It’s past time to throw out baseball’s antitrust exemption

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 as 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.

Instead of revisiting the Federal Baseball Club decision, however, the Supreme Court invented a new rationale for not subjecting baseball to federal antitrust law. In a 1953 decision, the court rejected a challenge to the reserve clause. It accepted that the business of baseball is interstate commerce, but it nonetheless ruled that Congress had not intended to apply the antitrust laws to baseball. This conclusion lacked support in both the text and accompanying legislative debates of the antitrust laws. Notably, in the same decade, the court declined to apply the antitrust exemption to boxing and football.

The arbitrary character of baseball’s special status was impossible to ignore. Justice Felix Frankfurter acidly noted in one 1955 dissent: “It would baffle the subtlest ingenuity to find a single differentiating factor between other sporting exhibitions, whether boxing or football or tennis, and baseball.”

In its third and most recent decision on the topic, the Supreme Court in 1972 affirmed the baseball antitrust exemption and ruled that the reserve clause could not be challenged under either federal or state antitrust law. Curt Flood, an All-Star outfielder who was Black, had refused to play for the Philadelphia Phillies, a poorly performing team known to have a racist fan base, after being traded from the St. Louis Cardinals. Under the reserve clause, Flood could play only for the Phillies unless they decided to trade him to another club.

Flood opted to stand on principle and fight the reserve clause in court. In a bizarre opinion, Justice Harry Blackmun, writing for the majority, listed some of his favorite baseball players of all time in the first section. After paying tribute to baseball’s greats, he concluded the sport was not subject to antitrust law until Congress affirmatively said otherwise. Justice William O. Douglas called the exemption “a derelict of the court’s own creation” and said he had “lived to regret” supporting it in the 1953 decision. Justice Thurgood Marshall, writing separately, lamented Flood’s plight and noted the reserve clause’s resemblance to indentured servitude.

While the Major League Baseball Players Association exercised its power to end the reserve clause through arbitration and collective bargaining in the 1970s, the antitrust exemption continued to inflict substantial harms. The minor league baseball system is a testament to that. Minor league teams are controlled or owned by major league teams, which collude to suppress players’ salaries at appallingly low levels. One former minor leaguer estimated he was “making about 4 bucks an hour.” Many players, who were not unionized until just last year, reported struggling to pay rent and buy food. They were further tied to their major league franchise through seven-season contracts. While an elite few were promoted to the major leagues and earned handsome paydays, the vast majority toiled for years in the minor leagues and barely managed to scrape by, due to their employers’ collusion. With minor league players reaching a collective bargaining agreement with MLB teams in the spring, the terms and conditions of playing minor league baseball are likely to improve. Yet this win doesn’t undo the previous effects of employer exploitation for thousands of current and former players. If not for baseball’s antitrust exemption, the collusion against players would be illegal under federal antitrust law, with teams on the hook for millions of dollars (or more) in damages.

Major League Baseball has also abused individual minor league teams and the communities that host them. In September 2020, MLB and its independently owned clubs decided to terminate their affiliation with 40 minor league teams and bar them from obtaining new major league affiliations. That meant these teams could no longer field the best minor league players and compete against the top minor league teams. Minor league franchises in places such as Burlington, Iowa, and Troy, N.Y., were effectively wiped out at great loss to their fans and communities. If the antitrust exemption did not exist, Major League Baseball’s and its teams’ collective boycott of these towns would likely violate the law.

Change may be coming, though. Four minor league baseball teams that were victims of MLB’s 2020 termination plan filed an antitrust suit against the commissioner of baseball. While the district court found their claims to be credible, that court and the court of appeals concluded that the teams were bound by baseball’s exemption and dismissed the complaint. Two of the four teams have now petitioned the Supreme Court to take the case and to abolish this special legal treatment. (The Open Markets Institute, where I am the legal director, will file a brief in support of the minor league teams.) The court may be ready: In 2021, all nine justices, in a case involving college basketball and football, accepted that baseball’s antitrust exemption is “aberrational,” “unrealistic,” and “inconsistent.” While the court should have ended this grievous error of its own creation a long time ago, it is not too late to abolish it and protect players, fans, and communities from baseball’s monopolistic abuses.

The benefits of ending the exemption are likely to be substantial: Dozens of small towns could get their teams back, minor league players could obtain compensation after years of collusion against them, scouts could see teams competing for their services, and fans could watch more games played outside their home markets. The time has come for the high court to kill the century-old zombie.

Sandeep Vaheesan is the legal director at the Open Markets Institute, an antimonopoly research and advocacy organization based in Washington, D.C.