There is new pressure on MLB’s antitrust exemption

One of the things that makes Major League Baseball unique among American sports is the existence of MLB’s antitrust exemption. The sweeping antitrust exemption for America’s pastime really only exists because when Federal Baseball Club v. National League was decided by the Supreme Court in 1922 the court’s understanding of interstate commerce was quite different than what it is today. I wrote about the curious history of the antitrust exemption, it’s almost accidental character and widespread impact on MLB a few years ago. At that time I wondered if MLB was jeopardizing their special status by threatening Minor League Baseball in dozens of communities:

The antitrust exemption has always been about far more than whether the Federal League could exist and free agency. In the years since those decisions it has come up in countless business matters for MLB including the Cubs lawsuit against the rooftop owners and San Jose’s attempt to convince the Athletics to leave Oakland. Rob Manfred is playing with fire by threatening baseball in dozens of communities across the country. Those communities all have representation in Congress and Congress is one of the few institutions with the power to hit baseball where it hurts most.

The wheels of progress turn slowly at times, but Al highlighted a lawsuit by four MiLB teams filed in December that challenged MLB’s antitrust exemption in court. That lawsuit alleges that:

The teams — former affiliates of the New York Yankees, Houston Astros, San Francisco Giants and Detroit Tigers — said this was a horizontal agreement between the MLB and its 30 franchises that violates the Sherman Act.

According to the complaint, big league baseball teams are meant to compete with one another for affiliations with the minor league outfits that feed them players. By conspiring to reduce that competition pool, the minor league teams alleged, the MLB and its teams effectively engaged in a group boycott in order to cut costs.

However, that lawsuit, like many lawsuits before it, faces the considerable challenge of a precedent that exempts MLB from the Sherman Act. Which could explain why MLB decided to press its luck on MiLB contraction in the first place.

In a rare move, the one entity who can limit the scope of the antitrust exemption has now weighed in. Congress has some questions about MLB’s antitrust exemption.

Today the Senate Judiciary Committee released a letter promising more scrutiny of the scope of MLB’s antitrust exemption and it is a doozy:

There are five main areas covered by this letter, but each of them is a potential landmine for MLB all on their own, let’s take a look at each in turn.

The first question is rhetorical, no other sport has an antitrust exemption because the ruling in Federal Baseball Club v. National League is based on an antiquated understanding of interstate commerce. The next five points highlight reasons baseball has taken full advantage of that exemption in ways that negatively impact players and MiLB teams.

The second point is a two-part question: what is the impact of the antitrust exemption on lockouts (gee, I can’t imagine why lockouts and work stoppages would be front of mind for Congress right now) with a sub-question about how those lockouts specifically impact minor league players. These are excellent questions and I look forward to hearing MLB’s answers.

Then we get serious with a set of questions about the mandatory Minor League Contract including: implications on wages, housing, and working conditions. But the real power play in this letter comes next: the possible impact of extending the protections of the Curt Flood Act to minor league players. The Curt Flood Act limits the scope of MLB’s antitrust exemption in labor matters. The Athletic’s Evan Drellich notes:

Among the different stakeholders in the sport, major league players might be the least impacted. For one, they are represented by a union, and labor law presides rather than antitrust law when a collective bargaining agreement is in place between management and employees.

Major league players were also carved out from the antitrust exemption in the 1998 Curt Flood Act, which preserved the antitrust exemption for the rest of MLB’s business, but newly gave power to major league players to bring a challenge on antitrust grounds if they chose. (Notably, to do so would require essentially disbanding the union, likely with the intent of reinstating it later. NFL and NBA players have undertaken this process, but MLB players never have.)

Minor leaguers, however, have no union.

That lack of representation or protection from anti-competitive practices in labor allows MLB to basically set salaries and wages for MiLB players in ways that no other industry could, Drellich continues:

In the minor leagues, players are paid according to a scale set by the 30 major league teams. In effect, those 30 businesses are making an agreement as to what salaries their employees, the minor league players, can make, or not make.

“Even Google and Facebook wouldn’t agree on prices,” Ross said. “If they did, they’d go to jail. … When the 30 owners say we’re going to play 162 games, that is an agreement among the owners. When the owners say the strike zone is measured here, there and the other thing, that is an agreement among the owners. And when the owners say here is the scale for paying minor-league players, that’s an agreement among the owners.”

That is potentially a sea change for Minor League Baseball players.

The fourth point contains questions about the processes and corruption of the international free agent process, which is particularly timely given recent Collective Bargaining Agreement terms, as Anthony Castrovince explains:

The entire subject of the International Draft, which was temporarily tabled when the new Collective Bargaining Agreement was ratified in March, remains open for discussion until July 25.

By that date, a final decision must be made. If MLB and the MLBPA agree to implement an International Draft, beginning with the 2024 signing period, then the current free-agent Draft-pick compensation system (which includes the qualifying offer) would be abolished, beginning with the 2022-23 offseason.

The fifth area of questions surrounds the “Save America’s Pastime Act” which was included in the 2018 omnibus spending bill. The senators language indicates they believe they were misled by MLB’s commitments from that piece of legislation, as you can see below:

In lobbying for the Save Americas Pastime Act (SAPA) MLB claimed the bill was necessary to prevent minor league contraction. However, despite its enactment, prior to the 2021 baseball season dozens of minor league teams lost their affiliations with MLB clubs as a result of its reorganization of the minor leagues.

It doesn’t take much to read between those lines that these senators are not happy with MLB. Drellich’s reporting contains the following statement from Democratic Senator Durbin, the Chair of the Judiciary Committee:

“We need to examine how Major League Baseball’s 100-year-old antitrust exemption is affecting the operation of Minor League baseball teams and the ability of Minor League ballplayers to make a decent living,” said Durbin, the U.S. Senate Majority Whip, in a statement. “This bipartisan request for information will help inform the Committee about the impact of this exemption, especially when it comes to Minor League and international prospects. We need to make sure that all professional ballplayers get to play on a fair and level field.”

It also included this statement from the Ranking Republican Member of the Committee, Senator Chuck Grassley and no comment from MLB:

“This is about ensuring a level playing field for the Minor Leagues and its players,” said Grassley in a statement. “MLB’s special antitrust exemption shouldn’t be imposing labor or contraction problems for Minor League teams and players. Baseball is America’s pastime, and that means more than just the Major Leagues.”

MLB declined comment.

MLB will need to choose their words carefully when they decide to comment, because at a time where Congress cannot agree on much of anything, there seems to be bipartisan agreement that the scope of MLB’s antitrust exemption needs to be reevaluated.