persons engaging in,
conducting, or participating in professional football, basketball, or
SEC. 9. DEFINITIONS.
For purposes of this Act:
(1) Antitrust laws.--The term ``antitrust laws''--
(A) has the meaning giving it in subsection (a) of
the first section of the Clayton Act (15 U.S.C. 12(a)),
except that such term includes section 5 of the Federal
Trade Commission Act (15 U.S.C. 45) to the extent such
section applies to unfair methods of competition; and
(B) includes any State law similar to the laws
referred to in subparagraph (A).
(2) Community.--The term ``community'' means a city, county,
parish, town, township, village, or any other general function
governmental unit established by State law.
(3) Investor.--The term ``investor'' includes a person, group
of persons, shareholders, or a community.
(4) League.--The terms ``league'' and ``professional sports
league'' mean an association composed of two or more
professional sports teams (which have been engaged in
competition in their sport for more than seven years) which has
adopted, accepted, or put into effect rules for the conduct of
professional sports teams which are members of that association
and for the regulation of contests and exhibitions in which
such teams regularly engage. The term includes--
(A) the National Football League;
(B) the National Hockey League; and
(C) the National Basketball Association.
(5) Located.--The term ``located'', with respect to a
professional sports team, means situated in the stadium or
arena in which the professional sports team plays its home
(6) Professional sports team.--The term ``professional sports
team'' means any group of professional athletes organized to
play major league football, hockey, or basketball.
(7) State.--The term ``State'' means any of the 50 States and
the District of Columbia.
SEC. 10. EFFECTIVE DATE.
This Act takes effect as of August 1, 1995.
purpose and summary
H.R. 2740, the ``Fan Freedom and Community Protection Act
of 1996,'' which was introduced by Congressman Martin R. Hoke,
is a response to the growing problem of sports franchise
relocation. Since a series of federal court decisions in the
1980s--dealing with the applicability of the antitrust laws to
professional sports leagues--professional sports teams have
been free to move from one city to another. Often, they have
extracted large public subsidies either to stay where they are
or to move to a new city. Because there are far fewer
franchises than there are cities who want franchises, local
government officials often have little leverage in these
H.R. 2740, as reported by the Committee, seeks to address
this issue in several ways. It clarifies the law regarding
rules that allow leagues to block franchise moves by providing
for an explicit antitrust exemption for such rules so long as
the leagues base their decisions on neutral criteria and hold
public hearings. It attempts to balance the bargaining power of
the cities with that of the leagues by requiring that a league
which approves a franchise move provide an expansion team to
the city from which the franchise left, if the city submits the
name of a qualified investor within three years after the team
It further requires that if a relocating team owner
breaches a stadium contract with a local government, that owner
must repay all of the financial assistance that he has received
from that local government. Finally, H.R. 2740 would remove for
one year the pooled broadcast rights antitrust exemption, 15
U.S.C. Sec. 1291 et seq., that Congress gave the leagues, if
they do not comply with the expansion provisions of the Act.
background and need for the legislation
In 1960, the National Football League (``NFL'') came to the
United States Congress seeking relief from antitrust laws. The
NFL argued on behalf of all three of the major sports leagues
not already enjoying exemptions from the federal antitrust laws
(football, hockey, and basketball), that in the absence of a
limited antitrust exemption, teams in smaller markets would not
be able to survive financially because the television revenue
available to teams in large markets would enable them to hire
the best players--a situation that could seriously detract from
balance on the playing field and threaten the leagues' very
To bring stability to the major professional sports leagues
and protect fans and communities, Congress passed, and
President Kennedy signed into law, the Sports Broadcasting Act
of 1961, 15 U.S.C. Sec. 1291 et seq. The new law permitted each
of the leagues to pool their separate broadcasting rights for
sale to a single purchaser. This broadcast antitrust exemption
has succeeded in providing the financial foundation for every
team in each of the leagues. In the case of the NFL, the Act
allowed the league's 30 teams to divide equally $1.2 billion in
the 1995-1996 season.
In 1966, arguing that competition between the NFL and the
American Football League (``AFL'') was undermining the
stability of teams in both leagues, the NFL approached Congress
again seeking special protection under the law: an antitrust
exemption to permit the NFL and the AFL to merge. In testimony
before Congress, then-NFL commissioner Pete Rozelle argued
forcefully for the merger, saying that if it were approved:
Professional football operations will be preserved in
the 23 cities and 25 stadiums where such operations are
presently being conducted. This alone is a matter of
considerable public interest--to local economies,
stadium authorities, and consumers. Without the plan,
franchise moves and/or franchise failures will occur as
a matter of course within the next few years.
Professional Football League Merger: Hearings on S. 3817
Before the Antitrust Subcommittee of the House Committee on the
Judiciary, 89th Cong., 2d Sess. 37 (1966). Congress once again
responded to the leagues' entreaties, this time by enacting the
Football Merger Act of 1966. See 15 U.S.C. Sec. 1291.
During congressional consideration of the Sports
Broadcasting Act and the Football Merger Act, the professional
sports leagues made certain promises, both explicit and
implicit, as to how they would behave if the exemptions were
granted. Specifically, they argued that the exemptions would
create stability for the leagues, communities, and the fans.
Recent history indicates that this has not been the case.
Instead of bringing stability, pro sports team owners have
taken advantage of the guaranteed television income stream and
the limited number of franchises available to pit city against
city in ever-escalating bidding wars with public officials
desperate to keep existing teams or attract new ones.
Now, thirty years later, the leagues have returned to
Congress looking for a third antitrust waiver to halt the
recent rash of team movements because franchise relocations
have caused continuing controversy for the NFL. In the 1980s,
owner Al Davis moved the Oakland Raiders to Los Angeles; in
1994, he moved them back to Oakland. The St. Louis Cardinals
moved to Arizona in the late 1980s, while the Los Angeles Rams
recently moved to St. Louis. The city of Baltimore lost its
team in 1984 when the Baltimore Colts abruptly abandoned that
city for Indianapolis, Indiana. At present, the Houston Oilers
are actively seeking to move to Nashville, and there are
numerous rumors concerning possible moves by other teams. Since
the early 1980s, the number and cost of team movements have
dramatically increased. For example, the state of Maryland
agreed to spend approximately $200 million dollars of public
money to entice the Cleveland Browns to move.
The recent move of the former Cleveland Browns illustrates
the problem that the cities and fans face. On November 6, 1995,
the owner of the Browns, Art Modell, announced that he was
moving the team to Baltimore, Maryland. Citing financial
difficulty, Mr. Modell agreed to move his team in return for
promises from the Maryland Stadium Authority of a new, multi-
million dollar, state-of-the-art stadium. The Cleveland
community, which has fervently supported the Browns for years,
erupted in a storm of protest. In the controversy which
followed, the public has hotly debated the economic, social,
and emotional costs and benefits of moving professional sports
franchises from one city to another.
In response, the city of Cleveland filed a lawsuit seeking
to block the move. On February 8, 1996, the NFL reached a
settlement with the city which, among other things, will
provide Cleveland with a team by the 1999 season and allow the
new team to use the ``Browns'' nickname. However, as part of
the settlement, Cleveland will have to build a new stadium that
will be funded in large part with public funds, but with a
small part coming from a loan from the NFL. On February 9, the
NFL owners voted to approve the settlement and to approve the
relocation of the old team to Baltimore. Under the NFL
Constitution, any move by an NFL owner must be approved by a 3/
4ths majority of the team owners. The owners approved the move
by a vote of 25-2.
Interestingly, a member of Congress at the time of the 1961
sports broadcasting debate, Representative George Meader of
Michigan, foresaw the current problem when he addressed Mr.
Are you not asking us to place a rather large amount
of power in your football league, which you say you
will use judiciously? What I am trying to find out is
whether or not some phraseology could be included in
the statute itself so that we would not have to depend
upon the good will of the management of the
professional football league.
* * * * * * *
[Y]ou are now asking for an exemption from the
antitrust laws from Congress, and if there was concern
that the power granted by such an exemption would be
abused, I think the Congress would have the right to
make it conditional.
Telecasting of Professional Sports Contests: Hearings on H.R.
8757 Before the Antitrust Subcommittee of the House Committee
on the Judiciary, 87th Cong., 1st Sess. 38-39 (1961). It is
clear from the historical record that the major professional
sports leagues do not operate in a completely free market
environment. Given the history of legislation relating to
sports leagues, Congress has an ongoing obligation to ensure
that not only that the financial health of the leagues is
served, but that the public interest is served as well.
Antitrust implications of franchise relocations
Current legal environment
The NFL contends that under current law, it cannot prevent
franchise relocations. That contention grows out of litigation
in the 1980s over Section 4.3 of the NFL's Constitution and
Bylaws. Section 4.3 provides in relevant part that: ``No member
club shall have the right to transfer its franchise or playing
site to a different city, either within or outside its home
territory, without prior approval by the affirmative vote of
three-fourths of the existing member clubs of the League.''
\1\ Section 4.3 originally required unanimous approval for a move
into another team's home territory, but it was changed in late 1978.
When Al Davis announced that he would move the Oakland
Raiders to Los Angeles, the NFL owners voted 22-0 to block the
move under Rule 4.3. Mr. Davis brought an antitrust suit
against the league claiming that the vote under Rule 4.3
amounted to an illegal conspiracy to restrain trade in
violation of Sec. 1 of the Sherman Act.
Mr. Davis ultimately prevailed in the liability phase of
the case on two grounds. Los Angeles Memorial Coliseum
Commission v. National Football League, 726 F.2d 1381 (9th
Cir.) (``Raiders I''), cert. denied, 469 U.S. 990 (1984).
First, the Raiders I court held that, as a matter of law, the
NFL is not a single entity incapable of conspiring with itself.
Id. at 1387-90. Rather, the court found that the teams in the
League compete with one another and may conspire with one
another to restrain trade. One judge on the panel vigorously
dissented from this holding arguing that the NFL is a single
entity incapable of conspiring with itself. Id. at 1401, 1403-
Second, the Raiders I court considered whether the jury
properly found that Rule 4.3 was an unreasonable ancillary
restraint to the legitimate and necessary cooperation among NFL
members. Applying a rule of reason analysis, the court held
that ``the jury could have found that the rules restricting
team movement do not sufficiently promote interbrand
competition [i.e. competition among leagues] to justify the
negative impact on intrabrand competition [i.e. competition
among League members].'' Id. at 1397. The court further
suggested that a league rule that included objective criteria
and procedural due process mechanisms might pass antitrust
scrutiny. Id. at 1397-98.
Later, the appeal of the damages phase of the case shed
further light on these issues. Los Angeles Memorial Coliseum
Commission v. National Football League, 791 F.2d 1356 (9th Cir.
1986) (``Raiders II''), cert. denied, 484 U.S. 826 (1987). In
resolving the various claims as to how damages were to be
offset, the Raiders II court held that the jury's verdict
should be read as finding Rule 4.3 illegal only as it applied
to this specific case. Id. at 1369. It was not to be read as
finding the rule invalid in all cases. Id. The court
specifically noted that the trial court's injunction only
prohibited the NFL from enforcing the rule in the circumstances
of this case and not in all other cases. Id. at 1369 & n.4.
In a later case involving the relocation of the NBA's San
Diego Clippers to Los Angeles, the Ninth Circuit reaffirmed the
basic principles it set forth in Raiders I and Raiders II.
National Basketball Association v. SDC Basketball Club, Inc.,
815 F.2d 562 (9th Cir.), cert. dismissed, 484 U.S. 960 (1987).
The court held:
Collectively, the Raiders opinions held that rule of
reason analysis governed a professional sports league's
efforts to restrict franchise movement. More narrowly,
however, Raiders I merely held that a reasonable jury
could have found that the NFL's application of its
franchise movement rule was an unreasonable restraint
of trade. * * * Neither the jury's verdict in Raiders,
nor the court's affirmance of that verdict, held that a
franchise movement rule, in and of itself, was invalid
under the antitrust laws.
815 F.2d at 567.
The decisions in the Raiders cases may be read to mean more
than they do. In particular, analysis of the Raiders decisions
rarely focuses on the fact that the Raiders moved to a market
in which another NFL team, the Los Angeles Rams, was already
playing. That consideration raises competitive issues that are
not present in a more typical move like the Browns' move to
Baltimore where no other team is located. In short, the NFL's
claims that it is powerless to prevent franchise relocations
because of the antitrust laws have not been thoroughly tested,
and they may be based on a decision that arose out of an
atypical fact situation. Nonetheless, the NFL raises a
legitimate concern about the expense and uncertainty of
antitrust treble damage lawsuits hanging over its head for
Objective criteria and procedural mechanisms
As noted above, the Raiders I court suggested that an NFL
rule that included objective criteria and procedural mechanisms
to guide league decisions on franchise relocations might pass
antitrust scrutiny. In December 1984, the League adopted a
policy that provides for the types of objective criteria
suggested by the court. These criteria include: (1) the
adequacy of the team's stadium and the willingness of the city
to renovate it; (2) the loyalty of the team's fans; (3) the
extent of the team's public financial support; (4) the degree
to which team management has contributed to the need to move;
(5) the team's financial viability; (6) the degree to which the
team has engaged in good faith negotiations with the city; (7)
whether the existing city and the new city already have other
teams; and (8) whether the stadium authority opposes the move.
The criteria provided in H.R. 2740 for league review of
franchise relocation decisions closely track these criteria.
That NFL policy also provides a procedural mechanism for
consideration of franchise relocations. However, these
procedural mechanisms apply only to the subject team and other
League members. The policy does not allow the affected
communities any participation in the process. H.R. 2740
requires notice to the communities and two public hearings. To
the Committee's knowledge, no court has ever reviewed this
policy to determine whether it would violate the antitrust
Sports leagues as single entities
Despite the decision in Raiders I, there is an ongoing
debate as to whether professional sports leagues should be
treated as unified single entities (i.e., essentially
partnerships or joint ventures) or whether each team in a
particular league should be treated as a separate competing
firm for antitrust analysis purposes. Many legal commentators,
as well as the NFL, have advanced the single entity theory
arguing that the leagues are joint ventures in which the owners
are partners. Other courts have followed the Raiders I decision
on this point holding that each team should be treated as an
independent competitor. Sullivan v. NFL, 34 F.3d 1091, 1098-99.
(1st Cir. 1994), cert. denied, 115 S.Ct. 1252 (1995); McNeil v.
NFL, 790 F.Supp. 871, 879-80 (D. Minn. 1992).
Professional sports leagues involve elements of both
cooperation and competition. For example, sports leagues adopt
uniform league rules and agree on the appropriate size of the
playing field. They cooperate on scheduling dates, the number
of games played, and the playoff structure. In addition, they
also share revenue from television rights and gate receipts.
The leagues argue that the economic success of each team
depends on the economic strength and stability of the other
league members and that they are not economic competitors.
Others argue that the teams are separate competing
entities. This argument carries the most weight when two teams
play in the same city, as in the Raiders case. Each club makes
most of its own business decisions on a day-to-day business.
They have separate profit and loss results. Each team
determines its own ticket prices, players' salaries, and player
acquisitions. Each team hires its own coaches, negotiates the
terms of its stadium leases, and enters into its own local
radio broadcasting deals. These practices support the idea that
the teams are economic competitors.
Since the Committee ordered H.R. 2740 reported, the Supreme
Court has held that the NFL is not a single entity for purposes
of the antitrust exemption for multiemployer collective
bargaining. Brown v. Pro Football, Inc., ---- U.S. ----, 1996
U.S. Lexis 4047 (June 20, 1996). In making this decision, the
Court made the following comments in dicta:
We concede that the clubs that make up a professional
sports league are not completely independent economic
competitors, as they depend upon a degree of
cooperation for economic survival. In the present
context, however, that circumstance makes the league
more like a single bargaining employer, which analogy
seems irrelevant to the legal issue before us.
Id. (citations omitted). This passing comment does not resolve
this issue for purposes of franchise movement.
Other sports antitrust exemptions
Aside from the franchise relocation issue, professional
football, basketball, hockey, and baseball leagues currently
enjoy another important antitrust exemption under the Sports
Broadcasting Act, 15 U.S.C. Sec. 1291 et seq., which allows the
teams in each league to market the league's broadcast rights
jointly. In addition, the NFL benefits from the Football Merger
Act of 1966, Public Law No. 89-800, 80 Stat. 1508 (codified at
15 U.S.C. Sec. 1291), which allowed the merger of the NFL with
the old American Football League.
The Hyde amendment in the nature of a substitute
At the Committee's markup, Chairman Hyde offered an
amendment in the nature of a substitute. The Hyde amendment
followed the basic format of H.R. 2740 as introduced with some
Most importantly, the Hyde amendment drops the language
relating to trademarks that was included in Section 3 of H.R.
2740. These provisions would have required a relocating team to
leave its team name, logo, and other trademark items in the
city to be used with the expansion team. Experts in the
trademark field indicated that these provisions might cause a
constitutional takings problem.
The Hyde amendment also changes the terms under which
required expansion franchises are to be granted. The Hyde
amendment allows the league to charge the new expansion team up
to 100%, rather than 85% as originally provided, of the fee
charged to the last expansion team, but it further requires
that the other financial terms and conditions given to the new
team would be at least as favorable as those given the last
expansion teams. At the suggestion of Congressman Flanagan, the
Hyde amendment also requires a new expansion team whenever a
team relocates across state lines.
The Hyde amendment makes several changes to the league
review provisions in H.R. 2740. It provides that when the
league reviews a relocation, it must hold at least two public
hearings and issue written findings. The criteria for the
league's decision originally contained in H.R. 2740 are
slightly modified so that they more closely track the criteria
in the NFL's existing policy.
The Hyde amendment also makes some changes to the remedies
provisions of H.R. 2740. It provides for a Department of
Justice suit for declaratory and injunctive relief to enforce
the expansion provisions as well as private rights of action by
local governments, sports authorities, and potential investors.
It adds to the penalty provisions so that the league would lose
the antitrust exemption that this Act provides if it does not
comply with the expansion provisions. In addition, the Hyde
amendment dropped baseball from the coverage of the bill
because it already has a general exemption from the antitrust
laws and therefore had no need for the protections of this
bill. See Federal Baseball Club of Baltimore, Inc. v. National
League of Professional Baseball Clubs, 259 U.S. 200 (1922). See
also Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953);
Flood v. Kuhn, 407 U.S. 258 (1972). Finally, the amendment
makes a variety of other minor substantive and technical
changes. At the markup, the Committee adopted the Hyde
amendment in the nature of a substitute, as further amended, by
Before this year, the last time the Judiciary Committee had
held hearings on the subject of sports franchise movement was
in 1981 and 1982. 2 On February 6, 1996, the full
Committee held a day of hearings on H.R. 2740. The Committee
received testimony from thirteen witnesses, including four
members of Congress.
\2\ The Subcommittee on Economic and Commercial Law did hold a
hearing in the 103rd Congress on baseball's antitrust exemption, and
franchise relocation and movement was discussed extensively at that
The first panel consisted of Representatives Martin Hoke of
Ohio, Michael Flanagan of Illinois, and Louis Stokes of Ohio,
and Senator John Glenn of Ohio. Representative Hoke pointed out
that the National Football League had benefited greatly from
the antitrust exemptions the Congress provided in the Sports
Broadcasting Act and the Football Merger Act. He testified that
the provisions of H.R. 2740, including the required expansion
provisions, were a fair trade off for these antitrust
exemptions. Representative Flanagan also testified in favor of
H.R. 2740 with special emphasis on his amendment to require
relocating teams to repay the financial assistance they have
received from local governments.
Representative Stokes testified in favor of his bill, H.R.
2699, which is similar in some respects to H.R. 2740, but does
not include the required expansion provisions. Senator Glenn
also testified in favor of H.R. 2699 and noted that he is the
sponsor of companion legislation in the Senate.
The second panel consisted of Mayor Bob Lanier of Houston,
Texas, Countywide Commissioner Joe Chillura of Hillsborough
County, Florida, County Executive Gary Locke of King County
Washington, and Mr. John ``Big Dawg'' Thompson of Cleveland,
Ohio. Mayor Lanier testified about the Houston Oilers' pending
move to Nashville, Tennessee in spite of Houston's long time
support for the Oilers. He argued that the NFL has a monopoly
status that gives them an advantage over the cities and that
the leagues ought to be able to have rules to prevent franchise
movements that take into account the public interest. He
specifically endorsed the required expansion provisions of H.R.
Commissioner Chillura testified about the relationship
between the Tampa community and the Tampa Bay Buccaneers. He
noted that the Tampa community had provided many kinds of
public support for the Buccaneers since the team's inception in
1974. He said that despite this support, the Buccaneers are now
threatening to leave and that the community has little leverage
against the team. He applauded the provisions of both H.R. 2740
and H.R. 2699.
County Executive Locke testified about the investment that
the Seattle community had made in the Seattle Seahawks and
their threatened move to Los Angeles. He called for giving the
National Football League a limited right to control franchise
moves and for requiring franchises to give 180 days' notice to
communities that they are leaving.
Mr. Thompson testified about the human impact that the
Browns' move from Cleveland had on the Browns' fans. He pointed
to the loss of the charity work that the Browns' players had
done for many years. He argued that the fans need rights that
are equivalent to those that the owners have so as to preserve
this important community asset.
The third panel consisted of Mr. Paul Tagliabue, the
commissioner of the National Football League. Mr. Jerry
Richardson, the owner of the Carolina Panthers, appeared with
Mr. Tagliabue for the purpose of answering questions, but he
did not give a statement. Mr. Tagliabue testified that the
League needed a narrow antitrust exemption to have some control
over football franchise relocations. He further asserted that
the decisions in the Oakland Raiders cases and other court
decisions severely restrict the NFL's power to prevent an owner
from moving a football team to a new city.
The fourth panel consisted of Professor Gary Roberts of
Tulane Law School, Professor Andy Zimbalist of Smith College,
and Mr. Bruce Keller on behalf of the International Trademark
Association. Professor Roberts testified that he believes that
a sports league is a natural monopoly and that short of
government regulation, the best solution to the franchise
relocation problem is to grant a limited antitrust exemption.
Professor Zimbalist testified that the franchise relocation
problem arises out of the leagues' monopoly status. He argued
that the problem could be dealt with either through breaking up
the leagues or regulating them in some fashion. He favored the
required expansion provisions as one way of regulating the
Mr. Keller limited his testimony to the provisions of H.R.
2740 that would require a team that moved to give up its
trademark to the city that it was leaving. He argued that these
provisions would effect an unconstitutional taking of the
trademarks and would be inconsistent with the basic goals and
principles of trademark law.
On April 25, 1996, the full Committee met in open session
and ordered favorably reported the bill H.R. 2740 as amended by
the amendment in the nature of a substitute offered by Mr.
Hyde, as amended, by a vote of 24 to 6, a quorum being present.
Votes of the Committee
The following roll call votes took place during Committee
deliberations on H.R. 2740 (April 25, 1996).
1. An amendment by Mr. Flanagan to the amendment in the
nature of a substitute by Mr. Hyde to add a new section to
require relocating team owners who breach their contracts with
State and local governments to reimburse State and local
governments for the value of financial assistance received.
(Before the roll call vote, the Committee adopted by unanimous
consent an amendment by Mr. Barr to the underlying amendment by
Mr. Flanagan to clarify that the State and local governments
could not recover such assistance twice when such recovery was
otherwise provided under the contract.) The Flanagan amendment,
as amended by the Barr amendment, was adopted by a roll call
vote of 20-8.
Mr. Hyde Mr. Gallegly
Mr. Moorhead Mr. Inglis
Mr. Sensenbrenner Mr. Goodlatte
Mr. McCollum Mr. Bono
Mr. Smith (TX) Mr. Bryant (TN)
Mr. Canady Mr. Conyers
Mr. Buyer Mr. Boucher
Mr. Hoke Ms. Lofgren
Ms. Jackson Lee
2. Three amendments en bloc by Mr. Bryant of Tennessee to
the amendment in the nature of a substitute by Mr. Hyde to
strike the required expansion provisions, the penalties
provisions, and certain of the findings relating thereto, and
to insert a modified judicial review procedure. The Bryant of
Tennessee amendments en bloc were defeated by a roll call vote
Mr. McCollum Mr. Hyde
Mr. Coble Mr. Moorhead
Mr. Buyer Mr. Sensenbrenner
Mr. Bono Mr. Gekas
Mr. Bryant (TN) Mr. Smith (TX)
Mr. Chabot Mr. Gallegly
Mr. Conyers Mr. Canady
Mr. Frank Mr. Inglis
Mr. Watt Mr. Goodlatte
Ms. Lofgren Mr. Hoke
Ms. Jackson Lee
3. An amendment by Messrs. Schumer and Nadler to the
amendment in the nature of a substitute by Mr. Hyde to provide
for limitations on the use of the names of professional sports
teams in certain circumstances. The Schumer/Nadler amendment
was defeated by a roll call vote of 12-18.
Mr. Hoke Mr. Hyde
Mr. Heineman Mr. Moorhead
Mr. Flanagan Mr. Sensenbrenner
Mr. Barr Mr. McCollum
Mr. Conyers Mr. Gekas
Mr. Schumer Mr. Coble
Mr. Reed Mr. Smith (TX)
Mr. Nadler Mr. Gallegly
Mr. Scott Mr. Canady
Mr. Watt Mr. Inglis
Mr. Becerra Mr. Goodlatte
Ms. Jackson Lee Mr. Buyer
Mr. Bryant (TN)
4. An amendment by Mr. Bryant of Tennessee to the amendment
in the nature of a substitute by Mr. Hyde to strike the
effective date (August 1, 1995). The Bryant of Tennessee
amendment was defeated by a roll call vote of 8-22.
Mr. McCollum Mr. Hyde
Mr. Coble Mr. Moorhead
Mr. Gallegly Mr. Sensenbrenner
Mr. Buyer Mr. Gekas
Mr. Bono Mr. Smith (TX)
Mr. Heineman Mr. Canady
Mr. Bryant (TN) Mr. Inglis
Mr. Watt Mr. Goodlatte
Ms. Jackson Lee
5. An amendment by Mr. Canady to the amendment in the
nature of a substitute by Mr. Hyde to change the exception to
the required expansion provision so that it applies when the
team relocates within 25 miles of the original community rather
than 60 miles. The Canady amendment was adopted by a roll call
vote of 19-9.
Mr. Hyde Mr. Moorhead
Mr. Coble Mr. Sensenbrenner
Mr. Smith (TX) Mr. McCollum
Mr. Gallegly Mr. Buyer
Mr. Canady Mr. Bono
Mr. Inglis Mr. Bryant (TN)
Mr. Goodlatte Mr. Chabot
Mr. Hoke Mr. Watt
Mr. Heineman Ms. Lofgren
Ms. Jackson Lee
6. A substitute amendment by Mr. Conyers (the text of H.R.
2699) to the amendment in the nature of a substitute by Mr.
Hyde. The Conyers substitute amendment was defeated by a roll
call vote of 13-15.
Mr. Sensenbrenner Mr. Hyde
Mr. Bryant (TN) Mr. Moorhead
Mr. Chabot Mr. Coble
Mr. Conyers Mr. Smith (TX)
Mr. Frank Mr. Gallegly
Mr. Schumer Mr. Canady
Mr. Boucher Mr. Inglis
Mr. Reed Mr. Goodlatte
Mr. Nadler Mr. Buyer
Mr. Scott Mr. Hoke
Mr. Watt Mr. Bono
Mr. Becerra Mr. Heineman
Ms. Lofgren Mr. Flanagan
Ms. Jackson Lee
7. The motion to favorably report H.R. 2740 as amended by
the amendment in the nature of a substitute by Mr. Hyde, as
amended. The motion was agreed to by a roll call vote of 24-6.
Mr. Hyde Mr. Buyer
Mr. Moorhead Mr. Bryant (TN)
Mr. Sensenbrenner Mr. Chabot
Mr. Gekas Mr. Conyers
Mr. Coble Mr. Frank
Mr. Smith (TX) Ms. Lofgren
Ms. Jackson Lee
committee oversight findings
In compliance with clause 2(l)(3)(A) of rule XI of the
Rules of the House of Representatives, the Committee reports
that the findings and recommendations of the Committee, based
on oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
committee on government reform and oversight findings
No findings or recommendations of the Committee on
Government Reform and Oversight were received as referred to in
clause 2(l)(3)(D) of rule XI of the Rules of the House of
new budget authority and tax expenditures
Clause 2(l)(3)(B) of House Rule XI is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
congressional budget office cost estimate
In compliance with clause 2(l)(3)(C) of rule XI of the
Rules of the House of Representatives, the Committee sets
forth, with respect to H.R. 2740, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 403 of the Congressional Budget Act of
Congressional Budget Office,
Washington, DC, June 21, 1996.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
reviewed H.R. 2740, the Fan Freedom and Community Protection
Act of 1996, as ordered reported by the House Committee on the
Judiciary on April 25, 1996. CBO estimates that enacting this
legislation would have no significant impact on the federal
budget. Because H.R. 2740 would not affect direct spending or
receipts, pay-as-you-go procedures would not apply.
Section 4 of the Unfunded Mandates Reform Act of 1995
(Public Law 104-4) excludes from the application of that act
legislative provisions that enforce the constitutional rights
of individuals. CBO has determined that the bill's provisions
pertaining to antitrust laws and local governments' private
right of action in federal court fit within that exclusion.
Other provisions in H.R. 2740 contain private-sector mandates
that exceed the $100 million annual threshold established in
Public Law 104-4 (see the enclosed mandate cost statement).
These other provisions do not contain intergovernmental
mandates, and would impose no direct costs on state, local, or
Bill Purpose. H.R. 2740 would make several changes to the
current laws relating to relocation of professional football,
hockey, and basketball franchises. The bill would loosen
federal and state antitrust restrictions, giving professional
sports leagues approval authority over team relocations, and
would place significant new requirements on leagues and team
owners involved in such relocations.
Intergovernmental Impact. The bill would protect state and
local governments from some adverse impacts of team
relocations. In particular, the bill would require owners of
teams who breach a contract when moving out of existing playing
facilities to reimburse state and local governments for the
value of the financial assistance provided by those
governments. The bill would also require a league that approves
the relocation of a team to another state, or outside a 25-mile
radius, to grant a replacement franchise to the community
losing the team, and to do so on favorable financial terms.
These requirements would be sufficiently onerous, however, that
CBO expects few relocations would occur. In recent years,
approximately three teams have relocated annually.
Federal Budgetary Impact: Enacting H.R. 2740 could result
in additional costs to the U.S. Department of Justice to
enforce the bill's provisions and in additional costs to the
federal courts to hear cases. Since we expect very few of these
cases, however, CBO estimates that any such costs would be less
than $500,000 annually.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark
Grabowicz for federal costs and Karen McVey for effects on
state, local, and tribal governments.
James L. Blum,
(For June E. O'Neill, Director).
congressional budget office estimate of costs of private-sector
1. Bill number: H.R. 2740.
2. Bill title: Fan Freedom and Community Protection Act of
3. Bill status: Ordered reported by the House Committee on
the Judiciary on April 25, 1996.
4. Bill purpose: H.R. 2740 would impose several new federal
restrictions on the business operations of the National
Football League (NFL), the National Hockey League (NHL), the
National Basketball Association (NBA), and the owners of
professional sports teams that compete in those leagues. New
constraints, however, would not affect the governing body for
Major League Baseball and owners of major league baseball
franchises because of that sport's existing exemption from
anti-trust-related laws. In addition, the bill would extend a
limited exemption from anti-trust laws to the NFL, NHL, and
NBA, which would grant those leagues greater control over
franchise movement by league members.
5. Private-sector mandates contained in the bill: In
general, the private-sector mandates imposed by the bill fall
into four categories: (1) those requiring certain actions by
owners and sports leagues before teams can relocate from one
community to another; (2) those mandating the expansion of
professional sports leagues by requiring leagues to provide
replacement franchises to communities from which teams have
relocated; (3) those requiring team owners who relocate their
franchise from one facility to another to reimburse state and
local governments for financial assistance; and (4) those
restricting franchise movement.
6. Estimated district cost to the private sector: Because
the legislation is retroactive and sports leagues and
franchises have already planned for or are now completing team
relocations, the cost of federal mandates proposed in the bill
could be significant. CBO estimates the direct costs, as
defined in Public Law 104-4, of complying with new federal
private-sector mandates could exceed the $100 million annual
threshold during the first five years that the mandates were in
effect. That estimate is based on the effective date of August
1, 1995; provisions that cap the fees that sports leagues could
charge potential investors for the rights to replacement
franchises; provisions that could require team owners who
relocate their franchises from one playing facility to another
to reimburse communities for financial support; and severe
financial penalties that effectively restrict franchise
movement and the income that owners may earn.
In the future, the direct costs of complying with new
federal private-sector mandates in H.R. 2740 would likely be
much lower. That is because the bill would promote franchise
stability and would more closely wed franchises to their
current communities except where expansion is the desired
outcome for leagues. Professional sports leagues, which act
effectively as monopolies by controlling the supply of
franchises below the quantity desired by communities, would
approve team relocations only when benefits to the league
exceed costs. Given the history of slow expansion by sports
leagues and the addition of new teams by each league within the
past three years, it is unlikely that leagues would voluntarily
undergo another round of expansion until after 2000. In that
case, the direct costs imposed on the NFL, NHL, NBA, and
franchise owners to comply with new private-sector mandates
would be negligible. The costs of forgone opportunities for
sports leagues and owners resulting from new operating
restrictions, however, would be much larger.
Basis of estimate
Section 3--Notice of proposed relocation of a professional
Section 3 contains provisions that would impose new federal
private-sector mandates on the owners of professional sports
teams who seek to relocate their franchises from one community
to another by requiring owners to take specific actions to
notify the community in which the team plays of a proposed
CBO estimates that the direct costs of complying new
federal private-sector mandates contained in Section 3 would be
insignificant. Any costs incurred would be a function of the
number of owners who proposed to relocate their teams from one
community to another and the cost of publishing official notice
in a local newspaper of general circulation. In addition, some
cost would be associated with producing the summary of the
reasons for moving. Lastly, in any given year, relatively few
owners propose to relocate their franchises.
Section 4--Requirement to make expansion teams available to
communities upon the fulfillment of certain
Section 4 contains federal mandates that would impose new
requirements on professional sports leagues that approve the
relocation of a team from one community to another. Sports
leagues would be required to grant a replacement franchise to
the community from which a team relocates when that community
fulfils certain conditions. Therefore, Section 4 effectively
mandates the expansion of professional sports leagues and
places an enforceable duty on leagues to operate in certain
geographic locations but reduces slightly the ability of
leagues to act as monopolists.
Under Section 4(a), sports leagues that approve the
relocation of a team are required to provide a replacement
franchise to the community from which a team relocated within
12 months, if a bona fide investor is identified. In addition,
leagues are required to provide the replacement franchise to
the community under terms and conditions no less favorable than
provided to the most recent expansion team granted by the
league. The window of opportunity for the community to identify
a bona fide investor, however, is limited to three years.
Penalties could be imposed on professional sports leagues that
fail to comply with those two requirements, and leagues would
also be liable for monetary damages.
Provisions in Section 4 would not apply in cases where the
site approved by a sports league for franchise relocation is
not more that 25 miles from the community and is located within
the same jurisdiction (state or the District of Columbia).
CBO estimates that the direct private-section costs
associated with new federal mandates contained in Section 4
could exceed $100 million during the first five years that the
mandates were effective. That estimate of costs assumes sports
leagues would be able to charge a fee to investors in
replacement franchises that is greater than the limit on such
fees imposed by the bill. However, that level of direct costs
is somewhat speculative because it relies on variables that are
difficult to estimate with any certainty.
First, the number of teams that would apply for and be
given approval to move from one community to another is
unpredictable. Second, the spread between the fee that the
league could charge for a new franchise unconstrained by the
cap in the bill and the franchise fee charged by the league
during its most recent round to expansion is not fixed over
time. In addition, league variable costs would rise somewhat
because mandatory expansion would increase operating costs due
to augmented league duties, an expanded game schedule, and
hiring additional game officials.
Because the effective date for H.R. 2740 is August 1, 1995,
several franchise relocations that have already been executed,
are in progress, or are planned for the near future would be
affected. For example, the former Cleveland Browns of the NFL
relocated to Baltimore for the beginning of the 1996-97 season.
Section 4 would require the NFL to grant a replacement
franchise to the city of Cleveland if a bona fide investor is
identified by September 1999 (at this time, a replacement
franchise has been promised to Cleveland by the NFL). However,
the entry fee that the league may charge would be limited by
the bill to the amount--$150 million--paid by investors in the
Jacksonville and Carolina expansion franchises in 1993. CBO
estimates that the entry fee that the NFL could now charge for
an expansion franchise is about $175 million. Similarly, entry
fees are capped for the NBA at the $125 million fee paid by the
Toronto and Vancouver expansion franchises prior to competing
in league play during the 1995-96 season and for the NHL at the
$50 million fee paid by the Florida Panthers and Anaheim Mighty
Ducks prior to the 1993-94 season. Given the growth in the
value of sports franchises over the last decade, sport leagues
could probably charge entry fees that are at least $25 million
higher than those charged during the last round of league
expansion. Thus, if the NFL, NBA, and NHL were each required in
the same year to grant replacement franchises, the direct costs
imposed by new mandates in Section 4 could eclipse $100
Enacting H.R. 2740 would have other notable effects on
professional sport leagues and team owners. First, the recent
tide of franchise movement would probably be slowed for several
years to come. That conclusion is evidenced by recent
developments in the proposed relocation by the NFL's Houston
Oilers to Nashville, Tennessee. Reports cite legislation before
the Congress covering team relocations as a primary reason that
the agreement between the Oilers and the city of Nashville has
been temporarily suspended. Second, leagues would be given
incentives to expand the number of cities with franchises at
shorter intervals than in the past. Consequently, voluntary
league expansion would become the more likely way that teams
would play in communities where they had not previously
competed. Third, franchises could be locked-in to playing
facilities that are less preferable than alternative sites.
Section 4(d) would create a cause of action against a sports
league that approved the move of a franchise more than 25 miles
from its current community or across state lines. For example,
the proposed relocation of the NHL's Washington franchise from
its playing facility in Landover, Maryland into a new arena in
the District of Columbia could require the league to provide
that metropolitan region with another franchise even though
community support generally exists for such a move. Fourth,
mandatory expansion of league play would reduce the amount of
shared revenue (from television, for example) provided to each
team by increasing the number of shares. Expansion could also
reduce the quality of league play because existing teams would
have to make some players available for selection by new
franchises to ensure a minimum level of competitiveness by new
teams. Finally, owners deterred from applying for relocation or
whose applications are denied by leagues would forgo income
that they could earn by relocating. (These costs are discussed
in more detail in reference to Section 7).
Section 5--League relocation authority and relocation
Section 5 contains new private-sector mandates that would
require professional sports leagues to follow certain
procedures before the relocation of a team from one community
to another could be approved. It would, however, extend the
antitrust exemption to leagues with regard to their authority
over the relocation decisions by franchises that are league
members. That exemption would enable sports leagues to legally
enforce league by-laws that prohibit franchise relocation
without league approval.
Under the provisions of this section, leagues are required
to conduct at least two public hearings on the relocation of
franchises and to make public written findings regarding the
relocation process. Decisions by leagues that approve the
relocation of sports franchises and do not follow the
procedures provided for in Section 5 would not be valid or
final under federal law. Further, leagues would be required to
publish written findings in one or more newspapers of general
circulation in the community that state the basis of approving
the proposed team relocation and to deliver its findings to the
CBO estimates that the direct costs imposed by mandates in
Section 5 would be minor. Those costs would flow from new
requirements to publish in one or more newspapers of general
circulation the written findings from the mandatory public
hearings on team relocation. Again, in any short period of
time, few owners propose to relocate their franchise.
By extending a limited anti-trust exemption to sports
leagues such that they could exert real power over the movement
of franchises, the Congress would also confer a significant
benefit on sports leagues. That exemption should reduce both
the legal costs that would now be incurred by sports leagues
for attempts to block in court the relocation of franchises and
the likelihood that leagues could be liable for monetary
Section 6--Requirement for professional sports team owners
who relocate to new playing facilities to reimburse
State and local governments for value of financial
Section 6 would impose new mandates on the owners of
professional sports teams that relocate their teams from one
playing facility to another and, in the process of relocating,
commit a breach of contract with a state or local government
with regard to the original playing facility.
Section 6(a) requires owners who fit the above criteria to
reimburse the state or local government within 30 days of
playing in a new facility for the amount of financial
assistance--including special tax treatment and financing of a
playing facility--provided to the team. Treble monetary
penalties could be imposed on owners who fail to fulfill
reimbursement requirements within the specified time period.
However, those provisions do not apply in cases where recovery
of financial assistance is already available to communities
under the terms of existing contracts with professional sports
The reimbursement requirements in Section 6 could impose
new costs on some owners. Those costs would be a function of
the number of teams that apply to the league and are approved
for relocation, that were provided with financial assistance by
states or local governments, and that committed a breach of
contract and were not liable for financial assistance
reimbursement as part of a contract between the team and the
CBO estimates that the direct costs of complying wih the
federal mandate to reimburse governments for financial
assistance provided would be small. Enacting H.R. 2740 would,
in essence, lock-in franchises that have been provided with
financial assistance to their current playing facilities until
their lease is expired because the cost of reimbursement or
potential monetary penalties would, in most cases, exceed the
benefits of relocation. Under the requirements of H.R. 2740, if
the Oilers relocate prior to the expiration of their lease with
the Astrodome, for example, the Houston owner could be required
to repay to Harris County, Texas in excess of $100 million for
renovations performed on the playing facility in the 1980s.
Thus, the relocation of franchises would likely be met with
league approval only in those cases where franchises fulfill
the condition to remain within a 25 mile radius of their
current playing facility (in addition to not crossing state
lines) and had been provided with insignificant levels of or no
community financial assistance, or whose lease is due to
Section 7 creates several financial penalties that could be
levied against sports leagues. Those penalties would
effectively prohibit the movement by franchises from one
community to another without prior approval by sports leagues
unless league expansion was a desired outcome. Leagues would
exercise their ability to restrict team movement to avoid being
liable for monetary damages to abandoned communities in an
amount equal to three times the purchase price or market value
of the departed team--or about $100 million to $700 million
depending on the franchise--if a replacement franchise is not
appropriately granted. In addition, leagues could face a
suspension for one season of their antitrust exemption for
pooling the broadcasting rights to games and the loss of the
antitrust exemption provided under this legislation. Thus,
those penalties act as federal restrictions on franchise
Federal restrictions on movement by teams would affect the
profitability of franchises that wish to relocate. In general,
owners who relocate can expect a medium-term boost to annual
operating income of $10 million to $25 million. Severe
penalties in Section 7, therefore, directly limit the income
that team owners can earn. If, on average, one franchise from
each sports league would relocate annually in the absence of
H.R. 2740, enacting the bill would impose direct costs of
between $30 million and $75 million in the first year that the
mandate was effective. By the fifth year, the direct costs of
provisions in Section 7 would be between $150 million and $375
7. Previous CBO estimate: None.
8. Estimate prepared by: Matt Eyles.
9. Estimate approved by: Robert W. Hartman, Assistant
Director for Special Studies.
inflationary impact statement
Pursuant to clause 2(l)(4) of rule XI of the Rules of the
House of Representatives, the Committee estimates that H.R.
2740 will have no significant inflationary impact on prices and
costs in the national economy.
Section 1 provides that this act may be cited as the ``Fan
Freedom and Community Protection Act of 1996.''
Section 2 sets forth the congressional findings underlying
Section 3(a) provides that professional sports team owners
who seek to relocate from one community to another must give
notice to the community that they will be leaving not later
than 180 days before the start of the season in which the team
is to play in the new city.
Section 3(b) sets forth the parties to whom the notice must
be given--the local government for the community from which the
team is moving; the sports authority for the team's stadium or
facility; the owner or operator of the stadium or facility; and
the professional sports league and each of its members.
Section 3(c) requires that the notice must be delivered in
person or by certified mail, that it must be published in a
newspaper of general circulation in the community from which
the team is leaving, and that it must contain the location to
which the team is moving, a summary of the reasons for the
move, and the date on which the move is effective.
Section 4(a) provides that within twelve months after a
community that has lost a team meets the conditions in section
4(b), the professional sports league must make an expansion
team available to that community. The league must provide the
team at an expansion fee no greater than the amount of the fee
charged to the last expansion franchise granted by the league.
It must also grant the franchise on financial terms and
conditions no less favorable than those granted to the last
expansion franchise granted by the league.
Section 4(b) provides that if the community from which a
professional sports team has moved provides the name of a
qualified investor within three years after the team moves, the
league must provide it with an expansion team under section
4(a). Section 4(c) provides that the league may approve a
resale of an expansion franchise granted under section 4(a),
but it may not approve the relocation of such an expansion
franchise for ten years except as provided in Section 5.
Section 4(d) provides for an exception from the
requirements of this section for any relocation of a franchise
which is within 25 miles of the original location and which
remains within the same state.
Section 5(a) makes it explicit that a league does not
violate the antitrust laws by enforcing rules which authorize
the league to decide whether a franchise may relocate, subject
to certain conditions.
Section 5(b) requires that the league make any such
decision based on the ten criteria enumerated in this section.
These criteria track those currently included in the National
Football League's relocation policy.
Section 5(c) requires that the league must also hold at
least two public hearings on a proposed relocation and publish
its findings relating to the criteria.
Section 6(a) provides for a new, self-executing remedy for
States and local governments when a professional sports team
leaves one playing facility for another and, in doing so,
breaches its contract with respect to playing in the facility.
In such a case, the team must pay the government an amount
equal to the financial assistance the government provided to
the team within thirty days after the team plays its first game
in the new facility. Section 6(b) limits this remedy to those
cases in which the recovery is not already provided for under
the contract that was breached. In other words, the Committee
intends that the State or local government should be able to
recover the amount of the financial assistance whenever the
team has breached its contract, but that it should not be able
to effect a double recovery when such recovery is otherwise
available under the terms of the contract. Section 6(c) defines
``financial assistance'' to include special tax treatment and
the financing of a stadium or arena in which a professional
sports team plays. The Committee intends that this definition
should be read as inclusive, rather than limiting, and that the
term ``financial assistance'' should be interpreted in a common
sense fashion to include all forms of monetary help that a
government may have provided to a team.
Section 6(d) provides that if a team fails to pay the
amount set forth in section 6(a) within the required time
period, the government may bring a lawsuit and recover three
times the financial assistance it provided to the team.
Section 7(a) provides for three remedies if a league does
not comply with the expansion provisions of section 4(a).
First, the league is liable to the community from which the
team left for three times the purchase price or market value of
the team, whichever is greater. Second, the league may lose its
antitrust exemption for pooling its broadcasting rights under
15 U.S.C. Sec. 1291 et seq. for one season. Third, the league
may lose the antitrust exemption provided under section 5(a)
for the franchise relocation that led to the violation of
Section 7(b) provides for three causes of action to enforce
various provisions of the Act. First, the Department of Justice
may bring an action for declaratory and injunctive relief,
including the injunctive relief provided in sections 7(a)(2)
and 7(a)(3), to determine whether a league has complied with
the expansion provisions of section 4(a).
Second, any local government that has provided financial
assistance to a team or any local government for a community in
which a team's home stadium or facility is located may bring an
action to enforce the notice provisions of section 3 and the
expansion provisions of section 4.
Third, an investor whose name has been submitted by a
community under section 4 may bring an action for injunctive
relief, including the injunctive relief provided in sections
7(a)(2) and 7(a)(3), to enforce the provisions of section 4(a).
The Committee intends that the actions and remedies
enumerated in this Act are in addition to, and not in lieu of,
any other appropriate actions and remedies that may be
available under applicable law, except as explicitly provided
in section 6(b). As in all other cases, the Committee intends
that any of the actions provided for in this Act may be joined
with any other actions, if appropriate under the applicable
rules of joinder.
Section 8 provides that except as expressly provided in the
Act, nothing in the Act shall be construed to alter, determine,
or otherwise affect the applicability or inapplicability of the
antitrust laws, labor laws, or other laws to any other matters
involved in professional sports.
Section 9 defines various terms that are used in the Act.
The term ``antitrust laws'' is defined to include state
antitrust laws. The term ``professional sports team'' is
defined as any group of athletes organized to play major league
football, basketball, or hockey. The term ``State'' is defined
as any of the 50 States and the District of Columbia. Section
10. Section 10 provides that the effective date of the Act is
August 1, 1995. The Committee realizes that some events
triggering parts of the act have occurred after that date.
Moreover, it is likely that additional such events will have
occurred between the date this report is filed and the date of
enactment, if enactment occurs.
The Committee intends that the substantive requirements of
the Act should fully apply to those events. However, in cases
in which a time period provided under the Act would be
shortened because part or all of the time period ran before the
date of enactment, the Committee intends that the party
required to act within the time period should get the full
benefit of the time period provided in the Act and that the day
after the date of enactment should be deemed to be the first
day of any such time period. In cases in which a deadline for
action required under the Act has already passed, the Committee
intends that the party required to act shall act as soon as
practicable after the date of enactment.
At the markup, Congresswoman Lofgren pointed out that the
Golden State Warriors will be playing the next season in San
Jose while their regular arena in Oakland is being renovated.
The Committee wishes to clarify that none of the provisions of
this bill are intended to apply to temporary moves made for the
purposes of renovation or other similar reasons. In addition,
none of the provisions of this bill should be construed to
apply to teams that play a small minority of their home games
in a nearby city for the purpose of widening their market
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3 of rule XIII of the Rules of
the House of Representatives, the Committee notes that the
bill, as reported, does not make any changes to existing law.
On a bipartisan basis, we oppose the legislation reported
by the Committee which constitutes an unwarranted and
unprecedented intrusion into private economic decisions. In
particular, by mandating franchise expansion, the legislation
will engender greater economic uncertainty for sports leagues
and lead to less stability for professional sports teams and
In addition to being opposed by all of the affected major
sports leagues--the National Football League; National
Basketball Association; and National Hockey League 1--the
legislation is opposed by the U.S. Conference of Mayors
(through their Franchise Relocation Task Force). Task Force co-
chairman, Cleveland Mayor Michael White has written that the
forced expansion potentially required under the legislation
would compel sports leagues ``to retain economically unviable
ventures in cities * * * [and] ultimately doom major sports
leagues as we know it.'' 2
\1\ See Letters from Paul Tagliabue, Commissioner, National
Football League (April 23, 1996); Jeffrey A. Mishkin, Executive Vice
President and Chief Legal Officer, National Basketball Association
(April 19, 1996); and Gary B. Bettman, Commissioner, National Hockey
League (April 17, 1996) to Members of the House Judiciary Committee.
\2\ Letter from the Hon. Michael R. White, Mayor, City of Cleveland
to the Hon. John Conyers, Jr. (April 24, 1996). Participants in the
task force represented a cross-section of mayors with NFL franchises in
We do agree that the record before us supports a
legislative response to prevent unneeded and unwanted franchise
relocations. And we would support confirming that the sports
leagues have limited legal authority to prevent unwarranted
relocations, so long as the clarification is coupled with
notice requirements, specified relocation criteria, and permits
affected communities to seek review of relocation decisions in
federal court. Similar approaches were offered through
amendments by Mr. Bryant (R-TN) and Mr. Conyers (D-MI), but
were rejected by the Committee (the latter amendment failed by
a 13-15 vote). Such proposals offered a far more non-
regulatory, free market approach to the problem of franchise
Unfortunately, the legislation approved by the Committee
goes well beyond such measured responses and forces the leagues
to expand and enter into partnerships with potentially unwanted
and undesired partners whenever a franchise relocates--even if
the facts justify a relocation. In addition, the legislation
reported by the Committee unnecessarily interferes with
contractual arrangements entered into between sports franchises
and public stadium authorities.
i. mandatory expansion is inappropriate and unprecedented
Section 4(a) of H.R. 2740 provides that in the event of a
franchise relocation ``the league shall grant to an investor
[selected by the community] * * * a new expansion * * *
franchise.'' In essence, this provision would force
professional sports leagues to expand into all communities from
which a team has relocated, whether or not the community is
able to support a franchise economically or the relocation
otherwise complied with the federally-mandated relocation
Such forced expansion would threaten the financial
stability of the sports leagues and clubs. Expansion of a
sports league does not ordinarily produce additional net
revenues for league members in the long run, even if a
substantial expansion fee is paid up front. 3 Instead such
expansion can dilute each member's share of shared revenue
sources and jeopardize the ability of lower revenue clubs to
field competitive teams. As the gulf between clubs widens,
attendance could well decline, and with attendance, revenues.
Such a circumstance would increase the pressure on clubs to
relocate--a result completely contrary to that sought by the
authors of the legislation.
\3\ For example, in connection with the most recent NFL expansion,
although each NFL team will receive $10 million in expansion payments
over a 4-5 year period, it will forego at least $13.9 million in
television payments in the first seven years alone. A similar dilution
occurs with regard to team revenues from licensing and marketing. See
Letter from Paul Tagliabue, Commissioner, National Football League, to
the Hon. Arlen Specter (December 8, 1995).
The Congressional Budget Office agrees that mandated expansion
would reduce the revenues available to existing teams, concluding:
[M]andatory expansion of league play would reduce the amount of
shared revenue (from television, for example) provided to each team by
increasing the number of shares. Letter from June O'Neil Director,
Congressional Budget Office, to Honorable Henry J. Hyde, Chairman,
Comm. on the Judiciary, June 21, 1996 [hereinafter, ``CBO Letter''].
Moreover, the forced expansion required by H.R. 2740 would
deprive the leagues of the ability to ensure that the new
owner--forced upon the league--is in compliance with the
league's ownership policies. A wealthy investor with a criminal
record or who otherwise does not meet a league's ownership
criteria could undermine the integrity of a professional sports
league's product and diminish fan interest. Although the sports
leagues are free to exclude such owners today, H.R. 2740 would
force them to accept anyone willing to pay the required fee.
This is also true for investors whose other business
investments create a conflict-of-interest involving the league.
The legislation's geographical restrictions--which apply
any time a franchise relocates outside of its current State or
moves to a stadium 25 miles further than its current home--
could also result in unintended and undesirable consequences.
For example, under the terms of H.R. 2740, the National
Football League would be forced to provide the District of
Columbia with a franchise to replace the Redskins, who are
relocating from Washington, D.C. to nearby Landover, Maryland.
This would result in the absurd situation of two professional
football teams within a less than 5 mile radius. A recent Wall
Street Journal editorial criticizing H.R. 2740 points out:
If this law had been in effect when the football
Giants and Jets moved across the Hudson River from New
York City to the New Jersey Meadowlands, New York would
now have four football teams--two courtesy of Adam
Smith, two from Uncle Sam. If Cincinnati's Bengals
build a new stadium a couple of miles away in Kentucky,
Cincinnati would become the smallest city with two NFL
teams (it's already the fifth smallest city with one
\4\ Richard J. Tofel, ``When Conservatives Tilt the Playing
Field,'' The Wall Street Journal, May 15, 1996 at A14. The legislation
has also been criticized by The Washington Times. See ``Ministry of
Football,'' The Washington Times, June 12, 1996 at A20.
Another absurd consequence is the legislation's failure to
specify any inflation or time adjustment for the franchise fee.
As currently drafted, the investor selected by the community
must pay a franchise fee ``no greater than * * * the franchise
fee charged by the league for the last expansion * * *
franchise granted.'' Thus if a league has not expanded for many
years, or if a league has secured significant capital influx or
otherwise realized a significant increase in franchise value
since the last time a franchise was awarded, the league would
be forced to offer a franchise at a significant discount from
the fair market value. This would also allow a mayor or other
public official to award valuable private benefits to whomever
may be selected as the designated ``investor''--a significant
In all likelihood, the net effect of these forced expansion
provisions would be to freeze the status quo of major league
sports franchises. Professional football, basketball, and
hockey would all be discouraged from expanding into new markets
because of the punitive new legal obligations associated with a
sports franchise. Why expand into a new city if a league is
already facing the threat of a significant increase in
franchises through the legal device of forced expansion?
We are aware of no other legislative precedent which
authorizes such unilateral federal intervention into private
decisions and financial arrangements. 5 The only
comparable legislative context is the Worker Adjustment and
Retraining Notification Act, 6 which ensures that large
groups of dislocated workers (those working for employers of
100 or more persons) receive at least 60 days notice before a
plant closing. H.R. 2740 constitutes a quantum leap beyond the
scope of the plant closing law--instead of providing a simple
notice, the legislation provides for outright community
acquisition of a new franchise from a private sports league.
\5\ Indeed, it should be noted that CBO has estimated that the bill
would constitute an unfunded private sector mandate, and that ``the
direct costs * * * of complying with the new federal private-sector
mandates could exceed the $100 million annual threshold during the
first five years that the mandates were in effect.'' CBO Letter, supra.
\6\ Pub. L. 100-379, 29 U.S.C. 2101 et seq.
Finally, we would note that among the other punitive
remedies for failing to comply with mandated league expansion
is the legislation's imposing suspension of the Sports
Broadcasting Act of 1961. 7 The Sports Broadcasting Act
permits members of a professional sports league to pool their
television rights for purposes of sale to networks. Absent such
arrangements, clubs in smaller markets (such as Cincinnati,
Green Bay, Indianapolis, Jacksonville, Kansas City, Salt Lake
City, and San Antonio) would likely have been forced to
relocate to larger communities and the expansion of each of the
professional sports leagues to new and growing communities in
recent years would not have occurred. Moreover, if clubs are
precluded from pooling their television rights even for a
single season, they would be faced with the economically
untenable choice of either suspending their network rights
agreements (which are negotiated on a multi-year basis) or
maintaining those arrangements and facing the prospect of
defending treble damage antitrust actions. Again the result--
increased franchise instability--would be the precise opposite
of that intended by the bill's sponsors.
\7\ 15 U.S.C. Sec. Sec. 1291 et seq.
II. Unnecessary Intervention into Sports Contracting Arrangements
We also have serious concerns with section 6 of the
legislation, which would require a professional sport franchise
that moves from one facility to another to reimburse the state
or local government for any ``financial assistance'' if the
move were in breach of a lease with that entity.
This provision constitutes an unnecessary and unwarranted
federal intervention into the domain of contract law. Our
hearings disclosed no instance where a professional sports team
breached a lease with a state or local government. Moreover,
state and local governments can and do protect themselves from
the prospect of such breaches by including liquidated damages
or specific performance provisions in the contract. 8
\8\ For example, the stadium lease signed between the Oilers and
Nashville, TN has been described as ``ironclad'' and provides that if
the team seeks to break the lease, they will be legally obligated to
pay the city (i) $117 million if they break the lease in the first 12
years; (ii) $87 million if they break the lease in the following 10
years; (iii) $34 million if they break the lease in the following 8
years; (iv) and $15 million if they break the lease in the following
10-year extension. The lease also allows the city to seek an injunction
barring any move. See Trebor Banstetter, Nashville's lease deal among
NFL's toughest, Nashville Banner, April 17, 1996, et al.
Moreover, even in the absence of an explicit contractual
remedy, any stadium landlord would be free to bring an action
for breach of contract if the tenant club breached its lease.
If successful, the landlord would be entitled to recover all
its actual and consequential damages--not an artificially
imposed reimbursement for all ``financial assistance''
rendered, regardless of when the asserted assistance was
rendered. No public policy consideration warrants such unusual
remedies when traditional damages--and in many cases liquidated
damages--are available to interested government parties.
Finally, the term ``financial assistance'' is so vague that
it could be interpreted to require compensation for all
services (including police protection) for all time (not even
limited to the period of the lease). Therefore, in addition to
being discriminatory, this provision could prove to be
For all of the foregoing reasons, we respectfully dissent
from H.R. 2740. Although we support efforts to bring fairness
and equity to the issue of sports franchise relocations, we
cannot endorse legislation which co-opts private financial
arrangements and exacerbates the financial problems that lead
to the relocations that the sponsors of the bill would like to
John Conyers, Jr.
Stephen E. Buyer.