Canada's Competition Bureau investigating the NHL's franchise relocation policies?

Discussion in 'Fugu's Business of Hockey Forum' started by MAROONSRoad, Jun 6, 2007.

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  1. MAROONSRoad

    MAROONSRoad f/k/a Ghost

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    According to the National Post:

    "Canada's Competition Bureau is believed to have launched an inquiry into the franchise relocation practices and policies of the National Hockey League amid speculation that one of its financially strapped teams in the United States could be relocated to Southwestern Ontario.

    Sources familiar with the probe told the National Post the federal independent law enforcement agency notified the NHL's executive offices in New York last month. Officials from the NHL did not respond to a request for an interview yesterday.

    At the same time, it is believed Canadian billionaire Jim Balsillie, who signed a letter of intent to purchase the struggling Nashville Predators for US$220-million last month, has also been contacted by the Canadian competition watchdog."


    Full article here:

    http://www.canada.com/nationalpost/news/story.html?id=18c34495-8adc-491e-b73e-e70e1fa02456&k=0

    GHOST
     
  2. Brazz

    Brazz This boat is 4 real!

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  3. Big#D

    Big#D __________________

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  4. Mr BLUEandWHITE

    Mr BLUEandWHITE Registered User

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    Interesting, If Balsille chooses to move the team it looks like he will have more power. The Leafs and Sabres wont be able to say now. Interesting to say the least.
     
  5. saskganesh

    saskganesh Registered User

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    still premature at this point. I have no idea how long an inquiry would take or how the process works. I imagine it could drag on.
     
  6. Irish Blues

    Irish Blues Present once again

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    Personal guess: I doubt this goes anywhere - it's not like the NHL just passed this last week. It's been in effect for years, and for Canada to say "it's not valid" without the U.S. saying something similar would cause potential problems down the road.

    Besides, the NHL could just as easily pass a new by-law requiring a super majority (25 of 30 teams) to ratify a move as well as imposing mandatory payments to affected teams and other things as conditions of the move. Unless someone is going to take the Al Davis position and allege wrongdoing by the rest of the NHL, this isn't going to go very far or have much of an effect.
     
  7. GSC2k2*

    GSC2k2* Guest

    It is very much NOT in Jim Balsillie's interests to pursue this alternative. Three guesses as to why (hint: given the events of recent years, Al Davis is currently very sorry he ever took the NFL to court).
     
  8. Irish Blues

    Irish Blues Present once again

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    Balsille's going to be pacing up and down the bench with a walker while his team stinks up the place? :D
     
  9. GSC2k2*

    GSC2k2* Guest

    :D

    Seriously, you know the deal with Davis, right, IB?
     
  10. Irish Blues

    Irish Blues Present once again

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    Of course I do - people remember the $1 billion judgment he won against the league (argued down on appeal) and that he was allowed to move the Raiders to Los Angeles and then back to Oakland without penalty, they fail to remember everything that came after that infamous verdict in the 80s.

    If you don't brief everyone, I'll go through the gritty details later tonight.
     
  11. MAROONSRoad

    MAROONSRoad f/k/a Ghost

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    Test: Is it in the public's interest; is it an undue restriction of trade

    "[NHL] policies appear to grant to individual teams...the ability to veto a move by another team to within an 80 kilometre radius of their markets, raising questions of whether that amounts to stifling competition.

    "It's an entirely reasonable thing for the Competition Bureau to do," said Prof. Mihkel Tombak, director of the masters of management of innovation program at the University of Toronto.

    "Anti-trust authorities in all sorts of other jurisdictions have looked at similar contracts for car dealerships and territories for beer distribution so this is entirely within their purview."

    At issue is whether attempts to protect an existing team's turf amounts to an undue restriction of trade and whether that is in the public interest.

    For the NHL, the question to be answered is whether the territorial exclusion is reasonable in protecting a team's legitimate economic interests and its owners investments.

    ...

    In light of the overall market size, Tombak said the Leafs could face an uphill battle trying to show that the arrival of the Preds in Hamilton would cost them money or make the teams unsustainable."


    http://canadaeast.com/ce2/docroot/article.php?articleID=7072

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  12. MAROONSRoad

    MAROONSRoad f/k/a Ghost

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  13. Jonjmc

    Jonjmc Registered User

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    It is games like this that caused the NHL to attach the conditions to Balsille during his attempt to get the Pens. For someone who everyone claims is so smart (he must be because you dont get to be a billionaire if you arent right?) Balsille seems to be missing a basic concept here.... dont irritate the people who have the power to deny you as an owner. This doesnt bode well for his approval. Why would the BOG want someone who appears to already be causing problems, regardless of how much money he has.
     
  14. Irish Blues

    Irish Blues Present once again

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    If Balsille's bid to buy the Predators gets turned down by the BoG, I fully expect to see threads discussing the legal avenues he has to force the NHL to approve the sale - when in fact, the NHL (a private entity) can approve or deny sales at their own whim.
     
  15. Jonjmc

    Jonjmc Registered User

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    Of course.

    There will be those that argue that the owners want Balsille because he increased the value of all franchises with his bid. But, the owners already have the benefits of this without actually needing to approve the sale. Balsille set the franchise value with his bid, accepted or not.

    His bid will be viewed as an anomaly, accepted or not, but it still caused all the franchises to be immediately worth more.
     
  16. MAROONSRoad

    MAROONSRoad f/k/a Ghost

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    Balsillie and his team of lawyers and advisors are not stupid. I do not know what his "end game" is or whether he will achieve it, but here is what we do know:

    a) Balsillie signs a "letter of intent" to buy the Predators for what appears a premium of probably 100 million dollars over what the franchise is worth to operate in Nashville long term. Balsillie doesn't attend the news conference and says very little.

    b) News is leaked to the press that Balsillie is negotiating with the city of Hamilton over Copps, the convenion centre, etc.

    c) News is leaked to the press regarding a confidential Competition Bureau investigation of the NHL's territorial restrictions.

    b) and c) above are done before the BOG will meet to approve or turn down Balsillie's proposed purchase of the Predators.

    Interesting to say the least.

    GHOST
     
  17. Jonjmc

    Jonjmc Registered User

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    From a third party point of view, it appears that this isnt true. I will freely admit that neither I nor anyone else not associated with Balsille has any clue what his plans are, but the moves made to date dont indicate any real intellect here.... it appears to be emotionally driven.

    He did the same thing before approval on the Pens sale (Copps) and look what happened with that. As I said, i have no idea what his real agenda is but one would think if he truly wanted to move the team that things like Copps and the Competition Bureau investigation could have been done after approval.
     
  18. mooseOAK*

    mooseOAK* Guest

    The NHL has franchises like a restaurant or grocery store chain. I am sure that McDonalds would prevent someone opening one too close to another existing franchise.
     
  19. Irish Blues

    Irish Blues Present once again

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    Many of you remember (or know about) Al Davis moving the Raiders from Oakland to Los Angeles in 1982, then back to Oakland in 1995. In 1980, Davis and the L.A. Coliseum filed an antitrust lawsuit against the NHL, claiming that the league had no right to restrict Davis from moving his team to Los Angeles. After the first trial ended in a hung jury, a second jury ruled in favor of Davis et. al. and ordered the NFL to pay $35 million. (The two sides later settled for $18 million.) Davis and the Raiders moved to L.A. in 1982.

    Davis never won $1 billion as some believe he did - it was $18 million.

    In 1995, Davis decided to move back to Oakland, and the two sides swapped various lawsuits, with Davis filing a suit against the league for $1.2 billion claiming that the league conspired to scuttle a deal to allow the the Raiders to play at a proposed new stadium in Hollywood Park - a move that forced the team from the L.A. market - and that the league's actions were intentional and with malice. A jury heard the suit and ruled in favor of the NFL, against Davis. Calfornia Superior Court overturned the verdict and ordered a new trial, citing citing juror misconduct - but the California Court of Appeals reinstated the verdict. (The case is currently pending before the California Supreme Court.)

    The implications of that ruling:
    -- It reinforced the NFL's authority as a governing body over all member teams, and
    -- It established that the NFL - not the individual teams - control who can enter (and leave) a market, and on what terms.


    Davis also sued the Alameda County Coliseum, claiming it had breached contractual promises for selling out the stadium - and asked for $1 billion in damages. A jury initially awarded $34 million in damages, but an appeals court threw out the verdict by pointing out that Davis and the Raiders subsequently signed a contract with the Coliseum after the alleged damages were incurred and that the new deal compensated him for such damages - so he could not collect damages on the initial breach as a result.

    Davis also attempted to sue the Buccaneers and the Panthers for trademark infringement; that lawsuit was thrown out b/c Davis had filed suit in California state court, which didn't have legal standing (federal courts do).

    So ... how does this apply to Balsille and the CCB?
    1. Even if the CCB offers a ruling that the NHL's by-laws regarding the veto power of teams does not apply, it will have no effect on protecting U.S. markets (and possibly Canadian markets as a result); since Hamilton is within the specified range of Buffalo, the NHL would retain the power to protect its U.S. markets - and as such, could prevent a team in Hamilton on those grounds.

    2. The CCB isn't ruling on who has control of the Hamilton market - they're simply ruling on whether teams can control who can go into the market. Even with a ruling that says teams cannot veto relocations to a neighboring market unilaterally, control of the Hamilton market would be vested in the National Hockey League - who, by the latest Davis v. NFL ruling, would have the final say on who can enter and leave a market and on what terms.

    3. If Balsille goes to court challenging the NHL so he can move the Predators and loses, he runs the risk of further strengthening the ability of the NHL (or any other pro sports league) to control team movement and markets - thus making it even more difficult for him (or anyone else) to relocate a franchise.

    gs can add what he needs to on top of this - but that's the short version.
     
  20. MAROONSRoad

    MAROONSRoad f/k/a Ghost

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    Speculation is fun so I'll give a try here of making a case for the intelligence of Balsillies' moves. I have no idea if the below is correct. As I just said, this is just for fun.

    - 220 million offer

    Balsillie is playing a high stakes game of poker with the BOG. He's making it hard for them to say no. Everyone knows a franchise in Nashiville is not worth anything near that.

    - leaks re Copps and Competition Bureau; Balsillie's lack of public statements

    Balsillie is sending a message to Predator fans and Nashville's business community, that his intention is to move the team and therefore they should just give up and face the inevitable.

    Balsillie is again playing a high stakes game of poker with the BOG. "I have a plan. I have my lawyers working on it. I will not give up and I will use my lawyers to the extent necessary to achieve my goals."

    The end game may not even be Hamiltion. It could very will be K/W or somewhere in Toronto even.

    GHOST
     
  21. Jonjmc

    Jonjmc Registered User

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    Thats as reasonable an explaination as any. If I were forced to make a guess, it would be very close to what you stated. And while I understand that's a hypothetical situation, whats lacking is the incentive for BOG approval. Aside from Liepold getting 100 million or so more than his franchise is probably worth, the BOG has no real incentive to approve Balsille. The bid itself drove up the values of all franchises, even if Balsille isnt approved.
     
  22. Irish Blues

    Irish Blues Present once again

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    It does not have the right to declare that Buffalo cannot be compensated for such a move - and you can bet the Sabres and the NHL aren't going to settle cheaply if Balsille pulls an end-run with this.

    Besides ... while the NHL has a league office in Toronto, the official headquarters are in New York City ... in the United States. (The meaning of this becomes clear below.)

    And vice versa. In the end, Balsille is going to have to get approval from the BoG for any move - if they say "no" and he sues to get approval, there will be a huge fight over jurisdiction; since the team is in Nashville (in the U.S.) and the league is headquarted in NYC (in the U.S.), I'd bet the house that any lawsuit would have to be filed in the U.S. - meaning precedent has been set in favor of the league, and ... as you so eloquently pointed out, any Canadian rulings will have no impact.

    In fact, I'd bet my neighbor's houses that the NHL By-Laws contains a provision that any action against the League itself must be filed in the United States. Of course, should Balsille get to that point, it's quite likely that he'll be in a fight with Nashville over the lease - meaning one side will sue the other over it. If Balsille loses that fight, it's a guarantee he'll be shelling out millions in damages to Nashville.

    The moral of this story: in the end, it really doesn't matter what Balsille thinks/wants or the CCB thinks/says, any move of a team from the U.S. to Canada is going to have to go through the Board of Governors - and playing really nice is going to be a part of it. Should there be any dispute, the fight will have to go through U.S. courts, where precedent is established in favor of the NHL ... and where Balsille is going to have to mount one hell of an argument to overcome that precedent. "I want to move the team and the league won't let me" won't cut it.
     
  23. MAROONSRoad

    MAROONSRoad f/k/a Ghost

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    Here's my original post which I deleted and have now edited slightly:

    The Canadian courts and administrative bodies (in this case the Competition Bureau) have jurisdiction over the issue of how Canadian competition law would apply to the NHL’s by-laws on relocation of an NHL franchise in Canada. Canada is a sovereign nation last time I checked. If there is an international treaty on the matter, that might come into play.

    US rulings are not binding on any Canadian court/administrative body. Canada has its own Competition Act and case law. At most, a US ruling would be considered by the judge/tribunal in Canada if one of the interested parties submitted such foreign ruling and argued that the Canadian court/admin body should adopt such approach (or if the court/administrative body decided to look at the foreign ruling on its own).

    GHOST
     
  24. mudcrutch79

    mudcrutch79 Registered User

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    You're missing a distinction here. While they may well retain a right to declare that Buffalo needs to be compensated, they can't exercise that right if it violates Canadian law. Jurisdiction is a wooly topic but the territorial rights that Buffalo is purporting to exercise are in Canada. My instincts tell me that it's the location of the territory over which Buffalo claims an interest that will define jurisdiction as opposed to the location of Buffalo. That's the logical, jurisdiction friendly answer.

    Again, I'd like to see the case law on this as it relates to jurisdiction. There's probably a case to be made for jurisdiction each way - the fact that Balsillie wants to move to Canada suggests to me that it's Canadian law that should be applied. The NHL's presence in NYC is the weakest part of your argument, I think - there's ONT case law saying that if you choose to set up business here, we'll take jurisdiction over you. The NHL obviously has no problem setting up business in ONT.

    This might be the strongest possibility but I've got some doubts, given the league's presence in Canada. I don't see that the lease is necessarily connected to the league issue - regardless of whether the lease conditions are satisfied, the league has an interest in protecting the territorial rights, because that's part of what it has to sell to prospective owners.

    As I've said above, I disagree with your comments about jurisdiction. That said, the element of risk cuts both ways - I saw this as a bit of a warning shot - if you read the story, you'll see the CCB has shut down previous investigations. This is a just a tool that I suspect Balsillie is using as leverage. There's a risk to him if the ruling cuts against him; there's a significant risk to the NHL if it cuts against them. At some point, the BOG members will presumably start to think "Why do I want to risk the territorial exclusivity because it will screw the Maple Leafs?"
     
  25. MAROONSRoad

    MAROONSRoad f/k/a Ghost

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    That's a very good point. I was going to respond to IB, but had a hockey game to watch and as you mention it's a complicated issue involving jurisdiction, conflict of laws, etc. But your basic point seems a sound one. How is the Buffalo franchise going to claim a right to territory which is not even in the USA and how is the Canadian legal system not going to have a say in the issue. The idea that Buffalo has a right to be compensated for a franchise relocation in another country is far from certain.

    GHOST
     

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