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Monday, March 31, 2008

Visitor's Territory

At Illegal Curve, we’re all hockey fans. But a number of us are also law students, or at least have had brushes with the law. So when news comes down from the legal community concerning NHL-related issues, we pay attention.

As reported in Monday’s National Post, (
http://www.nationalpost.com/news/story.html?id=412677), Canada’s Competition Authority (Antitrust Authority, for IC American readers) has decided against taking action directed at the NHL regarding the League’s relocation policies.

The issue rose to the forefront when Canadian blackberry billionaire Jim Balsille of Research in Motion attempted, without success, to purchase the Pittsburgh Penguins, and later, the Nashville Predators, in hopes of relocating a team to Hamilton, Ontario, which is a short jaunt from Toronto, home to the Maple Leafs.

NHL rules stipulate that any plan for the placement of a new franchise within 80 miles of the “home territory” of an existing franchise first requires the consent of the existing NHL team. And since most clubs wouldn’t want to risk the loss of market share that could result from the entry of a new franchise and would therefore never approve the proposal, the rule effectively functions as a barrier to entry.

The investigation by the competition authority concluded that the home territory rules did not violate the Canadian Competition Act provisions related to market restrictions since they do not inhibit competition.

There’s a number of arguments for and against the home territory provisions, but the most simple justification for the rules is that the home territory rules are necessary to make franchises valuable, since a purchaser would be less willing to invest in a franchise if they could not be assured that the league wouldn’t then turn around and approve of another franchise to set up nearby, thus drawing away fans, television revenue, and the like.

That said, it is certain that a compendious amount of cash was spent on legal fees during the Balsille ordeal. And it’s equally certain that many a creative proposal must have been brought forward in hopes of circumventing, or at least working within the existing rules to nevertheless facilitate the proposed relocation. But one wonders if every plausible option was put on the table to get around the rules……..like this one:

What if the NHL relocated a team to Hamilton, but the team would only play playoff games? That way, the Hamilton team would not be competing within 80 miles of another team’s territory at the time, since the Toronto Maple Leafs would have missed the playoffs by then?

I’d forward that suggestion to Balsille, but according to the Post, he could not be reached for comment.

Someone needs to get that guy a blackberry.

For Illegal Curve, I’m Steve Werier.

Ballhype: hype it up!

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