The History of Baseball's Antitrust Exemption

Over the last two weeks, we have gone over some of the history of major league baseball. In Expansion Part I we looked at the origins of the American and National Leagues. In Expansion Part II, we looked at how and why baseball moved west, and we detailed the breakneck pace of expansion and relocation in the 1960s and 1970s. In Free Agency Part I, we looked at the history of labor unions in major league baseball, and examined how Marvin Miller sowed the seeds for free agency. In Free Agency Part II we detailed exactly how Miller won concession after concession and eventually won the right for players to become free agents.

Today, we will examine the history of concept that we alluded to in some of the previous articles: baseball’s antitrust exemption.

The United States currently has antitrust laws in order to prevent businesses from monopolizing a given market. However, throughout its history, major league baseball has monopolized the baseball market, preventing upstart competitors from ever really getting off the ground. And the Supreme Court has upheld MLB’s right to their monopoly several times. In many ways, major league baseball is the only true monopoly in the United States, and has been since its inception. Let's look at the history of how the antitrust exemption came to be.

When the National League joined forces with the American League in 1903, the partnership proved to be fruitful immediately. And one of the main rules of business is: success breeds imitation.

Thus, it should be no surprise that another baseball league soon had intentions of challenging the AL/NL monopoly. The Federal League started out as a minor league, but it had major intentions. In 1914, in fact, many people considered the Federal League to be a Major League. And the Federal League wanted to make it official.

On January 5, 1915, the Federal League sued Major League Baseball under federal antitrust law for interfering with their attempts to hire players that were between contracts (meaning not bound by the Reserve Clause) from the American and National League. The judge hearing the case was Kenesaw Mountain Landis [http://www.library.northwestern.edu/archives/exhibits/alumni/landis2.jpg], who was known for his strict adherence to the letter of the law. Landis, however, just so happened to also be a huge Chicago Cubs fan. He understood that the Federal League had a legitimate case. However, ruling in favor of the FL would harm his Cubs, so he took the case under advisement rather than issue a ruling immediately.

In 1915 the Federal League ran into difficulties. Major League baseball had attempted to operate with three leagues in 1884 and 1890 and had failed both times. 1915 was no different. The players and owners in the Federal League were absorbed into the two more-established leagues, and late in the year the Federal League asked Judge Landis to dismiss the case against the American and National Leagues. Landis happily obliged.

But not everyone was happy with the collapse of the Federal League. The owners of the Baltimore Federal League franchise attempted to purchase a Major League team, and were rebuffed. They tried to buy an International League franchise (the IL was the top minor league organization at the top) and were once again denied. White Sox owner Charles Comiskey insulted the city when he said that “Baltimore is a minor league city and not a hell of a good one at that.” Dodgers owner Charles Ebbets chimed in by saying that Baltimore was one of the worst minor league cities because “you have too many colored population to start with.”

The perspective owners then filed an antitrust lawsuit against Major League baseball, claiming a conspiracy to destroy the Federal League. In April of 1919 a court found in favor of the Baltimore owners, and awarded them $240,000 in damages. The case was appealed in 1920, and the appellate court didn’t rule until 1921. When they did rule, they overturned the lower court’s decision, stating that baseball “was not the kind of commerce” federal law was intended to regulate. On May 22, 1922, the Supreme Court upheld this decision, reinforcing baseball’s antitrust exemption.

This exemption remained unchallenged – as did MLB’s monopoly – until 1972. As you know from reading Free Agency, Part II, Curt Flood sued baseball after being traded from the St. Louis Cardinals to the Philadelphia Phillies after the 1969 season. Flood’s case eventually made its way to the Supreme Court, who let the old decision stand, criticizing it but saying that it was up to Congress, not them, to fix the “anomaly.” Although Flood lost his case, he paved the way for salary arbitration, and, soonafter, free agency. Today, free agency exists, but the antitrust exemption remains law as well.

Baseball may not have an antitrust exemption if the owners of the Baltimore Federal League team had been paid off upon the league’s disbanding. Every other team’s owners were given compensation except for Baltimore, prompting them to file the original antitrust suit. The exemption remains suspect, at best, and few observers believe that it would hold up once again in a court of law. However, since Flood’s case in 1972, no case has even come close to going up the ladder to the Supreme Court, and no league has challenged MLB’s monopoly since the failed Continental League in the late 1950s.