Federal and state antitrust laws protect businesses from unfair and anticompetitive practices by other businesses that compete with them in the market. Another view of these laws is that they prevent businesses from operating in a way that promotes profitability and success. Which view a particular business takes tends to depend on the situation in which it finds itself. Several federal courts, including the Ninth Circuit Court of Appeals, have recently ruled on how antitrust laws affect certain athletic organizations, producing a variety of holdings. Some rulings have held that antitrust laws do not apply to professional baseball because of an exemption recognized by the Supreme Court, but the exemption depends on the issue in dispute.
Bay Area Baseball
Major League Baseball (MLB) limits each team to a designated geographic area for “home” games. In the case of the Oakland Athletics, or the “A’s,” this area consists of Alameda and Contra Costa Counties. The team reportedly wants to move to San Jose, which is located in the exclusive territory of the San Francisco Giants. Moving the A’s to San Jose would require approval by at least three-fourths of all MLB clubs. The A’s requested this approval as early as 2009. After four years of allegedly little to no progress, the City of San Jose sued the MLB commissioner, alleging violations of the Sherman Antitrust Act, 15 U.S.C. § 1, et seq., and several state-law claims.
The district court granted MLB’s motion to dismiss the antitrust claims. City of San Jose, et al. v. Comm’r of Baseball, et al., No. 5:13-cv-02787, order (N.D. Cal., Oct. 11, 2013). It held that the relocation of a baseball club is part of the “business of baseball,” recognized as exempt from antitrust laws by the U.S. Supreme Court. Id. at 2-3, citing Fed. Base Ball Club of Baltimore v. Nat’l League of Prof. Base Ball Clubs, 259 U.S. 200 (1922); Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953); and Flood v. Kuhn, 407 U.S. 258 (1972). The Ninth Circuit affirmed the ruling, holding that only the Supreme Court or Congress can overrule the holdings of the cited cases. 776 F.3d 686 (9th Cir. 2015). The Supreme Court denied the city’s petition for certiorari. 577 U.S. ___ (2015).
MLB Blackout Rules
A court on the other side of the country reached a different conclusion about the baseball exception in a class action challenging the “blackout rules” of MLB and the National Hockey League (NHL). Each team has a designated geographic area for purposes of live broadcasting. Within that territory, only regional sports broadcasters may air the games. National broadcast networks may air games outside that area. These rules are much stricter than other sports leagues, which might only impose a local “blackout” if a home game is not sold out.
A group of plaintiffs sued the NHL and MLB, along with various broadcasters and media companies, under the Sherman Act. The district court held that the baseball exemption does not apply to “territorial broadcasting restrictions.” Laumann, et al. v. NHL, et al., No. 1:12-cv-01817, order at 24 (S.D.N.Y., Aug. 8, 2014). The Second Circuit Court of Appeals denied the defendants’ petition for a writ of mandamus, leaving the case free to proceed to trial. In re Office of the Comm’r of Baseball, et al., No. 14-4233, slip op. (2d Cir., Jan. 28, 2015).
For nearly 40 years, business litigation attorney James G. Schwartz has advocated for the rights of Bay Area businesses and business owners. To schedule an initial confidential consultation to see how we can help you or your business, contact us today online or at (925) 463-1073.
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Judge Rules that NCAA Rules Restricting Football and Basketball Players’ Compensation Violate Antitrust Law, Pleasanton Business & Commercial Law Blog, September 15, 2014
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