THE BASEBALL TRUST: THE HISTORY OF BASEBALL’S ANTITRUST EXEMPTION
by Stuart Banner. New York: Oxford University Press, 2013. 304pp. Cloth $29.95. ISBN 978-0-19-993029-6.
Reviewed by Richard A. Glenn, Department of Government and Political Affairs, Millersville University, Pennsylvania.
Baseball and law have a longstanding relationship. Organized baseball has been in and out of courtrooms since the late nineteenth century. The first commissioner of baseball was a former federal judge. Managers and umpires study the Major League Baseball Rule Book as fastidiously as lawyers and judges scrutinize the U.S. Constitution. And the comparisons between umpires and judges are near ubiquitous. In his confirmation hearings for the chief justiceship, John Roberts noted, “Judges are like umpires. Umpires don’t make the rules[;] they apply them.” But as we learn from Stuart Banner’s THE BASEBALL TRUST, THE HISTORY OF BASEBALL’S ANTITRUST EXEMPTION, judges have been “making the rules” in baseball-related cases for more than a century.
For reasons that are rarely uttered and even more rarely understood, baseball – unlike every other sport and virtually every sort of business – is not governed by federal antitrust laws. The Sherman Antitrust Act, adopted in 1890, prevents competitors from colluding with each other in ways that will harm consumers. But professional sports are different. Opposing teams must agree on a standard set of rules, a playing schedule, and a means of allocating players, among other things. Without such collusion, consumers (fans) would be harmed. And eliminating competition – perhaps the goal of a hardware store – is a death knell in professional sports. If the Chicago Cubs are so wildly successful that their competitors are driven out of business, the Cubs will also cease to exist. This principle would seemingly apply to all professional sports. But it does not. Only baseball has the exemption. This makes little sense as a matter of law or economics (p.xi).
Banner, the Norman Abrams Professor of Law at the University of California, Los Angeles, has written a grand, engaging, multi-generational tale of the evolution and maintenance of this curious exemption. THE BASEBALL TRUST draws upon the papers of baseball players, baseball officials, lawyers and judges. Banner’s purpose, in part, is to debunk the oft-cited conclusion that baseball’s exemption was based on love and nostalgia for the national pastime. Rather, the exemption owes its existence to good lawyering and standard politics. “[B]aseball’s cultural status is neither the primary reason it originally gained its exemption nor the primary reason the exemption has persisted for nearly a century. Beyond a simple tale of policy preferences, in which powerful judges and legislators expressed their passion for baseball by insulating it from antitrust attack, the history of baseball’s antitrust exemption is something more interesting. It is a story in which a sophisticated business organization has [*201] been able to work the levers of the legal system to achieve a result favored by almost no one else” (p.xiv).
The story unfolds chronologically, beginning in the late 1800s, and is revealed primarily through an examination of a series of lawsuits filed by players and team owners. Well-known characters from baseball and law appear throughout. The book is divided into ten chapters, each approximately twenty-five pages in length, and covering a relatively brief period of time. Black and white photographs of key actors, accompanied by a brief statement of each person’s contribution, are included in each chapter. (I find this preferable to having all pictures together.) At times the narrative is dense, especially when explaining a legal strategy or the rationale of a court decision. But legal matters are rarely simple. An interested layperson will be able to follow along.
In the late nineteenth century, the “bugbear” of baseball was the reserve clause, which permitted each National League club to “reserve” some (eventually all) of its players for the ensuing season. The purpose was to prevent players from offering their services to the highest bidder, thus reducing expenses and enhancing the value of the clubs. The clause was one-sided, however. The player was bound to the club, but the club was not bound to the player. Competing leagues had similar clauses and each league largely agreed to respect the others’ reserve lists. Though many players understood the negative consequences of the clause – some even comparing it to slavery – few objected. “While it may have reduced the share of the pie enjoyed by the players, many were certain that it increased the overall size of the pie,” and with it each player’s individual income (p.11).
In 1889, a number of “reserved” players, led by player (and lawyer) John Montgomery Ward, who “knew more about law than any other baseball player and knew more about baseball than any other lawyer,” abandoned the National League and formed a rival league (p.31). Owners filed suits against the players, seeking injunctions preventing the players from participating in the Players’ League. Banner, in what becomes standard procedure, takes the reader through the arguments advanced by the owners and the players and then turns his attention to the rulings, which came in early 1890. The owners lost all three suits. Because the contracts lacked mutuality – they bound the players to the club but not the club to the players – the contracts were unenforceable. The players were allowed to skip leagues. The reserve clause appeared near extinction. But the Players’ League soon folded. Thus, so long as the National League owners agreed to enforce the reserve clause themselves by not signing players belonging to sister clubs, players were effectively “bound” to one club. The only court to find the reserve clause enforceable during this decade was the Pennsylvania Supreme Court. Banner speculates that the author of the decision may have been influenced by his desire to keep Napoleon Lajoie, one of the best hitters in the game, with the hometown Philadelphia Phillies. As Benjamin Cardozo (1957, p.168) said, “The great tides and currents which engulf the rest of men do not turn aside in their course and pass the judges by.” In 1900, when the rival American League began to [*202] recruit players, a series of lawsuits followed. The owners lost again, and the leagues merged.
The formation of the Federal League a decade later gave rise to a different legal strategy – antitrust litigation. While many players believed baseball to be an unlawful trust, it was an open question as to whether the trust harmed or benefitted the players. After all, player salaries had never been higher. In 1915, two Federal League owners filed an antitrust case in Chicago. This venue may have been strategic: One of the two federal judges in Chicago was Kenesaw Mountain Landis, who had a reputation as a trust-buster. What the owners did not anticipate was his fondness for baseball. Landis tarried. The court never decided the case. The parties reached an agreement. The Federal League dropped the lawsuit. In exchange, five Federal League teams were absorbed by the major leagues. Landis later explained his delay: If he had been forced to render a decision, he would have ruled that baseball violated the Sherman Antitrust Act. But he just could not do it because it would have destroyed baseball. Banner concludes, “Baseball . . . was lucky enough to get a judge who put his love for the game above his professional obligation to follow the law” (p.62). Once again, baseball had staved off its rivals.
One Federal League team left out of the settlement, the Baltimore Terrapins, sued. By the time FEDERAL BASEBALL CLUB OF BALTIMORE v. NATIONAL LEAGUE (1922) reached the U.S. Supreme Court, each side had one victory. The trial court held that baseball violated the Sherman Antitrust Act. The appellate court ruled that because baseball was not commerce, antitrust laws did not apply. Banner leads the reader through the precedent on the Commerce Clause, discussing the often inconsistently applied distinction between manufacture and commerce. (The discussion here is all law and no baseball). Banner concludes, “Precedents thus supported reasonable arguments on both sides” (p.78). Moreover, no Supreme Court precedent existed addressing whether show business was interstate commerce. Two lower courts had split, one holding that opera was not commerce, the other that vaudeville was. In a short, unanimous opinion, the justices ruled that baseball was not interstate commerce and thus not bound by the Sherman Antitrust Act. Banner explains how this decision was not nearly as bizarre as modern critics have portrayed it. In subsequent decades, the Court’s definition of interstate commerce would grow exponentially, thus making FEDERAL BASEBALL CLUB anachronistic. Banner also points out how the case is misunderstood. FEDERAL BASEBALL CLUB is credited with creating baseball’s antitrust exemption, but “no one involved in the case would have understood [the case] to have created any sort of exemption” (p.88). The Court did not exempt baseball from antitrust laws; instead it held (simply and quite understandably at the time) that baseball was not a form of interstate commerce. As such, Congress could not apply antitrust laws to baseball.
In the 1940s, the Court’s understanding of the Commerce Clause changed dramatically, thus calling into question the rationale behind FEDERAL BASEBALL CLUB. The House Judiciary Committee even held hearings on whether antitrust laws should apply to baseball. But the fix may have been in from the start. The [*203] purpose of the hearings, wrote one member of the committee, was “primarily and solely to assist baseball . . . so that all of us might continue to give our great love and attention to the great pastime” (p.107). Not surprisingly, Congress chose to stand down. Its final report concluded that general legislation for baseball was premature.
When the Supreme Court returned to the issue in TOOLSON v. NEW YORK YANKEES (1953), most legal commentators predicted that the justices would overrule FEDERAL BASEBALL CLUB and put an end to baseball’s immunity. Instead, in a one paragraph opinion, the Court noted, “Congress has had [FEDERAL BASEBALL CLUB] under consideration . . . but has not seen fit to bring such business under these laws by legislation. . . . We think that if there are evils in this field which now warrant application to it of the antitrust laws it should be by legislation” (p.119). In other words, baseball was exempt because Congress chose to do nothing about it. FEDERAL BASEBALL CLUB had rested on the limits of congressional power, holding that because baseball was not interstate commerce, Congress could not subject it to antitrust laws even if it wanted to do so. But TOOLSON rested on the vagaries of Congress’s choice, holding that baseball was exempt because Congress had not seen fit to include the business of baseball within the scope of antitrust law. Congress declined to act because it was waiting for the Supreme Court to decide the antitrust issue, but then the Court declined to act because it was waiting for Congress. Banner finds this conclusion nonsensical and “almost certainly wrong.” In 1890, baseball was a negligible industry; the Congress that enacted the Sherman Antitrust Act most likely did not think about it at all. Nevertheless, “[f]rom 1953 on, the argument would no longer be about whether Congress could bring baseball under the antitrust laws. The argument would be about whether Congress should” (p.120).
Other professional sports warmly received TOOLSON. After all, if baseball were exempt, why not boxing, football, and basketball? Yet in a series of decisions that Philip Kurland (1958, p.279) characterized as “border[ing] on the absurd,” the Supreme Court held that baseball stood alone. Banner is not as critical of the Court’s approach, and offers “adherence to precedent” as a (weak) rationale for baseball’s “most favored sport” status:
In all three cases from the 1950s . . . the justices were careful to explain that if the precedent of FEDERAL BASEBALL CLUB did not exist, there would be no doubt that all professional sports, including baseball, were forms of interstate commerce governed by the antitrust laws. Baseball’s unique status was not a product of romanticism among the justices about the national pastime. It was a result of the justices’ aversion to overruling the Court’s prior cases, even when, like FEDERAL BASEBALL CLUB, those cases were vestiges of a very different climate of constitutional thought (142). These decisions sparked a decade of pointless activity in Congress.
Another challenge came in the early 1970s, when player Curt Flood asked the justices, once again, to overrule FEDERAL BASEBALL CLUB. Baseball responded with two arguments. First, baseball had relied upon the exemption in building the game. To whisk away the exemption would disrupt settled expectations. [*204] Second, the new players’ union had agreed that the reserve clause was subject to collective bargaining. Flood was represented by former justice, Arthur Goldberg, who underwhelmed in oral argument (p.204). Relying on the private papers of the justices, Banner walks through the conference justice-by-justice. As readers of Court opinions know, most are straightforward applications of the law to the facts. But not in FLOOD v. KUHN (1972), where Harry Blackmun wrote a “long, rhapsodic, and highly idiosyncratic history of baseball.” His opinion recalled the names of eighty-eight players – “names, celebrated for one reason or another, that have sparked the diamond and its environs and that have provided tinder for recaptured thrills, for reminiscence and comparisons, and for conversation and anticipation in-season and off-season” (p.210). (Banner reveals that Potter Stewart, a Cincinnati native, joked that he would join the opinion if Blackmun would add the Reds’ pitcher Eppa Rixey. Blackmun did. Banner also discredits the widely reported claim that Thurgood Marshall was angry that Blackmun’s list did not include any black players. Not true, says Banner. Jackie Robinson, Roy Campanella, and Satchell Paige were on the original list.) Substantively, the opinion held that team owners had made investments in reliance upon the exemption and that Congress, by its inaction, had allowed numerous decisions to stand, evidencing a desire not to disapprove them legislatively. Any change had to come from Congress. Banner concludes: “[FLOOD] provided reasons for doubt. Baseball’s antitrust exemption now seemed to rest on the nostalgia of elderly men for the glory days of the national pastime rather than on any defensible legal basis” (p.215).
A half-century of litigation had resulted in little change to the reserve clause. Interestingly, the clause ultimately fell not because of the courts, but because of binding arbitration. Prior to 1970, the commissioner, hired by owners, settled labor disputes. The 1970 Collective Bargaining Agreement permitted players to file grievances before a panel of arbitrators – one chosen by the players, one chosen by the owners, and one chosen by mutual agreement. In reality, the neutral arbitrator decided the grievances. In 1975, arbitrator Peter Seitz declared that the reserve clause meant something different than what the owners and players had understood it to mean for a century. Both parties had understood the clause as a perpetually renewing series of options that bound players to their teams for their entire careers. But Seitz noted that the clause did not state specifically that it would be perpetually renewing. A one-year contract, for example, bound a player for one year and “reserved” him for the next year, but not beyond the second year. A player was thus free to sign with other teams after playing one year without a contract. Three times the reserve clause had been upheld by the courts, and effectively nullified by a single arbitrator. The owners fired Seitz within hours. The following year, the parties agreed that the reserve clause would apply only to players in their first six years in the major leagues. Free agency followed, and salaries skyrocketed. Seitz later commented, “As a result of this decision it is said that I freed the slaves like A. Lincoln or, alternatively, I killed the game of baseball” (p.232).
In the mid-1980s, club owners, at the urging of MLB Commissioner Peter [*205] Ueberroth, agreed not to compete with each other for the services of free agents. Curiously, though, Banner does not mention this “gentlemen’s agreement” among the owners or its resolution by arbitration in favor of the players. A brief retelling would have reminded readers that free agency did not end attempts at collusion. (For a summary, see Steve Beitler, “The Empire Strikes Out.”)
Most of THE BASEBALL TRUST focuses on federal antitrust law. In one chapter, though, Banner turns his attention briefly to state antitrust law. FEDERAL BASEBALL CLUB had held that regulation of baseball was for the states, not for the federal government. Even so, no one had tried to use state antitrust law as a weapon against baseball. The Braves’ move from Milwaukee to Atlanta provided a test case. A Wisconsin trial court judge ruled that the National League had violated Wisconsin antitrust law by allowing the franchise to relocate. (What judge would want to go down as the fellow who let the Braves leave town?) On appeal, however, the Wisconsin Supreme Court reversed, holding that the state’s antitrust law did not did not apply to baseball. (The sitting chief justice lost in the next election, to a candidate who blamed him for letting the Braves depart.)
THE BASEBALL TRUST is full of anecdotes at the intersection of baseball and law. To demonstrate the monopolistic practices of organized baseball, major leaguer Mordecai “Three Finger” Brown testified that the Cardinals once traded another player to a minor league club for a bird dog (p.55). Banner touches on the justices’ varying degrees of interest in baseball. Of Holmes, a law clerk said, “There was nothing that did not interest him except athletics.” William Howard Taft, who was the first president to throw out a ceremonial first pitch on opening day, was only the “slightest” of baseball fans. The Court’s most earnest followers of the game were William Day and Blackmun. Day would have a page slip him inning-by-inning updates from World Series games while the justices were in session. Blackmun, whose “ode to baseball” in FLOOD became a conversation everywhere he went, kept a baseball encyclopedia behind his desk in his chambers at the Supreme Court. Blackmun’s lifelong regret was not including Mel Ott on the list of great players. Years later, Blackmun’s law clerks gave him a Mel Ott baseball bat, mounted in a glass case, with a small plaque that read, “I’ll never forgive myself” (p.211). And in 1995, federal judge (and future Supreme Court justice) Sonia Sotomayor enjoined the owners from changing free agency and salary arbitration rules unilaterally during the 1994-1995 strike. Fourteen years later, former major leaguer David Cone testified at her confirmation hearings.
THE BASEBALL TRUST is part baseball, part law, and part history. It is a good book for baseball historians. Knowledge of the game in incomplete without considering “baseball as a business.” It is a good book for lawyers and legal historians. When courts make decisions, consequences follow. Courts matter. So does precedent. One decision affects laws and lives for decades. But it a great book for those who enjoy baseball and legal history. There is much to learn from THE BASEBALL TRUST. I have never enjoyed more reviewing an academic book. [*206]
Beitler, Steve. “The Empire Strikes Out,” 36 BASEBALL RESEARCH JOURNAL (2007): 58-60.
Cardozo, Benjamin N. THE NATURE OF THE JUDICIAL PROCESS. New Haven: Yale University Press, 1957.
Kurland, Philip. “The Supreme Court and the Attrition of State Power,” 10 STANFORD LAW REVIEW (1958): 274-296.
FEDERAL BASEBALL CLUB OF BALTIMORE v. NATIONAL LEAGUE, 259 U.S. 200 (1922)
FLOOD v. KUHN, 407 U.S. 258 (1972)
TOOLSON v. NEW YORK YANKEES, 346 U.S. 356 (1953)
Copyright 2014 by the Author, Richard A. Glenn.