Baseball's Antitrust Exemption Research Articles

Four Cases in Sports Competition Policy: Baseball, Judo, Football, and Motor Racing

Practices and conducts in professional and even amateur sports can be subject to competition laws as soon as commercial activities are involved. From an economic perspective, this implies that both directly commercial activities like the sale of broadcasting/media rights and indirectly commercial activities like defining and enforcing the rules of the games can be hit by competition policy interventions. Setting and enforcing the rules of the game is an activity with commercial effects because it influences attractiveness and marketability of the sports in question. After discussing fundamental issues, this contributions reviews selected landmark cases in sports competition policy from an economic perspective. This includes the U.S. baseball antitrust exemption, access rules to Judo tournaments, sale systems of media rights in European football as well as a unique combination of long-run exclusivity contracts, skewed allocation of common revenues, and special influences on rule-setting by some competitors in Formula One motor racing. Eventually, the areas of state aid to football clubs and mergers in Danish football are sketched.

Protecting America's Pastime: The Necessity of Major League Baseball's Antitrust Exemption for the Survival of Minor League Baseball

Protecting America's Pastime: The Necessity of Major League Baseball's Antitrust Exemption for the Survival of Minor League Baseball

Book Review: Crack of the Bat, by James R. Walker

James R. Walker Crack of the Bat. Lincoln: University of Nebraska Press, 2015. 305 pp.Walker's comprehensive history is of the often-times stormy relationship between the radio broadcast industry and Major League Baseball (MLB). Walker offers a detailed chronology of that history, beginning with the broadcast of a major league game on August 5, 1921, on KDKA, Pittsburgh. KDKA engineer Harold Arlin gave the first play-by-play commentary that afternoon during a Pirates-Phillies game. That broadcast ushered in the beginning of the marriage between baseball and broadcasting, a relationship that has been tumultuous throughout its history, but one that helped to shape both the sport and radio industry.Walker focuses on MLB team owners, the MLB commissioner's office, and the pioneers of radio, who negotiated how the sport would be distributed to a public eager for access to the national pastime. There were visionaries, such as the Chicago Cubs' owner William Wrigley and Cubs President Bill Veeck, who saw the advantages of broadcasting games. They viewed radio as a vital instrument for increasing interest in the team and for fueling game attendance. Other owners, however, saw radio (at least initially) as a threat to box office receipts. Yankees owner Jacob Ruppert and the team's Chief Executive Ed Barrow were among the majority of major league owners and representatives who shunned radio and took actions to keep broadcasters out of their ballparks. The Yankees formed a pact with the other New York teams (the Giants and Dodgers) to initiate a 5-year ban on radio broadcasts of games. World Series games, however, were different, and MLB Commissioner Kenesaw Mountain Landis appointed himself chief negotiator in striking deals with sponsors, such as the Ford Motor Company and the Gillette Safety Razor Company, to be among the first to advertise via World Series broadcasts.As Walker explains, commercialization and sponsorships were major forces in the proliferation of baseball on the radio. Until night baseball became standard in the Major Leagues, sponsorships were limited to the audience that MLB daytime broadcasts were reaching: women and children. It is no wonder, then, that General Mills cereals were the major sponsors of MLB games on the radio. MLB and its broadcasters, however, desired another demographic, and that was men, ages 25 to 54. But day jobs kept many in that demographic from listening to MLB broadcasts and kept potential sponsors who targeted that demographic from supporting those broadcasts. Those sponsors included cigarette makers and breweries, and those sponsors grew as night baseball expanded in the late 1940s and 1950s. Although baseball broadcasts became increasingly commercialized, legal, social, and technological developments also affected the baseball-radio dyad. Baseball's anti-trust exemption, the Radio Act of 1927, the Communications Act of 1934, the Great Depression, digitization, and the web, all affected the ways in which radio delivered MLB. …

Book Reviews

Andrew Zimbalist, a Robert A. Woods Professor of Economics at Smith College reviews “Baseball on Trial: The Origin of Baseball's Antitrust Exemption”, by Nathaniel Grow. The Econlit abstract of this book begins: “Analyzes recently released documents from the National Baseball Hall of Fame to trace the Federal Baseball litigation from 1914 to 1922 in order to explain how the Supreme Court reached its decision in the Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs case. Discusses the rivalry beginning in 1913; the opening salvos--December 1913 to June 1914; the Federal League striking back--June 1914 to December 1914; the Landis case--January 1915; the long wait--February 1915 to February 1916; an aborted trial--February 1916 to June 1917; Baltimore going to trial, again--June 1917 to April 1919; the defense and verdict--April 1919; and the appeal and final decision--May 1919 to October 1922. Grow is Assistant Professor of Legal Studies in the Terry College of Business at the University of Georgia.”

Baseball on trial: the origin of baseball's antitrust exemption

The controversial 1922 Federal Baseball Supreme Court ruling held that the business of base ball was not subject to the Sherman Antitrust Act because it did not constitute In Baseball on Trial, legal scholar Nathaniel Grow defies conventional wisdom to explain why the unanimous Supreme Court opinion authored by Justice Oliver Wendell Holmes, which gave rise to Major League Baseball's exemption from antitrust law, was correct given the circumstances of the time. Currently a billion dollar enterprise, professional baseball teams crisscross the country while the games are broadcast via radio, television, and internet coast to coast. The sheer scope of this activity would seem to embody the phrase interstate commerce. Yet baseball is the only professional sport--indeed the sole industry--in the United States that currently benefits from a judicially constructed antitrust immunity. How could this be? Drawing upon recently released documents from the National Baseball Hall of Fame, Grow analyzes how the Supreme Court reached this seemingly peculiar result by tracing the Federal Baseball litigation from its roots in 1914 to its resolution in 1922, in the process uncovering significant new details about the proceedings. Grow observes that while commerce was measured at the time by the exchange of tangible goods, baseball teams in the 1910s merely provided live entertainment to their fans, while radio was a fledgling technology that had little impact on the sport. The book ultimately concludes that, despite the frequent criticism of the opinion, the Supreme Court's decision was consistent with the conditions and legal climate of the early twentieth century.

The baseball trust: a history of baseball's antitrust exemption

Introduction 1. The Reserve Clause 2. The Baseball Trust 3. The Supreme Court Steps In 4. The Birth of the Antitrust Exemption 5. Baseball Becomes Unique 6. A Political Football 7. Three Months of State Antitrust Law 8. The Curt Flood Case 9. The End of the Reserve Clause 10. A Shrunken Exemption

In Defense of Baseball's Antitrust Exemption

This Article challenges the overwhelming scholarly consensus opposing baseball’s historic antitrust exemption on policy grounds by providing the first comprehensive defense of the exemption. The Article does so by advancing two primary arguments: first, it argues that the common criticisms of the baseball exemption are largely without merit. Specifically, given the treatment of the other major professional sports leagues under antitrust law, simply exposing baseball to antitrust liability alone will not yield the benefits that the exemption’s critics believe, and in some cases would actually harm the public interest. Second, and perhaps more importantly, the Article argues that the existing literature has overlooked significant pro-competitive benefits that result from baseball’s antitrust exemption. Specifically, because baseball is loath to lose its exemption legislatively, Congress has been able to use threats of revocation to help extract a variety of valuable concessions from Major League Baseball (MLB). These concessions provide pro-competitive benefits that would not have been directly obtained through antitrust litigation alone. Perhaps most notably, every single round of league expansion in MLB history has been directly preceded by a Congressional threat to revoke the sport’s antitrust exemption. Therefore, baseball’s antitrust exemption provides Congress with considerable leverage over the sport, ultimately leading to significant, but heretofore overlooked, pro-competitive benefits for the public. Thus, this Article rejects the existing scholarly consensus, and concludes that baseball’s antitrust exemption ultimately has a net pro-competitive effect.

Congressional complicity in the baseball antitrust exemption: analysing senate voting patterns

This article examines a key congressional vote on preserving baseball's antitrust exemption. It finds that the most important factor influencing a legislator's vote was whether there was a Major League Baseball (MLB) team in the legislator's constituency. This supports the notion that the professional sports industry has been effective in ‘capturing’ their political overseers.

D.C.'s Latest Baseball Team to Unveil New Home

D.C.'s Latest Baseball Team to Unveil New Home

National Pastime: How Americans Play Baseball and the Rest of the World Plays Soccer (review)

Reviewed by: National Pastime: How Americans Play Baseball and the Rest of the World Plays Soccer Ron Briley (bio) Stefan Szymanski and Andrew Zimbalist. National Pastime: How Americans Play Baseball and the Rest of the World Plays Soccer. Washington DC: Brookings Institution Press, 2005. 263 pp. Cloth, $26.95. I must confess to initial disappointment with this fine volume from economists Stefan Szymanski and Andrew Zimbalist. I teach at a prep school that has earned over a dozen state soccer championships, and my own children [End Page 134] play on youth soccer leagues. I have seen hundreds of soccer games, but I still simply do not understand the game's appeal. In rural West Texas, I grew up playing baseball, while soccer was perceived during the Cold War years of the 1950s and 1960s as some type of dangerous foreign import. After all, soccer was played in communist nations. Szymanski and Zimbalist do not explain the appeal of soccer to a baseball purist, but after reading this volume I do have a better comprehension of why and how soccer evolved into the world's most popular sport. Economists Szymanski and Zimbalist focus upon the histories of soccer and baseball as professional games and analyze the challenges confronting the two sports in the twenty-first century. Baseball scholars will be familiar with the arguments presented by Zimbalist in works such as Baseball and Billions and May the Best Team Win: Baseball Economics and Public Policy. On the other hand, many readers of NINE may be less familiar with the scholarship of Szymanski, who teaches economics at the Tanaka Business School, Imperial College London and is the author of Winners and Losers: The Business Strategy of Football. His insights regarding soccer will expand the horizons of many baseball historians. The authors argue that sport reflects culture and that the gulf between American and European values is most apparent in the histories of professional soccer and baseball. Both games developed during the nineteenth century. The model pioneered by the founders of baseball's National League provided for closed sports leagues. Ownership controls the number of franchises and territorial expansion. Strict limitations are placed on player rosters to keep costs down. In addition to baseball's antitrust exemption, public subsidies are often extracted for stadium construction. Essentially, this is a monopoly formula much at odds with the American rhetoric of free enterprise. World soccer, on the other hand, is based upon the English model in which leagues are open. Depending upon a team's performance, it is possible to move up and down within league hierarchies. This more competitive model owes its origins, according to Szymanski and Zimbalist, to the conflict between amateurism and professionalism within English soccer. This division was papered over with a unified governing body (Football Association), which maintained that clubs were "foremost sporting entities, not profit centers" (p. 5). The competitive nature of soccer as a business and sport in which a team's status in the top leagues is fluid has made many clubs and cities reluctant to invest in stadium construction. Most deaths at soccer matches are due to antiquated stadiums rather than fan violence. The authors, attempting to ascertain what is best for the fans of both sports, conclude that the monopoly structure of baseball will inevitably lead to the exploitation of fans and taxpayers, while [End Page 135] the more competitive nature of the soccer world results in financial pressures which threaten the future of clubs and leagues. With an emphasis upon profits and the nation getting a late start in the imperialist game, baseball monopolists in the United States saw little market incentive for expanding their game internationally. The expansion of soccer was fostered by British imperialism, and the game was adopted by locals who relished in beating the colonialists at their own game. Today, the governing body of world soccer, the Federation Internationale de Football Association (fifa), is a community of nations with 204 members. Baseball, on the other hand, is the national sport only in Japan, the United States, and the Caribbean region. In fact, baseball has been dropped as a sport for the 2008 Olympics. Recognizing the need to seek broader financial...

Baseball's Antitrust Exemption: Why It Still Matters

Major League Baseball has enjoyed a presumed, blanket exemption from the nation's antitrust laws since 1922. The other team sports have no such protection, and baseball's reserve clause has been in history's dustbin since 1976. (1) Does the exemption still matter? Yes, and here are some reasons why. MLB has not faced a rival league since 1915. Its exemption has insulated the industry from legal challenges to its restrictive practices. When baseball abuses its power, the injured parties are not entitled to call for judicial review along with discovery of evidence. Over time this circumstance has led to a management culture of laxity, inefficiency, and arrogance. Evidence of this culture still persists. For instance, home field advantage in the 2003 World Series was decided for the first time by the winner of the All-Star Game. Why? Not because it made any logical or competitive sense, but because baseball was desperately grasping for a way to boost its flagging television ratings for the midseason classic. The gambit, by the way, seems to have failed: 2003 All-Star Game ratings and share were identical to the record low ratings in 2002. Worse still, the ratings among the crucial eighteen- to thirty-four-year-old male demographic were down 9.7 percent relative to 2002. The pattern here is well established. Grab for the proximate dollar and never mind about the long-term consequences. Or consider the revealing message in Michael Lewis's new book Moneyball: The Art of Winning an Unfair Game. For decades baseball teams' front offices were run by good old boys who followed a dubious lore of player evaluation as if it were catechism. The enlightening statistical analyses of the game by innovators like Bill James went ignored until Sandy Alderson in Oakland decided that his team could benefit from James's insights in the mid-1990s. And benefit they did, creating a first-class competitive team on a shoestring budget.(2) Or take the absence of a Major League team in our nation's capital, the eighth largest media market. The NFL, NBA, and NHL, all without antitrust exemptions, have teams in Washington DC, but not baseball. Over the years MLB has offered several arguments in defense of its league's presumed antitrust exemption. First, until 1977 MLB maintained that the player reserve system was essential to preserve competitive balance in baseball and that the exemption permitted the industry to maintain this labor market restriction. Yet the reserve system simply affected whether monopoly rents went to the owners or to the players. It did not equalize the distribution of player talent. In fact, with free agency it became more expensive to hold together a winning team and easier for a weak team to turn around its fortunes. Thus, after the reserve system was eliminated, competitive balance in baseball actually improved. So much for defense number one. COMMISSIONER'S POWER Second, MLB asserted that it did not need to be regulated administratively or subjected to competitive pressure because, through its independent commissioner, it self-regulated effectively. The commissioner's power to act in the game's best interests, the argument went, was the only stewardship needed to prevent exploitation of the consumer or dynamic inefficiency. To be sure, commissioners had a small degree of wiggle room until the dismissal of Commissioner Fay Vincent in 1992. But it was only very modest wiggle room. The few commissioners who tried to exercise true independence were usually dispensed with in short order by unappreciative owners. Since 1992, however, the commissioner has been an owner. Any claim that Mr. Selig behaves as anything other than a CEO strains credulity. NO PROFIT MEANS NO MONOPOLY Third, the owners have claimed that MLB is not really a monopoly and that the absence of profitability proves it. Rather, this argument goes, baseball is one of many games in the sports industry and one of an even greater number of companies in the entertainment industry. …

Regulating the national pastime: baseball and antitrust

Major League Baseball, alone among industries of its size in the United States, operates as an unregulated monopoly. This 20th-century regulatory anomaly has become known as the baseball anomaly. Major League Baseball developed into a major commercial enterprise without being subject to antitrust liability. Long after the interstate commercial character of baseball had been established and even recognized by the Supreme Court, baseball's monopoly remained free from federal regulation. Duquette explains the baseball anomaly by connecting baseball's regulatory status to the larger political environment, tracing the game's fate through four different regulatory regimes. The constellation of institutional, ideological, and political factors within each regulatory regime provides the context for the survival of the baseball anomaly. Duquette shows baseball's unregulated monopoly persists because of the confluence of institutional, ideological, and political factors which have prevented the repeal of baseball's antitrust exemption to date. However, both the institutional and ideological factors are fading fast. Baseball's owners can no longer claim special cultural significance in defense of their exemption. Nor can they credibly claim that the commissioner system approximates government regulation effectively. Both of these strategies have been discredited by the labor unrest of the 1980s and 1990s. Duquette provides a unique perspective on American regulatory politics, and by explaining a complicated story in comprehensive prose, he has given researchers, policy makers, and fans a fascinating look at the business of baseball.

"A Derelict in the Stream of the Law": Overruling Baseball's Antitrust Exemption

"A Derelict in the Stream of the Law": Overruling Baseball's Antitrust Exemption

Legal bases: baseball and the law

Preface Introduction 1. The Legal Process at the Birth of Baseball: John Montgomery Monte Ward 2. The Enforcement of Contracts: Napoleon Nap Lajoie 3. Baseball's Antitrust Exemption: Curt Flood 4. Collective Bargaining: Marvin Miller 5. The Owners and the Commissioner: Branch Rickey and Charles O. Finley 6. Labor Arbitration and the End of the Reserve System: Andy Messersmith 7. The Collusion Cases: Carlton Fisk 8. The Crimes of Baseball: Pete Rose 9. Baseball's Labor Wars of the 1990s: Sonia Sotomayor Conclusion Notes Bibliography Index