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The Supreme Court Might Reconsider MLB’s Antitrust Exemption

Successfully suing Major League Baseball under federal antitrust law is no easy task. Not only does the league typically hire the best legal representation money can buy, but it is also the beneficiary of a unique, judicially-created antitrust exemption generally shielding it from liability under the Sherman Antitrust Act.

Nevertheless, an enterprising plaintiff every so often decides to try his or her luck at convincing a court to set aside baseball’s exemption and hold MLB liable for various, allegedly anticompetitive practices.

These challengers typically hope to overcome baseball’s antitrust exemption in either of two ways. Initially, the plaintiffs usually try to persuade the trial court that the exemption does not apply to whichever of MLB’s business practices is at issue in the case, asserting that the league’s legal protection should instead be narrowly construed.

And — as is the case more often than not — when that strategy fails to work, the plaintiff’s fallback plan is to hope to be able to convince the U.S. Supreme Court to overturn its prior decisions affirming the exemption and instead hold that MLB is no longer immune from legal challenge under the Sherman Act.

Two such cases contesting MLB’s antitrust exemption are currently before the Supreme Court, both of which have been covered here previously at FanGraphs during their earlier stages of litigation.

In the first case, Wyckoff v. Office of the Commissioner, two former scouts have accused MLB teams of illegally colluding to depress the market for the services of professional and amateur scouts. Meanwhile, the second case — Right Field Rooftops v. Chicago Cubs — involves a claim that the Cubs have unlawfully attempted to monopolize the market for watching their games in-person by purchasing a number of the formerly competing rooftop businesses operating across the street from Wrigley Field and also blocking the view of some of the remaining rooftops by installing new, expanded scoreboards.

In each case, the plaintiffs failed to convince the trial court to construe the league’s antitrust immunity narrowly, and now they must hope they can convince the Supreme Court to reconsider the nearly century-old exemption it first created back in 1922.

Unlike most previous challenges to the antitrust exemption, however, the Wyckoff and Rooftop plaintiffs are not necessarily asking the Supreme Court to directly overrule its prior decisions and strip MLB of its antitrust immunity. Instead, the parties are primarily urging the Court to take their respective cases to clarify just how broadly baseball’s exemption ought to apply.

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Whither the Independent Leagues?

Last week, Congress passed — and President Trump’s signed into law — the Save America’s Pastime Act as part of the omnibus spending bill funding the operation of the federal government for the foreseeable future. As Sheryl Ring and I each noted last week, the act created a new exemption to the federal minimum-wage and maximum-hour laws applying to minor-league baseball players.

Specifically, under the new provision that went into effect on Friday, so long as Major League Baseball pays its minor leaguers the federal minimum wage for 40 hours per week during the regular season, the players will not be entitled to any additional pay for overtime or offseason work under federal law.

Although most commentators initially focused on the effect the provision is likely to have on those playing for one of MLB’s affiliated minor-league teams, Baseball America’s J.J. Cooper noted last week that the new exemption could have dire implications for teams belonging to non-MLB-affiliated, so-called independent minor leagues (such as the American Association, Atlantic League, Frontier League, and Pacific Association). Yahoo’s Jeff Passan expressed a similar concern on Monday, while SB Nation’s Marc Normandin argued that these independent teams deserve to go out of business if they cannot afford to pay their most important employees the minimum wage.

Undoubtedly, the obligation to pay players the minimum wage would likely impose a financial hardship on many independent-league teams. But it’s not at all clear that that will actually be the end result of the Save America’s Pastime Act.

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The Remaining Path Forward for Minor-League Players

Much digital ink has been spilt regarding the plight of minor-league baseball players. Dating back to the filing of the first minor-league wage lawsuit in back 2014, countless pieces have been written denouncing Major League Baseball for paying minor-league players a sub-minimum wage. Indeed, the optics of an organization that generates $10 billion dollars per year in revenues electively deciding to pay thousands of its full-time employees at below a subsistence level is — needless to say — not great.

So it was not surprising that the news that Congress appears posed to officially exclude minor leaguers from (at least some of) the protections afforded under federal wage and hour laws resulted in an immediate wave of outcry by numerous commentators. Specifically, as Sheryl Ring discussed earlier in the week, news reports emerged on Sunday night that, after years of persistent lobbying efforts, MLB was posed to succeed in persuading Congress to include a provision in its omnibus spending bill that would exempt minor-league players from Fair Labor Standards Act, the federal law establishing the minimum wage and overtime rules that millions of Americans take for granted.

On Wednesday night, the actual language of the provision that Congress would be voting on was released:

In some respects, the specific legislative language is better than critics had anticipated. Rather than entirely excluding minor leaguers from the right to the minimum wage — as had originally been feared — the provision’s focus was actually a bit narrower. Instead, it simply provides that minor league players are not entitled to overtime benefits when working more than 40 hours in a week, so long as they are otherwise paid a weekly salary compliant with the federal minimum wage (at least during baseball’s regular season). In other words, the exemption doesn’t deprive players of the right to the minimum wage, just to overtime compensation.

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A Possible Path Forward for the MLBPA

Over the last couple weeks, I have taken a look at the unenviable position in which the Major League Baseball Players Association currently finds itself. Although the glacial pace of free-agent signings this offseason has helped to highlight the extent to which the sport’s existing economic model increasingly favors ownership, the union is relatively powerless to change its trajectory.

Indeed, because there is currently not much of value that the players can offer the owners in collective bargaining, the union has comparatively little leverage over the owners, and thus presently would appear to have relatively little hope of substantially improving its position in the next round of CBA negotiations in 2021 (although much can, of course, change between now and then).

That does not necessarily mean the union’s position is hopeless; however, securing the sort of modifications to the game’s economic structure that will be necessary to substantially improve the players’ financial position may require the MLBPA to engage in some outside-the-box thinking, at least as compared to its recent operating procedure. And as Buster Olney recently observed, it’s never too early for the union to develop a long-term strategy ahead of the 2021 CBA negotiations.

So what can the union do? Realistically, because the owners are unlikely to voluntarily agree to substantially better the players’ financial position, the MLBPA will probably have to adopt a more adversarial negotiating posture in 2021 than it has in recent years if it wishes to substantially change the current economic structure of the sport. That would mean that players should be ready to head into the 2021 CBA talks anticipating a work stoppage, potentially a rather lengthy one.

And it also means that the union should at least consider preparing to do what for many would have long been  unthinkable: disband the MLBPA. While certainly a drastic step, dissolving the union could help provide the players with additional leverage of the sort needed to secure some real concessions from ownership, concessions of the sort that could meaningfully improve the players’ financial position.

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The Threat of a Strike Might Not Help the MLBPA

Last week, I took a look at the unenviable position in which the Major League Baseball Players Association currently finds itself — and, in particular, the relative lack of leverage it is likely to have over ownership during the next round of collective bargaining in 2021.

In addition to noting that there are few substantive concessions the union could offer ownership, my post last week also briefly discounted the extent to which the threat of a work stoppage would benefit the players. The point probably merited further discussion, however, so this post is intended to more comprehensively explain my thinking in that regard.

How a Work Stoppage Would Most Likely Arise

To begin, it’s important to understand how a work stoppage would likely unfold during the next round of collective bargaining. As I previously explained back in 2016, any labor stoppage in Major League Baseball would — at least for the foreseeable future — most likely come in the form of a lockout by ownership rather than a strike by the players.

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The MLBPA Has No Leverage

The story of the offseason thus far has been the lack of activity on the free-agent market. As has been thoroughly covered elsewhere, this offseason is the slowest in recent memory, with seven of FanGraphs’ top-10 free agents still unsigned halfway through January.

Not only has this lack of activity generated considerable speculation regarding the cause of the offseason’s glacial pace (with theories ranging from a subpar group of free agents and a lack of competitive races to outright collusion), but it has also triggered talk about what the Major League Baseball Players Association should do in response.

Indeed, as I noted back in 2015, major-league players have seen their share of MLB’s overall league revenue plummet in recent years, with player payroll as a share of league revenues falling from a high of 56% in 2002 to just 38% in 2015. So while this offseason’s lack of activity may be unprecedented, in some respects it is simply the culmination of a trend dating back 15 years.

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Major League Baseball and Workers’ Comp

Largely overlooked amidst the hoopla surrounding last weekend’s Super Bowl, DeMaurice Smith, the executive director of the National Football League Players Association, weighed in on an obscure bill currently working its way through the Illinois state legislature. If enacted into law, the proposed legislation — presently dubbed Illinois Senate Bill 12 — would amend the state’s workers’ compensation laws to decrease the benefits provided to professional athletes who sustain career-ending injuries on the playing field.

This possibility led Smith to threaten that, if Senate Bill 12 were to be signed into law, the NFLPA would officially encourage players to steer clear of signing with the Chicago Bears. As Smith stated over the weekend, “If you’re a free-agent player and you have an opportunity to go play somewhere else… isn’t a smarter financial decision to go to a team where a bill like this hasn’t passed?”

The fact that the NFLPA would take such a public stance against the proposed Illinois legislation raises the question of what potential impact Senate Bill 12 would have on Major League Baseball players, and, more generally, how workers’ compensation laws affect MLB in the first place.

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Braves, D-backs in Litigation with Cities Over Stadium Leases

Currently, more than 75% of major-league teams — 23 out of 30, to be exact — play their home games in stadiums publicly owned by a local government entity. Each of these relationships between the franchise and its host municipality is, in turn, governed by a contract specifying the terms under which the government has leased its stadium to the MLB team.

As one might expect, disagreements between the franchises and their local communities occasionally arise under these lease agreements. Recently, two such disputes — one involving the Atlanta Braves and the other involving the Arizona Diamondbacks — progressed to the point that the team or local municipality opted to file a lawsuit against the other in state court.

S.M.P. Community Fund v. Atlanta Braves

In late December, the Atlanta Braves were sued in local state court by the S.M.P. Community Fund, an entity formed by the City of Atlanta to distribute funds generated by the Braves’ former stadium — Turner Field — throughout the local community. Under the terms of the Braves’ lease agreement, the team was obligated to contribute 8.25% of the parking revenue it generated at Turner Field, along with 25% of the net revenue generated from any special events held at the stadium, to the Fund. The Fund would then use these proceeds to benefit the neighborhoods immediately surrounding Turner Field.

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How Mike Trout Could Legally Become a Free Agent

What type of contract would Mike Trout have commanded this offseason had he been a free agent? Coming off an MVP-award-winning campaign in which he compiled 9.4 WAR and about to enter just his age-25 season, Trout would have easily been one of the most sought after players ever to hit the open market. And given the state of this year’s historically weak free-agent class, the bidding for Trout may very likely have ended up in the $400-500 million range over eight to ten years.

Considering that Trout signed a six-year, $144.5 million contract extension back in 2014 – an agreement that runs through 2020 – this is just an interesting, but hypothetical, thought experiment, right?

Not necessarily. A relatively obscure provision under California law — specifically, Section 2855 of the California Labor Code — limits all personal services contracts (i.e., employment contracts) in the state to a maximum length of seven years. In other words, this means that if an individual were to sign an employment contract in California lasting eight or more years, then at the conclusion of the seventh year the employee would be free to choose to either continue to honor the agreement, or else opt out and seek employment elsewhere.

Although the California legislature has previously considered eliminating this protection for certain professional athletes – including Major League Baseball players – no such amendment has passed to date. Consequently, Section 2855 would presumptively apply to any player employed by one of the five major-league teams residing in California.

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Assessing What We Know About the New CBA

After nearly a year’s worth of negotiation sessions, and with little more than three hours remaining before the deadline, Major League Baseball’s owners and players came to terms on a new collective bargaining agreement Wednesday evening. Not only does this agreement avert a possible work stoppage, but it also means that teams will head into next week’s Winter Meetings with a better sense of the economic ground rules under which they’ll be operating in the coming seasons.

It will be at least a few weeks, if not a couple months, before the final written version of the new CBA is released publicly. Indeed, while the owners and players reached a consensus on the core components of the deal last night, many of those verbal agreements must still be reduced to writing, a process that will take some time.

Still, many of the core components of the deal have already been reported in the press. Here’s what we know so far about the new CBA:

Duration of the New CBA

To begin, the new agreement will last for five years, covering the 2017-2021 seasons. This means that by the time the next CBA expires, MLB will have enjoyed an unprecedented 26 years of uninterrupted labor peace. Considering the state of the sport’s labor relations following the 1994-95 players’ strike, that is quite an impressive accomplishment for the game.

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