When one business believes a larger, domineering competitor is abusing its market position to drive it out of business, the normal next step would be to file an antitrust lawsuit under the Sherman Act. But professional baseball enjoys a unique privilege. In the 1922 case Federal Baseball Club v. National League, the Supreme Court ruled that professional baseball is naturally exempt from the Sherman Act because it does not involve interstate commerce.
“The business is giving exhibitions of baseball, which are purely state affairs,” Justice Oliver Wendell Holmes wrote for the court. “It is true that, in order to attain for these exhibitions the great popularity that they have achieved, competitions must be arranged between clubs from different cities and states. But the fact that, in order to give the exhibitions, the Leagues must induce free persons to cross state lines and must arrange and pay for their doing so is not enough to change the character of the business.”
While the court’s approach to antitrust law and interstate commerce changed over the decades that followed, the 1922 ruling remained intact. The Supreme Court upheld it 31 years later in Toolson v. New York Yankees. Minor league player George Toolson wanted to play in the major leagues but was bound to the Yankees and their farm teams by a reserve clause in his contract. (Free agency would not exist for another two decades.) To break the clause, Toolson unsuccessfully brought a restraint-of-trade lawsuit against the Yankees.
The Supreme Court ultimately dispensed with it in a short, unsigned opinion. The seven justices in the majority concluded that baseball’s antitrust exemption remained intact because Congress had not seen fit to legislate it away in the decades since the Federal Baseball Club ruling. “We think that, if there are evils in this field which now warrant application to it of the antitrust laws, it should be by legislation,” the court wrote.
Baseball’s antitrust immunity stands out even among the other pro sports leagues, for which the court did not extend its logic. The other three major professional sports, for example, have enjoyed a limited form of antitrust immunity for selling the broadcast rights to their games under the Sports Broadcasting Act of 1962. Congress has typically only granted such immunity in exchange for other restrictions—the 1962 law, for example, forbids the NFL from televising pro football games on Fridays and Saturdays to avoid competing with high school and college football. The NCAA, as I’ve noted before, is also currently seeking its own antitrust exemption after a series of major legal defeats over the past decade.