In Defense of Baseball's Antitrust Exemption

• Published date: 01 June 2012
• DOI: http://doi.org/10.1111/j.1744-1714.2012.01132.x
• Author: Nathaniel Grow
• Date: 01 June 2012

In Defense of Baseball’s Antitrust

Exemption

Nathaniel Grow*

TABLE OF CONTENTS

Table of Contents.............................................................................211

Introduction.....................................................................................212

I. Revoking Baseball’s Antitrust Exemption Will Not Curb MLB’s

Allegedly Anticompetitive Conduct.............................................. 217

A. Revoking Baseball’s Antitrust Exemption Will Not Prevent

MLB Teams from Demanding Stadium Subsidies from

Local Municipalities ...............................................................219

1. Antitrust Law Will Not Force MLB to Expand................... 223

2. Baseball’s Antitrust Exemption Does Not Block the

Formation of Rival Leagues............................................... 228

B. Baseball’s Relocation Restrictions Do Not Warrant the

Revocation of Its Antitrust Exemption....................................232

C. Baseball’s Antitrust Exemption and Labor Restraints .............. 240

D. Baseball’s Antitrust Exemption Does Not Facilitate

Anticompetitive Broadcasting Agreements.............................. 247

E. Baseball’s Antitrust Exemption Has a Minimal Effect on

MLB’s Franchise Ownership Restrictions................................ 251

F. Baseball’s Antitrust Exemption Has Not Fostered

Incompetent Management Practices........................................253

*Assistant Professor of Legal Studies, Terry College of Business, University of Georgia. This

article received the Holmes–Cardozo Award for Outstanding Submitted Conference Paper at

the 2011 Annual Conference of the Academy of Legal Studies in Business. I would like to

thank Judge Richard Arkow, Professors Robert Emerson, Mitchell Nathanson, and Jamie

Prenkert, the participants at the Florida–Georgia Legal Studies Research Conference, and

two anonymous reviewers for supplying helpful comments to earlier drafts of this article. All

views expressed herein are, of course, my own.

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American Business Law Journal

Volume 49, Issue 2, 211–273, Summer 2012

© 2012 The Author

American Business Law Journal © 2012 Academy of Legal Studies in Business

211

G. Professional Baseball Differs from the Other Professional

Sports Leagues in a Significant Respect Warranting Its

Unusual Antitrust Status........................................................ 255

II. The Procompetitive Benefits of Baseball’s Antitrust Exemption.... 259

A. Congress Regularly Uses the Threat of Revoking Baseball’s

Antitrust Exemption to Pressure MLB to Expand or

Relocate Its Franchises........................................................... 261

B. Congress Also Pressures MLB to Make Other Concessions......270

Conclusion....................................................................................... 273

INTRODUCTION

Professional baseball’s judicially created exemption from antitrust law is

among the most uniformly criticized doctrines in American jurispru-

dence.1Scholarly commentators considering baseball’s unique antitrust

status have derided it as “inexplicable and indefensible,”2“illogical,”3“irra-

tional,”4and “anachronistic.”5Others have gone even further, declaring

1See Gary R. Roberts, The Case for Baseball’s Special Antitrust Immunity,4J.SPORTS ECON. 302,

307 (2003) (stating that the exemption “has enjoyed almost no support except from the

baseball hierarchy itself ”); cf. Stephen J. Matzura, Will Maple Bats Splinter Baseball’s Antitrust

Exemptions?: The Rule of Reason Steps to the Plate,18W

IDENER L.J. 975, 995 (2009) (finding that

the baseball exemption is “an aberration and lightening rod for criticism by courts, members

of Congress, and scholars”); Andrew E. Borteck, Note, The Faux Fix: Why a Repeal of Major

League Baseball’s Antitrust Exemption Would Not Solve Its Severe Competitive Balance Problems,25

CARDOZO L. REV. 1069, 1080 (2004) (concluding that the baseball exemption has been “heavily

criticized by legal scholars”).

2ROGER I. ABRAMS,LEGAL BASES:BASEBALL AND THE LAW 69 (1998); see also Edmund P. Edmonds,

Over FortyYears in the On-Deck Circle: Congress and the Baseball Antitrust Exemption,19T.M

ARSHALL

L. REV. 627, 660 (1994) (stating that the “exemption is a judicial aberration without justifica-

tion”);Carol Daugherty Rasnic & Reinhard Resch, Limiting High Earnings of Professional Athletes:

Would the American Concept of Salary Caps Be Compatible with Austrianand German L abor Laws?,7

WILLAMETTE SPORTS L.J. 57, 58 (2010) (stating that the baseball exemption is “inexplicable”).

3Morgen A. Sullivan, Note, “A Derelict in the Stream of the Law”: Overruling Baseball’s Antitrust

Exemption,48D

UKE L.J. 1265, 1275 (1999).

4Spencer Weber Waller & Neil B. Cohen, Run Baseball Just Like Any Other Business? That’s the

Last Thing the Owners Should Want,in BASEBALL AND THE AMERICAN LEGAL MIND 158, 158 (Spencer

Weber Waller etal. eds., 1995).

5Robert G. Berger, After the Strikes: A Reexamination of Professional Baseball’s Exemption from the

Antitrust Laws,45U.P

ITT.L.REV. 209, 209 (1983).

212 Vol. 49 / American Business Law Journal

the exemption to be a “judicial embarrassment” and an “archaic reminder[]

of judicial decision making at its arthritic worst,”6as well as a “grotesque

legal anomaly” and an “arrogant testament to stubborn ignorance.”7

The exemption—which shields many of the activities of both Major

League Baseball (MLB) as well as the lower-ranked, so-called “minor

leagues” from antitrust scrutiny—dates back to the U.S. Supreme Court’s

decision in the 1922 case of Federal Baseball Club of Baltimore,Inc. v. National

League of Professional Baseball Clubs.8In Federal Baseball, Justice Oliver

Wendell Holmes wrote for a unanimous Court holding that under then-

prevailing precedent, the business of “giving exhibitions of base ball” was

neither interstate in nature nor commerce, and thus was not subject to the

Sherman Antitrust Act.9Even though the Court has since significantly

expanded its interstate commerce jurisprudence—and in the process

applied antitrust law to other professional sports leagues10—it has never-

theless affirmed Federal Baseball in two subsequent cases, first in its 1953

decision in Toolson v. New York Yankees11 and again in 1972 in Flood v. Kuhn.12

6Roger I. Abrams, Before the Flood, The History of Baseball’s Antitrust Exemption,9MARQ.SPORTS

L. REV. 307, 307 (1999); see also Connie Mack & Richard M. Blau, The Need for Fair Play:

Repealing the Federal Baseball Antitrust Exemption,45FLA.L.REV. 201, 204 (1993) (stating that

the exemption is “arcane”).

7Eldon L. Ham, The Immaculate Deception: How the Holy Grail of Protectionism Led to the Great

Steroid Era,19MARQ.SPORTS L. REV. 209, 228–29 (2009).

8259 U.S. 200 (1922).

9Id. at 208.

10See Haywood v. Nat’l Basketball Ass’n, 401 U.S. 1204, 1205 (1971) (holding that antitrust

law applies to the activities of the National Basketball Association (NBA)); Radovich v. Nat’l

Football League, 352 U.S. 445, 447–48 (1957) (holding antitrust law applies to the National

Football League (NFL)). Lower courts have subsequently refused to extend baseball’s anti-

trust exemption to the National Hockey League (NHL), Phila. World Hockey Club, Inc. v.

Phila. Hockey Club, Inc., 351 F.Supp. 462, 466 n.3 (E.D. Pa. 1972); professional golf, Blalock

v. Ladies Prof’l Golf Ass’n, 359 F. Supp. 1260, 1263 (N.D. Ga. 1973); and professional tennis,

Gunter Harz Sports, Inc. v. U.S. Tennis Ass’n, 665 F.2d 222, 223 (8th Cir. 1981). See also

Thomas C. Picher, Baseball’s Antitrust Exemption Repealed: An Analysis of the Effect on Salary Cap

and Salary Taxation Provisions,7S

ETON HALL J. SPORT L. 5, 14 n.53 (1997) (identifying cases).

11346 U.S. 356 (1953).

12407 U.S. 258 (1972). For a more detailed account of the development of the Supreme

Court’s baseball antitrust jurisprudence, see Nathaniel Grow, Defining the “Business of Base-

ball”: A Proposed Frameworkfor Determining the Scope of Professional Baseball’s Antitrust Exemption,

44 U.C. DAVIS L. REV. 557, 565–76 (2010).

2012 / In Defense of Baseball’s Antitrust Exemption 213