When it comes to antitrust laws and their impact on American sports leagues, baseball is in a verifiable league of its own. For a century, professional baseball has held a unique exemption from antitrust laws, making its business distinctly immune from the pressure of Section 1 of the Sherman Act in ways that no other American sports league is.[1] While it has long been the subject of debate, and has survived several past challenges, its most recent challenge, posed by several formerly affiliated minor league baseball teams, has led to a petition for certiorari.[2] In addition, this case has been accompanied by a renewed combination of legislative attention and the scholarly support of eight amicus briefs.[3] It seemed like Major League Baseball might once again be forced to take the plate and defend baseball’s historic antitrust exemption.[4] However, on November 2, 2023, it was announced that Major League Baseball had settled all three lawsuits with the minor league teams, avoiding the possible Supreme Court challenge, and sending the question of the validity of its long-held antitrust exemption back to the bullpen.[5]
Article 1 of the Sherman Act
Article 1 of the Sherman Act has long held, “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”[6] In summary, the Sherman Act § 1 outlaws anticompetitive behavior, such as price fixing, wage fixing, market allocations, and group boycotts, because this kind of collusion amongst competitors denies consumers the benefit of a free, competitive, market.[7] Thus, “[t]he ‘central evil addressed by Sherman Act § 1’ is the ‘elimin[ation of]competition that would otherwise exist.’”[8] That being said, federal law has carved out several exemptions to antitrust laws when other federal priorities intervene, such as the protection of labor law through the non-statutory labor exemption, which immunizes unions and products of their collective bargaining from antitrust scrutiny.[9] In fact, many sports leagues benefit from this exemption when it comes to the rules that govern their relationship with the players.[10] One of the oldest and most periodically contested exemptions to the antitrust laws is one that is solely held by the sport of baseball.
The History of Baseball’s Exemption
Back in 1922, a time before the expanded power of the Commerce Clause, the Supreme Court held in Federal Baseball Club v. National League, that, despite its players moving across state lines, the business of baseball was not interstate commerce and thus exempt from federal antitrust laws.[11] Despite the subsequent expansion of the Commerce Clause in Wickard v. Filburn, Federal Baseball was later upheld by Toolson v. New York Yankees, Inc., finding that the Court’s decision, 30 years prior, should not be adjusted because Congress had considered it and chose not to overwrite it.[12] Finally in 1972, baseball’s “reserve clause,” which allowed players to be unilaterally assigned to teams, came under fire in Flood v. Kuhn, which saw the Supreme Court acknowledge that baseball was in fact interstate commerce, yet again defend baseball’s exemption.[13] The Court defended the exemption largely on the grounds of stare decisis and congressional acquiescence, tasking Congress with changing the long-standing law if they felt the need.[14] Nearly 30 years later, Congress appeared to do just that, by passing the Curt Flood Act of 1998, which stated that:
“major league baseball players are covered under the antitrust laws (i.e., that major league baseball players will have the same rights under the antitrust laws as do other professional athletes, e.g., football and basketball players), along with a provision that makes it clear that the passage of this Act does not change the application of the antitrust laws in any other context or with respect to any other person or entity.”[15]
However, while this did give major league baseball players standing to bring antitrust claims against Major League Baseball (“MLB”), the statute is notoriously confusing with respect to all other parties. In fact, a majority of courts have found that based on Flood, the antitrust laws apply the same as the Supreme Court had previously stated, which is that the entire business of baseball is still exempt.[16] However, there is a split on this issue, such as in Piazza v. Major League Baseball, where the District Court in the Eastern District of Pennsylvania held that baseballs’ exemption did not extend beyond its reserve clause.[17] Meanwhile, cases such as Radovich v. National Football League and Haywood v. National Basketball Assn. have long held that antitrust laws apply normally to other sports leagues.[18] Thus, baseball is unique in MLB’s ability to make several business decisions, from protecting the exclusive territory of its teams to its trademark licensing polices.[19]
The Latest Challenge
Most recently, baseball’s exemption has come under fire once again, as the subject of several suits by formally affiliated minor league teams, namely the Staten Island Yankees, Tri-City ValleyCats, Salem-Keizer Volcanoes, and the Norwich Sea Unicorns.[20] These suits emerged due to MLB’s league-wide decision to reduce the number of affiliated Minor League Baseball (“MiLB”) teams for each MLB Club, from six to a maximum of four.[21] Teams like the ValleyCats and the Sea Unicorns were thus stripped of their affiliations, and consequently filed suit under Section 1 of the Sherman Act, alleging this decision was a group boycott, a horizontal agreement among the Clubs to exclude them from MLB’s new professional development league.[22] However, in Nostalgic Partners v. Office of the Commissioner of Baseball, the District Court in the Southern District of New York found that while the plaintiffs had done enough to allege an antitrust injury, their case was ultimately foreclosed by Baseball’s antitrust exemption.[23] The Second Circuit then affirmed the District Court’s decision, in a very brief summary order, stating that it must continue to apply the Supreme Court’s precedent, i.e., the exemption, until it is overruled.[24]
Petition for Certiorari
On September 16, 2023, Weil, Gotshal & Manges LLP, filed a petition for certiorari, in Tri-City ValleyCats Inc. v. Office of the Commissioner of Baseball, to review baseball’s exemption and potentially answer the long-held question of whether it applies to all of the business of baseball, or the reserve clause.[25] This was accompanied in October by the filing of eight amicus briefs, including those from the MLB Players Association, a bipartisan coalition of eighteen state attorney generals, a bipartisan combination of Republican Senators Mike Lee and Marco Rubio alongside Democratic Representatives Paul Tonko and Joe Courtney, and a multitude of law professors including Fordham’s own Marc Edelman, all urging the Supreme Court to consider this issue once again.[26] Those Senators had even recently introduced a bill in June 2023, that proposed repealing the exemption; however, it has yet to receive a committee hearing.[27]
Repealing the exemption would have potentially far-reaching consequences, not only effecting how MLB deals with minor league teams, but how it can deal in regards to a number of business decisions. For example, MLB, meaning all of its individual clubs, is currently able to collectively determine exclusive suppliers of all its clubs’ merchandise, in a way that the Supreme Court held was a violation of Section 1 of the Sherman Act when the National Football League tried to do the same in American Needle.[28] The same reasoning applies to MLB’s negotiating of its broadcasting deals and its ability to exclusively allocate teams to certain cities.[29]
Settlement
On November 2, 2023, James W. Quinn, an attorney for the minor league teams, announced that the teams had reached a settlement with MLB in all three cases, the terms of which were confidential.[30] For now, this settlement puts to rest the debate over baseball’s antitrust exemption, before the Supreme Court can take another swing at its century-old anomaly.[31]
[1] Marc Edelman and John Holden, Baseball’s Anticompetitive Antitrust Exemption (September 7, 2023). B.C. L. Rev., Forthcoming, at 1, Available at SSRN: https://ssrn.com/abstract=4565178.
[2] Weil, News & Announcements, Weil Asks U.S. Supreme Court to Overturn Major League Baseball Antitrust Exemption, https://www.weil.com/articles/weil-asks-us-supreme-court-to-overturn-major-league-baseball-antitrust-exemption; Mike Lee US Senator for Utah, Press Release: Leveling the Playing Field: Senators Swing for Fair Competition in Baseball, https://www.lee.senate.gov/2023/6/leveling-the-playing-field-senators-swing-for-fair-competition-in-baseball; Katie Arcieri, Lawmakers, AGs Urge High Court to End MLB Antitrust Immunity (3), Bloomberg, https://news.bloomberglaw.com/antitrust/us-lawmakers-join-push-to-eliminate-mlb-antitrust-exemption; Marc Edelman, Law & Professional Sports, Class Notes, October 30, 2023; Supreme Court of the United States, Docket No. 23-282, https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/23-283.html.
[3] Id.
[4] Evan Drellich, Challenge to MLB’s antitrust exemption nears juncture: chase payday or history?, The Athletic, https://theathletic.com/5000420/2023/10/26/mlb-antitrust-exemption-challenge/.
[5] Ronald Blum, MLB settles lawsuits from minor league teams, avoids possible antitrust challenge at Supreme Court, Associated Press, https://apnews.com/article/mlb-antitrust-suit-settled-01ac3549586a7b98fce7361d00073062.
[6] Sherman Act § 1, 15 U.S.C.A. § 1 (West).
[7] Id.; Antitrust Division, U.S. Department of Justice (2023) https://www.justice.gov/atr/antitrust-laws-and-you.
[8] Nostalgic Partners, LLC v. Off. of Comm’r of Baseball, 637 F. Supp. 3d 45, 52 (S.D.N.Y. 2022) aff’d, No. 22-2859, 2023 WL 4072836 (2d Cir. June 20, 2023) (quoting, Am. Needle, Inc. v. NFL, 560 U.S. 183, 195 (2010)).
[9] Mackey v. Nat’l Football League, 543 F.2d 606 (8th Cir. 1976)
[10] Id.
[11] Fed. Baseball Club of Baltimore v. Nat’l League of Pro. Base Ball Clubs, 259 U.S. 200, 207 (1922).
[12] Edelman and Holden, supra note 1, at 3.
[13] Flood v. Kuhn, 407 U.S. 258, 282 (1972).
[14] Id. at 285.
[15] Curt Flood Act of 1998, § 2, Public Law 105-297, 112 Stat. 2824, (1998).
[16] Edelman, supra note 2; October 30, 2023; Edelman and Holden, supra note 1, at 27.
[17] Id.; Piazza v. Major League Baseball, 831 F. Supp. 420, 421 (E.D. Pa. 1993).
[18] Flood, 407 U.S. at 278-80.
[19] Edelman and Holden, supra note 1, at 30, 37.
[20] Drellich, supra note 3.
[21] Nostalgic Partners, 637 F. Supp. 3d at 49.
[22] Id.
[23] Id. at 45.
[24] Nostalgic Partners v. Office of the Comm’r of Baseball, 2023 WL 4072836 (2d. Cir. 2023).
[25] Weil, supra note 2.
[26] Id.; Arcieri, supra note 2.; Edelman, supra note 2; Supreme Court of the United States, Docket No. 23-282, https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/23-283.html.
[27] Mike Lee U.S. Senator for Utah, supra note 2; Arcieri, supra note 2.
[28] Edelman and Holden, supra note 1, at 37; Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 186 (2010).
[29] Id., at 30-37; Edelman, supra note 2.
[30] Blum, supra note 4.
[31] Id.
