Why does baseball have an antitrust exemption?

The history behind current events.
July 19 2002 10:36 AM

Baseball's Con Game

How did America's pastime get an antitrust exemption?

Illustration by Mark Alan Stamaty

Baseball is in trouble, again. Another player strike looms. The World Series may be canceled for the second time in a decade. Commissioner Bud Selig is threatening to eliminate teams. Fans are incensed over Selig's decision to declare last week's All-Star Game a tie after 11 innings. And just like every other time baseball has been in turmoil recently, sportswriters and politicians are making noises about revoking the sport's antitrust exemption.

The antitrust exemption is an irony. Owners and players prove day after day that they consider baseball above all a business. But the exemption stems from the government's naive insistence that baseball is only a game. Alone among professional sports, baseball enjoys immunity from antitrust prosecution because neither Congress nor the Supreme Court has been willing to overturn an ancient decision that baseball is merely an amusement, not a commercial enterprise.

The controversial antitrust exemption dates to the early years of organized ball. In January 1903, the American and National Leagues united to form Major League Baseball. They systematically included a "reserve clause" in their contracts (as had already been National League practice for 25 years), which bound athletes to the teams that first signed them. Players could be sold or traded, but they couldn't simply sign with new teams when their contracts expired.

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In 1914 the new Federal League tried to lure ballplayers with higher salaries and no reserve clauses. Only a few athletes jumped leagues, however, and in 1915 the Federal League sued MLB for cornering the players' market—a violation, it contended, of the Sherman Antitrust Act. The parties soon reached a settlement that terminated the upstart league while compensating its owners. But the owners of the Federal League's Baltimore Terrapins, who were offered only a sliver of the settlement money, rejected the pact and pursued their antitrust claims at the Supreme Court. In the 1922 decision in Federal Baseball Club of Baltimorev. National League,the court ruled against the Terrapin owners. Justice Oliver Wendell Holmes wrote that "personal effort, not related to production, is not a subject of commerce" and that baseball therefore wasn't subject to federal regulation.

Holmes' ruling was in keeping with other lower-court rulings from the era that stressed baseball's status as a game. (One judge who'd taken this position, Kenesaw Mountain Landis, was tapped as the sport's commissioner.) Over time, however, the ruling came to be widely regarded as flawed, as the Constitution's "commerce clause" was increasingly used as grounds for the government to regulate a range of dealings that had once been deemed off-limits to the feds. The court itself decreed, in other contexts, that exhibitions that crossed state lines were subject to federal control. Yet it had in effect rendered Major League Baseball exempt from antitrust law.

The Supreme Court had a chance to revisit its decision in 1953, when it heard arguments in Toolson v. New York Yankees. The case concerned George Toolson, whom the Yankees had reassigned from their minor-league Newark franchise to another team. Toolson sued, claiming that the reserve clause in his contract violated antitrust laws. But the high court stood by its 1922 decision. It stated that if Congress had disagreed with the earlier ruling, it would (or should) have introduced new laws in the interim. "We think," the court wrote in an unsigned 7-2 opinion, "that if there are evils in this field which now warrant application of it to the antitrust laws, it should be by legislation."

Congress, however, again failed to act, and ballplayers remained bound to a system in which they had no say. Then, in 1969, the St. Louis Cardinals traded their star outfielder Curt Flood to the Philadelphia Phillies without his consent. Flood did not want to uproot his family, abandon his business interests in St. Louis, or move to a city with a notoriously racist mayor (Frank Rizzo). He appealed the trade to Commissioner Bowie Kuhn, stating, "After twelve years in the Major Leagues, I do not feel I am a piece of property to be bought and sold irrespective of my wishes." Kuhn sided with the Cardinals ownership and upheld the trade. Flood retired rather than play for the Phillies.

Flood's case reached the Supreme Court in 1972. Harry Blackmun, a newcomer to the Court, wrote the opinion in Flood v. Kuhn, in which the court upheld Flood's trade by a vote of 5-3. The opinion—for which Blackmun would long be ridiculed—included a juvenile, rhapsodic ode to the glories of the national pastime, sprinkled with comments about legendary ballplayers and references to the doggerel poem "Casey at the Bat." (As the justices were bartering over their positions, Thurgood Marshall objected that Blackmun's list of all-time greats included only whites, so Blackmun added Jackie Robinson, Satchel Paige, and Roy Campanella. Marshall dissented anyway.)

Blackmun admitted that ever since the Federal Baseball decision, the court had consistently interpreted the commerce clause to expand the government's sphere of influence; he noted, too, that no other sport was immune from antitrust laws. And yet, in the face of his own accumulated evidence, he maintained that the Federal Baseball precedent should stand because of the judicial custom of stare decisis, or a respect for precedent. In dissent, William O. Douglas regretted that he had joined the majority in Toolson, noting that he now recognized baseball was "big business that is packaged with beer, with broadcasting, and with other industries."

Ironically, shortly after Flood, baseball players won the right to free agency and ended the 100-year tyranny of the reserve clause. The avenue of redress wasn't litigation but collective bargaining, through which the players' union had recently secured the right to arbitration. In 1975, pitcher Andy Messersmith's contract with the Los Angeles Dodgers expired, and although the Dodgers and Major League Baseball insisted the Dodgers alone had the option to re-sign him, Messersmith claimed otherwise. The parties took the case before an arbitrator hired by the owners, Peter Seitz, who ruled for Messersmith. (Seitz was immediately fired.) The owners lost an appeal in federal court, and thereafter players enjoyed a limited right to free agency.

In October 1998, in a belated effort to address the labor problem, President Clinton signed into law the so-called Curt Flood Act, which stipulated that baseball's antitrust exemption didn't apply to player employment issues after all. But with the players faring well through collective bargaining, and with free agency embedded in baseball's practices, the point was now moot. On the other hand, the 1998 act explicitly left untouched such issues as team relocation, minor-league play, the employment of umpires, broadcasting agreements, and league expansion—suggesting that the exemption did in fact apply in these areas.

Some of these issues continue to grate on players, owners, and fans. Minor league players, unlike major leaguers, continue to be tied to the club that signs them. The antitrust exemption essentially gives the league veto power over team relocation. NFL teams move frequently, settling in to new homes with bigger, richer fan bases. But baseball can block any franchise relocation—no team has moved for 30 years—preventing small-market owners from finding baseball-friendlier cities.

The antitrust exemption is also likely to let Selig and the owners get away with shrinking the league. Last year the Major Leagues suggested eliminating the Minnesota Twins and Montreal Expos in order to raise other owners' profits and competitive prospects. The idea met stiff resistance and provoked members of Congress (especially Minnesota Sen. Paul Wellstone) to make noises about further limiting the antitrust exemption. Under this pressure, the idea was tabled. But Selig and the owners are still urging contraction, and an arbitrator is supposed to rule soon whether the players' union—which opposes contraction and the loss of jobs it would entail—is entitled to a say in the decision.

Abolishing the antitrust exemption wouldn't bring peace to baseball. Conflict is hardwired into the player-owner relationship, as it is in any labor-management arrangement where gross inequities persist. (Although lavishly paid, most ballplayers in their lifetimes earn a mere fraction of what the baseball CEOs reap.) But since 1922, baseball's ownership has treated its gift from Justice Holmes as license to act arrogantly. Curtailing the exemption might humble the owners and Commissioner Selig, and that would certainly please baseball's increasingly unhappy fans.

David Greenberg, a professor of history and of journalism and media studies at Rutgers University, worked at the New Republic in the early 1990s as an intern, as managing editor, and as acting editor.

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