In theory, spring has finally sprung. But forget crocuses and breathably warm air; the real sign of seasonal change is baseball, America’s favorite monopoly. Major League Baseball has the dubious distinction not only of being entirely exempt from antitrust law, but also being the only major league sport with such a privilege. With the start of the 2015 season still some days away, we have time to take a look at the history, and the possible future, of this quirk.
Where did the antitrust exemption come from?
In short, from a 1922 Supreme Court ruling.
In the early parts of the 20th century, professional baseball was far from unified under the single Major League Baseball header of today. There were multiple early leagues, separate entities trying to muddle through how to run a money-making baseball business in an era before TV deals and $12 hot dogs.
That led to some turf challenges, of a sort, and groups trying to prevent other groups from competing. And so it came to pass that in 1915, the Federal Baseball Club in Baltimore sued the National and American Leagues under the Clayton Antitrust Act.
The defendants were found indeed to be behaving like anticompetitive jerks, and were fined. And like any business would do, they appealed.
The appeals court basically reversed the decision of the lower court, and ruled that baseball was not subject to the Sherman Antitrust Act (and, therefore, that the first verdict couldn’t hold up). The Federal league did not like that, and appealed the appeal. Appeal the appellate court and, well, you end up before the Supreme Court.
And so, in a unanimous ruling on Federal Baseball Club v. National League, the Supreme Court ruled that baseball was indeed to be held as exempt from antitrust rules.
What’s the logic there?
That baseball is not an interstate business.
No, really.
Justice Oliver Wendell Holmes wrote the unanimous opinion that although all of the clubs and teams that did the playing of the baseball games were in different cities and different states, and although they had to travel to each other to play those games, that the actual games were local and so therefore did not qualify as interstate commerce.
“The fact that, in order to give the exhibitions, the Leagues must induce free persons to cross state lines and must arrange and pay for their doing so is not enough to change the character of the business,” Holmes wrote. “The transport is a mere incident, not the essential thing. That to which it is incident, the exhibition, although made for money, would not be called trade of commerce in the commonly accepted use of those words.”
Holmes contuinued, “Personal effort not related to production is not a subject of commerce. That which in its consummation is not commerce does not become commerce among the states because the transportation that we have mentioned takes place.”
So: a baseball game (“exhibition”) is not commerce, because there is nothing produced at the end. And it doesn’t become interstate commerce if you cross state lines to do it, because it’s not commerce to begin with.
And that’s held up?
Mostly.
The Supreme Court has reaffirmed baseball’s antitrust exemption twice since 1922: once in Toolson v. New York Yankees (1953), and again in Flood v. Kuhn (1972). However, the Court did agree in Flood that baseball, while still exempt, is in fact interstate commerce.
Okay, but the first case was 93 years ago. How does MLB still benefit from it today?
The original issues from 1915, about free agency and player contracts, are long since subject to other laws. Today, the biggest issue in the exemption has to do with team relocation.
In other sports, if a team in City A has flagging attendance, merch sales, and has lost its ability to generate revenue and attract fans, that team can relocate itself to City B. In baseball, the league specifically has to approve such a move. It can still happen — the Montreal Expos became the Washington Nationals ten years ago now — but it’s rare. The Nats’ move was the first since 1972, and none has happened since.
Which brings us neatly to the present day.
What’s the status of the exemption now? Is it ever going away?
There’s a case in the works right now that could bring the matter back to the Supreme Court in the near future.
The city of San Jose, CA has been trying to woo the Oakland Athletics to their side of the bay for many years. In 2013, the city filed a suit claiming MLB was unlawfully blocking the move. In January of this year, the Court of Appeals for the Ninth Circuit, in San Francisco, ruled against the city and for MLB, saying that baseball’s antitrust exemption is “one of federal law’s most enduring anomalies,” only to be changed by Congress or the Supreme Court.
And so, like the Federal Baseball Club of Baltimore before them, the city of San Jose is heading to D.C., to try to get the nation’s highest court to hear their case.
It’s too soon to know of the current crop of Justices will decide to hear the arguments or not — and even if they do, there’s no guessing how they’d rule. But it is indeed possible that this particular quirk of American law will not make it to a hundredth anniversary.
by Kate Cox via Consumerist
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