In Name Only: How Major League Baseball's Reliance on Its Antitrust Exemption Is Hurting the Game

Article excerpt

TABLE OF CONTENTS

INTRODUCTION
  I. THE HISTORY AND EVOLUTION OF BASEBALL'S
     ANTITRUST EXEMPTION
     A. Federal Baseball
     B. Toolson
     C. Flood
     D. The Exemption Applied
 II. THE FUNDAMENTAL IRRELEVANCE OF THE EXEMPTION
     A. The Impact of Labor Law
     B. Nature of Professional Sports
     C. MLB Does Not Assert or Take Advantage of
        Its Exemption
III. How THE EXEMPTION HURTS BASEBALL
     A. Cumbersome and Uncertain Nature of the Exemption
     B. Fear of Congressional and Judicial Intervention
 IV. THE IMPLICATIONS OF A POTENTIAL POLICY CHANGE
     A. Application of Antitrust Law
        1. Per Se vs. Rule of Reason
     B. Analysis Under Rule of Reason
        1. Factors Suggesting MLB's Practices Might
           Pass Rule of Reason Analysis
        2. Franchise Relocation
           a. L.A. Coliseum and Other Non-Baseball Cases
           b. Defining the Applicable Market
           c. Procompetitive Aspects
           d. Consumer Welfare
       3. Expansion
       4. The Minor League System
    C. Counterarguments as to How MLB Would Be
       Hurt by a Revocation Fail
CONCLUSION

INTRODUCTION

Major League Baseball (MLB) is exempt from federal antitrust regulation, an oddity that has earned it the title of a "true monopoly." (1) Baseball's status in the eyes of the law is puzzling in a number of ways. First, its exemption is a judicial creation that the Court has never extended to any other professional sport or industry. (2) Second, the Supreme Court, despite having created the exemption in 1922, has never ruled directly on its scope. (3) Finally, lower courts have applied the exemption inconsistently, leaving many commentators to openly wonder whether the exemption even still exists, and if it does, in what form. (4) Despite repeated attempts by the courts, the legislature, and the legal community to clarify the precise nature of baseball's antitrust exemption, the interaction of baseball and antitrust law remains very unsettled.

Although there has been significant disagreement as to both the breadth and validity of MLB's antitrust exemption, those debates are beyond the scope of this Note. The more interesting question, as yet unanswered, is what effect the exemption has had on MLB's operations, and whether that effect is worth the costs of maintaining the exemption. This Note asserts that MLB's exemption is counterproductive and bad for business, contrary to the belief of even those who run MLB. The exemption, as currently applied and utilized, exposes MLB to intervention from both Congress and the courts. (5) MLB, in its zeal to protect its exemption, has unwittingly exposed itself to pressures that no other professional sports league faces.

At the same time, the impact of a policy change, initiated by either Congress or the courts, is unlikely to have a material effect on MLB's structure or day-to-day business operations. Despite the argument that revoking MLB's exemption would leave it exposed to antitrust violations, (6) a thorough analysis of antitrust law, combined with the standing precedent implicating professional sports, indicates that almost all of MLB's practices would survive such scrutiny. (7) This Note concludes that the exemption is largely, if not completely, irrelevant to MLB's operations. Prior arguments that the exemption is irrelevant have based that conclusion on an overly narrow reading of the trilogy of Supreme Court baseball cases. (8) Instead, it is not the origins of the exemption that render it irrelevant, but rather its application and practical consequences. Other scholarship has identified the implications of removing the exemption as to particular areas of MLB's operation, such as franchise relocation, (9) but no commentator has examined how and why MLB derives no benefit from its exemption.

This Note briefly summarizes in Part I the history and development of MLB's exemption through an examination of the Supreme Court's trilogy of cases. …