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The Supreme Court May Overturn the Error That Made Major League Baseball Rich

A pair of minor league clubs are asking the court to reverse the league’s lucrative 101-year-old antitrust exemption.

A. Messerschmidt/Getty Images
The Tri-City ValleyCats played in the Baseball Hall of Fame’s showcase game during induction weekend in 2004.

One of the strangest things in the Supreme Court’s history is the antitrust exemption for Major League Baseball. The justices have previously described the judicially crafted immunity as an “exception,” an “anomaly,” and an “aberration,” even as they let it stand on other grounds. Now a group of minor league teams is asking the court to reverse what it describes as a century-long error.

Two former minor league teams, the Tri-City ValleyCats and the Norwich Sea Unicorns, asked the Supreme Court this week to overturn the exemption and allow lawsuits against MLB for anticompetitive practices. “This Court should revisit and correct what may be its longest-lived mistake: the common-law ‘baseball exemption’ to antitrust enforcement,” the teams said in a petition filed on Monday.

The justices are no strangers to shaking up the landscape of American sports. The court’s decision in NCAA v. Murphy opened the door for the glut of sports-betting ads and promotions that now entangle all of professional sports. And its ruling in NCAA v. Alston cleared the way for college student-athletes to obtain some form of compensation for their labor despite the colleges’ claims of amateurism. Ending the antitrust exemption for baseball, if the court chooses that path, would be its biggest change yet.

The case, Tri-City ValleyCats v. Office of the Commissioner of Baseball, sprang from MLB’s 2020 decision to overhaul its affiliation system with minor league baseball teams. Except for the National Football League, all of the major North American sports leagues have developmental “farm teams” that are used to train potential talent, showcase future stars, and rehabilitate injured players. Baseball’s unique longevity and deep cultural roots meant that many of its minor league teams have their own celebrated histories and fanbases.

In 2019, however, MLB introduced a plan to dramatically restructure how the minor leagues operate. It proposed capping the number of minor league teams that could be affiliated with a major league team to just four per franchise, severing dozens of smaller-market teams from their connections with larger, more prestigious ones. “MLB also handpicked minor league clubs that could remain—favoring those owned by MLB insiders and politicians, which would best serve MLB’s interest in controlling the minor league system and extracting profits for itself,” the teams alleged.

MLB’s plan had a dramatic impact on the minor league landscape. “After the dust settled, 40 minor league clubs lost their affiliations and their ability to compete for new ones,” the teams claimed. “[The ValleyCats and Sea Unicorns] were among the minor league teams placed on MLB’s do-not-call list. MLB’s naked, horizontal restriction on output eliminated the competitive market for affiliations and severely damaged petitioners, which had been successful organizations.” The two teams now participate in independent baseball leagues that operate as “partner leagues” with MLB as a whole, but they no longer have direct ties to individual MLB teams.

When one business believes a larger, domineering competitor is abusing its market position to drive it out of business, the normal next step would be to file an antitrust lawsuit under the Sherman Act. But professional baseball enjoys a unique privilege. In the 1922 case Federal Baseball Club v. National League, the Supreme Court ruled that professional baseball is naturally exempt from the Sherman Act because it does not involve interstate commerce.

“The business is giving exhibitions of baseball, which are purely state affairs,” Justice Oliver Wendell Holmes wrote for the court. “It is true that, in order to attain for these exhibitions the great popularity that they have achieved, competitions must be arranged between clubs from different cities and states. But the fact that, in order to give the exhibitions, the Leagues must induce free persons to cross state lines and must arrange and pay for their doing so is not enough to change the character of the business.”

While the court’s approach to antitrust law and interstate commerce changed over the decades that followed, the 1922 ruling remained intact. The Supreme Court upheld it 31 years later in Toolson v. New York Yankees. Minor league player George Toolson wanted to play in the major leagues but was bound to the Yankees and their farm teams by a reserve clause in his contract. (Free agency would not exist for another two decades.) To break the clause, Toolson unsuccessfully brought a restraint-of-trade lawsuit against the Yankees.

The Supreme Court ultimately dispensed with it in a short, unsigned opinion. The seven justices in the majority concluded that baseball’s antitrust exemption remained intact because Congress had not seen fit to legislate it away in the decades since the Federal Baseball Club ruling. “We think that, if there are evils in this field which now warrant application to it of the antitrust laws, it should be by legislation,” the court wrote.

Baseball’s antitrust immunity stands out even among the other pro sports leagues, for which the court did not extend its logic. The other three major professional sports, for example, have enjoyed a limited form of antitrust immunity for selling the broadcast rights to their games under the Sports Broadcasting Act of 1962. Congress has typically only granted such immunity in exchange for other restrictions—the 1962 law, for example, forbids the NFL from televising pro football games on Fridays and Saturdays to avoid competing with high school and college football. The NCAA, as I’ve noted before, is also currently seeking its own antitrust exemption after a series of major legal defeats over the past decade.

The most recent Supreme Court case to address the exemption is the 1972 case Flood v. Kuhn. The St. Louis Cardinals had traded Curt Flood to the Philadelphia Phillies in 1969, but Flood refused to play for them despite being bound by the reserve clause in his contract. He sought relief from the courts on antitrust grounds, arguing that the clubs were using the reserve clause to reduce player salaries.

In its ruling, the court noted that baseball’s treatment was “an exception and an anomaly” and that the two prior rulings were “an aberration confined to baseball.” It also recognized professional baseball as interstate commerce for the first time. Despite this, the justices still declined to overturn the exemption on stare decisis grounds. “We continue to be loath, 50 years after Federal Baseball and almost two decades after Toolson, to overturn those cases judicially when Congress, by its positive inaction, has allowed those decisions to stand for so long and, far beyond mere inference and implication, has clearly evinced a desire not to disapprove them legislatively,” Justice Harry Blackmun wrote for the court.

While not on the scale of the court’s injustices on slavery and racial segregation, the 1972 ruling is widely seen as one of the court’s most enduring legal errors. How did it come about? Blackmun, the author of the majority opinion, was a passionate baseball fan, and his opinion is essentially a love letter to the sport. There is nothing wrong with loving baseball, of course, but even a casual reader might conclude that it obscured the legal issues at hand. Perhaps the most infamous portion of the opinion is where Blackmun recites a lengthy list of, in his estimation, the greatest baseball players in the sport’s history.

Then there are the many names, celebrated for one reason or another, that have sparked the diamond and its environs and that have provided tinder for recaptured thrills, for reminiscence and comparisons, and for conversation and anticipation in-season and off-season: Ty Cobb, Babe Ruth, Tris Speaker, Walter Johnson, Henry Chadwick, Eddie Collins, Lou Gehrig, Grover Cleveland Alexander, Rogers Hornsby, Harry Hooper, Goose Goslin, Jackie Robinson, Honus Wagner, Joe McCarthy, John McGraw, Deacon Phillippe, Rube Marquard, Christy Mathewson, Tommy Leach, Big Ed Delahanty, Davy Jones, Germany Schaefer, King Kelly, Big Dan Brouthers, Wahoo Sam Crawford, Wee Willie Keeler, Big Ed Walsh, Jimmy Austin, Fred Snodgrass, Satchel Paige, Hugh Jennings, Fred Merkle, Iron Man McGinnity, Three-Finger Brown, Harry and Stan Coveleski, Connie Mack, Al Bridwell, Red Ruffing, Amos Rusie, Cy Young, Smokey Joe Wood, Chief Meyers, Chief Bender, Bill Klem, Hans Lobert, Johnny Evers, Joe Tinker, Roy Campanela, Miller Huggins, Rube Bressler, Dazzy Vance, Edd Roush, Bill Wambsganess, Clark Griffith, Branch Rickey, Frank Chance, Cap Anson, Nap Lajoie, Sad Sam Jones, Bob O’Farrell, Lefty O’Doul, Bobby Veach, Willie Kamm, Heinie Groh, Lloyd and Paul Waner, Stuffy McInnis, Charles Comiske, Roger Bresnahan, Bill Dickey, Zack Wheat, George Sisler, Charlie Gehringer, Eppa Rixey, Harry Heilmann, Fred Clarke, Dizzy Dean, Hank Greenberg, Pie Traynor, Rube Waddell, Bill Terry, Carl Hubbell, Old Hoss Radbourne, Moe Berg, Rabbit Maranville, Jimmie Foxx, Lefty Grove. The list seems endless.

Indeed it does. According to The Brethren, a 1979 book by Bob Woodward and Scott Armstrong, some of the other justices and their clerks insisted on adding their own favorite players to the list after the first draft was circulated, which helps explain the length. The book’s original claim that Blackmun’s first draft did not include any Black baseball players until Justice Thurgood Marshall pressured him to add three—Campanella, Robinson, and Paige—has been debunked by Blackmun’s archival papers. All of this is great fodder for baseball fans, of course, but it is hardly the work of the highest court in the land.

Baseball’s antitrust exemption has nonetheless changed since the Flood ruling. The reserve clause was sharply curtailed during union negotiations in the years following the court’s decision, eventually leading to professional baseball’s modern free-agency system. Flood’s failed war against the clause was later memorialized when Congress passed the Curt Flood Act of 1998, which lowered baseball’s antitrust shield when it came to labor negotiations. But the exemption itself remains a broad and potent tool in MLB’s legal arsenal, according to the ValleyCats and the Sea Unicorns.

“Major League Baseball—the largest professional baseball association—and its independently-owned teams may thus engage in anticompetitive conduct, to the detriment of consumers and the public,” the teams told the court in their petition for review. “They openly carry on their businesses in ways that ‘would be flatly illegal in almost any other industry in America.’ They are free to conspire to raise prices, inflate their earnings with monopoly rents, or (as they did here) enter into a horizontal agreement to reduce output and boycott other businesses.”

None of the justices who took part in the Flood decision are still on the high court, of course. But some of the court’s members have no shortage of experience with the intersection between law and sports. While serving on the Second Circuit Court of Appeals, for example, Justice Sonia Sotomayor helped resolve the 1994 labor dispute between the MLB and the players’ union by issuing an injunction that blocked owners from starting the season with scab players. When he nominated her to the Supreme Court in 2009, then-President Barack Obama said Sotomayor’s ruling had “saved baseball” after the prolonged and caustic standoff.

Justice Samuel Alito, in a 2008 speech to the Supreme Court Historical Society, offered a lengthy semi-defense of the Federal Baseball Club ruling. He concluded that, while strange to modern eyes, the 1922 ruling was a logical conclusion of the court’s approach to interstate commerce and antitrust law at the time. “This approach forced the Court to draw fine—some would say arbitrary—lines,” he concluded. “Those who think poorly of this entire enterprise will obviously think poorly of the Federal Baseball case as well.” Alito did not indicate whether he counted himself among them, nor did he offer such a defense of the Toolson and Flood rulings.

The Justice Department voiced support for the minor leagues, filing a statement of interest during legal proceedings in the lower courts. While the federal government could not ask the district court to overturn the exemption—only the Supreme Court can do that—it did urge the court to interpret it as narrowly as possible. “To the extent the court analyzes the scope of the ‘baseball exemption,’ the United States respectfully requests that the Court define the exemption narrowly and decline to extend its scope beyond conduct that is central to the offering of professional baseball exhibitions,” the department argued.

Professional baseball’s continued immunity from much of antitrust law likely stemmed at least in part from the esteem in which the country once held it as the national pastime. While baseball remains popular and profitable, it no longer enjoys the monolithic presence that it once did in American culture. Predicting the court is always a difficult task, and the justices may ultimately decline to hear the case. But the Tri-City ValleyCats and the Norwich Sea Unicorns aren’t wrong for thinking that the justices who’ve been willing to change so much in American sports over the last few years might be up for revisiting baseball’s antitrust exemption as well.