Do Territorial Rights Have Any Teeth?

In professional sports, one of the entrenched “institutions” is the idea of a franchise having territorial rights. In theory, this projects a franchise owner’s investment by making sure there is no nearby competition.Of course, there are markets such as New York where more than one sports franchise can be supported so when a new player wants to come on to the scene, the incumbent demands financial compensation. The New York Rangers, for example, got paid $4-million when the New York Islanders were created.

But the question is whether territorial rights have any legal standing? Do they, in fact, serve as an unfair economic impediment. When Al Davis moved the Oakland Raiders to Los Angeles, the LA Rams demanded territorial rights. Davis told to take a hike, and then went to court to hammer home the point. In the end, he won.

In the NHL, the idea of whether territorial rights have any teeth could be tested soon if Jim Balsillie decides to move the Nashville Predators (assuming the deal goes through) to Hamilton or Waterloo. The Toronto Maple Leafs and/or Buffalo Sabres could demand to be compensated. The situation could become extremely interested after the National Post reported today that Canada’s Competition Bureau has apparently launched an inquiry looking at the NHL’s re-location policies. The Competition Bureau is apparently focused on Article 4.1 of the NHL’s constitution that “each member shall have exclusive territorial rights in the city in it is located and within 50 miles of that city’s corporate limits”.

Balsillie’s no fool. For him to even raise the idea of moving the Predators is either a negotiating tactics to encourage more corporate support from Nashville businesses, or he really is interested in the idea of moving the franchise to Southern Ontario. You have to believe that Balsillie is politically connected given Research in Motion is hailed as one of Canada’s flagship tech companies. Read into the Competition Bureau’s intentions but if you think there’s a connection, you’re probably right.