“More Than a Game”
Baseball enjoys a unique position, not just as America’s pastime but also in
United States law. Almost a hundred years ago, in 1922, when professional baseball was
a fledgling business, the Supreme Court determined that the sport was not interstate
commerce and therefore not subject to the Commerce Clause of the Constitution. As a
result, professional baseball remains the only sport exempt from the Sherman Antitrust
Act. For decades, baseball clubs were permitted to include a reserve clause in players’
contracts which prevented players from moving to another club without the permission of
their existing team, yet clubs could trade or move players freely. Although the reserve
clause has now been negotiated away, other aspects of trust-like behavior remain. For
instance, a club wishing to move to a new city must obtain the permission of other clubs
in the league. In 1922, when professional baseball was taking its first tentative steps
towards becoming the lucrative business it has become, its future economic viability was
in doubt, and the justices opted for a narrower application of the law than likely would
have been the case had Federal Baseball Club v. National League been argued years
later. In the decades since that original ruling, while the Supreme Court steadily
expanded the definition of interstate commerce, and along with that Congress’ authority
to regulate, it has refused to overturn the original judgment, instead arguing that Congress
was responsible for determining the extent of baseball’s antitrust regulation. Given what
the justices knew at the time, and in the context of when they made their ruling, the 1922
Court acted wisely, and its successors have shown admirable judicial restraint.
Major League Baseball first came to the attention of the Supreme Court in 1922 in
the case of Federal Baseball Club, when the Baltimore Terrapins, one of the teams of the
1
by-then defunct Federal League, brought an antitrust suit against the National and
American Leagues, arguing that the reserve clause in the National and American Leagues
players’ contracts violated the Sherman Act.i Players could not switch to the Federal
League even when given attractive offers because in their existing contracts their current
team reserved the right to rehire them the following season.ii Only if the team they
played for chose not to exercise that right were the players free to sign with another team.
Essentially, a player was “bound to a team for life.”iii As one of the lawyers in a later
case explained, the clause was like saying, “you're an American and have the right to
seek employment anywhere you like, but this right does not apply to baseball players."iv
Justice Oliver Wendell Holmes wrote the pithy opinion in Federal Baseball Club
v. National League, rejecting Federal Baseball Club’s request for an application of the
Sherman Act to baseball. In the text of its ruling, the Court cited Hooper v. California
(1895), an insurance case in which the Court decided that “insurance was not commerce”
and so could not be regulated as interstate commerce because “the transport is a mere
incident, not the essential thing.”v Holmes stated that “personal effort” is “not a subject
of commerce” and compared baseball players to “lawyers…argu[ing] a case or…[a]
lecture bureau sending out lecturers,” pointing out that lecturers and lawyers do not
engage in interstate commerce even if they travel to another state.vi The unanimous
opinion of the Court derived from a limited definition of interstate commerce, asserting
that an individual offering up his skills, even when across state lines, is not a commercial
activity subject to federal regulation. The judgment invoked the Commerce Clause to
explain that the federal government does not have jurisdiction over baseball and,
therefore, that the Sherman Antitrust Act did not apply. The assessment appears to be
2
straightforward, and it is significant that at this point there was no reference in the ruling
to an exception for baseball.
Many observers have criticized the decision for the apparent failure of the justices
to anticipate the future national and even international character of the sport. While in
1922 one could point to early indications that baseball was bigger than the game on the
field, the future of the business was hard to anticipate. Newspapers started covering
baseball in the 1860s, in the 1890s telegraph was used to broadcast games to bars, and in
1910 the movie industry purchased the rights to show highlights of the World Series.vii
The first radio broadcast of a game occurred in 1921, and the World Series went on the
air the next year.viii Therefore, the justices, although not omniscient, might reasonably
have anticipated that the business was more than “giving exhibitions of baseball,” as
Holmes had concluded.ix Even though there were some signs for big things to come for
Major League Baseball, few could tell in what direction it was headed - the billion dollar
business it is today or another failed enterprise like the National League’s other by-then
defunct competitors.
The Justices who heard the case had differing levels of interest in
baseball. William Howard Taft, the only justice nominated by newly-elected President
Harding, had the role of Chief Justice and appears to have had a minimal level of interest
in the professional version of the sport. Even though he attended games as president, and
his brother owned a team, he rarely attended games after he retired from the presidency
and those he did were for his alma mater, Yale.x Justice Holmes had even less interest; a
law clerk remembered that “there was nothing that did not interest him except
athletics.”xi In contrast, Justice William R. Day “lament[ed] that to sit on the bench never
3
seem[ed] so difficult as when there [was]…a game in Washington,” and during the World
Series he even asked a page to bring him updates each inning.xii The other six justices
fell somewhere in between in their level of baseball enthusiasm.
Passionate fan or disinterested judge alike would have had a hard time
anticipating the multibillion dollar industry baseball has become today, because the first
three decades of the sport indicated that the business was struggling. For example, in
1890, the players started their own Players League, only to see it soon absorbed into the
existing structure.xiii Later, in 1900 a Western League was formed which ended up
incorporated into the American League in 1903, helping form today’s two league
structure.xiv The 1922 court case arose out of yet another failed attempt to expand the
industry with the addition of another baseball league. This volatility in the number and
profitability of teams and leagues was also reflected in the salaries paid to players. The
late 1800’s nominal average annual salary of $3,054 more than doubled to $6,523 by the
early 1900s, but then dropped to even less than the earlier number in the 1910s with an
average of $2,307.xv The comparisons are clear when adjusted for inflation. Today, the
shift equates to sixty thousand dollars in the 1800s, $124 thousand in the 1900s, and then
forty two thousand dollars in the 1910 – hardly the mark of a healthy business.xvi Finally,
Major League Baseball almost went bankrupt multiple times between its founding and
1922, making it hard for even the biggest of baseball fanatics to anticipate the future
growth of the industry. The likelihood of this bright future would have seemed especially
low to individuals (i.e. many in the Court) who did not see the sport’s appeal in the first
place.
4
Accusations by other observers of bias on the part of the baseball-loving Day are
also unconvincing when the case is viewed in the context of when it was heard. While
some early rulings had expanded the regulatory role of the federal government, that
expansion was still in its infancy. Furthermore, the clear intent of the Sherman Act was
not to drive companies out of business but to promote robust economic competition in
industries where some individuals had become too powerful. A ruling in favor of the
plaintiffs would have been aggressive for the time and, if it led to further economic
pressure on an already shaky industry, potentially run counter to the goals of the Act, for
it might have killed the industry, serving neither the law, nor the players, nor the owners.
Importantly, it would also have been bad for consumers, whose interests were ostensibly
the central rationale for the Act.
While the text of the decision does not directly point to the considerations above,
the justices had ample exposure to the line of reasoning that application of the Sherman
Act to baseball would have been aggressive in light of earlier precedents and run counter
to the goals of the Act. The defense cited a number of cases, including United States v.
E.C. Knight Co. (1894). In that decision, the Court ruled that the federal government
could not regulate a trust that controlled 98% of the sugar refining business in the United
States because the key issue in the case was “not on whether the defendant’s conduct
violated the substantive prohibition of the antitrust laws, but on whether the conduct
sufficiently partook of interstate commerce to be prohibited by Congress at all.”xvii In
E.C. Knight the Court had decided that because the company was not engaged in
interstate commerce the Sherman Act should not be applied, despite the defendant’s near
absolute control of the sugar refining business.xviii Major League Baseball also argued
5
that in both the antitrust precedents of Standard Oil Company (1911) and American
Tobacco Company (1911) the objective of the Court had been to offer “better or cheaper
tobacco or oil” to the consumer, but no such results could be accomplished by declaring
that the National League was a trust, as the games would not be better to watch or
cheaper to attend.xix The defense contended, ultimately successfully, that the business of
baseball was not interstate commerce because a product is not moved across state lines
and that a consumer of baseball games was better off with the status quo of not being
subject to antitrust laws. Finally, it is worth noting that the defending lawyers also
implied that the burgeoning sport could not survive without the reserve clause, as it
would enable teams with large budgets to buy all of the available good players.xx
The reference in the text of the ruling to “personal effort” indicates that the
justices may also have been persuaded by the defense lawyers’ arguments that focused on
the game aspects of the business. The defense claimed that “playing baseball, whether
for money or not, is a striking instance of human skill exerted for its own sake and with
no relation to production,” thus asserting that by purchasing a ticket to a baseball game,
one is not buying something that was produced.xxi Although the lawyer admitted that
players and equipment travel, often across state lines, he pointed out that “the transit is
not the end in view,” and that it only serves as a way to bring the men and supplies to the
venue where they could play.xxii The lawyer for the Federal Baseball Club countered
that baseball clubs are “not engaged in a pastime for…[their] own amusement” and
pointed out that players are “transport[ed]…from state to state in order that they may give
an exhibition of skill.”xxiii
With this argument, the plaintiffs may have been drawing a
parallel with American Tobacco Company, which the Supreme Court dissolved under the
6
Sherman Antitrust Act because the “Company exert[ed its monopolistic power] over the
marketing of tobacco as a raw product, its manufacture, its marketing when
manufactured, and its consequent movement in the channels of interstate commerce…and
the commerce of the whole world.”xxiv In this way the plaintiff very persuasively
illustrated that in this previous judgment, the Court had focused on the control of
manufacturing and distribution, not the local consumption of the product. One could
reason that the National and American Leagues dominated the production of baseball
games, regardless of where the games were consumed, especially given the name of the
championship game as the World Series. Similarly, in the case Swift & Co. v. U.S.
(1905), meat dealers were charged with antitrust violations even though they bought the
livestock in one state and sold the meat in another.xxv In Swift, the meat dealers’ lawyer
argued that based on Gibbons v. Ogden (1824), interstate commerce meant “only the
buying, selling and transport of goods between states” and that, because the purchase and
sale of meat are both local and independent events, antitrust laws did not apply.xxvi In
fact, Justice Holmes wrote an opinion which expressed the view that although the buying
and selling of meat might be viewed as local, the two steps were an essential part of the
“stream of interstate commerce” when they were put together.xxvii Operating a baseball
team in one state and then visiting another state for a competition could have been
construed similarly. However, instead of using these precedents, the Supreme Court
focused on the lack of commercial activity in baseball games and, as a result, decided that
the Commerce Clause did not apply to the industry of baseball.
Federal Baseball Club entered into constitutional law and remained unchallenged
at the Supreme Court level for more than thirty years. During this time, the Court had
7
greatly expanded the reach of the Commerce Clause. For example, in Wickard v.
Filburn (1942) the Supreme Court established that Congress could regulate intrastate
activities which had an effect on interstate commerce in total. The case was related to
wheat production, yet could easily be interpreted to include baseball games because they
too had, by then, an effect on interstate commerce.xxviii Similarly, under United States v.
Darby Lumber Co. (1941), the federal government charged Darby with violating the Fair
Labor Standards Act of 1938 that established a minimum wage and maximum hours for
employees involved in producing goods for interstate commerce. Darby argued that
regulating intrastate issues such as in-state labor practices exceeded the reach of
Congress, but the Supreme Court held that Congress could “exclude from interstate
commerce articles which deteriorate[d] the health, welfare, and morals of the nation” and
that “Congress may apply its own vision of public policy.” xxix With these two cases, the
Supreme Court greatly extended Congress’ authority to regulate businesses.
By the time the second baseball related case made it to the Supreme Court in
1953, namely Toolson v. New York Yankees, the business of baseball had also changed
significantly. In the Toolson case, when a minor league player was reassigned to another
team, he sued, claiming that the reserve clause violated antitrust laws. Although two
judges dissented this time, the majority opinion was “that if there are evils in…[baseball]
which now warrant application of it to the antitrust laws, it should be by legislation.”xxx
The Court concluded that Congress should be the branch limiting baseball’s trust-like
aspects and, because Congress had not acted, the Court also could not now act. However,
in Federal Baseball Club, the Court had found that baseball was not subject to the
Commerce Clause of the Constitution and was thus not subject to federal government
8
regulation. Therefore, the judges in the Toolson case clarified that Congress had the
authority to regulate baseball if it so chose. This decision established that baseball is
under the purview of the Commerce Clause, albeit implicitly because the majority
opinion makes no mention of interstate commerce. The Court spelled out the reasoning
behind this decision when it expressed a concern that baseball had “been left for thirty
years to develop on the understanding that it was not subject to existing antitrust
legislation,” and if were now held to antitrust standards, past and present players could
sue for triple damages retroactively, thus bankrupting the league.xxxi A legislative
change, on the other hand, would protect the league from an invalidation of all of its
contracts.xxxii The Justices legitimately were worried that overturning the earlier decision
would lead to chaos as players sued over past contracts. Therefore, their only recourse
was to explicitly shift the burden of baseball regulation to Congress.
Another twenty years passed before the Supreme Court again confronted a
baseball case. In Flood v. Kuhn (1972), Curt Flood, a star player for the St. Louis
Cardinals who did not want to be traded, declared free agency and introduced an antitrust
lawsuit after the Cardinals send him to Philadelphia via trade.xxxiii In the lower courts the
defense sought to demonstrate that investors in baseball had assumed that the legislative
status quo would continue and that they “would not have put …money into” a baseball
team if they thought courts would reverse the exemption.xxxiv Although the lower court
criticized Federal Baseball Club by stating that the case “was not one of Mr. Justice
Holmes’ happiest days,” it refused to rule against the two precedents.xxxv Yet again, a
baseball antitrust case moved up to the Supreme Court.
9
During the two decades since Toolson had reaffirmed the Federal Baseball Club
decision, the business had grown in ways that would make it difficult to argue that
professional baseball was not a form of interstate commerce. By 1971 television revenue
from baseball was forty one million dollars annually and, adjusted for inflation, that
would be $180 million in today’s dollars.xxxvi Therefore, a significant portion of baseball
club owners’ revenue came from broadcasts of games, especially because the average
ticket price had remained relatively stable in real dollars at $11.50 in 1950 to $12.57 in
1970.xxxvii Furthermore, between 1953 and 1972, over fifty bills related to antitrust
regulation of baseball had been entered in Congress, yet none of them had passed, largely
because no one could agree on the best approach for regulating the business.xxxviii
Therefore, the situation was ripe for change.
Again the Supreme Court ruled against the player, but this time with three judges
dissenting and one recusing himself from the case. Although the opinion opens with a
celebration of baseball in which Justice Harry Blackmun whimsically summarizes the
history of the sport and the importance of baseball as America’s pastime, the majority
opinion explicitly states that “professional baseball is a business…[which] is engaged in
interstate commerce.”xxxix The opinion continued by clarifying that baseball’s “reserve
system enjoy[s] exemption from the federal antitrust laws, [so] baseball is…an exception
and an anomaly.”xl For the first time, the Court explicitly recognized baseball’s antitrust
exemption and acknowledged that it created a historical footnote in constitutional law,
explaining that this “aberration [is] confined to baseball” and that “even though others
might regard this as “unrealistic, inconsistent, or illogical…the aberration is an
established one.”xli The opinion cited several cases which supported baseball’s unique
10
established precedent of antitrust treatment, including Radovich v. National Football
League (1957) where the Court found that the NFL did not enjoy the same exemption.xlii
Furthermore, the opinion points out that it was an “aberration that has been with us now
for half a century…[and should therefore have] benefit of stare decisis” and that this
treatment of baseball “has survived the Court's expanding concept of interstate
commerce.”xliii In Flood, the Supreme Court established that baseball’s status was unique
to the particular sport.
Although Major League Baseball was not subject to the Sherman Act, the
Supreme Court reminded everyone that Congress had the authority to regulate baseball.
In fact, the judges pointed out that baseball enjoyed its own unique set of laws. By
introducing “remedial legislation” multiple times, but never implementing them, the
Justices argued that Congress had upheld the special status. The opinion placed the
regulatory situation entirely into Congress’ domain when Justice Blackmun stated that
“[t]he Court…has concluded that Congress as yet has had no intention to subject
baseball’s reserve system to the reach of the antitrust statutes” and that the Justices had
concluded this lack of action “to be something other than mere congressional silence and
passivity.”xliv With this admonishment, the Supreme Court implied that while Congress
should do something about baseball’s reserve clause, the judicial branch of the
government could not.
The wording of the opinion in Flood suggested that the Justices were in a
quandary over maintaining baseball’s exemption from Sherman Act antitrust regulation.
Justice Blackmun wrote that “there is merit in consistency even though some might claim
that beneath that consistency is a layer of inconsistency.”xlv Unwilling to overturn a fifty-
11
year old precedent largely because of the financial repercussions of the triple damages
that a plaintiff could seek under the Sherman Act, the Supreme Court felt forced to allow
collusive behaviors over labor practices that were clearly at odds with existing laws for
other businesses, including other professional sports. Although some critics of the Flood
decision have claimed that the Justices based their reasoning on their love of baseball, by
showing restraint in not overruling the previous baseball cases, the Justices actually
aligned themselves with the Founding Fathers who had established the balance of power
between the three branches of government and left Congress to write the laws. The
Supreme Court chose not to undermine the business of baseball by overruling the
previous decisions, but underscored the need for Congress to pass definitive and relevant
legislation either upholding or removing baseball’s special status regarding anti-trust law.
While the Court did not eliminate baseball’s antitrust exemption, the Flood case
encouraged baseball team owners to compromise in order to avoid legislation from
Congress. In 1972 the Major League Baseball Players Association, a recently organized
players’ union, convinced Major League Baseball to accept collective bargaining and, as
a component of that, salary arbitration.xlvi Although many players refused to sign
contracts in the years immediately after Flood, others relented to pressure from their
clubs’ management and accepted terms which included a reserve clause.xlvii Finally, in
1975 both Dave McNally, a pitcher for the Baltimore Orioles, and Andy Messersmith, a
pitcher for the Los Angeles Dodgers, played an entire season without agreeing to new
contracts.xlviii When an arbitrator heard the cases, he ruled that because the reserve clause
did not specifically state that it was in effect in perpetuity it was only valid for only one
season.xlix Therefore, McNally and Messersmith were free agents who were no longer
12
bound to their teams. Although at first owners were outraged, worrying that teams with
lower payrolls could no longer remain competitive, they eventually relented and agreed
to allow free agency.l While baseball technically retained its unique status in U.S.
jurisprudence, through a cooperative effort between the player union and management,
the two sides effectively eliminated the reserve clause.
Professional baseball continues to hang onto its antitrust exemption. In fact,
Federal Baseball Club, Toolson, and Flood have only strengthened the judicial anomaly
that gives baseball an exemption that is not enjoyed by any other professional sport in
North America. Each case had a significant impact on the development of the sport of
baseball, with Toolson making the exemption explicit and Flood demonstrating the
reluctance of the Court to the overturn the precedents, but neither would have occurred
without the original Federal Baseball Club case, when few could have foreseen how big
a business baseball could and did become. Today the decision to evaluate professional
baseball as something other than interstate commerce is puzzling, leading some to the
unfounded accusations of judicial bias to protect the business of baseball. Even though
the reserve clause is no longer a part of baseball players’ contracts, other aspects of
baseball’s exemption still affect the sport today. For example, an owner who hopes to
move his team to a new location requires the permission of other club owners. The San
Francisco Giants are currently blocking efforts by the Oakland Athletics to relocate to
San Jose, an area that Major League Baseball views as Giants’ territory.li When the city
of San Jose and the Athletics tried to use the legal system to aid their cause, local judges
agreed that the immunity is abnormal, yet they, like the Supreme Court, felt bound by
precedent and ultimately ruled in favor of the Giants.lii If this case is heard by the
13
Supreme Court, one can look forward to another debate about baseball’s unique legal
status.
14
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18