DThe Suggestion that Baseball’s Antitrust Exemption Does Not Extend to Agreements with Non-Baseball Entities Lacks a Basis in the Supreme Court’s Existing Precedent

. DThe Suggestion that Baseball’s Antitrust Exemption Does Not Extend to Agreements with Non-Baseball Entities Lacks a Basis in the Supreme Court’s Existing Precedent

An additional limitation to baseball’s antitrust exemption proposed by two of the courts discussed above also warrants consideration. Specifically, both the Henderson Broadcasting Corp. v. Houston Sports Association, Inc.²⁷⁹ and Major League Baseball v. Crist²⁸⁰ courts have suggested that baseball entities lose their exemption when contracting with non-baseball entities, a limitation also recognized by some scholars.²⁸¹ For example, in the conclusion to its opinion, the court in Henderson noted that it was persuaded by the argument that “an exempt baseball team, like a labor union or agricultural cooperative which is exempted from the Sherman Act by statute, loses its exemption when it combines with a non-exempt radio station.”²⁸² Similarly, the Eleventh Circuit in Crist stated twenty-one years later that “[i]t is true that the antitrust exemption has not been held to immunize the dealings between professional baseball clubs and third parties.”²⁸³ However, such a limitation is unwarranted, as the Supreme Court has never suggested that baseball’s exemption is lost when contracting with a non-exempt entity.²⁸⁴ In fact, the Court has ruled in an analogous context that a similar antitrust exemption may apply in cases involving allegedly anticompetitive agreements between exempt and non-exempt entities.

Specifically, in Union Labor Life Insurance Co. v. Pireno,²⁸⁵ the Court considered the McCarran-Ferguson Act,²⁸⁶ and the scope of its exemption for the “business of insurance” from federal antitrust law.²⁸⁷ The Court considered its earlier jurisprudence on the issue, and derived a three-factor test for future courts to apply when construing the “business of insurance” exemption. The final factor of the test was “whether the practice is limited to entities within the insurance industry.”²⁸⁸ However, in its very next sentence, the Pireno majority specifically stated that none of the three factors “is necessarily determinative in itself.”²⁸⁹ Therefore, while the fact that the challenged agreement was formed between an insurance company and a non-insurance company may certainly indicate that the agreement falls outside the “business of insurance,” contracting with a non-exempt entity is not itself enough to displace an insurance company’s exemption under the McCarran-Ferguson Act.

Courts applying the baseball exemption should follow the Supreme Court’s guidance in Pireno, and reject the proposition that a baseball entity forfeits its antitrust exemption when contracting with a traditionally non-exempt entity. While the fact that a challenged agreement was entered by a baseball entity and a non-baseball entity will in many circumstances indicate that the activity falls outside the bounds of the exemption – i.e., the business of providing exhibitions of baseball to the public²⁹⁰ – that factor alone should not drive a court’s analysis. Indeed, in some circumstances – such as broadcasting – an agreement with a non-baseball entity may directly relate to the business of supplying baseball entertainment to fans.²⁹¹

Moreover, with joint and several liability well established in antitrust cases,²⁹² traditionally non-exempt entity are likely to be cautious when entering potentially anticompetitive agreements with baseball entities. Because the non-exempt entities would not be protected under the baseball exemption, these entities would potentially be liable for an entire judgment (including treble damages) themselves, should a court determine that the agreement at issue violated antitrust law. This threat is likely to deter non-baseball entities from entering anticompetitive agreements with organized baseball,²⁹³ meaning that the practical impact of extending the scope of the baseball exemption to contracts with non-exempt entities will be relatively insignificant.

Thus, the Henderson and Crist courts erred by suggesting that baseball’s antitrust exemption did not apply to agreements between baseball and non-baseball entities. Instead, while future courts should consider this factor, they should not find it dispositive as to whether the baseball exemption applies.

IV. Applying Baseball’s Antitrust Exemption to Only Those Activities Directly Related to Providing Baseball Exhibitions to the Public Provides a Consistent, Predictable Standard

In view of the divergent opinions and general uncertainty surrounding the scope of baseball’s antitrust exemption,²⁹⁴ a uniform, predictable standard for the exemption is sorely needed. This article has asserted that the boundaries of the exemption should be drawn from the specific focus of the Supreme Court’s baseball opinions, namely the business of providing exhibitions of baseball to the public. Indeed, although a focus on supplying baseball entertainment to the public was central to Federal Baseball, reaffirmed in Toolson, and inferred in Flood, subsequent lower courts applying the exemption have nevertheless failed to recognize this particular element of the Court’s opinions. Instead, these lower courts have attempted to create their own inconsistent and muddled standards for the exemption on an ad hoc basis, resulting in the conflicting precedent discussed in Parts II and III.

Future courts should reject these existing lower court precedents, and instead hold that baseball’s antitrust exemption extends to those activities directly related to the business of providing baseball entertainment to the public. Not only is this standard consistent with the focus of the Supreme Court’s decisions in Federal Baseball and Toolson,²⁹⁵ but it also provides a workable, predictable standard, allowing future parties to reliably gauge whether a particular activity is likely to be held exempt. Moreover, while the proposed standard is generally consistent with the outcomes of the existing precedent, it offers a more consistent framework than the divergent reasoning utilized by courts to date when applying the baseball exemption.

Under the proposed standard, exempt activities directly related to the business of providing professional baseball exhibitions to the public would include league rule making, decisions regarding the league structure (including franchise ownership and location), broadcasting, the organization of the minor leagues, and labor disputes with umpires, managers and coaches, or minor league players. Meanwhile, tangential activities not exempt under the proposed standard include licensing, concessions, and sponsorship agreements.