Major League Baseball’s Antitrust 'Exemption' Is Immune From Judicial Overrule

The City of San Jose, California, entered into an option contract to lease land to the Oakland A's, a Major League Baseball ("MLB") club, for the construction of a new stadium. The land was within the exclusive territory of another MLB club, the San Francisco Giants, who refused to waive their right under MLB's Constitution to territorial exclusivity. The City sued MLB under the antitrust laws for not putting repeal of that constitutional provision up for a vote by all of the teams belonging to MLB, despite repeated demands by the City that it do so. City of San Jose v. Office of the Commissioner of Baseball, __ F.Supp.2d __, 2013 WL 5609346, Case No. C-13-02787 RMW (N.D. Cal., Oct. 11, 2013).

The MLB defendants moved for dismissal for failure to state a claim on two grounds, one being that the City lacked antitrust standing to sue, but the Court does not reach that issue. City of San Jose, 2013 WL 5609346 at 11-12. Instead, the Court granted a Rule 12(b)(6) motion to dismiss without leave to amend based on MLB's "exemption" from enforcement under the antitrust laws.

The exemption came into being when Justice Holmes authored an opinion dismissing a Section 2 Sherman Act conspiracy claim because MLB did not participate in interstate commerce. Federal Base Ball Club of Baltimore, Inc. v. National League of Base Ball Clubs, 259 U.S. 200 (1922). The Court stated that the games were entirely intrastate (id. at 208: "The business is giving exhibitions of base ball, which are purely state affairs"), and that the travel between States by teams was not the game itself, and so did not place baseball in interstate commerce. Id. at 209 ("the transport is a mere incident, not the essential thing").

In City of San Jose, Judge Whyte provides a thorough history of MLB's antitrust immunity. In brief, the Supreme Court has called the Federal Base Ball decision "unrealistic, inconsistent" and "illogical." Radovich v. National Football League, 352 U.S. 445, 452 (1957); Salerno v. American League of Professional Baseball Clubs, 429 F.2d 1003, 1005 (2d Cir. 1970) (Friendly, J.: "Federal Baseball was not one of Mr. Justice Holmes' happiest days"). The Court has refused to follow its reasoning to exempt any other major sport besides MLB from the antitrust laws. U.S. v. Int'l Boxing Club, 348 U.S. 236 (1955) (boxing); Radovich, 352 U.S. at 450-51 (football). The Court has also expressly overruled the holding in Federal Base Ball on the interstate commerce issue...