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Baseball Antitrust Exemption Extends 93-Year Winning Streak In Federal Courts

Posted  January 21, 2015

By Nneka Ukpai

Although federal courts may consider baseball’s antitrust exemption to make about as much sense as the infield fly rule, last week’s decision by the U.S. Court of Appeals for the Ninth Circuit in City of San Jose v. Commissioner of Baseball shows that courts still consider themselves bound to invoke that anachronistic exemption to call antitrust plaintiffs out.

According to a three-judge panel of the Ninth Circuit, the U.S. District Court for the Northern District of California correctly held that the baseball industry’s historic antitrust exemption required the court to dismiss antitrust claims against Major League Baseball (“MLB”).

In June 2013, the City of San Jose filed suit against MLB alleging a conspiracy to prohibit the Oakland Athletics’ relocation to downtown San Jose.  According to the lawsuit, the relocation of the Oakland A’s to San Jose was blocked solely because the territorial rights to San Jose and its suburbs belong to the San Francisco Giants.  The City of San Jose alleged that the exclusive territorial rights agreement among MLB teams was a “blatant market allocation scheme.”  In October 2013, District Judge Ronald Whyte dismissed these claims and barred the City of San Jose from refiling, holding that “MLB’s alleged interference with the A’s relocation to San Jose is exempt from antitrust regulation.”  Judge Whyte said he was bound by precedent, but agreed “with the other jurists that have found baseball’s antitrust exemption to be ‘unrealistic, inconsistent, or illogical’” and agreed that the “exemption is an ‘aberration’ that makes little sense given the heavily interstate nature of the ‘business of baseball’ today.”

The baseball exemption has a long history in American jurisprudence.  The United States Supreme Court adopted the antitrust exemption for professional baseball in 1922 and reaffirmed the exemption most recently in 1972 in Flood v. Kuhn.  Now, nearly one century after the birth of the exemption, the federal courts say that because Congress’ 1998 Curt Flood Act changed the exemption only with respect to the employment of players, Congress did not intend to change the exemption for MLB’s other business interests.

In affirming the dismissal of San Jose’s antitrust claims, the Ninth Circuit referred to the exemption as “one of federal law’s most enduring anomalies.”  The Ninth Circuit cautioned, however, that its ruling does not grant MLB complete immunity from antitrust suits, noting that MLB may engage in activities wholly collateral to the public display of professional games and for which antitrust liability may therefore attach.  The court reasoned that franchise relocation is not one of those activities.

The appellate court concluded its opinion with a powerful statement as to its inability to decide differently: only Congress and the Supreme Court are empowered to question Flood’s vitality and the fate of baseball’s singular, historic exemption from antitrust laws.

Edited by Gary J. Malone

Tagged in: Antitrust Litigation,