Again Challenged – Baseball’s Antitrust Exemption Lives On

Sep 22, 2023

By Dr Robert J. Romano, JD, LL.M, Senior Writer, St. John’s University

The U.S. Supreme Court’s historic decision of Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, in what would be considered today as extremely dubious logic, held that Major League Baseball (MLB) has the right to conduct its business without fear of violating the Sherman Act and provided the game of professional baseball with a highly coveted, and what has turned out to be a longstanding, “antitrust exemption.” In a somewhat desultory opinion written by Oliver Wendell Holmes, after adopting the rational of the Court of Appeals for the D.C. Circuit, the Chief Justice found:

The business is giving exhibitions of baseball, which are purely state affairs. Once a team acquired a player, the team “owned” him for as long as it wanted. …[T]he fact that in order to give the exhibitions the Leagues must induce free persons to cross state lines and must arrange and pay for their doing so is not enough to change the character of the business.…[T]he transport is a mere incident, not the essential thing. That to which it is incident, the exhibition, although made for money would not be called trade or commerce in the commonly accepted use of those words.

Over the last one hundred years, baseball’s antitrust exemption has been scrutinized on a series of occasions and is again facing challenges to its legality as evidenced by the recent lawsuit brought by the former owner of the Cangrejeros de Santurce Baseball Club, Tom Axon. Mr. Axon outlines in his complaint how the Puerto Rican Winter Baseball League and Puerto Rico Mayor Miguel Romero (together with a number of other co-conspirators) colluded in having him removed as the head of the Cangrejeros franchise and that such acts of collusion violated both Section 1 and 2 of the Sherman Act, the Antitrust Laws of Puerto Rico, the Fair Competition Laws of Puerto Rico and the Civil Rights Act of 1871. 

Yes, a century after the U.S. Supreme Court’s infamous Federal Baseball decision, on July 18, 2022, in the matter of Cangrejeros de Santurce Baseball Club, LLC vs. Liga de Béisbol Professional de P.R., Inc., Mr. Axon, together with his co-plaintiffs, again challenged the way the business of baseball is conducted by attacking the game’s antitrust exemption’s legitimacy (and logic) in its seven count complaint filed in the U.S. District Court for the District of Puerto Rico.

The gravamen of Mr. Axon’s lawsuit stem from his assertions that after partially acquiring the Cangrejeros in October 2019, he became the sole owner in February 2022, that he improved the franchise’s competitive success through “increased levels of investment and dynamic new ways to operate and promote the team in economic competition” but that his efforts and business savvyness, however, were met with “stiff resistance by the other teams who did not want to have to face such enhanced economic competition.” He then alleges through his complaint that such resistance by both the League and individual teams resulted in an illegal “group boycott” that ultimately led to an “unlawful seizure of his legal interest in the Cangrejeros Franchise,” which was sold to one of the named defendants, Impulse Sports Entertainment Corporation.”

Without batting an eye, the defendants collectively, on October 12, 2022, moved to dismiss the Cangrejeros’ and its co-plaintiffs’ complaint on the basis that the U.S. District Court for the District of Puerto Rico lacks subject matter jurisdiction as the ‘business of baseball’ is exempt from antitrust regulation in accordance with the decision rendered by the U.S. Supreme Court in Federal Baseball.

The U.S. District Court for the District of Puerto Rico, in its June 27, 2023 decision on the defendants’ motion to dismiss, acknowledge that, although challenged, no other federal court has ever expressly drawn a distinction as to the applicability of the antitrust exemption afforded Major League Baseball by the U.S. Supreme Court to other professional baseball leagues that are non-MLB or its minor league affiliates. Therefore, the District Court relied on the expressed wording of the two cases brought subsequent to Federal Baseball decision – Toolson v. New York Yankees, Inc. and Curt Flood v. Bowie Kuhn – as guidance before delivering its decision.

The District Court noted that the U.S. Supreme Court’s precise wording in both the 1953 Toolson case: “[T]he business of providing public baseball games for profit between clubs of professional baseball players was not within the scope of the federal antitrust law,” and the 1972 Flood matter: “The longstanding exemption of professional baseball from antitrust laws” signifies that the antitrust exemption afforded in Federal Baseball applies to the game of professional baseball in its totality, not specifically Major League Baseball. The District Court found that “The wording is clear; the antitrust exemption applies to professional baseball. Had the Cangrejeros and the Winter League been amateur, the non-applicability of the exemption could have been better supported.” Consequently, the U.S. District Court dismissed the lawsuit on the grounds that it lacks jurisdiction over the subject matter because professional baseball in its entirety, not just MLB, has the benefits associated with an antitrust exemption afforded by the U.S. Supreme Court in Federal Baseball. 
Who would have thought that the Supreme Court’s use of the term professional baseball, as opposed to the National League or American League – the defendants in the Federal Baseball case, would have such an enduring and substantial significance over one hundred years later. It exposes how judges, when rendering opinions, need to be both purposeful and forward thinking in using particular words or language. As Rachael Wolchin identified – “Be mindful when it comes to your words. A string of some that don’t mean much may stick with someone (or something) for a lifetime.”

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