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.

In the Wyckoff case, for instance, the plaintiffs contend that lower courts have applied the exemption to an array of business practices well beyond the bounds of what was authorized by the Supreme Court in its three prior decisions on the matter. In particular, they assert that the exemption was really only intended to immunize MLB’s reserve clause — the pre-free-agency-era contractual provision that tied players to their teams for life — from challenge under the Sherman Act.

As a result, the Wyckoff plaintiffs contend that decisions like the ones issued by trial and appellate courts in their case have improperly expanded the scope of MLB’s antitrust immunity to areas beyond which the Supreme Court ever intended (like the employment of scouts). They thus urge the Court to grant their appeal not necessarily to overturn the exemption, but to provide clarity regarding the extent to which MLB is exempt from antitrust law.

The Rooftop plaintiffs take a slightly different approach to this same general strategy. Specifically, whereas the Wyckoff plaintiffs argue that lower courts have all but uniformly adopted an overly broad interpretation of the exemption, the Rooftop plaintiffs contend that lower courts are more deeply divided as to the scope of MLB’s antitrust immunity. (I previously discussed some of these differing opinions in a post available here.)

The Rooftop plaintiffs are hoping that this latter argument will help persuade the Supreme Court to grant their appeal. Although the Supreme Court only agrees to hear around 1% of appeals each year, it typically prioritizes cases that implicate a so-called “circuit split” — or, in other words, an area in which lower courts are divided regarding the proper interpretation and application of the law.

Whether these arguments will ultimately be enough to persuade the Supreme Court to grant either appeal remains to be seen. The Court has had several opportunities to reconsider MLB’s antitrust exemption in recent years but has elected not to grant appeals in cases challenging the league’s relocation policies (in the City of San Jose case) or its collusive minor-league pay practices (in the Miranda case).

Moreover, both MLB and the Cubs have filed opposition briefs in the Wyckoff and Rooftop cases, respectively, that could persuade the Court’s justices to refrain from granting either appeal. Specifically, both the league and team contend that — contrary to the argument advanced by the Wyckoff plaintiffs — the Supreme Court’s prior decisions have consistently held that the “business of baseball” — and not just the reserve clause — is exempt from antitrust law. And both briefs rather forcefully assert that the challenged conduct at issue in their respective cases clearly falls within the scope of that exemption.

At the same time, both defendants reject the contention in the Rooftop case that lower courts are divided as to the scope of the exemption. In particular, they argue that while a couple lower courts applied differing interpretations back in the early 1990s, federal appellate courts have uniformly adhered to an interpretation of the exemption shielding the “business of baseball” from the Sherman Act.

Ultimately, only four of the Supreme Court’s nine justices must vote to accept an appeal in order for the Court to agree to hear the case.

And in one potentially promising development for the plaintiffs, both MLB and the Cubs initially waived their right to file opposition briefs outlining the reasons why the Court shouldn’t take the cases, only to have the Supreme Court officially request that they file opposing arguments. This stands in contrast to the recent appeal in the Miranda minor-league wage collusion case, where the Supreme Court opted to deny the appeal without even hearing from MLB, after the league similarly waived its right to file an opposition.

This doesn’t mean that the Supreme Court will necessarily elect to take either case, of course. Indeed, the odds overwhelming favor the Court denying both appeals later this year. But it is at least possible that the Supreme Court could once again call upon MLB to defend its unique status under federal antitrust law.

Nathaniel Grow is an Associate Professor of Business Law and Ethics and the Yormark Family Director of the Sports Industry Workshop at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.

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5 years ago

Justice Samuel Alito is a Phillies fan and took part in (paid for?) a Phillies “Fantasy Camp” before joining the Supreme Court.