Major League Baseball ("MLB") and antitrust seem destined to remain intertwined forever. On June 18, 2013, hoping to sack MLB's antitrust exemption (which we will delve into later in this post), the city of San Jose filed an antitrust lawsuit against MLB in federal district court seeking a court order barring MLB from prohibiting the relocation of the Oakland Athletics ("A's").
The complaint filed by San Jose alleges that both the MLB's franchise relocation policies and the league's failure to approve the A's relocation to the city, violate state and federal antitrust law. MLB has not yet rejected the A's relocation but has rules in place allowing it to control any such move. All MLB relocations must be approved by at least three-quarters of MLB teams and each team has veto power to prevent another franchise from relocating to their home territory. According to the complaint, part of the reason the move has not been approved is because the move would place the A's in the San Francisco Giants defined territory. San Jose alleges those rules violate the Sherman Antitrust Act and that the delay in the relocation process has cost the city millions of dollars.
Unfortunately for the city of San Jose, baseball is the only sport that enjoys a federal antitrust exemption. The first case to issue this exemption was the 1922 Supreme Court decision in Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, et al., 259 U.S. 200 (1922). Justice Oliver Wendell Holmes, writing for the majority, stated, "personal effort, not related to production, is not a subject of commerce", therefore precluding baseball from federal regulation. The Supreme Court upheld this ruling in two subsequent decisions in 1953 and most notably in its 1972 decision of Flood v. Kuhn, 407 U.S. 258 (1972). Curt Flood challenged the "reserve clause" adhered to by MLB which prevented him from negotiating with another team for one year after his contract expired. The Supreme Court ruled in favor of MLB and upheld its antitrust exemption, but in doing so admitted that the exemption was questionable at best. This rationale eventually led to the nullifying of the reserve clause and free agency was born.
However, the elimination of the reserve clause has little to do with San Jose's current lawsuit. What remains from the Flood decision is the antitrust exemption, and that exemption creates an uphill battle for the city of San Jose. As noted by legal scholars, the city's best argument may come by way of an Eastern District of Pennsylvania case Piazza v. Major League Baseball, No. 92-7173, 1993 U.S. Dist. LEXIS 10552 (E.D. Pa. Aug 4, 1993). The Piazza court interpreted Flood as only protecting the "reserve clause" from antitrust scrutiny and allowed plaintiffs' antitrust claims against MLB to proceed. Nevertheless, subsequent courts have disregarded the Piazza decision when ruling on baseball's antitrust exemption.
Even if the city of San Jose set forth an argument worthy of consideration by the Supreme Court to overturn MLB's antitrust exemption, would that be the ultimate result they are hoping for? One would think not. It only makes sense for San Jose to bring this suit if they are keen on obtaining a franchise that has the potential to make the city money. The opportunity to nullify a flawed Supreme Court decision would mean little if the city was not awarded the Athletics. With that being said, San Jose's best hope is a settlement that preserves baseball's antitrust exemption but grants them the ability to call the Athletics their own.
The complaint filed by the city of San Jose can be found here.