Major League Monopoly: Examining Possibilities to Overturn Baseball’s Antitrust Exemption

by Kristen Pierce, Associate Member, University of Cincinnati Law Review Vol. 92

I. Introduction

For over one hundred years, Major League Baseball (“MLB”) has enjoyed a unique exemption from the Sherman Antitrust Act that allows the organization to function as a monopoly.¹ While the Supreme Court held that other sports leagues were not exempt from antitrust law, MLB retained its special privileges through the Court’s reluctance to overturn prior precedent, known as stare decisis.² Following MLB’s decision to cut ties with forty minor league teams, a lawsuit was launched in 2021 that seemed poised to again bring the debate surrounding baseball’s antitrust exemption back to the Supreme Court.³ However, the case was settled in an undisclosed agreement in November 2023 before it could reach the Supreme Court.⁴ Despite this setback, many players, fans, and members of Congress have expressed interest in stripping MLB of its special exemption.⁵

Part II of this article explores the history of baseball’s antitrust exemption and contrasts it with the Court’s rulings in similar antitrust suits against comparable sports leagues. Part III examines the effects of baseball’s antitrust exemption and examines different options for ending MLB’s special exemption status. Part IV concludes by pointing out the best opportunities for change.

II. Background

A. The Baseball Exemption

The Sherman Antitrust Act was passed in 1890 with the goal of preventing anticompetitive business behavior that would unfairly restrain trade because such organizations could inflate prices and limit competition.⁶ Lawsuits under the Sherman Antitrust Act allow a plaintiff to collect treble, or triple, damages for the amount that they were harmed by the monopoly.⁷ A monopoly is “exclusive ownership through legal privilege, command of supply, or concerted action.”⁸ Monopolies under the Sherman Antitrust Act also allow the government to dissolve monopolistic organizations if necessary.⁹

In 1922, the Supreme Court established a carve-out under the Sherman Antitrust Act that exempted professional baseball from antitrust consequences in Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs.¹⁰ In 1903, the two most successful and long-lasting baseball leagues at the time, the National League (“NL”) and the American League (“AL”), joined together in a partnership that would later become the modern-day MLB.¹¹ In the 1910s, a rival league called the Federal League began operations as a united baseball league in competition with the NL and AL partnership.¹² All but one of the Federal League baseball teams were bought or induced to leave the Federal League by the NL and AL, causing the remaining team to sue under antitrust law.¹³ A unanimous Supreme Court held that baseball was exempt from the Sherman Antitrust Act because the business of baseball did not implicate interstate commerce.¹⁴ The Court reasoned that, though teams traveled over state lines for games, the games themselves occurred in one state and therefore should be governed only under applicable state law and not federal legislation.¹⁵

In 1955, the Supreme Court upheld Federal Baseball and MLB’s antitrust exemption in Toolson v. New York Yankees.¹⁶ The Court reasoned that MLB had been left to develop in reliance on the holding in Federal Baseball and a sudden change might disrupt the business.¹⁷ The Court also argued that if Congress had meant to include baseball in its antitrust legislation, then it would have acted to change baseball’s exemption status in the three decades since Federal Baseball had been decided.¹⁸

In 1972, the Supreme Court reiterated baseball’s antitrust exemption in Flood v. Kuhn, which concerned MLB’s reserve system that allowed teams to own the rights to certain players.¹⁹ The Court in Flood admitted that baseball was a business operating in interstate commerce and that the antitrust exemption granted in Federal Baseball was an “aberration,” but held that the decision was “fully entitled to the benefit of stare decisis.”²⁰ The Flood decision also said that national broadcasts of MLB games did not change the Court’s holding.²¹ Flood further affirmed Toolson’s proposition that baseball would only loose its antitrust exemption by an act of Congress because of MLB’s reliance on the decision in Federal Baseball.²²

Over twenty years after Flood, Congress passed the Curt Flood Act, which ended MLB’s reserve system and allowed MLB players to have the same employment rights under antitrust law that players in other sports leagues enjoyed.²³ However, the Curt Flood Act took care to emphasize that MLB’s other antitrust exemptions would remain in place.²⁴

Functionally, baseball’s antitrust exemption becomes relevant in a few different areas. MLB’s anticompetitive nature allows team owners to agree to set ticket prices because there is no threat of competition or baseball alternatives for consumers.²⁵ More significantly, owners can collude to suppress Minor League Baseball (“MiLB”) wages.²⁶ A majority of baseball players spend at least some time in the minor leagues, with many players spending a majority of their careers in the minors.²⁷ Until 2023, minor league players did not benefit from collective bargaining like their major league counterparts.²⁸ This led to lower wages, little to no overtime pay, poor housing accommodations, and no pay for spring training or the offseason.²⁹ The new five-year deal, ratified in 2023, will more than double wages for minor leaguers and provide them with more benefits.³⁰ Despite a temporary labor win for players in MiLB, MLB still holds most of the power. MLB has the ability to keep minor league players’ wages low because its antitrust exemption allows MLB to keep some of its profits private, therefore taking some bargaining power away from the players.³¹

In 2019, MLB announced its intention to disaffiliated from forty minor league teams in order to save money through restructuring.³² This left many teams with no place to go and deprived several rural communities of their local teams.³³ This move led two disenfranchised teams, the Tri-City ValleyCats and the Norwich Sea Urchins, to sue and raise the first real challenge to MLB’s antitrust protections in fifty years.³⁴ The plaintiffs petitioned the Supreme Court to hear the case.³⁵ Many predicted that the issue would be ripe for debate on the current Court, but the case was settled in an undisclosed agreement in November 2023.³⁶ Though this case represented the best opportunity to challenge MLB’s antitrust status, another lawsuit, brought by former minor league player Daniel Concepcion concerning MLB’s wage fixing in MiLB, is currently waiting to be heard in the First Circuit.³⁷

B. Other Sports

MLB’s antitrust exemption is unique and has not been applied to any other professional sports organization.³⁸ In Radovich v. National Football League, decided in 1957, the Supreme Court declined to extend baseball’s antitrust protections to the National Football League (“NFL”).³⁹ The Court held that the NFL’s business affected interstate commerce and recognized national radio and television broadcasts as proof of the interstate business of the NFL.⁴⁰ The Court also expressed disdain for the holding of Federal Baseball, stating that the ruling “at best, was of dubious validity” and suggesting that the Court in 1957 would have decided the case differently.⁴¹ The Court subsequently held that the National Basketball Association (“NBA”) was subject to antitrust laws in Haywood v. National Basketball Ass’n, decided in 1971.⁴²

In 2021, the Supreme Court held in Alston v. National Collegiate Athletic Ass’n that the National Collegiate Athletic Association (“NCAA”) was subject to antitrust laws and could not unfairly restrict student-athlete compensation.⁴³ This case represented a monumental shift in the history of college athletics and in the authority of the NCAA.⁴⁴ The decision in Alston also rejuvenated hopes for the detractors of MLB’s antitrust exemption that the Court might be primed to revisit MLB’s exemption status.⁴⁵

III. Discussion

MLB’s antitrust exemption should be reconsidered because it is completely inconsistent with antitrust holdings concerning other sports and nothing differentiates MLB from other sports leagues.⁴⁶ MLB’s antitrust exemption has allowed the league to monopolize baseball contrary to the goals of the Sherman Antitrust Act by permitting it to suppress its income and fix prices and wages.⁴⁷ The effects of MLB’s antitrust exemption can be felt most severely in the minor leagues, as players have less negotiating power because of MLB’s ability to keep profits private.⁴⁸ Smaller communities also bear the burden of MLB’s ability to unilaterally cut local teams, though MiLB’s new five-year deal includes a clause to temporarily prevent MLB from making those kinds of unilateral moves.⁴⁹

There are two possible ways that MLB could lose its antitrust exemption status. First, the Supreme Court could overturn its prior ruling in Federal Baseball.⁵⁰ In order for this solution to occur, a case would have to reach the Supreme Court. The best hope for a Supreme Court hearing on the issue was the recently settled Tri-City ValleyCats lawsuit.⁵¹ However, there are other cases, like Concepcion v. Office of the Commissioner of Baseball, that could eventually arrive before the Supreme Court in the coming years.⁵² This solution would also require the Supreme Court to overturn its own precedent and bypass stare decisis.⁵³

The Court has been willing to go against its own precedents when it finds that a previous case has been wrongly decided.⁵⁴ When overturning precedent, the Court considers “the quality of the decision’s reasoning; its consistency with related decisions; legal developments since the decision; and reliance on the decision.”⁵⁵ The Court has many times acknowledged the faulty reasoning of its decision to grant MLB antitrust immunity in Federal Baseball.⁵⁶ The Court has also admitted that baseball has been granted special privileges that do not apply to any other sports league.⁵⁷ Since the Court’s decision in Federal Baseball, other sports leagues similarly situated to baseball have been denied the same antitrust immunity.⁵⁸ Therefore, the only factor weighing in favor of maintaining the holding of Federal Baseball is MLB’s reliance on its antitrust exemption in the operation of its business.⁵⁹

The reliance argument is inherently flawed because the Court has recognized that MLB would be in violation of the Sherman Antitrust Act if not for a 1922 ruling that is completely inconsistent with subsequent holdings.⁶⁰ The MLB Commissioner’s Office and thirty team owners rely most on the antitrust exemption, and they use that exemption to deny minor leaguers a fair wage, deprive rural cities of their hometown teams, and raise prices in conjunction with one another.⁶¹ But the reliance argument ignores the thousands of fans and players that are actively exploited by MLB’s baseball monopoly.⁶² Further, MLB would still be able to function as a profitable business because it is unlikely that any legitimate competitors would rise up in the wake of a ruling to overturn baseball’s exemption status.⁶³

A second option to overturn MLB’s antitrust exception would be Congressional action.⁶⁴ Congress removed some of baseball’s antitrust protections with the Curt Flood Act.⁶⁵ However, the Curt Flood Act was only passed after a 232-day strike between 1994-1995, the longest player strike in any sport in United States history at the time.⁶⁶ Over the years, some politicians have introduced legislation to remove baseball’s antitrust exemptions, but none have passed.⁶⁷ In 2022, during the 117th Congress, Senator Bernie Sanders proposed the “Save American Baseball Act” in response to his hometown team, Vermont Lake Monsters, being among those cut from MLB in 2020.⁶⁸ However, that Congress ended before the bill reached a vote.

In 2023 during the 118th Congress, Senator Mike Lee introduced a bill that would remove baseball’s antitrust exemption, called the “Competition in Professional Baseball Act.”⁶⁹ Representative Jeff Duncan introduced a companion bill in the House of Representatives, entitled the “Teddy Roosevelt Fair Competition and Public Trust Act of 2023.”⁷⁰ Both bills are currently in their respective Judiciary Committees.⁷¹ Congressional action would be the easiest and most efficient way to end baseball’s antitrust exemptions, and an enaction date would delay implementation to allow owners and MLB time to prepare.⁷² However, with several other crises currently facing the nation, it is unclear whether congressmembers would give those bills their full attention without an equivalent of the 1994 strike to push them to action.⁷³

IV. Conclusion

MLB’s antitrust exemption is outdated and inconsistent with other antitrust rulings. Sports leagues comparable to MLB, such as the NFL and NBA, have proven that an antitrust exemption is not necessary for a successful sports league.⁷⁴ Both Congress and the Supreme Court will likely have opportunities in the coming years to finally revisit MLB’s exemption and force the league to comply with antitrust law.

Cover Photo by Lesley Juarez on Unsplash

Kristen Pierce

Kristen Pierce is originally from Louisville, KY, and graduated from the University of Alabama with a degree in American Studies. She enjoys writing about a wide variety of legal topics. In her free time, she enjoys staying active, doing puzzles, and watching movies.

References

1
Katie Arcieri, MLB’s Century-Old Antitrust Immunity Nears High Court Reckoning, BL (Oct. 30, 2023).
2
Flood v. Kuhn, 407 U.S. 258, 282 (1972).
3
Arcieri, supra note 1.
4
The Athletic Staff & Evan Drellich, MLB Settles Lawsuits with Former Minor League Teams, Avoids U.S. Supreme Court Challenge to Antitrust Exemption,The Athletic (Nov. 2, 2023), https://theathletic.com/5026563/2023/11/02/mlb-settlement-minor-league-teams/.
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6
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8
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9
15 U.S.C. §§ 1-38.
10
Fed. Baseball Club, Inc. v. Nat’l League of Prof’l Baseball Clubs, 259 U.S. 200, 209 (1922).
11
Samuel G. Mann, In Name Only: How Major League Baseball’s Reliance on its Antitrust Exemption is Hurting the Game, 54 Wm. & Mary L. Rev. 587, 591 (2012).
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13
Id.
14
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16
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17
Id.
18
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19
Flood v. Kuhn, 407 U.S. 258, 282 (1972).
20
Id.
21
Id. at 283.
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Id.
23
Curt Flood Act, 15 U.S.C. §§ 26-27 (2018).
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38
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39
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40
Id. at 449.
41
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42
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43
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44
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52
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53
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55
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56
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57
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58
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59
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60
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61
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64
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65
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66
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67
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68
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69
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70
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71
Id.
72
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73
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74
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