How a sports franchise relocation is approved
An owner cannot simply move a club. League rules require a vote, and the antitrust history behind those rules explains why they are written as they are.
Franchise relocation looks like a business decision by an owner. Legally it is a decision by the league, and the rules governing it were written in response to losing a lawsuit.
The antitrust background
League restrictions on relocation were successfully challenged on antitrust grounds, on the reasoning that member clubs are separate economic actors and an agreement among them to restrain a club's movement can be a restraint of trade.
Leagues responded by adopting formal relocation guidelines with articulated, defensible criteria, rather than an unstructured veto. The guidelines are as much a litigation defence as a governance document.
Baseball's position differs because of its long-standing and much-criticised antitrust exemption, which is why its process is not a useful comparison for the other leagues.
The criteria
Guidelines typically address whether the club made good-faith efforts to remain, the adequacy of existing and proposed facilities, fan support and attendance history, the demographic and economic strength of both markets, the effect on other clubs' territories, and the extent of public investment already made in the current market.
Territorial rights matter: moving into another club's territory triggers additional approvals and usually compensation.
The relocation fee
A relocating club typically pays a fee to the league, distributed among the other clubs, reflecting the value of the new market and compensating for the collective interest being given up.
This is a significant number and it is negotiated, which introduces an obvious incentive problem: the owners voting on whether a move serves the league's interest are also the recipients of the payment.
“Every relocation vote is partly a vote on receiving a cheque. It is not a hypothetical conflict.”
Non-relocation agreements
Where a stadium was publicly financed, the lease almost always contains a non-relocation covenant binding the club to the venue for a term.
The practical question is the remedy. Specific performance — an order to stay — is far more effective than damages, and whether the agreement provides for it, with a defined mechanism, is what determines whether the covenant has teeth.
Practical points
- Read the league constitution's relocation provisions rather than press summaries.
- Check the non-relocation covenant's remedy, not merely its existence.
- Follow the relocation fee, since it shapes the vote.
- Note territorial rights of nearby clubs in any proposed market.
