Commitment to Monopoly is the NHL's Only Constant Argument

Steve ThompsonAnalyst IIISeptember 4, 2009

In 1756, at the start of the Seven Years War, Admiral John Byng sailed to Minorca to relieve its garrison, then under seige by the French.

His fleet was inadequate to accomplish the task and after an indecisive fight with a French fleet, he withdrew to Gibraltar to await reinforcements.  But there was no time for delay and the Minorca garrison surrendered.

There was a loud, public outcry in Great Britain, and the government, to save its hide shifted the responsibility solely on to Byng's shoulders.

In probably the worst evasion of responsibility in history ever perpetrated by a British Government, Byng was arrested, then tried for "failing to do his utmost" to save the garrison, found guilty, and then executed by firing squad on the deck of his own flagship.

This episode is worth recalling because according to the lawyers of Jim Balsillie, a similar situation is the reason for Balsillie being opposed to the death by the NHL.

Balsillie's lawyers allege that Byng's role is being played by Commissioner Gary Bettman and the Government by the Toronto Maple Leafs.  They claim that if Bettman doesn't prevent Balsillie from moving into his territory, the Leafs will sue the NHL.  

Hence Bettman must "do his utmost" and declare war to the death on Balsillie or face a lawsuit from one of his own backers.  He's already vowed to continue fighting even if Judge Baum rules against him.

This, say the Balsillie people is the real reason for Hamilton not getting a franchise.

I'm inclined to go along with their argument.

First let's dispense with one piece of fiction.  After pleading before Judge Baum over and over that they were acting in the best interest of the Phoenix fans by refusing to let the team be moved, the NHL showed its true commitment to Phoenix.

First they backed an offer by Jerry Reinsdorf that demanded massive concessions from the taxpayers and allowed him an "out" clause that would allow him to move the team from Phoenix if things got no better.

Then they allowed a bid that would see the team play regular season games and all its playoff games in Saskatoon.

Finally their own bid allows them to move the team if they don't want to lose money. So much for a commitment to Phoenix and Glendale.

So what is the NHL really fighting for?  Two things.  The American owners are afraid that moving a team to Canada will hurt their chances of getting a rich American tv contract.

And the Canadian owners, particularly the Toronto Maple Leafs want to keep their tv money and marketing territory intact.

The first problem can be solved by expanding the league in the United States again, hopefully this time to northern cities where hockey matters.

The other issue revolves around what is called in sports language, territorial rights. Under this system, each team has a circumference set by the NHL (or any professional sports league) that is considered its own exclusive marketing area.

If there is a conflict between franchises, as in the NHL's case, between New York Rangers, New York Islanders, and New Jersey, and between Los Angeles and Anaheim, compensation is paid by the new team to the old one.

Hamilton is said to lie within the marketing territory of both Buffalo and Toronto, but both these teams have refused to discuss compensation and instead want Balsillie and Hamilton prevented from joining the NHL.

Wrong Issues are Being Discussed in Court

So far Balsiille and his lawyers have been content to attack Bettman and the NHL and make allegations against the "invisible" hand of the Toronto Maple Leafs behind them.

But what they ought to be arguing against is this whole concept of territorial rights.

First of all legally, the only legal entities involving territory that are recognized by law are countries; states, provinces, or territories; and local municipalities.

The marketing area is simply an arbitrary division set by a business or individual.  It has no legal existence in law.

Sometimes this division is made for delivery purposes.  One pizza outlet might service all orders north of a street while its sister franchise serves the south.

Sometimes this division is made to punish communities for not supporting a business. For example, the NFL's blackout rule prevents a local territory from seeing its team play if the game is not sold out.

The marketing area can be any size.  It doesn't have to be large.  It is quite common to see several McDonald's franchises or the same doughnut franchises within blocks of one another.  It is an entirely arbitrary scheme set by a business or individual.

In sports, usually the city's metropolitan area is considered the franchise's marketing boundary.  Some franchises by their name, eg. Minnesota claim a whole state as its marketing area.  But there nothing in law to define a franchise's market region.

In this case, the Toronto Maple Leafs claim most of Southern Ontario, including Hamilton as their marketing area.  Bettman and the NHL are "doing their utmost" to preserve this monopoly.

How absurd is this argument?  Let's take an example that will never happen.

Let's imagine that Balsillie does what I recommend what he should do, withdraw his offer and start a new league.  

In this case, he founds the Toronto Professional Hockey League.  He creates thirty franchises and places them in thirty wards within the City of Toronto.  Then, with generous pay increases, he induces every player in the NHL to abandon the league and join his new entity.

Is this legal?  Of course it is.

Now the City of Toronto has thirty teams within its boundaries all within driving distance or public transit of each other.

The monopoly of the Toronto Maple Leafs is broken. What do they get in compensation? Nothing.

Let's take a more realistic situation. The NFL is hoping Los Angeles will build a new stadium so that they can return.

But once the NFL gets a team back in Los Angeles they won't want to stop there. The Los Angeles market is so big that they will want two teams there like all the other major professional sports, one in each conference.  They'll call this second team Los Angeles too, or perhaps California, Anaheim, Pasadena, Burbank, or Hollywood.

And when the second team is added, there won't be any lawsuits.  They'll tell the two owners to work out compensation between themselves.  It will be purely an internal matter that doesn't involve the law at all.

That's what the Buffalo-Toronto-Hamilton NHL dispute should have been.  A sick franchise in Phoenix that never made any money during its entire stay there transferred to a market where it would be valued.  

What right has any city to bar another from getting a product or service? What right has Toronto and Buffalo to bar Hamilton?

Instead the paranoia of Buffalo (The franchise will go out of existence says its Chicken Little owner) and Toronto (Who still will have a huge market that is so large I believe that more franchises besides Hamilton can be added without too much damage) is being allowed to call the shots.

And Admiral Bettman and the NHL will face death by lawsuit if they "fail to do their utmost" to preserve a monopoly and stop Balsillie.


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