The Sherman Antitrust Act is one of the most important pieces of legislature which impacts our daily lives. As critical as it’s been to us, MLB’s exemption from being subject to the law is equally critical. It’s allowed baseball owners to manipulate their own market, especially in the minor leagues to suppress salaries and increase profits.
Now, the most serious challenge to MLB’s protection has been launched by senator Bernie Sanders. Appearing on HBO’s Real Sports With Bryant Gumbel, Sanders announced he was introducing the “Save American Baseball Act,” which would strip MLB of its Sherman Act protections.
The legislation is designed to take away the anti-competitive protections baseball has been granted for over a century, allowing for competition to exist in the space — with an end goal of returning the sport to the individuals and families who have been priced-out of seeing games by MLB’s practices.
“It is an outrage that they imposed a 99-day lockout on players,” Sanders said, “And I think they were attempting to break the union.” The senator went on to point out that while profits inside baseball have soared to unprecedented levels, nothing is being given back to the fans.
“To my mind, it was an outrage that over the last several years, they have eliminated Minor League Baseball in 40 communities all over this country. You know, so we had one in Burlington, Vermont. Kids come and for five bucks, you know, fans can get close to the players, enjoy baseball. They eliminated that.”
The bill is yet to find a co-sponsor, however Sanders is confident the Save American Baseball Act will eventually find bipartisan support. How vial is all this to the future of baseball? How can a single piece of legislation alter the entire sport?
The Sherman Act, and what exemption means for MLB
Signed into law in 1890, the Sherman Act grants the federal government the ability to dissolve private trusts in clear incidents of collusion or price fixing. It also allows those damaged by anti-competitive practices to pursue treble damages in civil litigation, which results in a payment of three-times the financial impact of these practices.
Put into very simple terms: Imagine you went to the store to buy a gallon of milk. The cost is a whopping $7. Every brand is equally $7 — there is no place around you to buy milk for less than that price. It turns out the dairy industry colluded to ensure every brand set the price equally, in order to remove competition and maximize profits. In this example you would have the right to sue the dairy industry, and if found guilty you would make three times your damages, plus legal costs.
Obviously this is a small, simplistic example, but this is the scenario the Sherman Act presents. It protects the products we buy, the commodities we need, and even ensures a free market for salary and compensation. If there were no antitrust laws then every company could agree to pay half of your salary for your position, and you’d essentially have no company that would pay you competitively.
That is exactly what’s happening, particularly in minor league baseball. In 1922, the case of Federal Baseball Club v. National League heard before the Supreme Court established that Major League Baseball is not an example of interstate commerce. The verdict found that baseball was purely a business inside its own state, and didn’t cross lines — which may have applied back in 1922, prior to media deals and international marketing, but the concept is ludicrous now.
Still, baseball has benefitted from not having to adhere to the Sherman Act. As a result of Federal Baseball Club v. National League, MLB was granted the right to maintain a monopoly over professional baseball which allowed them to fix salaries, collude on pricing, and guarantee no competition could survive.
The decision is seen as a relic. No other organization in American sports is afforded the same right. The NFL, NBA, NHL and NCAA all have to operate under antitrust law — although the NFL has an exemption for its national television deals. MLB’s arrangement even prompted Justice Neil Gorsuch to point out back in 2016 when he was on the 10th Circuit Court of Appeals that Federal Baseball Club v. National League is contrary to the letter, and spirit of the law, saying:
“[it] manage[s] to survive indefinitely even when surrounded by a sea of contrary law…. [that] would never expand but would, if anything, wash away with the tides of time.”
This feels as if Gorsuch would at least be receptive to an argument to remove MLB’s antitrust protections when brought the Supreme Court again, which would be the final stop in the Save American Baseball Act, should it clear the house and senate. In the past the Supreme Court has been reluctant to remove MLB’s protections citing a need to preserve precedent, most recently in Flood v. Kuhn in 1972, which upheld MLB’s exemption.
We also understand that functionally it’s impossible to challenge a major sporting league in the United States when it comes to implementing competition. In football we’ve seen dozens of attempts over the years to launch alternative leagues to the NFL — and all have failed. However, the ability to launch competitive leagues is still in place. Someone can functionally try to create their own league. This does not happen in baseball, for good reason.
The exemption from the Sherman Act would allow baseball owners to blackball, or ban anyone participating in a rival league without fear of legal reprisal. Players, manufacturers, anyone associated with a rival league could find the proposition of joining a rival league impossibly risky for fear of losing out on a baseball career all together. It’s how MLB has kept an iron grip on the sport since its inception.
How removal of antitrust protections would alter baseball
We have a tendency to look at moves like this from a macro level, focusing solely on MLB itself. The real difference would be seen in Minor League Baseball, where the players are exploited the most, and smaller communities suffer.
Negotiations would be wide open if owners could no longer collude on MiLB salaries. This would cause significant headaches to those in power, who would now need to honestly, and fairly negotiate contracts. The likely outcome of this pressure would be to allow minor league players to unionize, so collective bargaining would allow for salary minimums to be adopted and negotiations proceed more smoothly.
This would lead to increased transparency on the operating incomes of minor league teams, which have often been obfuscated so owners can poor mouth, claiming they are losing money on minor league teams. In 2019, MLB announced that numerous minor league teams would be dissolved to increase the profitability of baseball, a move that garnered swift condemnation from Congress. A letter signed by over 100 members of the House to MLB Commissioner Rob Manfred stated:
“Reducing the number of Minor League Baseball clubs and overhauling a century-old system that has been consistently safeguarded by Congress is not in the best interest of the overall game of baseball, especially when Major League Baseball’s revenues are at all-time highs.”
Still, MLB proceeded with its plan. As a result there will be fewer playing jobs available in minor league baseball, with salaries still restricted. All while dozens of smaller communities lose their local teams.
In addition, removing salary collusion would have a mammoth impact on Major League Baseball. Even with swelling salaries, the owner’s club has ensured these figures remain in check. Losing antitrust protection could be hugely damaging if teams are found to be colluding on contract offers, especially when we’re talking potential league damages trebling in the tens and hundreds of millions, rather than our small milk example earlier.
With a true free market in place, player salaries would go up. The highest-earning teams would become the biggest spenders, forcing MLB to either adopt a salary cap similar to the NFL, or a luxury tax system akin to than in the NBA. That is, assuming the baseball wants to preserve any semblance of competitive balance.
It’s not outside the realm of possibility that in this scenario the cheapest, most tight-pursed owners who run teams only as a cash cow, without any desire to actually win games, would then be forced to sell — lest they be forced to pay more in contracts. This in turn would increase parity in baseball.
This actually sounds like a really big deal …
It is. MLB has been terrified of losing its antitrust protections for this reason. It’s been part of the unfair fabric of baseball for over a century, and owners will not give up without a fight.
However, there might not be much fight left. If Senator Sanders can find the bipartisan support he expects of the “Save American Baseball Act” and it makes it to a 21st century Supreme Court willing to remove the exemptions, we could see a huge shift in the landscape of both major, and minor league baseball for the better.
The only people who lose out in this scenario are the billionaire owners who have controlled the sport and suppress competition. This should be profoundly exciting, and something to watch for every baseball fan as they see this legislation work through the system.