MLB’s Antitrust Exemption: Legal Challenge by Minor League Teams Ends in Settlement

Commentators hailed Tri-City ValleyCats, Inc. and Oneonta Athletic Corporation v. The Office of the Commissioner of Baseball as potentially the most significant legal challenge to Major League Baseball’s (MLB) antitrust exemption in decades.[1] Two formerly MLB-affiliated minor league teams, the Tri-City ValleyCats and Norwich Sea Unicorns, allege the MLB had violated the Sherman Antitrust Act through a “horizontal agreement between competitors that artificially reduced and capped output in the market for Minor League Baseball (MiLB) teams affiliated with MLB clubs.”[2] Despite the robust support garnered for the Supreme Court to revisit the validity of the exemption, the parties settled on November 2, 2023, before the Court could decide on whether to hear the case.[3]

Tri-City ValleyCats, Inc. and Oneonta Athletic Corporation v. The Office of the Commissioner of Baseball 

The lawsuit in question was brought by the Tri-City ValleyCats and the Norwich Sea Unicorns, after the teams lost their MLB affiliation when the league trimmed the minor leagues from 160 to 120 teams back in 2020.[4] The teams contend that the MLB’s restructuring “eliminated the competitive market for affiliations and severely damaged petitioners, which had been successful organizations.”[5] If this allegation is true, the MLB’s stripping 40 minor league teams of their affiliation likely would be a violation of federal antitrust law’s prohibition on unreasonable restraints on trade.[6] However, the MLB has enjoyed immunity from federal antitrust regulation since 1922, following the Supreme Court’s controversial decision in Federal Baseball v. National League.[7] In the Tri-City ValleyCats case, the plaintiffs essentially sought to invalidate professional baseball’s antitrust exemption, thereby ending the MLB’s century-long special treatment under federal law.[8]

Federal antitrust law is the primary framework for regulating professional sports beyond labor relations.[9] Rooted in the Sherman Act, this body of law aims to prevent agreements and collective actions that unreasonably restrain trade, with the overarching goals of preserving a competitive market and safeguarding consumers.[10] The Sherman Act applies to business practices that impact interstate commerce, including those of professional sports leagues such as the NBA and the NFL— so why not the MLB?[11] Professional baseball was gifted its unique antitrust exemption in Federal Baseball, where the 1922 Court found that the league’s business activities were inherently confined to state boundaries, and teams traveling to play or attend games in another state was merely incidental to their business: playing baseball for in-person spectators.[12]  Federal Baseball’s antitrust exemption was reaffirmed 50 years later in Flood v. Kuhn.[13] Today, games are televised, broadcast, and streamed nationally, so it is clear that the MLB engages in interstate commerce.[14] Despite this modern reality, Federal Baseball’s over 100-year-old precedent continues to shelter professional baseball from the reach of federal antitrust laws.[15]

Tri-City ValleyCats, Inc. and Oneonta Athletic Corporation v. The Office of the Commissioner of Baseball sought to challenge MLB’s immunity from antitrust scrutiny.[16] The lawsuit garnered support in amicus briefs from a broad range of entities, ranging from the MLB Player Association to a bipartisan coalition of 18 state attorneys general.[17] In an unusual move, the Department of Justice chimed in to praise minor league teams as an “essential contributor to employment, tourism, and accessible entertainment.”[18]

Unsurprisingly, MLB cut a check to the minor league litigants to avoid the matter reaching a Supreme Court composed of justices who have shown a willingness to overturn special treatment of sports under antitrust law.[19] On November 2, 2023, the MLB settled with its formerly affiliated minor league teams, resolving one federal suit and two state suits just 11 days before the state suits were scheduled for trial.[20] 

While the terms of the settlement remain confidential, an attorney for the ValleyCats, James Quinn, previously said, “In order for [a settlement] to happen, [the MLB] would have to pay a lot of money.”[21] Whatever the settlement price tag was, it was a small price for the MLB to pay and avoid the Supreme Court reconsidering the validity of the league’s antitrust exemption.[22] 

Nonetheless, eliminating the chances of Tri-City ValleyCats reaching the Supreme Court does not mean MLB is entirely secure in its antitrust exemption. While some legal experts deemed Tri-City ValleyCats as the most formidable challenge in decades, it’s still a good idea for Major League Baseball’s legal counsel to stay on top of its antitrust knowledge.[23]

New Challenges to Baseball’s Sherman Act Exemption

The Oakland Athletics’ impending relocation to Las Vegas could catalyze congressional action to dismantle the sport’s long-standing antitrust exemption.[24] On November 16, 2023, the Athletics’ announced a unanimous approval by MLB team owners for the sport’s first relocation since 2005.[25] Former MLB Commissioner Bud Selig justified the league’s antitrust exemption as necessary to prevent unilateral relocations that could harm consumer welfare and protect the league’s interests.[26] However, amid protests from loyal Oakland fans and city leadership, the A's move to Las Vegas tells a different story.[27] The A’s relocation highlights a contradiction: the MLB may consider relocation based on its needs rather than those of the market, fans, or consumers.

Congresswoman Barbara Lee of California questioned the league’s antitrust exemption in response to the A’s plan to move to Las Vegas.[28] In a letter to the MLB Commissioner, Lee expressed concern that MLB’s support for the A’s abandonment of Oakland contradicted the rationale supporting the century-old antitrust exemption.[29] Attorneys representing the Tri-City ValleyCats echoed the views expressed by Lee and criticized Major League Baseball for being hypocritical.[30] They pointed out that the MLB justifies its antitrust exemption by claiming it is essential to prevent teams from relocating, yet at the same time, the league is using this exemption to allow the A's to move out of Oakland.[31]

There is a real possibility of renewed challenges to the antitrust exemption stemming from the A’s move to Las Vegas, and it will not be the first time the franchise’s relocation efforts have dragged the league into the courtroom.[32] In 2013, the City of San Jose filed a federal lawsuit against the league, alleging antitrust violations when the San Francisco Giants blocked the A’s from moving to San Jose because the City was within the Giants’ exclusive territorial rights.[33] The Ninth Circuit Court of Appeals deferred the decision to the U.S. Supreme Court, writing in its opinion “San Jose is . . . asking us to deem Flood wrongly decided, and that we cannot do. Only Congress and the Supreme Court are empowered to question Flood’s continued vitality, and with it, the fate of baseball’s singular and historic exemption from the antitrust laws.”[34]

Complaints from Congress

The Ninth Circuit’s decision in City of San Jose deferred reevaluation of professional baseball’s antitrust exemption to the Supreme Court, but, when such challenges have reached the Court, it instead defers to Congress.[35] Legislative pushback has already emerged at the state level in response to the A’s relocation.[36] The “Moneyball Act,” recently introduced in the California legislature, proposes that owners compensate state and local authorities for relocating professional baseball clubs.[37] MLB’s claim that the exemption prevents frequent franchise relocations may face scrutiny if clubs are incentivized to move, potentially nullifying the legal and public policy bases for such immunity.[38]

Congress has presented several federal bills in recent years—including Bernie Sanders’ “Save American Baseball Act” in 2022 and, more recently, the “Competition in Professional Baseball” proposed in June 2023 by Republican senators—all aimed to get rid of the exemption and expose professional baseball to Sherman Act scrutiny.[39] While the federal legislation has not made significant progress yet, the A’s relocation may reignite discussions, shedding light on the MLB’s use of the exemption to prioritize corporate interests over the needs of consumers and host cities.

Will SCOTUS Reconsider?

When the Supreme Court last heard a case concerning MLB’s antitrust exemption 50 years ago, it emphasized that it is up to Congress to reconsider the exemption.[40] However, if another strong case like Tri-City ValleyCats comes along—and the plaintiffs can resist the temptation of the MLB’s deep pockets—it is possible the Court’s sitting justices may reevaluate the validity of exemption.[41] 

In 2013, Justice Sonia Sotomayor critiqued baseball’s antitrust exemption, saying it lacked legal justification and was outdated, suggesting the timing for overturning it might be right.[42] In the 2021 case of NCAA v. Alston, the Supreme Court found that the NCAA’s rules limiting education-related compensation for student athletes unreasonably restrained trade in violation of the Sherman Act.[43] Justice Neil Gorsuch’s majority opinion in Alston emphasized that antitrust violations hinge on market realities, which, if altered, can impact legal analysis.[44] Justice Brett Kavanaugh’s disapproval of labor violations in Alston mirrors the MLB’s antitrust justification for underpaying minor league players.[45] Because the Supreme Court has shown willingness to hold sports to the same standard as other businesses, relying on stare decisis to preserve baseball’s antitrust immunity could be unsuccessful.[46] Recent comments from justices that hint at their willingness to reconsider the validity of antitrust exceptions show there is a possibility of overturning the exemption if a case makes it to the Supreme Court.[47]

Nevertheless, at least four justices must believe reevaluating the MLB’s Sherman Act exemption is worthwhile to allow a challenge to have its day in court. While the Court has recently addressed sports-related cases with broad implications, the justices might perceive the baseball exemption as having implications too attenuated to industries beyond baseball and sports.[48] American Needle v. NFL in 2010 centered around the classification of a joint venture regarding the NFL and its independently owned teams as an antitrust-exempt single entity.[49] Murphy v. NCAA in 2018 evaluated the issuance of sports betting licenses while raising questions about whether the federal government has the authority to prevent state governments from legalizing certain activities against the wishes of individual states.[50] More recently, NCAA v. Alston in 2021 delved into the application and standard of review of antitrust law, with its decision affecting numerous college students and institutions.[51] Nonetheless, the counsel for the plaintiffs in Tri-City ValleyCats felt as though the Court invited a challenge to baseball’s exemption in Justice Kavanaugh’s concurrence in NCAA v. Alston.[52]

The A’s relocation to Las Vegas, the restructuring of the minor leagues at issue in Tri-City ValleyCats, and other infamous conflicts (for example, the player lockout in 2022) exhibit seemingly anticompetitive behavior by the league.[53] The heightened tensions surrounding this antiquated antitrust exemption make it more likely than not that MLB’s extensive freedom under its antitrust exemption to continue to face examination in either, if not both, legislative and judicial arenas.

[1]    Evan Drellich, Challenge to MLB’s antitrust exemption nears juncture: chase payday or history?, The Athletic (Oct. 26, 2023), https://theathletic.com/5000420/2023/10/26/mlb-antitrust-exemption-challenge/.

[2]    MLB settles lawsuits from former affiliates over minor league cuts, The Associated Press (Nov. 2, 2023, 06:57 PM), https://www.espn.com/mlb/story/_/id/38804284/mlb-settles-lawsuits-former-affiliates-minor-league-cuts.

[3]    Katie Arcieri, High Court Antitrust Challenge Ends After MLB Settles With Teams, Bloomberg Law (Nov. 3, 2023, 11:56 AM), https://news.bloomberglaw.com/antitrust/high-court-antitrust-challenge-ends-after-mlb-settles-with-teams.

[4] MLB settles lawsuits from former affiliates over minor league cuts, supra note 2.

[5] Brief for Petitioner, at 13, Tri-City Valleycats, Inc. et al.  v. The Office of the Commissioner of Baseball, No. 23-283 (dismissed Nov. 14, 2023).

[6]  Michael McCann, Sea Unicorns Score Despite Dismissal in MLB Antitrust Suit, Sportico (October 31, 2022, 10:00 AM), https://www.sportico.com/law/analysis/2022/minor-league-teams-antitrust-lawsuit-1234692985/.

[7] Matthew J. Mitten Et Al., Sports Law and Regulation 394 (5th ed. 2020) (referring to Fed. Baseball v. Nat’l League, 259 U.S. 200 (1922)).

[8] Brief for Petitioner, at 20, Tri-City Valleycats, Inc. et al.  v. The Office of the Commissioner of Baseball, No. 23-283 (dismissed Nov. 14, 2023).

[9] Matthew J. Mitten Et Al., supra note 7.

[10]  Matthew J. Mitten Et Al., supra note 7.

[11] Matthew J. Mitten Et Al., supra note 7.

[12] Fed. Baseball Club of Balt., Inc. v. Nat’l League of Pro. Baseball Clubs, 259 U.S. 200, at 208 (1922).

[13] Flood v. Kuhn, 407 U.S. 258 (1972).

[14] Joseph J. McMahon Jr., A History and Analysis of Baseball's Three Antitrust Exemptions, 2 Jeffrey S. Moorad Sports L.J. 213, 239-240 (1995); Toolson v. New York Yankees, Inc., 346 U.S. 356, 360 (1953) (Burton,J., dissenting).

[15] Id.

[16] Tri-City Valleycats, Inc. et al.  v. The Office of the Comm’r of Baseball, No. 23-283 (dismissed Nov. 14, 2023).

[17] Katie Arcieri, Lawmakers, AGs Urge High Court to End MLB Antitrust Immunity (3), Bloomberg Law (Oct. 23, 2023, 3:06 PM), https://news.bloomberglaw.com/antitrust/us-lawmakers-join-push-to-eliminate-mlb-antitrust-exemption.

[18] Brief for the United States of America as Amicus Curiae in Support of Neither Party, at 2, Nostalgic Partners, LLC v The Office of the Comm’r of Baseball, 637 F. Supp. 3d 45 (2022), No. 22-2859 (2d Cir. filed Jan. 30, 2023).

[19] Katie Arcieri, supra note 3; Michael McCann, Minor League Teams Take MLB Antitrust Exemption to Supreme Court, Sportico (Sept. 19, 2023, 11:23 AM), https://www.sportico.com/law/analysis/2023/mlb-antitrust-exemption-supreme-court-1234739097/.

[20] Katie Arcieri, supra note 3.

[21] Evan Drellich, supra note 1.

[22]  Michael McCann, supra note 6.

[23] Evan Drellich, supra note 1.

[24] Casey Harrison, Possibility of baseball team moving to Las Vegas sparks discussion about antitrust exemption, Las Vegas Sun (June 21, 2023, 2:00 AM), https://lasvegassun.com/news/2023/jun/21/possibility-of-baseball-team-moving-to-las-vegas-s/.

[25] Jeff Passan, MLB owners approve Athletics’ planned move to Las Vegas, ESPN (Nov. 16, 2023, 9:45 AM), https://www.espn.com/mlb/story/_/id/38911419/mlb-owners-approve-athletics-planned-move-las-vegas-sources-say.

[26] Matthew J. Mitten Et Al., supra note 7 at 381.

[27] Janie McCauley, A’s fans come out en masse for reverse boycott and tell owner John Fisher to sell, Associated Press (June 13, 2023, 6:22 PM), https://apnews.com/article/oakland-as-fans-reverse-boycott-sell-492340255543278241c63de72e2ddf77.

[28] Representatives Lee and DeSaulnier Introduce Legislation to Address Major League Baseball Anti-Trust Exemption, Congresswoman Barbara Lee 12th District of California (Jun. 13, 2023), https://lee.house.gov/news/press-releases/representatives-lee-and-desaulnier-introduces-legislation-to-address-major-league-baseballs-anti-trust-exemption.

[29] Id.

[30] The Sports Law Podcast, Oakland A’s Relocation & MLB Antitrust Exemption Challenge w/ Jim Quinn, Conduct Detrimental, at 17:45 (June 20, 2023), https://www.conductdetrimental.com/podcast/episode/1d4a4cb3/oakland-as-relocation-and-mlb-antitrust-exemption-challenge-with-jim-quinn.

[31] The Sports Law Podcast, supra note 29.

[32]  Associated Press, San Jose sue MLB over A’s vote, ESPN (June 18, 2013, 2:12 PM), https://www.espn.com/mlb/story/_/id/9399631/san-jose-sues-mlb-vote-oakland-athletics-potential-move.

[33] City of San Jose v. Office of the Com'r of Baseball, 776 F.3d 686 (2015).

[34] Id.; Flood v. Kuhn, 407 U.S. 258 (1972), was a decision by the Supreme Court that upheld the validity of Fed. Baseball Club of Balt., Inc. v. Nat’l League of Pro. Baseball Clubs, 259 U.S. 200 (1922), which first established the MLB’s antitrust exemption.

[35] City of San Jose v. Office of the Comm'r of Baseball, 776 F.3d 686 (2015); majority opinions in both Toolson v. New York Yankees, 346 U.S. 356 (1953) and Flood v. Kuhn, 407 U.S. 258 (1972) deferred action regarding the MLB’s antitrust immunity to Congress.

[36] Congresswoman Barbara Lee, supra note 27.

[37] Representatives Lee and DeSaulnier Introduce Legislation to Address Major League Baseball Anti-Trust Exemption, supra note 27.

[38] Matthew J. Mitten Et Al., supra note 7 at 381.

[39] S.3833, 117th Cong. (2022); S. 2010, 118th Cong. (2023).

[40] See Flood v. Kuhn, 407 U.S. 258 (1972).

[41] Michael McCann, Minor League Teams Take MLB Antitrust Exemption to Supreme Court, Sportico (Sept. 19, 2023, 11:23 AM), https://www.sportico.com/law/analysis/2023/mlb-antitrust-exemption-supreme-court-1234739097/.

[42] Nina Totenberg, Justice Sotomayor Takes Swing at Famed Baseball Case, NPR (May 23, 2013, 5:23 PM), https://www.npr.org/2013/05/23/186314129/justice-sotomayor-takes-swing-at-famed-baseball-case.

[43] Nat’l Collegiate Athletic Assn. v. Alston, 141 S. Ct. 2141, 2158 (2021).

[44] Id.

[45] Id. at 2168.

[46] See Leegin Creative Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007).

[47] Michael McCann, supra note 41.

[48] Michael McCann, supra note 41.

[49] American Needle v. NFL, 560 U.S. 183 (2010).

[50] Murphy v. NCAA, 138 S. Ct. 1461 (2018).

[51] Nat’l Collegiate Athletic Assn. v. Alston, 141 S. Ct. 2141, 2158 (2021).

[52] Oakland A’s Relocation & MLB Antitrust Exemption Challenge w/ Jim Quinn, supra note 29.

[53] Stacey Vanek Smith, MLB's lockout partially stems from the fact that the league is a monopoly, NPR (Dec. 17, 2021, 5:00 PM), https://www.npr.org/2021/12/17/1065312074/mlbs-lockout-partially-stems-from-the-fact-that-the-league-is-a-monopoly.