Sports fans may one day have more choices for viewing games and pay less to view them based on a ruling by a federal judge in Manhattan.
The decision, which holds that TV broadcasts of games do not fall within an exemption from antitrust law that Congress has extended to professional baseball, means that a lawsuit charging Major League Baseball and the National Hockey League with anticompetitive behavior in the divvying up of broadcast rights can continue.
“The clubs in each league have entered into an express agreement to limit competition between the clubs — and their broadcaster affiliates — based on geographic territories,” wrote Judge Shira Scheindlin in an opinion dated August 4. “There is also evidence of a negative impact on the output, price and perhaps even quality of sports programming.”
“I therefore decline to apply the exemption to a subject that is not central to the business of baseball, and that Congress did not intend to exempt — namely baseball’s contracts for television broadcasting rights,” Scheindlin added.
According to the court, the plaintiffs have raised a “genuine issue of material fact” that allows them to proceed toward trial.
The ruling stems from a suit filed in May 2012 by sports fans who subscribe to DirectTV, Comcast and online subscription services sold by the leagues. The plaintiffs, who filed the suit on behalf of themselves and other fans, accuse MLB and the NHL of restraining competition in the carving up of rights to show games. That results in consumers paying higher prices for games and limits the choice of games available for viewing, according to the plaintiffs.
Both leagues refrain from showing games that occur within teams’ home territories to avoid competition with regional sports networks, which pay each team for the exclusive right to show games within a designated home territory.
In seeking to dismiss the suit, the leagues argued that territorial restrictions prevent teams from so-called free-riding on the popularity of the leagues if the teams were able to license their games nationally, and encourage regional sports networks to invest in higher-quality telecasts.
The court rejected both arguments. The incentive for added investment represents “inflated profit stemming from limited competition,” Scheindlin wrote.
The court also dismissed the leagues’ argument that the division rights strikes a competition-friendly balance between the promotion of baseball and hockey as national games and the need to encourage teams to build their local fan bases.
“Most of defendants’ claimed pro-competitive effects are disputable, and the overall effect on the economy is even less conducive, especially in light of [plaintiffs’ expert] testimony that abolishing the territorial restrictions would decrease the cost of sports programming without diminishing output,” wrote Scheindlin.