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Baseball’s Antitrust Exemption Marks Its 100th Anniversary With A New Challenge – Antitrust, EU Competition



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For more than a century, minor league baseball and Major League
Baseball (MLB) have thrived in a symbiotic relationship. Minor
league teams affiliate with major league teams for financial
support and access to major league staff. In exchange, major league
teams receive a share of minor league revenue and access to budding
talent. The year 2020 marked the expiration of an agreement
governing these affairs. According to a case filed in the Southern
District of New York, Nostalgic Partners v. Office of the
Commissioner of Baseball
, a new agreement capping the number
of minor league affiliates at 120 is alleged to constitute a group
boycott in violation of the Sherman Act § 1.

The case has reanimated the debate over the controversial,
judicially ordained baseball antitrust exemption, which celebrated
its 100th anniversary on May 29. The complaint, brought by excluded
minor league teams, alleges that the exemption should be overturned
and, in any event, only narrowly applies to player reserve clauses.
In a statement of interest filed in June, the U.S. Department of
Justice argued the exemption applies only to “conduct that is
central to providing professional baseball games to the
public.” For its part, the Office of the Commissioner believes
it applies broadly to the “business of baseball,”
including MLB’s association with the minor leagues. Centrally
important to the debate is the Curt Flood Act of 1998 and the
extent to which Congress’ decision to legislatively repeal part
of the exemption implies an intent to preserve the rest.

Baseball’s antitrust exemption dates back to a 1922 Supreme
Court decision concerning the competitive consequences of player
reserve clauses. Applying a “narrow, parochial view” of
the commerce clause, as Justice William Douglas later characterized
it, the Court in Federal Base Ball Club of Baltimore v.
National League
found “the business is giving exhibitions
of base ball, which are purely state affairs” – not the
type of “business” regulated by the antitrust laws
– finding “the transport [of teams to play teams in
other states] is a mere incident, not the essential thing.”
Thus, the Court concluded, there was no jurisdictional basis for
the antitrust laws to regulate the business of “giving
exhibitions of base ball.”

Decades after Federal Base Ball, the Supreme Court in
Toolson v. New York Yankees revisited the exemption in
another case about player reserve clauses. The Court observed,
“The business [of baseball] has … been left for thirty years
to develop, on the understanding that it was not subject to
existing antitrust legislation.” Fearing the disruption it
would precipitate by reversing course, the Toolson Court
concluded, “[I]f there are evils in this field which now
warrant application to it of the antitrust laws[,] it should be by
legislation.” Justice Thomas Clark would later say, in a
decision declining to create a similar exemption for football, that
“more harm would be done in overruling Federal Base
Ball
” than by maintaining the status quo.

Later, in Flood v. Kuhn, decided in 1972, a well-known
baseball-enjoying Justice Harry Blackmun, writing for the Supreme
Court, again affirmed Federal Base Ball and explicitly
remarked, which it opted not to do in Toolson, that it was
bound by stare decisis and Congress’ “positive
inaction.” Although the Flood Court conceded that
“[p]rofessional baseball is a business and it is engaged in
interstate commerce,” it nonetheless held, “If there is
any inconsistency of illogic in all this, it is an inconsistency
and illogic of long standing that is to be remedied by the Congress
and not by this Court.” Thus, for now, the baseball exemption
represents a bygone era of constitutional jurisprudence, preserved
for the sake of continuity by Supreme Court decisions that
acknowledge its anachronistic origin, stare decisis distinction and
legislative inaction.

Nostalgic Partners is the latest case to challenge the
antitrust exemption for America’s favorite pastime. Plaintiffs
there predict, “Plaintiffs thus have objectively good reasons
to believe that the Supreme Court would no longer apply the …
baseball antitrust exemption if presented with a proper case for
reconsidering it. This is that case.” The current Supreme
Court was appointed well after Flood was decided, so it
would be hard to predict the outcome.

However, Leegin Creative Leather Products, Inc. v. PSKS,
Inc.
, decided in 2007, saw three current justices – John
Roberts, Clarence Thomas and Samuel Alito – vote without
hesitation to overturn 96-year-old jurisprudence in Dr.
Miles
concerning the antitrust treatment of vertical pricing
restraints, after testifying in their confirmation hearings about
the sanctity of stare decisis. The newly constituted Court seems
increasingly willing to jettison stare decisis when it believes
aging case law should be reconsidered and the thorny issues raised
left to the legislatures. But Congress still appears unlikely to
amend the Sherman Act to remove the antitrust exemption for
baseball, with acknowledged baseball fans Justices Samuel Alito and
Brett Kavanaugh the wild cards on that score this time around. Stay
tuned.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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