Minor League Teams Take MLB Antitrust Exemption to Supreme Court
It’s been 101 years since the U.S. Supreme Court ruled that professional baseball is exempt from antitrust scrutiny.
Now, two minor league baseball teams that lost their MLB affiliations during the MiLB reorganization a few years ago are asking the Court to hear their case and overturn the exemption.
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Gregory Silbert of Weil, Gotshal & Manges and other attorneys argue in a petition for the Tri-City Valleycats and the Norwich Sea Unicorns that the baseball exemption “has practically no supporters,” is an aberrational rule “that benefits one gigantic organization,” and “does not promote fairness, uniformity, or legitimacy.”
The Valleycats and Unicorns are suing MLB and its 30 teams under the Sherman Antitrust Act, arguing they unlawfully conspired to deprive MiLB teams of MLB affiliations. The Southern District of New York and the U.S. Court of Appeals for the Second Circuit sided with MLB, noting that MLB is exempt from antitrust scrutiny per the U.S. Supreme Court’s decision, Federal Baseball Club v. National League.
In 1922, the Court reasoned MLB was exempt from federal antitrust law because games were played in one state and federal antitrust law requires interstate activity. Federal Baseball Club has been widely criticized as illogical given that players, fans, equipment and broadcasts related to games travel across state lines. The Supreme Court later rejected similar exemptions for football, boxing and theater, and acknowledged that treating baseball preferentially represented a legal inconsistency.
The Supreme Court has nonetheless declined to disturb Federal Baseball Club over the last century. This was famously apparent in Curt Flood v. Bowie Kuhn (1972), where the justices seemed sympathetic to Flood, a player who challenged the reserve clause that allowed a team to renew a player’s contract after it expired. The justices reasoned that under the principle of stare decisis, which is Latin for “to stand by things decided,” courts must follow Supreme Court precedent. The justices also surmised that Congress could pass, and the President could sign, a law declaring the end of the exemption.
To some degree Congress took up the Supreme Court’s suggestion, when in 1998 it passed the Curt Flood Act. President Bill Clinton signed the legislation into law, and it eliminated MLB’s exemption as it pertains to MLB players’ employment. The act, however, preserved the exemption for MiLB, MLB franchise relocation and other topics.
The MiLB teams’ petition draws from statements by the justices indicating their reservations about the exemption. It quotes Justice Samuel Alito, who in a scholarly article titled “The Origin of the Baseball Antitrust Exemption” (2009) wrote that the “irony” of Federal Baseball Club is “the real losers in the case were local people.” The petition also cites the majority (Justice Neil Gorsuch) and concurring (Justice Brett Kavanaugh) opinions in NCAA v. Alston (2021). Gorsuch ridiculed the baseball exemption as anachronistic while Kavanaugh stressed that the NCAA and by extension other leagues are not “above the law.”
The petition also argues that while stare decisis is a powerful principle in law, it is less confining of judges when they’re presented with questions under the Sherman Act. The petition further claims that Congress “did not intend to exempt specific businesses or industries from the [Sherman] Act’s coverage.”
The A’s potential relocation from Oakland to Las Vegas also surfaces as an argument in favor of Supreme Court review. The petition says MLB has “leveraged its exemption” to facilitate the relocation of the A’s since MLB is immune from antitrust scrutiny. MLB, the petition asserts, considers relocation to fit its “own needs” and “not the needs of the market,” fans or consumers.
The petition also argues that MLB’s franchise policies “create an artificial scarcity, depriving smaller markets of clubs that might succeed in a competitive environment.” In a letter to the U.S. Senate last year, commissioner Rob Manfred argued the exemption promoted franchise stability since MLB owners can’t credibly threaten an antitrust challenge if denied a chance to move. His letter also noted that while 14 NBA, 10 NFL and nine NHL franchises had relocated during the last 50 years, just one MLB team (the Montreal Expos becoming the Washington Nationals) had done so.
The Valleycats and Unicorns face challenging odds in getting the Supreme Court to take their case. Most years, only between 1% and 2% of petitions are granted cert, which requires at least four justices (the minimum needed to grant cert) to support a review.
Although of intense interest to some sports law and antitrust law scholars and practitioners, the baseball exemption might also be viewed as a niche topic—especially since the Curt Flood Act narrowed the exemption’s scope—without much relevance to industries outside of baseball and sports.
When the Supreme Court has recently taken sports-related cases, they’ve involved matters with far-reaching implications. Alston (2021) concerned the application and standard of review of antitrust law and issues involving many thousands of college students and colleges. Murphy v. NCAA (2018) dealt with whether the federal government can prevent state governments from legalizing an activity, in that case the issuance of sports betting licenses, against states’ wishes. American Needle v. NFL (2010) focused on whether a joint venture, in that case the NFL and its independently owned teams, can be classified as an antitrust-exempt single entity.
Then again, the Department of Justice took the unusual step of weighing in on the Valleycats’ case. It filed statements of interest, asking for clarification on whether the baseball exemption remains good law. Members of Congress have also discussed the exemption from-to-time, often in the political context of threatening to take the exemption away.
Expect to see amicus briefs filed urging the Court to grant cert. MLB, meanwhile, will have its own response and likely its own set of supportive amicus briefs.
