Can a Sporting Body be a Monopoly?
According to an American Supreme Court decision over a century ago to exempt Major League Baseball from anti-trust laws, as far as Major League Baseball is concerned the answer is a resounding “no”.
Context
Sherman Anti-Trust Act (1890)
The Sherman Anti-Trust Act (1890) (‘Sherman Act’) is a United States piece of legislation that was enacted to enable Congress to exercise their constitutional power to regulate interstate commerce effectively in a way that would maintain competition in the market.[1]
Amongst many reasons, including the industrialization of the time, the Sherman Act was left purposely vague regarding definitions. This is demonstrated via Section 2 which makes it illegal to “monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations.”[2]
The Sherman Act was somewhat clarified by the Clayton Anti-Trust Act (1914) (‘Clayton Act’) which defined certain combinations or conspiring of parties as illegal.[3] However, the Court still played a large role in determining the scope and application of the Sherman Act via case law.
History of Major League Baseball Exemption Status
1903
The two major competing baseball leagues, the National League of Professional Baseball Clubs and the American League, sign “a truce known as the National Agreement” establishing recognition of the other as an equal and a promise to “honour each other’s contracts and observe the reserve clause”.[4] This pair is referred to as the Major League.
1913-1914
The Federal League is founded, gains capital, and establishes a full eight teams; shortly thereafter it begins openly engaging, albeit rather unsuccessfully, in competition with the Major League.[5]
1915
The Federal League sues the Major League for violation of Section 2 of the Sherman Act via an attempt “to monopolize the business of giving baseball exhibitions”.[6]
However, the case was not ruled on by Judge Landis before falling apart as “several Federal League owners accepted buyouts, a couple more were permitted to buy franchises in the major leagues, and three franchises…were left to twist in the wind”.[7]
1917
One of the three discarded franchises, the Federal Baseball Club of Baltimore (‘Baltimore’), sues the Major League for violation of Section 4 of the Clayton Act via an attempt to monopolize “the baseball business and [restrain] trade therein”.[8]
The district court jury is instructed by Judge Stafford that the case is within “interstate trade and commerce” and that the question in front of them is whether or not the Major League caused the damage to Baltimore via the monopolizing conduct.[9]
The jury ruled in favour of Baltimore.[10]
1920
The Major League appeals to the US Court of Appeals which reversed the decision given the conclusion that “the giving of exhibitions of baseball” did not fall under ‘trade and commerce’ per the Sherman Act.[11] The Court concluded this on the basis that “trade and commerce require the transfer of something, whether it be persons, commodities, or intelligence, from one place or person to another”, and that baseball exhibitions did not meet this standard as the movement of players/equipment was incidental to the game while the exhibition itself was purely intrastate.[12]
1922
Baltimore appeals to the US Supreme Court which, led by Justice Holmes, upholds the appellate court’s decision for the same reasoning.[13] This decision establishes the Major League as essentially exempt from anti-trust laws.
1953
In Toolson v. New York Yankees, the US Supreme Court upholds the 1922 decision, noting that baseball does not fall within the Sherman Act definition of ‘interstate trade and commerce’.[14]
1972
In Flood v. Kuhn, the US Supreme Court upholds the previous decisions, noting that because of the history of the exemption any change to baseball’s position in relation to anti-trust laws would have to come from Congress.[15]
1998
Congress enacts the Curt Flood Act (1998) which allows current players to file anti-trust suits against the Major League, partially repealing the Major League’s exemption from anti-trust laws.[16]
Challenging the Exemption
Relationship with Minor League Baseball
Following the continued exemption from anti-trust laws, the Major League was able to grow and establish itself as the predominant authority in practically all things concerning baseball, including a “highly organized ‘farm system’ of minor league baseball clubs”.[17]
This system became glaringly obvious during the major reorganization of the Minor League in 2020. The Major League allowed the Professional Baseball Agreement between the Major and Minor Leagues to expire and then instituted a new organizational structure under the Professional Development League; the result being the disaffiliation of forty Minor League teams.[18] Because of the way that the Major League has dominated the baseball scene, without affiliation the disaffiliated Minor League teams will be unable to survive.
Given that the Curt Flood Act only applies to current Major League players, neither the Minor League clubs that have been disaffiliated nor the Minor League players are able to file an anti-trust suit against the Major League.[19]
Federally
District Court (October 2022)
Four of the disaffiliated Minor League teams (referred to as Nostalgic Partners) brought a case to the District Court anyways, arguing that despite the “exemption precedent”, shifting Court opinion and the development of baseball over the past 100 years since 1922 casts “the entire exemption into doubt”.[20]
Although Justice Carter accepted that Nostalgic Partners had anti-trust standing and were able to establish a valid anti-trust violation by the Major League, he ultimately dismissed the case on the grounds that the Major League’s “anti-trust exemption [was] a different skein of yarn” which will survive and shield the Major League from lawsuits such as this “until the Supreme Court or Congress takes action”.[21]
Court of Appeals (June 2023)
The US Court of Appeals affirmed the District Court’s decision, stating that they “must continue to apply Supreme Court precedent unless and until it is overruled by the Supreme Court”.[22]
Supreme Court?
Although the case failed in both the District Court and the Court of Appeals, it could present an opportunity for the Supreme Court to have a chance to challenge the long-standing exemption with a perspective consistent with the current times.
Nostalgic Partners has requested that the Supreme Court review the decision, but no answer has been made on whether they will accept the case or not.[23]
State
State Court (January 2021)
Two of the four teams that initiated federal proceedings, the Tri-City ValleyCats and the Norwich Sea Unicorns, also filed lawsuits in New York; however, both teams settled the week before the case went to trial on November 13th of 2023.[24]
Conclusion
The Major League’s exemption from anti-trust laws has been established and reinforced for over 100 years.
If the Supreme Court chooses to accept the request to review the decision of the Court of Appeals in Nostalgic Partners, it is possible that we may see further, if not complete, dismantling of the exemption that began with the Curt Flood Act back in 1998. However, if the Supreme Court refuses, then it is likely this exemption will continue to stand until (and if) Congress chooses to do something to end it.
However, it should be noted that even if the exemption is completely dismantled, it is unclear if it will have any major effect on baseball as it stands after so many years.
[1] Sherman Anti-Trust Act (1890).
[2] Ibid, s 2.
[3] Clayton Anti-Trust Act (1914).
[4] Samuel Alito Jr., ‘The Origin of the Baseball Antitrust Exemption’ (2009) Baseball Research Journal. (‘Alito’)
[5] Ibid.
[6] Ibid; Federal League v. National League et al., [1915] N.D.Ill. 393.
[7] Ibid.
[8] Federal Baseball Club of Baltimore, Inc v. National League of Professional Baseball Clubs et al. (1922) 259 U.S. 200.
[9] Ibid; Alito.
[10] Ibid.
[11] Federal Baseball Club of Baltimore, Inc v. National League of Professional Baseball Clubs et al. (1922) 259 U.S. 200.
[12] Ibid.
[13] Federal Baseball Club of Baltimore, Inc v. National League of Professional Baseball Clubs et al. (1922) 259 U.S. 200.
[14] Toolson v. New York Yankees (1953) 346 U.S. 356.
[15] Flood v. Kuhn (1972) 407 U.S. 258.
[16] Curt Flood Act (1998); Karen Lent and Anthony Dreyer, ‘The current state of Major League Baseball’s antitrust exemption’ (Reuters, 21 July 2023) < https://www.reuters.com/legal/legalindustry/current-state-major-league-baseballs-antitrust-exemption-2023-07-20> accessed 17 November 2023.
[17] Toolson v. New York Yankees (1953) 346 U.S. 356 (Burton J, dissenting).
[18] Mike Scarcella, ‘Court challenge to MLB’s antitrust immunity’ (Reuters, 19 October 2023) < https://www.reuters.com/legal/government/pro-baseball-players-back-supreme-court-challenge-mlbs-antitrust-immunity-2023-10-18/> accessed 17 November 2023.
[19] Curt Flood Act (1998).
[20] Karen Lent and Anthony Dreyer, ‘The current state of Major League Baseball’s antitrust exemption’ (Reuters, 21 July 2023) < https://www.reuters.com/legal/legalindustry/current-state-major-league-baseballs-antitrust-exemption-2023-07-20> accessed 17 November 2023; Nostalgic Partners, LLC v. The Office of the Commissioner of Baseball (2022) S.D.N.Y. 21.
[21] Ibid.
[22] Karen Lent and Anthony Dreyer, ‘The current state of Major League Baseball’s antitrust exemption’ (Reuters, 21 July 2023) < https://www.reuters.com/legal/legalindustry/current-state-major-league-baseballs-antitrust-exemption-2023-07-20> accessed 17 November 2023; Nostalgic Partners, LLC v. The Office of the Commissioner of Baseball (2023) 2d Cir. 22-2859.
[23] Ronald Blum, ‘MLB settles lawsuits from minor league teams, avoids possible antitrust challenge at Supreme Court’ (AP News, 3 November 2023) <https://apnews.com/article/mlb-antitrust-suit-settled-01ac3549586a7b98fce7361d00073062> accessed 17 November 2023.
[24] Ibid.