Ninth Circuit affirms Major League Baseball's antitrust exemption

The Ninth Circuit Court of Appeals upheld in a written ruling last week the dismissal of the City of San Jose's antitrust challenge to the Major League Baseball's ("MLB") delay in deciding whether to approve the Oakland Athletics' move to San Jose, which is within the exclusive operating territory of the San Francisco Giants. The Ninth Circuit held that antitrust claims against MLB's relocation policy are barred by "the baseball industry's 92-year old exemption to the antitrust laws," which was characterized by the Ninth Circuit as "one of federal law's most enduring anomalies.

The Ninth Circuit stated its ruling was premised on three 20th-century Supreme Court cases involving the baseball antitrust exemption.

• First, the Supreme Court, reflecting the era's soon-to-be-outdated interpretation of the Commerce Clause, held in Federal League Baseball Club of Baltimore v. National League of Baseball Clubs, 259 U.S. 200 (1922), that the Sherman Act had no application to the "business of giving exhibitions of base ball" because such "exhibitions" are "a purely state affair."
• Second, the Supreme Court in Toolson v. New York Yankees, 346 U.S. 356 (1953), held that while Federal League's Commerce Clause underpinning was no longer good law, Congress had that ruling under consideration and had "not seen fit to bring [baseball] under the [antitrust] laws by legislation."
• Finally, the Supreme Court in Flood v. Kuhn, 407 U.S. 258 (1972), once again upheld the baseball exemption in what the Ninth Circuit characterized as a "lengthy, reasoned opinion." The Flood Court noted "the confusion and retroactivity problems that inevitably would result with the judicial overturning of Federal Baseball" and again stated its "preference that if any change is to be made, it come by legislative action."

The Ninth Circuit stressed that its ruling did not mean that all antitrust suits that touch on the baseball industry are barred. For example, "there might be activities that MLB and its franchises engage in that are wholly collateral to the display of baseball games, and for which antitrust liability may therefore attach." However, the Ninth Circuit then flatly stated: "San Jose does not – and cannot – allege that franchise relocation is such an activity."

So what is the significance of the Ninth Circuit's ruling? As The Wall Street Journal reports, "Baseball is the only sport with an antitrust exemption, which frees the league, at least in some circumstances, from laws that restrict firms in other industries from engaging in anticompetitive restraints of trade. Today one primary benefit to MLB is that it can rely upon the exemption in blocking teams from moving."

San Jose will likely appeal the ruling to the United States Supreme Court. And The Wall Street Journal says that at least one current justice has spent some time thinking about the antitrust exemption: Samuel Alito, a noted baseball fan who roots for the Philadelphia Phillies. The Wall Street Journal noted: "Justice Alito gave a historical lecture on the subject in 2008. The justice in his presentation acknowledged widespread criticism of the original 1922 ruling, but said the decision was a "fairly orthodox application of constitutional doctrine at the time."

Stay tuned to see if the Supreme Court decides to hear the case and, if so, whether the justices continue to uphold the exemption or instead rule that baseball's 92-year-old run around the antitrust laws should end.