Baseball’s antitrust exemption, which the U.S. Supreme Court created in 1922, is typically thought of as MLB’s antitrust exemption.
In a decision from earlier this week, the U.S. Court of Appeals for the First Circuit made clear the “business of baseball” exemption extends throughout professional baseball—and not just MLB.
The ruling comes at a time when college sports is evolving (or devolving, depending on whom you ask) into a model that resembles professional sports, with NIL and House settlement revenue shares. The ruling could thus have far-reaching implications beyond what is traditionally viewed as pro baseball, perhaps by including the evolving college game under the overall baseball antitrust umbrella.
A few years ago, Thomas Axon, a former owner-operator of the Cangrejeros de Santurce Baseball Club, and others sued Liga de Béisbol Profesional de Puerto Rico—the top pro baseball league in the U.S. territory—and league officials. Axon accused the league and other teams’ owners of conspiring to remove him and his associated businesses from the league and taking away his control of the franchise. The case involves Sherman Act claims and those that arise under other federal and Puerto Rico statutes.
U.S. District Judge William Young dismissed the lawsuit in 2023, reasoning the defendants are exempt from the antitrust claims since they involve professional baseball. Young stressed the U.S. Supreme Court’s decision in Federal Baseball Club v. National League (2022). Writing for the Court, Justice Oliver Wendell Holmes Jr. concluded that federal antitrust claims brought against MLB were not appropriate since federal antitrust law requires interstate commerce, meaning the movement of people, goods and services that cross from one state into another. MLB games are, of course, only played in one state.
Legal historians and other commentators have long criticized Holmes’ logic. Even though MLB games are played intrastate, they necessarily involve interstate activity. Players and team personnel, along with equipment and broadcasts, travel across states to make games possible. In the early 1920s, however, the Court adopted a narrow view of interstate commerce and Federal Baseball Club was not out of step with that line of thinking.
Years later, the Supreme Court refused to extend the baseball exemption to other sports, including football, basketball and boxing. And, when given the opportunity to reverse the baseball exemption in Curt Flood v. Bowie Kuhn (1972), the Supreme Court declined. The Court instead invoked the principle of stare decisis, which is Latin for “to stand by things decided.” It means courts, including SCOTUS, must follow Supreme Court precedent.
Young underscored that in Federal Baseball Club, the Court referred to the “business” of “giving exhibitions of baseball.” This depiction didn’t limit the exemption to MLB but instead, at least as worded, extends throughout professional baseball.
In an opinion authored by Chief Judge David J. Barron and joined by Judges O. Rogeriee Thompson and Gustavo A. Gelpí, the First Circuit agreed with Young that the exemption applies.
Barron acknowledged widespread criticism of the exemption as “unrealistic, inconsistent, or illogical,” but stressed that changing the exemption requires legislative action. In 1998, Congress passed, and President Bill Clinton signed into law, the Curt Flood Act. The act narrowed the exemption to no longer apply to MLB players’ employment. Yet to this day, the exemption still applies to other pro baseball topics.
Barron wrote that even if the exemption is substantively problematic, it “remains in place” on account of stare decisis. He also reasoned that the exemption does not apply “only to MLB and its affiliates,” since that is not what the Supreme Court actually said in 1922.
“Federal Baseball,” Barron wrote, “did not describe the ‘business of baseball’ exemption in terms of the specific professional baseball leagues that were parties to that case or to any specific league at all.” He added that the Court “defined the exemption in terms of an activity,” with the activity being the business of giving exhibitions of baseball.
Barron went on to cite other Supreme Court cases, including Toolson v. New York Yankees (1953), where the Court characterized the exemption as concerning “public baseball games for profit between clubs of professional baseball players.”
The litigation is not over. The First Circuit found that while the federal antitrust claims are off the board, the other claims aren’t exempted. The litigation for those claims will continue at the trial court level.
The interpretation of the baseball exemption as including pro leagues beyond MLB is especially intriguing as college sports morph into something akin to pro sports. College athletes, including college baseball players, can sign NIL deals that are akin to endorsement deals for MLB players. Some of those athletes will also receive direct pay from schools in the form of revenue sharing, a byproduct of the House settlement. The further college baseball transforms into professional baseball, particularly if college athletes are recognized as employees, the more plausible organizers of college baseball could rely on the baseball exemption to combat antitrust claims.
