For The Love of the Game: How the Supreme Court Exempted Major League Baseball From the

Sherman Anti-Trust Act By Salvatore Filippello Introduction With all of the news surrounding the NFLs lockout and the pending lockout for the NBA with baseballs All-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 from the Sherman Anti-Trust Act (the Sherman Act). The Sherman Act was passed in 1890. It criminalizes 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, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. . . . 15 USC 1 (emphasis added). Blacks Law Dictionary defines interstate commerce as [t]rade and other business activities between those located in different states; esp., traffic in goods and travel of people between states. MLB is an incorporated business that organizes and funds the exhibition of baseball in nineteen States plus Canada. While the actual game itself is wholly intrastate, it can hardly be disputed that MLB does trade and other business between those located in different states. The Sherman Act also criminalizes monopolization of any trade or commerce among the several States, or with foreign nations: Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony . . .

15 USC 2 (emphasis added). Merriam-Webster defines a monopoly as a commodity controlled by one party. Professional baseball is controlled by one partyMLB. It clearly has a monopoly on the market for professional baseball. So why is MLBone 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, 259 U.S. 200 (1922). On May 29, 1922, Justice Oliver Wendell Holmes delivered the most important decision in U.S. history for professional baseball as we know it. The Supreme Court held 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 the decision by the Court of Appeals of Washington D.C. overturning the $240,000 judgment against the National League of Professional Baseball Clubs and the American League of Professional Baseball Clubs (collectively referred to as the National Association of Professional Baseball Leagues, currently known as MLB). The Federal Club of Baltimore was a corporation organized in 1913 in Baltimore. The Federal 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. In December of 1915, an agreement was entered into between the Federal League and the National League and the American League. As a result of this agreement, the Federal League was dissolved along with every one of its clubs except the Baltimore Club. The Baltimore Club refused to become a party to the agreement. However, because all of the other clubs of the

Federal 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 Professional Baseball Leagues for violations of the Sherman Act. The D.C. trial court, the Supreme Court of the District of Columbia, found that the National League of Professional Baseball Clubs was guilty of a violation of the Sherman Act. A verdict 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 $240,000three times the amount of the verdictwith costs and attorneys fees. On appeal, the D.C. Court of Appeals held that the National Association of Professional Baseball Leagues was not within the Sherman Act, because it did not engage in interstate commerce. 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 its decision, 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 is the 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 the giving of exhibitions of baseball. A game of baseball is not susceptible of being transferred. The players, it is true, travel from place to place in interstate commerce, but they are not the game. Not until they come into contact with their opponents on the baseball field and the contest opens does the game come into existence. It is local in its beginning and in its end. Nothing is transferred in the process to those who patronize it. The exertions of skill and agility which they witness may excite in them pleasurable emotions, just as might a view of a beautiful picture or a masterly performance of some drama; but the game effects

no exchange of things according to the meaning of "trade and commerce" as defined above. Id at 684-85. This analysis seems flawed on its face, even for 1920. At the time of this decision, players traveled from one state to another to put on exhibitions of baseball. The National League of Professional Baseball Clubs had teams in New York, Pennsylvania, Massachusetts, Illinois, Missouri, Ohio, Michigan, and Washington, D.C. One can hardly suggest that an organization that conducts business by importing players, equipment, and the like from one state to another is not engaged in interstate commerce. However, the Supreme Court unanimously adopted this shoddy reasoning and held that MLB was not covered under the Sherman Act: The business is giving exhibitions of baseball, which are purely state affairs. . . . But the fact that in order to give the exhibitions the Leagues must induce free persons to cross state lines and must arrange and pay for their doing so is not enough to change the character of the business. . . . The transport is a mere incident, not the essential thing. Federal Baseball Club of Baltimore 259 U.S. at 208-09. The very nature of exhibiting baseball as described by the Supreme Court seems on its face to resemble pure interstate commerce. However, the Court took it upon itself to save baseball. Reaffirming a Commitment to Preserving Americas Favorite Pasttime The decisions by the D.C. Court of Appeals and the Supreme Court in Federal Baseball Club of Baltimore were contrary to the plain language of the Sherman Act. Yet, in Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953), the Supreme Court reaffirmed that decision without question. In the Toolson Courts opinion, it was up to the legislature to make the necessary corrections, if any, to the state of the MLB exemption to the Sherman Act: [T]his Court [, in Federal Baseball Club of Baltimore,] held that the business of providing public baseball games for profit between clubs of professional baseball players was not within the scope of the federal antitrust laws. Congress has had

the ruling under consideration but has not seen fit to bring such business under these laws by legislation having prospective effect. The business has thus been left for thirty years to develop, on the understanding that it was not subject to existing antitrust legislation. The present cases ask us to overrule the prior decision and, with retrospective effect, hold the legislation applicable. We think that if there are evils in this field which now warrant application to it of the antitrust laws it should be by legislation. Without re-examination of the underlying issues, the judgments below are affirmed on the authority of [Federal Baseball Club of Baltimore], so far as that decision determines that Congress had no intention of including the business of baseball within the scope of the federal antitrust laws. Toolson, 346 U.S. at 357. Essentially, the Court decided that it would not disturb the precedent of Federal Club of Baltimore. Contrary to logic and reason, the Court sent a message to Congress to correct the problem. As Justices Burton and Reed make clear in their dissent, it is a contradiction to say that the organized clubs of professional baseball were not engaged in interstate commerce: I am not able to join today's decision which, in effect, announces that organized baseball, in 1953, still is not engaged in interstate trade or commerce. In the light of organized baseball's well-known and widely distributed capital investments used in conducting competitions between teams constantly traveling between states, its receipts and expenditures of large sums transmitted between states, its numerous purchases of materials in interstate commerce, the attendance at its local exhibitions of large audiences often traveling across state lines, its radio and television activities which expand its audiences beyond state lines, its sponsorship of interstate advertising, and its highly organized "farm system" of minor league baseball clubs, coupled with restrictive contracts and understandings between individuals and among clubs or leagues playing for profit throughout the United States, and even in Canada, Mexico and Cuba, it is a contradiction in terms to say that the defendants in the cases before us are not now engaged in interstate trade or commerce as those terms are used in the Constitution of the United States and in the Sherman Act. Toolson, 346 U.S. at 357-58 (Burton, J. dissenting). While it was evident at the time of the Toolson decision that MLB was engaged in interstate commerce, the Supreme Court decided that Congress still had not intended to cover the league in the antitrust laws.

In Flood v. Kuhn, 407 U.S. 258 (1972) the Supreme Court again faced a challenge of the MLB exemption to the Sherman Act. In Flood, the Court made a number of observations about the state of professional baseball including the following: (1) Professional baseball is indeed a business engaged in interstate commerce. (2) The exemption from the federal antitrust laws, baseball is an exception and an anomaly. (3) Federal Baseball and Toolson had become an aberration confined to baseball. (4) Even though others might regard this as unrealistic, inconsistent, or illogical, the aberration is an established one and deemed fully entitled to the benefit of stare decisis, withstanding the Courts expanding concept of interstate commerce. (5) The anomaly rests on recognition and acceptance of baseballs unique characteristics and needs. (6) Other professional sports operating interstatefootball, boxing, basketball, hockey, and golfare not exempt from antitrust laws. (7) Remedial legislation has been introduced repeatedly in Congress but none has ever been enacted. This can be seen by the Court as an intention to continue professional baseballs exemption from the antitrust statutes. This is more than just mere congressional silence and passivity. (8) The Court expressed concern about the confusion and the retroactivity problems that inevitably would result with a judicial overturning of Federal Baseball Club of Baltimore. The Court found that MLB should have been covered under the antitrust laws. Further, it found that Federal Baseball Club of Baltimore and its progeny were decided on a faulty legal basis. Yet, the Court concluded that it could not overturn this defective precedent. It thus adhered to Federal Baseball and Toolson and to their application to professional baseball. Conclusion The Supreme Court decision in The Federal Baseball Club of Baltimore to exempt MLB from the antitrust laws is out of touch with logic and the law. As noted by both the Toolson and Flood Courts, MLB is an interstate business and is within the ambit of Congress. However, it was a decision that withstood the test of time and has shaped the evolution of MLB. If this decision did not come down the way it did, MLB would have never been what it is today. There would not be one consolidated professional baseball league. There would be multiple leagues,

which would create unnecessary competition between the business sides of those leagues. Talent would have been diluted throughout the different leagues as each would have desired to expand to different cities across the rapidly expanding nation. Because of the National League of Professional Baseball Clubs, Toolson, and Flood decisions, baseball became a consolidated endeavor. These decisions became a historic victory for MLB. The implications of this decision are wide-ranging and permanent. Ultimately, MLB is the only major sport in the U.S. that can operate as a monopoly and is exempt from the Sherman Act in many ways. The reason why this rather odd conclusion by the Supreme Court has withstood the test of time is not exactly clear. It appears that professional baseball had been adopted by the people as their favorite sport and the Supreme Court did not want to disturb its development. A quote by the district court in Flood is illustrative: Baseball has been the national pastime for over one hundred years and enjoys a unique place in our American heritage. Major league professional baseball is avidly followed by millions of fans, looked upon with fervor and pride and provides a special source of inspiration and competitive team spirit especially for the young. Baseballs status in the life of the nation is so pervasive that it would not strain credulity to say the Court can take judicial notice that baseball is everybodys business. . . . The game is on higher ground; it behooves every one to keep it there. Flood v. Kuhn, 309 F. Supp. 793, 797 (SDNY 1970). It appears that this higher ground status of professional baseball is the sole reason why the Supreme Court created this exemption. As perhaps one of the more Lochner-esque demonstrations of judicial activism, the Supreme Court has essentially preserved the status of baseball as the only legal monopoly in professional sports. However, unlike Lochner, the Supreme Courts decision in Federal Baseball Club of Baltimore has survived. It is an aberration grounded in public opinion rather than the law. In light of the sentiment and popularity which MLB has enjoyed since its inception in 1922, the Court ignored the proverbial blindness with which it is supposed to adjudicate and interpret the laws.