The Baseball Antitrust Exemption Lives, But with Criticism, in the Eleventh Circuit

May 31 2003
Testimony and Interventions

The American Antitrust Institute filed an amicus brief urging the 11th Circuit to read narrowly the antitrust exemption for baseball. http://www.antitrustinstitute.org/content/amicus-brief-major-league-baseball-v-crist-baseball-exemption. The Court has now ruled. Here is a quick review and prognosis the principal author of our brief, Professor Stephen F. Ross.

May 28, 2003

In a modest setback for consumers and a competitive economy, U.S. Court of Appeals in Atlanta yesterday re-affirmed baseball's aberrational exemption from the antitrust law in Major League Baseball v. Crist. The blow was somewhat softened, however, by Judge Gerald Tjoflat's conclusions that the exemption (1) is one whose death would be "met with considerable fanfare," (2) rests on dubious premises, (3) results in well-documented welfare losses due to anticompetitive agreements, and (4) is based on now-outmoded fears about the effects of applying an unduly rigid body of antitrust law to sports. A path still remains, therefore, for state or private attorneys general to seek judicial reconsideration of Flood v. Kuhn and to challenge future anticompetitive conduct by baseball owners.

Unfortunately, the appellate court did reject a key argument proffered by the Consumer Federation of America and the American Antitrust Institute in a friend-of-the-court brief. Significantly, the court said it was "hesitant to read the 'business of baseball' exemption broadly - especially since the Supreme Court has called the exemption an 'aberration.'" Yet it rejected the amici's argument that Flood narrowly applied only to those agreements that demonstrably related to baseballs "unique characteristic and needs." Instead, it found that the challenged conduct - baseball's threat to contract by two teams absent tax subsidies - was part of the "business of baseball" that was clearly exempt from antitrust scrutiny. Although two lower courts in the early 1990s had narrowly construed Flood, the court was decisive on this point. It should be observed that the court twice noted that the Florida Attorney General had conceded on appeal that Flood applied more broadly.

The decision is the second judicial rejection of a state attorney general's effort to use state civil investigative demands to investigate baseball (a similar decision coming in 1999 from Minnesota). This suggests another path to be followed by those seeking to protect consumers and taxpayers: directly filing a well-pleaded complaint in federal court, based on publicly available information. The advantage of this approach is that a district judge could well choose, based on the precedent of the actual Flood case, to permit discovery and trial to develop a factual record for determining whether Flood should be retained as precedent; even if the judge did not follow that course, a court of appeal might well write an opinion, using language similar to Judge Tjoflat's and following the course used by Judge Posner in the Khan case, to point out why the Supreme Court should reconsider the issue.

Who might bring such a claim? Currently, the most likely candidate would be a sports fan in the Washington, DC area, anxious to attract the Expos and concerned that baseball's horizontal market division scheme could give the Orioles a veto. (Obviously, local officials would not sue today lest baseball owners be antagonized, but that would not stop a wholly-independent consumer class action.) Once the Expos' fate has been decided, attorneys general from disappointed locales, or perhaps well-funded potential owners, might be interested in making such a challenge.

One final note: on the merits of the contraction issue, I have previously opined that the best solution would be the creation of a new Patriot League. The league would be open to any owner with a reputation for integrity and sound business practices, who could demonstrate an ability to field a team in a stadium seating at least 10,000 and to maintain a payroll of $10 million for three years. (DC, Brooklyn, Portland, Charlotte, Las Vegas, New Jersey, Connecticut, North-suburban Los Angeles, and San Juan are all examples.) The top four teams each year would be eligible for promotion to Major League Baseball, and the four worst major league teams would be demoted to the Patriot League.

Stephen F. RossProfessor of Law University of Illinois College of Law 504 E. Pennsylvania Avenue Champaign, IL 61820 (217) 333-2502 fax: (217) 244-1478e-mail: sross@law.uiuc.edu