Baseball’s Antitrust Exemption Marks Its 100th Anniversary with a New Challenge

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. 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, now on appeal to the Second Circuit, 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 in 2022. 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. The U.S. Department of Justice argued in a statement of interest that 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, 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.”

Later, in Flood v. Kuhn, decided in 1972, the Supreme Court again affirmed Federal Base Ball and explicitly remarked 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 baseball antitrust exemption. Plaintiffs there predict 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—Roberts, Thomas and Alito—vote without hesitation to overturn 96-year-old jurisprudence in Dr. Miles concerning the antitrust treatment of vertical pricing restraints. 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 Alito and Kavanaugh, the wild cards on that score this time around. Stay tuned.

The full article in its original form can be found here.

Carl Hittinger (LAW ’79, BA ’76) is a partner at BakerHostetler, serving as the firm’s Antitrust and Competition Practice National Team Leader.

Tyson Herrold serves as Counsel at BakerHostetler, focusing on antitrust and competition litigation.