A Tale of Two Cities

Here's how the Wikipedia begins its definition of oligopoly: "An oligopoly is a market form in which a market is dominated by a small number of sellers (oligopolists). The word is derived from the Greek for few sellers. Because there are few participants in this type of market, each oligopolist is aware of the actions of the others. Oligopolistic markets are characterized by interactivity. The decisions of one firm influence, and are influenced by, the decisions of other firms. Strategic planning by oligopolists always involves taking into account the likely responses of the other market participants."

When Congress granted major league baseball(MLB) immunity from antimonopoly laws many years ago,  they could hardly have dreamed of a day when a major league baseball owner would be able to blithely negotiate himself a deal that could indirectly transfer hundreds of millions of dollars of taxpayer money into his bank account.  But that's what it took to get Baltimore Orioles owner Peter Angelos to agree to allow major league baseball to move a money losing franchise from isolated Montreal to the fecund clime of the nation's capital.

As a result, it now looks like Congress may have to immunize the owners from the RICO Act first put in place against organized crime and recently used in the Enron case and other massive corporate fraud cases.

The long anticipated announcement came this week that Baseball had chosen to move the hapless Expos to Washington, DC where Mayor Anthony Williams has put together an offer of at least $440 million dollars --it'll probably cost far more-- for a taxpayer financed (but not owned) stadium plus the surrounding infrastructure.  Negotiations to get a new home for the Expos have been in progress for years.

Washington, of course, is a no-brain choice for a team site for a number of compelling economic and symbolic reasons.  Besides being the nation's Capital, it is at the heart of a fast growing economy, spurred by a shift in government spending that has increased federal employment but also fattened the coffers of the Beltway Bandits, or corporate contracting firms that have mushroomed around the Administration's thrust towards outsourcing government jobs.  In addition to the subsidy, Baseball will get entry into one of the nation's leading TV markets, a new riverside stadium with visually sexy camera angles on the Capitol and the Washington Monument and a rabid sports base that has made the pale Washington Redskins the most profitable team in the NFL.

The deal had to be rushed to completion after recent DC City Council primary elections in which three incumbents who supported the baseball package were, in effect, ousted by candidates who said they were against the $440 million taxpayer subsidies.  There will be a general election on November 2nd but the outcome of that election is a mere formality.  However, from a timing perspective, the new Council members won't be sworn in until January.

The Mayor has held up his plan as being citizen tax-neutral by levying a $22 million special tax on the city's 2,000 largest businesses.  Another $15 million a year will come from revenues raised through tickets, hotdogs and parking taxes.  Although the details of the plan have not been released to the public yet, it appears that although the City will pay for the stadium it will not own it, nor will it own any part of the team nor will it even have even a piece of the lucrative naming rights to the stadium.

In context, it has to be noted that Washington suffers from some of the worst performing public education, safety and health systems in the country.  A school house located just several blocks from where BlowBack is being written, has rotting boarded over windows ; another, closer by, in violation of the City's lead paint laws, hasn't been given a facelift in living memory.  City leaders who might have tapped the 2000 largest businesses in DC, among them many of the most powerful lobbying firms in the world, for more money to bring to the capital's citizens, have instead opted for the glamour of going major league, as if Washington DC wasn't in many ways already the world's capital.  Ironically, one of the contributors to the Baseball tax is Fannie Mae, by far the City's largest corporate entity.  We say, ironically, because Fannie Mae, presently enmeshed in a major scandal for the way it has been cooking its books to favor multimillion dollar bonuses for its top managers, is--even though it's traded publicly-- technically a federal agency, making it exempt from paying any regular taxes to the City.

A case of noblesse oblige? or rather the position of Franklin Raines, its CEO, who just happens to be a member of the group that plans to buy the Baseball team? Raines, who has banked millions since he got to Fannie Mae, is only a minor piker compared to Peter Angelos, the Orioles' owner.  As our compatriot, <i>dymaxion</i>, wrote earlier in the <a href="http://www.dymaxionweb.com/dymaxionweb/archives/2004_07.html#000534">"Senators and the Cosa Nostra"</a>, Angelos has been sitting in the catbird seat when it comes to this deal.

Baseball had to move out of Montreal where they were drawing an average of 8,000 fans per game.  They might have chosen Portland or Las Vegas or Northern Virginia.  But tax-adverse Virginia was not going to throw real public money at them the way Mayor Williams did, Vegas had its gambling problems and liberal Portland is just not Dickensonian enough .  Also, Baseball has learned from Anaheim, Oakland and Arlington, Texas that suburban stadiums just don't have the same cache' as ballparks surrounded by photogenic urban backdrops.

But the path to DC had to go through Peter Angelos of the Baltimore Orioles because in the oligopoly that is MLB, the owners are all powerful.  They are protected from the FTC's antimonopoly laws and nobody has proposed bringing in the Feds with RICO. 

So it came as no surprise today when Thomas Heath and Lori Montgomery writing in <a href "http://www.washingtonpost.com/wp-dyn/articles/A63534-2004Sep30.html">The Washington Post</a> (free reg req) revealed that the other owners have agreed to guarantee a price tag of almost $200 million more for his team than he paid for it 11 years ago.  In addition, according to the article, "Angelos would also receive 60 percent of the revenue from a potentially lucrative regional sports network and MLB would guarantee that Orioles' revenue would never fall below an average of what they earned before the Expos moved here, sources said."

Angelos was the head of a group that bought the team for $173 million back in 1993.  Through this EXPOS deal he has now bought himself an insurance policy that not only protects him from the increased competition of a rival business down the road but also from the general decline in popularity that baseball has suffered in recent years.  If the deal goes down as stated in The WP article, there is nothing to keep Angelos from cutting back on player salaries, siphoning off whatever immediate revenues he can pocket from loyal fans and putting the team on the block just before the bottom falls out.

Yes, Congress has immunized Baseball from real competition and turned the national pastime into the home of the national kleptocracy but can Congress protect Baseball from itself.

Note that this was the week in which Congress voted overwhelmingly to repeal all of DC's gun laws.  If the Bill got through the Senate it would be possible for DC residents to own and carry handguns and even assault rifles.  That, it appears is how Congress proposes the citizens get to defend themselves from the sports/congressional complex.

         

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