Federal Baseball Club v. National League
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Federal Baseball Club v. National League (full case name: Federal Base Ball Club of Baltimore, Inc. v. National League of Professional Base Ball Clubs et al., 259 US 200), often called the Federal Baseball Ruling, was a case in which the U.S. Supreme Court ruled that Major League Baseball was exempt from the provisions of the Sherman Antitrust Act. The case was argued on April 19, 1922 and decided on May 29, 1922 with Justice Oliver Wendell Holmes, Jr. delivering the unanimous majority opinion.
In 1914, the Federal League declared itself to be a third major league in competition with the National and American Leagues. In addition to competing for players and at the ticket office, the Federal League filed an antitrust lawsuit against the existing leagues. The Major Leagues responded with a series of lawsuits intended, at least in part, to drive up the Federals' expenses. The Federal League filed its lawsuit in the Northern District of Illinois court where a Judge Kenesaw Landis sat on the bench. He was well known for his strong antitrust rulings including the famed Standard Oil trial in 1907. Unfortunately for the Federals, Landis was also a baseball fan, and delayed the case in the belief that the parties would eventually be forced to reach a settlement.
Landis's judgment was correct; the Federal League never reached profitability, and after the 1915 season the majority of its owners decided to come to terms with the major leagues. Two Federal League owners, Charles Weeghman of the Chicago Whales and Phil Ball of the St. Louis Terriers, were allowed to buy existing major league teams, the Chicago Cubs and St. Louis Browns, respectivly. The remaining owners were offered a buyout; 5 of the 6 teams accepted the money, with the ownership group of the Baltimore Terrapins the lone holdout.
Abandoned by the other owners, and with the original antitrust suit settled as part of the agreement, the Baltimore owners decided to launch their own antitrust suit against the established leagues and their fellow Federal League owners claiming that they had conspired to form a monopoly on baseball by destroying the Federal League. Baltimore won in district court with damages of $80,000 assessed; this was then tripled to $240,000 under the provisions of the Clayton Act. On appeal, the Court of Appeals reversed the verdict, and held that baseball was not subject to the Sherman Act because it did not constitute a form of interstate commerce. The team then appealed to the Supreme Court.
The Supreme Court unanimously upheld the appeals court ruling, siding with the established leagues. Contrary to popular belief, the basis for the Court's judgment was not that Baseball was a form of entertainment rather than trade. Instead, the court ruled that "the business is giving exhibitions of base ball, which are purely state affairs" and that therefore that baseball did not classify as interstate trade, and hence Congress had no power to regulate it. According to the Court's logic, the interstate travel of players and fans being was "incidental" to the business of the game rather than essential to its nature. According to established precedent (Hooper v. California 155 U.S. 648, 655), such "incidental" involvement of interstate travel was not sufficient to make baseball interstate trade.
Although the Supreme Court subsequently refused to apply the Federal Baseball logic to other professional sports leagues, it also refused to overturn the Federal Baseball ruling. In Toolson v. New York Yankees (1952), the Court decided to let the existing ruling stand because baseball had built its business under the impression that it was not covered by antitrust law and suddenly applying it would be unfair. It also argued, rather illogically, that Congress had not seen fit to apply antitrust law to baseball, even though the original exemption was created by the Court rather than by Congress. In Flood v. Kuhn (1972), the Court continued to uphold the precedent, though it described it as "anomalous" and suggested that Congress should change the laws to apply to baseball. It took another quarter century after the Flood ruling for Congress to remove any part of baseball's special status; the Curt Flood Act of 1998 applied antitrust law to baseball but only in labor matters. The Flood Act thus entrenched the remainder of baseball's exemption from antitrust law.
- Samuel A. Alito, Jr.: "The Origins of the Baseball Antitrust Exemption: Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Players", in The Baseball Research Journal, SABR, Volume 38, Number 2 (Fall 2009), pp. 86-93.