US Department of Justice is Seeking to Limit MLB’s Antitrust Exemption

Late last year, four formerly-affiliated minor league teams (remember how MLB consolidated and dumped 40 teams?) filed suit against Major League Baseball, challenging their longstanding exemption under US antitrust law. As you may recall, MLB possesses a unique (and legally-bizarre) exemption from United States antitrust laws, which allows the entity and its owners to engage in behavior that could otherwise be deemed anticompetitive and illegal. It’s an exemption that has been challenged a number of times over the years (including recently in relation to minor league pay), but has never been struck down by the courts.

Could this be the time the exemption falls? Or is severely curtailed?

Well, if the legal arm of the US executive has anything to say about it, yes:

For its part, the Department of Justice sees no policy reason for MLB’s antitrust exemption to exist, and therefore asks the court in the case to read the exemption very narrowly – ie, apply it in a dramatically limited way: only to the actual playing of baseball games, which in practical effect would completely neuter the exemption.

While the Department of Justice’s imperative routinely changes depending on the makeup of the current administration, this is nonetheless a major step: MLB’s antitrust exemption exists only because of legal precedent, not because of some specific legislation. So when the government’s legal arm is saying to a federal court, “Don’t let them use the exemption to behave in an anticompetitive way anymore,” that’s really notable. it could have bearing on the court’s thinking.

To be sure, even if a court were to interpret the law in a way as to foreclose or limit MLB’s antitrust exemption, the league could go to Congress to try to get legislation passed to preserve the exemption. They’ve successfully lobbied Congress before when it came to limiting minor league pay.

Then again, US Senator Bernie Sanders has been pushing for an end to the exemption at a legislative level ever since the lockout:

I tend to doubt Congress is going to pass legislation specifically to carve out a renewed exemption to antitrust law for MLB, so I think this will come down to the courts.

And in that way, this case may now be a good one for MLB to try to reach a settlement. The last thing they want is a federal decision on the books that blows up their ability to operate as a legal monopoly. Sure, they could appeal from the district court to a circuit court (and then, if necessary, the US Supreme Court), but I just really doubt they want to go that route. If MLB lost the antitrust exemption, so much would be thrown into upheaval for them: the centralization of broadcast rights, standardized (and limited) minor league pay, the inability for teams to move without league permission, etc.

This is major stuff. Nothing has HAPPENED yet, to be very clear. But this is a bold move from the Justice Department.

So, if you want more antitrust primer, here are some of my previous thoughts:

You can’t really get into the news here without a little background on antitrust law in the United States, and Major League Baseball’s special standing in relation to those laws.

Antitrust law is basically all about preventing artificial and/or unfair restraints on competition. Businesses, for example, can’t get together and collude to artificially restrict the supply of Product X so that they can jack up the price in Market Y, and they cannot create monopolies that exclude others from competing. If you’re wondering, then, how it is that MLB artificially restricts and/or monopolizes all kinds of things without any issue, it’s because the entity and its teams are exempt from US antitrust law.

Major League Baseball’s exemption from antitrust law is concededly bizarre. It was the product of the sport getting to a certain level of business success at a very specific time in American history, overlapping with a belief that it was more than a business. Treating MLB like any other business simply didn’t make sense to those in charge in the 1920s, and then the Supreme Court left that exemption in place in the infamous Flood v. Kuhn decision., admitting in the process that MLB did engage in interstate commerce, should be subject to antitrust laws… but wouldn’t be because it’s just kinda special. (Seriously! The US Supreme Court did that! It was strange!)

Is that enough background? If you want more, you can read that link there on the Flood v. Kuhn decision, and it’ll get you more. From where I sit, what you mostly need to know is that MLB and its teams benefit greatly from being exempt from antitrust law, a situation that is extremely pro-business/pro-big-owner/etc. Striking down MLB’s antitrust exemption has long been the angle of extremely progressive Politicians, and those who wanted to see – for example – minor leagues get better protections and pay.

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