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MLBShermanAct

MLBShermanAct

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Published by: LegalBlitz on Jun 23, 2011
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1
For The Love of the Game: How the Supreme Court Exempted Major League BaseballFrom the Sherman Anti-Trust Act
By Salvatore Filippello
Introduction
With all of the news surrounding the NFL’s lockout and the pending lockout for the NBAwith baseball’s Al
l-Star break approaching, I decided to examine the most unique feature of Major League Baseball; namely, their exemption from the Sherman Anti-Trust Act.Major League Baseball is the only major sport in the United States that is exempt fromthe Sherman Anti-
Trust Act (the “Sherman Act”).
The Sherman Act was passed in 1890. Itcriminalizes the restraint of trade or commerce among the several States, or with foreign nations,by forming a trust or other type of agreement:
“Every contract, combination in the
form of trust or otherwise, or conspiracy, inrestraint of trade or commerce
among the several States, or with foreign nations
,
is hereby declared to be illegal. . . .
 15 USC § 1 (emphasis added).
 Black’s Law Dictionary
 
defines “interstate commerce” as
 
“[t]rade and other business activities between those located in different states; esp., traffic ingoods and travel of people between states.” MLB
is an incorporated business that organizes andfunds the exhibition of baseball in nineteen States plus Canada. While the actual game itself iswholly intrastate, it can hardly be disputed that MLB does trade and other business betweenthose located in different states. The Sherman Act also criminalizes monopolization of any tradeor commerce among the several States, or with foreign nations:Every person who shall monopolize, or attempt to monopolize, or combine orconspire with any other person or persons, to monopolize any part of the trade orcommerce
among the several States, or with foreign nations
, shall be deemed
guilty of a felony . . .”
 
 
215 USC § 2 (emphasis added). Merriam-
Webster defines a monopoly as “a commoditycontrolled by one party.” Professional baseball is controlled by one party— 
MLB. It clearly hasa monopoly on the market for professional baseball.So why is MLB
 — 
one entity, engaged in interstate commerce, restraining the trade or
commerce of professional baseball among the “Several States” and operating as a monopoly— 
exempt from the Sherman Act? Because the U.S. Supreme Court held that it is in
Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, et al
, 259U.S. 200 (1922). On May 29, 1922, Justice Oliver Wendell Holmes delivered the mostimportant decision in U.S. history for professional baseball as we know it. The Supreme Courtheld that professional baseball was exempt from the Sherman Act.
 Federal Baseball Club of Baltimore
: History is Made
In
Federal Baseball Club of Baltimore
, the Supreme Court faced an appeal of thedecision by the Court of Appeals of Washington D.C. overturning the $240,000 judgment againstthe National League of Professional Baseball Clubs and the American League of Professional
Baseball Clubs (collectively referred to as the “National Association of Professional BaseballLeagues,” currently known as MLB).
 The Federal Club of Baltimore was a corporation organized in 1913 in Baltimore. TheFederal Club of Baltimore was a member of the Federal League of Professional Baseball Clubs
(the “Federal League”).
It was organized for the purpose of exhibiting baseball games. InDecember of 1915, an agreement was entered into between the Federal League and the NationalLeague and the American League. As a result of this agreement, the Federal League wasdissolved along with every one of its clubs except the Baltimore Club. The Baltimore Clubrefused to become a party to the agreement. However, because all of the other clubs of the
 
3Federal League no longer existed, it was forced to cease operations. Shortly after the agreement,the Baltimore Club brought a federal suit against the National Association of ProfessionalBaseball Leagues for violations of the Sherman Act.The D.C. trial court, the Supreme Court of the District of Columbia, found that theNational League of Professional Baseball Clubs was guilty of a violation of the Sherman Act. Averdict in the amount of $80,000 was awarded to the Federal Baseball Club of Baltimore.Under the Sherman-Act, a successful plaintiff is awarded treble damages, or triple damages.Therefore, the final judgment against MLB was for $240,000
 — 
three times the amount of theverdict
 —with costs and attorney’s fees.
 On appeal, the D.C. Court of Appeals held that the National Association of ProfessionalBaseball Leagues was not within the Sherman Act, because it did not engage in interstatecommerce. This opinion is extremely important to the disposition of the Supreme Court case.The Supreme Court hung its hat on the analysis of the D.C. Court of Appeals. In making itsdecision, the D.C. Court of Appeals quoted the test articulated in 1910 by the Supreme Court in
 International Text-Book Co. v. Pigg
, 217 U.S. 91
. “[I]mportation into one state from another isthe indispensable element, the test, of interstate commerce.”
Federal Baseball Club of Baltimore
269 F. 681, 684 (D.C. Cir. 1920) (
quoting International Text-Book Co.
, 217 U.S. 91). The D.C.Court of Appeals used this test and made the following analysis:The business in which the appellants were engaged, as we have seen, was thegiving of exhibitions of baseball. A game of baseball is not susceptible of beingtransferred. The players, it is true, travel from place to place in interstatecommerce, but they are not the game. Not until they come into contact with theiropponents on the baseball field and the contest opens does the game come intoexistence. It is local in its beginning and in its end. Nothing is transferred in theprocess to those who patronize it. The exertions of skill and agility which theywitness may excite in them pleasurable emotions, just as might a view of abeautiful picture or a masterly performance of some drama; but the game effects

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