MLB’s Century-Old Antitrust Immunity Nears High Court Reckoning

A case seeking to overturn Major League Baseball’s antitrust exemption is the best shot in fifty years at getting the Supreme Court to reconsider the sports league’s historic immunity, attorneys and antitrust scholars say.

The case from minor league baseball teams that allege MLB engaged in an anticompetitive agreement has garnered support from the Major League Baseball Players Association, lawmakers, attorneys general, and academics. The league’s historic immunity has also caught the eye of several baseball fans on the nation’s highest bench.

Thanks to a 1922 Supreme Court opinion, Major League Baseball isn’t beholden to antitrust statutes in the way of other professional sports leagues. The multibillion-dollar enterprise and its clubs can set salaries and command control over players in communities across the country without running afoul of the law. Overruling the exemption could thwart its broad power.

At issue in the cert petition to the Supreme Court is the MLB’s decision to reorganize the minor leagues in 2020 in a move that eliminated 40 minor league teams from affiliations with major-league teams.

The details of the case — including its straightforward, easy-to-digest antitrust claims against the MLB that allege the agreement was a violation of the Sherman Act — give it a good chance in overcoming the Supreme Court’s century-old antitrust immunity for professional baseball, which many observers consider an anomaly.

Adding to the chances are the support of various states and lawmakers, and the current high court’s willingness to overturn long-standing precedent, said K. Craig Wildfang, a former special counsel to the assistant attorney general for antitrust at the Justice Department.

“I think the atmospherics here seem to point more favorably than they have in prior efforts to reconsider the baseball exemption,” said Wildfang, now a partner at Robins Kaplan LLP. “It’s the best shot in recent memory.”

MLB didn’t immediately respond to inquiries for this story. In its 2022 motion to dismiss the case, the league argued that baseball’s antitrust exemption barred the plaintiffs’ claims, and that their complaint failed to allege that any agreement was unlawful.

“Plaintiffs want to make this case a vehicle for reconsidering the antitrust exemption, and so they are anxious for this Court to gloss over their lack of antitrust standing and their failure to plausibly allege a Sherman Act violation,” the MLB stated. “But Plaintiffs are putting the cart before the horse. Given the other defects with their complaint, this Court need not start with, stop with, or even reach, the antitrust exemption.”

The league’s response to the Supreme Court petition is due Nov. 22.

Support for the case rolled in just days before the World Series matchup between the Texas Rangers and the Arizona Diamondbacks, as backers of a cert petition pushed for baseball to be held to the same antitrust standards as other sports organizations.

Earlier: Lawmakers, AGs Urge High Court to End MLB Antitrust Immunity (3)

‘Right Case at the Right Time’

Supporters of scrapping baseball’s antitrust immunity were emboldened after the Supreme Court in 2021 found the National Collegiate Athletic Association’s rules limiting student-athlete compensation violated antitrust laws.

The opinion written by Justice Neil Gorsuch, and a concurrence from Justice Brett Kavanaugh, signaled the court’s willingness to revisit the exemption stemming from its 1922 “Federal Baseball” decision, which found baseball exhibitions don’t implicate the 1890 Sherman Antitrust Act because baseball isn’t interstate commerce.

“To be sure, this court once dallied with something that looks a bit like an antitrust exemption for professional baseball,” Gorsuch wrote. “But this Court has refused to extend Federal Baseball’s reasoning to other sports leagues—and has even acknowledged criticisms of the decision as ''unrealistic’’ and ''inconsistent’’ and ‘aberration[al].’”

Kavanaugh’s concurring opinion suggested other NCAA compensation rules may also be unlawful.

See also: Kavanaugh’s Sports Fandom Shines in Athlete-Centered Opinion

The case brought in 2021 against MLB is a clean vehicle to revisit the exemption, largely because a district court upheld the antitrust claim at its center, said Greg Silbert, co-head of the appeals and strategic counseling group and complex commercial litigation practice for Weil.

“It’s the right case at the right time,” Silbert said.

Weil brought the case on behalf of the four minor league teams including Tri-City ValleyCats in upstate New York and the Norwich Sea Unicorns in Connecticut, which accused the MLB of engaging in an anticompetitive agreement when it cut its minor league affiliates to 120, from 160, in order to lower expenses and shut out competition.

The move caused the booted teams to lose all financial support from major league affiliates, and deprived fans from games that would otherwise be available in a competitive market, the teams argued.

Judge Andrew L. Carter Jr. of the US District Court for the Southern District of New York dismissed the lawsuit in 2022 due to the Supreme Court precedent, but said the plaintiffs adequately pleaded an antitrust violation under Section 1 of the Sherman Act in arguing that cutting minor league teams had an adverse effect on competition.

The plaintiffs “believe that the Supreme Court is poised to knock out the exemption, like a boxer waiting to launch a left hook after her opponent tosses out a torpid jab,” Carter said. “It’s possible. But until the Supreme Court or Congress takes action, the exemption survives.”

The Second Circuit affirmed the lower court’s decision that MLB is exempt from the Sherman Act.

See also: Supreme Court Asked to Overturn MLB’s Antitrust Exemption (1)

Past Attempts

Past cases that challenged the exemption that didn’t get as much traction. The court also upheld baseball’s immunity in the 1953 Toolson v. New York Yankees decision, as well as the 1972 Flood v. Kuhn case.

Patrick McGahan, partner at Scott+Scott who specializes in private litigation, said the fact that the antitrust claim in the case brought by the minor league teams was upheld in a lower court increases chances of the Supreme Court taking up the case. MLB’s actions in eliminating one-fourth of its minor league franchises was “arguably such a clear-cut violation of the Sherman Act that no business would attempt it without being exempt from the Sherman Act,” McGahan said. The alleged agreement was a “clear coordinated restraint on output,” he added.

The high court may also want to take on the case now in order to clarify how to interpret the exemption, observers said.

William Lavery, partner in Clifford Chance’s global antitrust litigation practice, said there is a “legitimate split” in the courts in terms of how to interpret baseball’s historic exemption, increasing the odds of the Supreme Court granting certiorari. “I think this case has a much much greater chance of getting cert than your average antitrust case,” Lavery said.

The Curt Flood Act that Congress passed in 1998 eliminated the baseball exemption in the market for major league player services, but left an impact on minor league players in the labor market. The law has left “courts and litigants to their own devices to determine the statute’s meaning,” according to an amicus brief filed in support of the case by a group of business and sports law professors. “This has led to further splits among the circuits about how, if at all, federal antitrust law applies to organized professional baseball.”

Though the high court takes up very few cases, it leans toward those that have public interest and a societal impact, Lavery added. “This is incredibly popular and culturally significant,” Lavery said about the current petition.

Swaying Justice

The high court accepts less than 3% of cases each year, requiring at least four of nine justices to grant a petition. But the odds could be better than in previous years with the court’s current makeup. In addition to the views of Gorsuch and Kavanaugh — a Washington Nationals fan — in the 2021 NCAA decision, Justice Samuel Alito has also expressed concerns about the impact of baseball’s antitrust exemption on local fans.

In a 2009 article published in the Baseball Research Journal, Alito, a Phillies fan, said the view of baseball as a local affair has “prevailed.” “The argument that baseball was a big interstate business lost. But the real losers in the case were local people.”

Several of the amicus briefs filed in support of the cert petition — including from 18 state attorneys general — specifically highlighted that argument, pointing to the harm that antitrust immunity causes to local communities.

Connecticut Attorney General William Tong, who led a bipartisan coalition among state AGs in support of the case, said in a statement the state’s Norwich Sea Unicorns “deserve the same, fair shot at recruiting talent and Major League support as any other team.”

Whether the case is heard could come down to whether Alito, Kavanaugh, and Gorsuch want to take up the challenge and find a fourth vote among the other six justices — possibly in Chief Justice John Roberts, who may be more interested in reversing precedent in a way that people may applaud rather than criticize, Wildfang, from Robins Kaplan, said.

Ellen Zavian, a professorial lecturer at George Washington University Law School who studies sports law, said some of the justices seem more willing to overturn long-standing precedent, pointing to the court’s 2021 NCAA decision. Prior cases related to the exemption aren’t going to hold the current court “back from correcting, in their view, what the proper decision should have been,” Zavian said.

Previous Supreme Court justices have said “this is for Congress to fix,” she said. Since the 1998 Curt Flood Act, no other legislation touching the exemption has gotten through.

The question for Roberts or another justice may be, “‘Is this an appropriate case for the court to step in and clarify the law since Congress has not been able to?’” Wildfang said. “Anything that might be a legislative solution to this is probably not in the cards, at least in the short term.”

The case is Tri-City ValleyCats Inc. vs. The Office of the Commissioner of Baseball, U.S., No. 23-283.