Should the MLB’s Antitrust Exemption Be Revoked?

by Garrett Emmons


What you can do:

  • Follow the progress of the legislation filed by Senator Jeff Duncan [1]
  • Monitor upcoming Supreme Court cases to see if decisions about antitrust exemptions could apply to the MLB
  • Support the minor leagues by attending local baseball games once Covid restrictions permit

On April 2, Major League Baseball announced its decision to move the 2021 All-Star  game out of Atlanta in response to Georgia’s new voting law [2]. This choice earned the ire of several Republican members of Congress, who stated desires to revoke the MLB’s antitrust exemption as a form of retaliation. South Carolina Representative Jeff Duncan tweeted, “In light of @MLB’s stance to undermine election integrity laws, I have instructed my staff to begin drafting legislation to remove Major League Baseball’s federal antitrust exception” [3]. Utah Senator Mike Lee tweeted, “Why does @MLB still have antitrust immunity? It’s time for the federal government to stop granting special privileges to specific, favored corporations—especially those that punish their political opponents” [4]. Finally, Senator Ted Cruz tweeted that he and Senator Mike Lee “will be working hard to END MLB’s antitrust immunity” with the hashtag “#GowokeGobroke” [5]. While using one political issue as the catalyst for another, completely unrelated one is, at best, concerning, it is nonetheless worth looking into how the MLB’s antitrust exemption came to be and whether it should continue to exist.

In the 1922 U.S. Supreme Court case Federal Baseball Club v. National League, the Supreme Court ruled that Major League Baseball was not subject to the Sherman Antitrust Act, which prohibits monopolies and collusive practices that unfairly restrict economic competition [6]. This ruling was based on the Court’s opinion that baseball games were “purely state affairs,” in the words of Justice Oliver Wendell Holmes. Thus, baseball did not constitute interstate commerce and as such federal law did not apply to it. In other words, because baseball games were played in a single state at a time, they were not considered interstate commerce. Such a ruling seems to ignore, or at least not care, that players, coaches, staff, and equipment traveled across states to compete and that radio and television broadcasts of games did not stop at state lines. The irony must have been lost on them that a league that brands itself as “National” claimed to not partake in commerce at an interstate level. Even at the time, the decision drew much criticism, and there is considerable reason to believe that the court was simply trying to avoid undermining the sport that was becoming immensely popular and quintessential of American culture. Regardless of the true reasoning behind the Court’s decision, a precedent had been established.

The exemption remained relatively unchallenged for thirty years until the Supreme Court case Toolson v. New York Yankees in 1953, in which a minor league pitcher named George Toolson for the Yankees sued the team [7]. Toolson believed that he was a good enough player to play in the major leagues, but would have a better shot with another team thanks to the plethora of talented players on the Yankees. However, due to the reserve clause, the Yankees could prevent Toolson from negotiating with other teams for a year after his contract expired. The Court ultimately confirmed the antitrust exemption and ruled in favor of the Yankees. The reserve clause was once again challenged but once again upheld almost twenty years later in Flood v. Kuhn [8]. 

Nowadays, free agency has replaced the reserve clause, meaning that players are free to negotiate with other teams once their contracts are up. But this transition was more the result of private arbitration and internal negotiating between players and team owners [9]. More significantly for the antitrust exemption was the Curt Flood Act of 1998, which stated that its purpose was “to state that major league baseball players are covered under the antitrust laws” [10]. Significantly, this act was limited to major league baseball players, meaning that minor league players were not covered, nor was any other aspect of the MLB’s operations. 

So, what is at stake if the antitrust exemption is completely revoked? One area that would be especially affected is the minor league system. Many minor leaguers have alleged that baseball teams act jointly—or rather, illegally collude, if the antitrust exemption did not exist—to keep their salaries low. The Athletic has calculated that the average salaries for minor leaguers in 2018 was $6,000 for those in Single-A, $9,350 for those in Double-A, and $15,000 for those in Triple-A in 2018 [11]. A revocation of the antitrust exemption would likely lead to higher salaries for these poorly paid ballplayers. However, there is also the risk that forcing the MLB to increase minor league play would simply lead to a divestiture of minor league teams from their major league counterparts—a trend catalyzed by the COVID pandemic. 

Another aspect that would be affected is franchise relocation. Under current MLB rules, franchises can be prevented from moving to different cities to prevent encroaching on another franchise’s market. One recent case involved the city of San Jose suing the MLB for refusing to let the Oakland Athletics relocate there [12]. San Jose wanted the case to reach the Supreme Court, but it was ultimately dismissed on account of the antitrust exemption. For comparison, the Oakland Raiders were able to relocate to Los Angeles despite it being against the NFL’s wishes since football has no such exemption.

There is also the topic of pooling intellectual property rights. Under the current rules, different teams in the MLB mandatorily pool intellectual property rights, enabling the MLB to have a monopoly over official merchandise, which can generate massive revenues [13]. Authentic jerseys often have costs starting around $75 and baseball caps, in partnership with the New Era Cap Company, are the most ubiquitous piece of team apparel. Meanwhile, a high-profile sponsorship from Nike, not to mention the many corporate names on stadiums across the country, further add to revenue. 

At the heart of the debate over MLB’s antitrust exemption is the question of whether sports are really like another form of business. Tied in with that debate is the tendency to see athletes as entirely distinct from other employees. This distinction of course makes some sense for the stars making millions of dollars. Yet for the many more who earn normal salaries, and especially for the thousands of minor leaguers who earn far below average salaries, the distinction begins to make much less sense. If the NFL and NBA can be incredibly profitable without exemptions from federal antitrust law, then so too can the MLB. The exemption is a reminder of the powerful role that culture can play in determining law and politics, but America’s pastime has never truly needed the extra assistance. It’s time for the MLB to lose its exemption. 


Works Cited

[1] https://jeffduncan.house.gov/media/press-releases/duncan-and-lee-file-legislation-strip-mlb-antitrust-exemption

[2] https://www.espn.com/mlb/story/_/id/31183822/mlb-moving-all-star-game-atlanta-georgia-voting-law

[3] https://twitter.com/RepJeffDuncan/status/1378074529076015106

[4] https://twitter.com/SenMikeLee/status/1378116038890377220

[5] https://twitter.com/tedcruz/status/1378128079449624580

[6] https://supreme.justia.com/cases/federal/us/259/200/#tab-opinion-1929449

[7] https://supreme.justia.com/cases/federal/us/346/356/

[8] https://supreme.justia.com/cases/federal/us/407/258/

[9] https://sabr.org/journal/article/arbitrator-seitz-sets-the-players-free/

[10] https://www.congress.gov/105/plaws/publ297/PLAW-105publ297.pdf

[11] https://theathletic.com/293189/2018/04/04/on-minor-league-pay-mlbs-stance-doesnt-line-up-with-the-facts/

[12] https://blogs.fangraphs.com/san-jose-strikes-out-at-the-u-s-supreme-court/

[13] https://www.investopedia.com/articles/personal-finance/062415/major-league-baseballs-business-model-strategy.asp

Photo credit: https://www.cbssports.com/mlb/news/why-mlb-didnt-use-bubble-plan-for-2020-regular-season-and-what-league-insiders-think-of-the-decision/