Major League Baseball

Major League Baseball and Antitrust Laws Keland Turner Kentucky State University Survey of Economics Philip Brown October 30, 2011

Major League Baseball Major League Baseball and Antitrust Laws

In the United States, professional sport is a multimillion dollar industry. This industry has gone from mere entertainment to a way of life for many Americans in the United States. Today, professional sport does not just provide entertainment but it is a business that has many stipulations. All of the major sports such as the NBA, NHL, and NFL are protected by the Sherman Anti-trust Act. MLB on the other hand are not protected by the Sherman Anti-trust Act. MLB has been struggling to overturn this exemption since 1922. Case after case has been brought to the Supreme Court time and time again the court has refused to overturn the exemption stating that Congress should overturn the exemption since they altered it originally. There have been so many issues revolving antitrust laws within the professional sport industry for many years. The reserve clause was originated around the 1880. In the clause owners agreed not to employ or negotiate any reserved players of any another team. They would not play games against any team that used a player reserved by another team. Teams would thus have exclusive bargaining rights with respect to their reserved players (Craib, 2004). The Sherman Antitrust Act was put in place by Congress in 1890 which was designed to curb the attention of power that was interfering with trade and to reduce competition of the economy. Antitrust Laws Antitrust law originated in the late 19th century when the people of the United States could no longer trust corporate monopolies because they were dominating manufacturing and mining business. Antitrust law was put in place to make sure that businesses participate fair. In order to produce fair competition and encourage the create of excellent goods and services at the best prices the federal and other state government though it was in the best interest to control the

Major League Baseball trade and commerce by putting a stop to unlawful monopolies, price and restraints. Legislations

primary goal was to safeguard the publics welfare by making sure that consumer demands were supplied by the manufacture and sale of goods would be sold at a reasonable price (Wests Encyclopedia of American Law, 2011). Antitrust law originated from Sherman Antitrust Act of 1890. The Act was later revised by adding the Clayton Act of 1914 and the Robinson-Patman Act of 1936. Congress created the Federal Trade Commission Act of 1914 to manage and enforce the law. The Sherman Antitrust Act states: 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 declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof. (Becker, 2004) This section of the Act is what many professional baseball players have issues with, because once a player signs a contract the team becomes free from the conditions of the Sherman Act. Why is Baseball Exempt from the Antitrust Laws? Baseball was first exempt by antitrust laws in 1922. On April 19, 1922, the National League and the American League was challenged in court by the Federal League in the case of Federal Base Ball Club of Baltimore, Inc. v. National League of Professional Base Ball Clubs. Justice Oliver Wendell Holmes, Jr. of the U.S. Supreme Court ruled in the favor of the National and American Leagues stating that Major League Baseball was exempt from the provisions of

Major League Baseball the Sherman Antitrust Act (Baseball Reference.com, 2010). It was also noted that games that

were cross state lines were considered intrastate events traveling from to one state to another was not the essential thing (Rovell, 2001). New York Yankees, Inc was brought before the U. S. Supreme Court to reconsider the baseball antitrust exemption. This time the Supreme Court agreed that baseball was not interstate commerce but ruled that when the Sherman Antitrust Act was enacted it was not to include baseball it directed toward monopolies and trusts of robber industrialist like John D. Rockafeller and Andrew Carnegie (Rovell, 2001). Ending Baseballs Antitrust Exemption

MLB is not in agreement with eliminating the antitrust exemption. If the antitrust exemption is lifted baseballs reserve clause could be faced with a legal dispute. Finding the reserve clause to be in infringement of the antitrust laws would result in baseball teams to forfeiting many of their rights if not all of their minor-league players. The need to develop players would have a high interest because big league teams would have no interest in supporting the minor league. Without the exemption, the minor leagues would have to change their operations, becoming more like the free minor leagues of the first half of the 20th century as opposed to subjects of MLB (Belth, 2001).

Without the reserve clause owners would no longer have power to negotiate with players. Players would have to be willing to agree to the reserve clause for it to be legitimate, which would cause for plenty of change. Because teams are not as willing to lose their rights to players so quickly, they tend to draft high school players quickly rather than wait a few years for them to develop into better players. This motive would be a plus for college and international baseball

Major League Baseball leagues because they would now become the proliferation for Major League Baseball talent drafting (Belth, 2001).

Franchise relocation would also be affected in the eliminating the antitrust exemption. Baseball has not moved in over 30 years while other sports have moved several times. Why you ask, because baseball owners have the power from the antitrust exemption to prevent moving. If the league is no longer exempt teams have the ability to bring up a lawsuit and sue MLB if they are not granted permission to move as they will. MLB would have to prove in court that moving would not be good for competition and that the decision was made upon lucid guidelines (Belth, 2001).

Conclusion

The courts are in control over the decision on whether or not to make professional baseball interstate business, but based on their results it could put a end to baseball as we know it. The best rational answer would be to either pass legislation in Congress granting the sport an exemption under the antitrust laws or not exempt baseball like the other sports (Marinelli, 1972). It is a difficult task in determining whether or not the game would be in a better situation if baseball was no longer exempted from antitrust laws. Lawyers would certainly be better off, since there would be more lawsuits. Fortunately for the owners, congress moves slowly, and MLB has successfully fought other efforts to repeal the exemption (Barkham, 2005). It looks like the professional sport of baseball will not get the chance to have the exemption of antitrust eliminated. I myself think that its unfair for all other professional teams to be protected from the antitrust laws. What difference does it make that they have been exempted for many years. Laws change everyday this is just one more. On the other hand is it

Major League Baseball wise to change eliminated the exemption. Honestly we would never know until that actually happens but as of now the professional sport of baseball will have to be eliminated until Congress or the Supreme Court decides to make the change.

Major League Baseball References

BaseballReference.com, (2010). Federal baseball club v. national league. Retrieved October 27, 2011 from, http://www.baseballreference.com/bullpen/Federal_Baseball_Club_v._National_League Becker, A. D., 2004. The Sherman antitrust Act (1890). Retrieved October 26, 2011 from, http://www.stolaf.edu/people/becker/antitrust/statutes/sherman.html Belth. A. (2011). Ending baseballs antitrust exemption. Retrieved October 26, 2011 from https://baseballprospectus.com/article.php?articleid=1286 Craib, D. F., (2004). Baseball: restricted service or restraint of trade?" Journal of Deferred Compensation Winter 2004: 62. Retrieved October 29, 2011 from, General One File. Marinelli Jr., A. J. (1972). Baseball and the Antitrust Laws. American Business Law Journal, 10(1), 69. Retrieved October 29, 2011 from, EBSCOhost. Rovell, D. (2001). ESPN.com Baseball antitrust exemption: Q & A. Retrieved October 26, 2011 from, http://sports.espn.go.com/espn/print?id=1290707&type=story Wests Encyclopedia of American Law. 1997. Antitrust Law. October 26, 2011 from http://iris.nyit.edu/~shartman/man/mba0101/trust.htm