Boston Globe - It’s Past Time to Throw Out Baseball’s Antitrust Exemption

Legal director Sandeep Vaheesan discusses antitrust exceptions in baseball, which permits baseball to collude against minor-league players and cap their salaries at poverty levels, while arbitrarily denying teams to cities and towns. The article furthers the potential overturning of this clause by the Supreme Court.

Baseball’s playoffs begin today without the Red Sox but with familiar contenders such as the Braves and Dodgers vying to win the 119th World Series. Although not quite as old or as well known, another defining feature of professional baseball — its antitrust exemption — turned 101 this year. This exemption allows baseball to collude against minor-league players and cap their salaries at poverty levels, while arbitrarily denying teams to cities and towns.

Fortunately for players, fans, and communities, the Supreme Court may finally terminate baseball’s special privilege.

In the early 20th century, Major League Baseball (MLB) faced serious rivalry from other leagues. One such league was the Federal Baseball League, which grew rapidly in the 1910s but struggled to attract top talent from the major league. This was by design. MLB imposed a “reserve clause” on players that effectively prevented them from switching teams or joining a new league in the United States or abroad.

Following the collapse of the Federal Baseball League, one of its teams sued the National and American Leagues, alleging that the reserve clause and other practices that led to the demise of the rival league violated the Sherman Antitrust Act. The case, Federal Baseball Club of Baltimore v. National League, went to the Supreme Court. In a unanimous decision authored by Justice Oliver Wendell Holmes Jr., the court ruled that the game of baseball did not constitute “interstate commerce,” as then interpreted by the courts, and therefore could not be regulated by Congress under the antitrust laws. The decision turned not so much on baseball but on the then-limits of federal power. The court’s decision was debatable even at the time: Teams traveled across state lines to play each other and transmitted game scores and summaries over the national telegraph network. Further, a Supreme Court case the following year, involving vaudeville productions, suggested that baseball might be considered interstate commerce after all.

Over the course of the mid-20th century, baseball became a major commercial enterprise, and the Supreme Court expanded its definition of interstate commerce. By the 1950s, baseball was undeniably interstate commerce subject to federal regulation. Considering these developments, Judge Jerome Frank in 1949 called Federal Baseball Club v. National League “an impotent zombie” and wrote that the reserve clause could be challenged in an antitrust suit.

Read full article here.