NHL acting like 'illegal cartel,' Coyotes charge

"The NHL is excluding competition and restraining trade in [the United States and Canada] through the application of unreasonable restrictions in its constitution and bylaws, which are preventing the relocation of the Coyotes from Phoenix, Ariz., to Hamilton, Ont.," said the lawsuit filed yesterday in Phoenix…the Toronto Maple Leafs, alleging it has colluded with the league for years to preserve "market power" in the Greater Toronto Area.

The Globe and Mail
May 8, 2009

NHL acting like 'illegal cartel,' Coyotes charge
Battle lines drawn in separate court filings, as league contends team owner cut illegitimate deal with Balsillie
Paul Waldie and David Shoalts

TORONTO and PHOENIX — The group backing Canadian billionaire Jim Balsillie's bid for the Phoenix Coyotes unleashed its sharpest attack yet on the National Hockey League, alleging in a lawsuit that the league is operating like an "illegal cartel" by blocking Mr. Balsillie's effort to move the Coyotes to Hamilton.

"The NHL is excluding competition and restraining trade in [the United States and Canada] through the application of unreasonable restrictions in its constitution and bylaws, which are preventing the relocation of the Coyotes from Phoenix, Ariz., to Hamilton, Ont.," said the lawsuit filed yesterday in Phoenix.

The suit also takes aim at Maple Leaf Sports and Entertainment, which owns the Toronto Maple Leafs, alleging it has colluded with the league for years to preserve "market power" in the Greater Toronto Area. Prohibiting relocation deprives hockey fans of "increased competition, lower prices, higher quality and more variety," the suit alleged.

MLSE officials declined comment but have insisted privately that whatever losses the league has incurred from the Coyotes pale compared to the revenue that would be lost from another team in the Toronto area.

The lawsuit was filed by the current owners of the Coyotes who want to sell the club to Mr. Balsillie for $212.5-million (U.S.).

The sale is conditional on Mr. Balsillie, who is co-chief executive of Research In Motion Inc., being allowed to move the team to Hamilton and play in Copps Coliseum.

The suit was the latest move in a series of escalating attacks by both sides yesterday.

Mr. Balsillie met with officials in Hamilton and then issued a statement saying the fight is "about the passion Canadians feel for the game of hockey and a chance to provide those Canadian fans with the opportunity to support a seventh NHL team."

Several politicians also came out in favour of adding another team to Ontario, including Toronto Mayor David Miller who said he had a "soft spot for Hamilton."

"I mean, they are our rival in football and wouldn't it be great to have a rivalry like that in hockey?" he said.

The NHL shot back just as hard. The league argued in a court filing that Mr. Balsillie and Jerry Moyes, the Coyotes majority owner, cut a secret deal that has no legitimacy. Mr. Moyes gave the NHL voting control of the club last summer in return for badly needed financing, the league argued.

Mr. Moyes allegedly asked to be allowed to keep his titles of chairman and chief executive officer "to avoid public embarrassment," but he had no authority to put the club into Chapter 11 protection and announce the proposed sale to Mr. Balsillie, the league argued.

Yesterday, the NHL formally put deputy commissioner Bill Daly in charge of the Coyotes and asked a judge to dismiss the bankruptcy proceedings, effectively terminating Mr. Balsillie's bid. U.S. Bankruptcy Court Judge Redfield Baum put off a hearing on the issue until May 19.

As lawyers traded arguments in court, the battle lines became clear.

Mr. Balsillie and the Coyotes argue the NHL has no hope in Phoenix and that depriving hockey fans in Ontario while forcing an owner to remain in Arizona makes no sense. "After 12 years in the desert … the Coyotes have been unable to build a large fan base," the group alleged.

They pointed out that while Phoenix is the fifth largest city in the United States, the Coyotes ranked 24th out of 30 teams in attendance despite having ticket prices that are $12.21 below the league average. They added that the club has never made money, lost $73-million over three seasons and did so badly financially this season that the league penalized the club by slashing the amount of revenue sharing it was to receive.

Hamilton, they argued, is a hockey hotbed and moving the club there would improve the NHL's image, "increase the output of hockey, increase the number of fans attending hockey games and increase fan intensity levels in the relevant markets." They noted that the New York area has three teams that have achieved success on the ice and on the balance sheet.

But the league has stood by its rules, which essentially forbid a club from moving into another club's home territory, defined as an 80-kilometre radius, without permission.

NHL commissioner Gary Bettman has said repeatedly that the league does not want teams to relocate, and in court filings the NHL said it was close to a deal that would have kept the Coyotes in Phoenix.

That deal was with Jerry Reinsdorf, owner of the Chicago White Sox baseball team and Chicago Bulls basketball team. The league said it informed Mr. Moyes's lawyer about the negotiations last Friday and was told Mr. Moyes "was not able to come up with anything better."

Just as Mr. Bettman was heading to Phoenix on Tuesday to discuss the deal with Mr. Moyes, his group quickly put the club into court protection and announced the deal with Mr. Balsillie.

No such sale "may be effected, nor may any franchise be relocated, without complying with the league's rules and procedures governing such actions and obtaining the league's approval," the NHL argued.

The league has long insisted that its rules governing relocation are legal.

It received a boost last year when the federal Competition Bureau said sports leagues have the right to put the interests of the league ahead of the interests of an individual club owner when it comes to relocating franchises.

The bureau studied the issue in the wake of Mr. Balsillie's unsuccessful bids for the Pittsburgh Penguins and Nashville Predators, which he also wanted to move to Hamilton. The bureau reviewed whether the NHL's policies on team transfers violated Canadian competition laws and concluded the league did not engage in anti-competitive conduct and that it has the right to restrict relocations.

However, others have pointed to the successful legal battle Al Davis waged against the National Football League in the 1980s over his bid to move the Oakland Raiders to Los Angeles.

Yesterday's court filings also shed new light on the involvement of Wayne Gretzky in the Coyotes. Mr. Gretzky, who is the team's coach, bought a 1.5-per-cent stake in the club for $1-million, according to court filings. He was also supposed to receive 14 per cent of any profits.

http://www.theglobeandmail.com/servlet/story/LAC.20090508.COYOTES08ART22292/TPStory/?query=%22illegal+cartel%22


See related FranchiseFool post: Sue the Leafs/NHL cartel in eMcKangaroo Court

Risks: Alan Eagleson, Beggars can't be choosers: take what you're given and shut up, Big Franchising, Collaborators, Conspiracy, Credence good fraudulent expert, Credence goods: taking advantage of the innocents, Economics of monopoly (not free market), Encroachment (too many outlets put in territory), Franchisor association public relations machine, Individuals with a very successful career history, Losing money hand over fist, McKangaroo Court, McLaw: toothless legislation designed to protect the dominant parties, Monopoly or near-monopolies creates sub-optimal capital allocations, Robber barron, Take what I give you or abandon 100% of your investment, United States, 20090508 NHL acting

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License