San Jose Takes Its Hacks Against Baseball

City Challenges MLB's Antitrust Exemption in Effort to Help Oakland Athletics Relocate

April 6, 2014
Wall Street Journal

Baseball's long-criticized antitrust exemption is the knuckleball of Supreme Court precedent: It appears vulnerable to attack, but challengers keep striking out.

Now city officials in San Jose, Calif., are taking their turn at bat in the most notable legal challenge to baseball's exemption in a generation—one that could ultimately swing back to the Supreme Court's doorstep.

The city, seeking to clear the way for the Oakland Athletics baseball club to move to San Jose, filed an antitrust lawsuit against a resistant Major League Baseball last year. It argues the exemption, which dates to a 1922 Supreme Court ruling, has outlived any logic that once supported it. At the very least, the city says, the exemption shouldn't apply to common commercial issues like the relocation of a business.

San Jose lost an initial round of litigation, but a U.S. appeals court surprised some observers by granting the city's request to fast-track the case, setting the stage for a potential ruling in the middle of the baseball season. If it loses at the appeals level, "San Jose is prepared to take its case to the Supreme Court," says Philip Gregory, a lawyer representing the city. "We are confident the justices will see the folly of treating Major League Baseball differently from all other professional sports."

San Jose alleges the league and team owners have colluded to prevent the A's from relocating because the league has made the San Jose market the exclusive territory of a competing franchise: the San Francisco Giants.

"That is not what our antitrust laws allow for any business in America, and it should not be allowed here," Mr. Gregory says.

Major League Baseball, which hasn't given the A's permission to move, says that the land offered by San Jose isn't enough to build a stadium and notes that the city hasn't offered to help fund construction.

In court papers filed late Friday with the 9th U.S. Circuit Court of Appeals, the league says its rules "regarding league structure, operating territories and team relocation are at the core of the business of baseball and thus are covered by the antitrust exemption." In defending its ability to determine where teams locate, MLB quoted a judge in a past antitrust case who said being a legally sanctioned monopoly means having "the power to decide who can play where."

The league declined to comment, citing the continuing litigation. The A's, which aren't a party to the case, also declined to comment.

In October, U.S. District Judge Ronald Whyte dismissed San Jose's lawsuit, saying he was bound to follow a trilogy of Supreme Court cases that established and preserved baseball's privileged place in the law. But even as he tossed the case, Judge Whyte said he agreed with past critics who found baseball's antitrust exemption "an aberration that makes little sense" today.

Baseball is the only sport with an exemption from the antitrust laws, the product of a unique run through the legal system that began in a different era of the sport—and the courts. In 1922, the Supreme Court held that federal antitrust law didn't apply to baseball because the game was a local affair, not interstate commerce.

In the following years, it became increasingly clear that baseball was in fact a big interstate business. And at the Supreme Court, the justices in other cases began embracing a broader view of the types of commerce that were subject to federal regulation.

Nevertheless, the court in 1953 and 1972 decided against bringing baseball under the antitrust laws, even as it allowed antitrust lawsuits against other sports. For example, the court in 2010 said the National Football League could be sued by an apparel maker over its licensing arrangements.

The court's later opinions said that even if the 1922 ruling was questionable, overruling it could be harmful, given that baseball had built its business around the rules the high court had announced. Any such changes should come from Congress, the court said in both cases.

The justices haven't touched the issue since, though the court in recent years hasn't been shy about revisiting past precedents in other areas, including in a ruling last week that was the latest to chip away at a longstanding campaign-finance precedent. Antitrust law hasn't been immune: The court in 2007 overruled a century-old precedent on retail-pricing agreements.

The court's baseball rulings are among the most widely criticized decisions that remain good law. The 1922 opinion "has been pilloried pretty consistently in the legal literature since at least the 1940s," Justice Samuel Alito said in a speech to the Supreme Court Historical Society in 2008, though he suggested the ruling was consistent with the legal thinking of the time. One justice who sided with baseball in the 1953 ruling later said he had "lived to regret it."... (To read the entire article, please click HERE)