Saturday, January 22, 2022

MLB’s antitrust exemption facing legal challenge as former minor-league teams sue over MiLB overhaul

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Major League Baseball’s antitrust exemption is facing a new legal test. On Monday, lawyers representing the parent companies of four former minor-league teams (the Staten Island Yankees, Tri-City Valley Cats, Norwich Sea Unicorns, and Salem-Keizer Volcanoes) filed a lawsuit in U.S. District Court alleging MLB’s commissioner’s office of violating the Sherman Act.

Those four clubs had their affiliate status revoked as part of MLB‘s overhauling of the minor leagues last year. That process saw 40 teams in all removed.

The complaint, filed by Weil, Gotshal & Manges, spans 33 pages. It states that MLB’s reorganization of the minors was a “naked, horizontal agreement to cement MLB’s dominance over all professional baseball.” 

MLB received its antitrust exemption, which allows it to serve as a legalized monopoly, in 1922 after it faced opposition from the Federal League. MLB’s antitrust exemption has been allowed to stand since by virtue of being immune to the Sherman Act — a piece of legislature that is supposed to prevent companies from fixing markets and thereby harming customers. MLB’s antitrust exemption was granted on the grounds that the league doesn’t constitute interstate commerce — a confusing claim given the very interstate nature of baseball. 

As baseball scribe Craig Calcaterra explained in 2019:

Organized baseball appealed, however, and the decision was reversed, with the Court of Appeals holding that baseball was not subject to the Sherman Act because it’s not interstate commerce. The short version: a game is only played in one place — a game is “local in its beginning and in its end,” the court said — nah, it’s not subject to the Sherman Act.

The Supreme Court has since stood by its ruling on other occasions, including as it related to Curt Flood’s quest for free agency in 1972. 

Part of MLB’s antitrust exemption was later removed in the ’90s, when then-president Bill Clinton signed the Curt Flood Act of 1998 into law. The Flood Act removed only part of the exemption that deal with labor relations, and not those that deal with the minor leaguers, expansion, or other business matters.  

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