American Needle and the American Pastime or: How I Learned to Stop Worrying and Love The Antitrust Exemption

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Please welcome Walkoff Walk reader and commenter Matt DeTura as he contributes this timely and informative guest piece. Take it away, MDT:

By the time you read this (or after you've attended the session and then taken a nap if you're crazy enough to show up live in THIS weather) the Supreme Court will have heard oral arguments in American Needle v. NFL, one of the more important sports cases to come across One First Street's docket in a while.

The core of the case centers around a lower court decision that held that the NFL was a single entity - not a collection of teams in competition - and therefore exempt from section 1 of the Sherman Act governing anti-trust law which prohibits "concerted action that unreasonably restrains trade". American Needle challenged the NFL's exclusive contracts with suppliers like Reebok which made them the only providers for things like hats. ANI appealed the decision all the way up the ladder, and in an unusual move, the NFL supported the appeal, knowing that if it could get the Supreme Court to affirm the broadest decision it would be exempt from the Act (since a single entity can't engage in concerted action).

This, as a baseball fan, is the point at which you're allowed to yawn and say "Football. Who gives a damn?" And the short answer is that, as a baseball fan: you don't have to. Let's discuss why after the jump.

As you may (or may not know), baseball occupies a unique place in American antitrust law because it operates under an antitrust exemption; the courts have held that MLB is a single entity. How they've gotten to that conclusion is a bizarre series of decisions that suggest that there have been quite a few seamheads on the Supreme Court over the years, because the legal contortions they've gone through in order to protect baseball from the Sherman Act are pretty impressive.

First, in 1922, Justice Oliver Wendell Holmes' opinion in Federal Baseball Club of Baltimore v. National Baseball Clubs exempted baseball on the grounds that baseball games were intrastate events. That's right: even though a team from Minnesota is playing a team from Georgia, the travel was "not the essential thing," said Holmes, and baseball games were a series of insular, intrastate happenings (pennant races be damned).

The Court revisited the issue in 1953 when deciding Toolson v. New York Yankees. Okay, okay, they said. So maybe baseball is pretty clearly interstate commerce. But the bird in the way of the fastball this time? The Court looked at the legislative intent of the Sherman Act and decided that Congress only made the law to deal with robber barons - not baseball owners. (Call Jeffrey Loria what you will.) Therefore, baseball was specifically exempt from the Sherman Act. That produced the antitrust exemption we know today.

Why does it still exist? For one, because Congress hasn't overruled it. The courts have repeatedly punted the chance despite acknowledging it's flawed. "An anomaly," it was called in Flood v. Kuhn (which you know better as the case that essentially created free agency). The courts have said that if Congress wants to change it they can, but who wants to be the Senator who brings forward the Disadvantage The Owners Of Our National Pastime Act of 2010?

The other thing to note is that the antitrust exemption only governs certain behavior: for example, while MLB still can unilaterally contract and move teams (and block moves) without antitrust concerns (although labor law is still an issue), Congress stripped MLB of its exemption with regards to labor in the Curt Flood Act of 1997.

All this history should encourage football fans who think the sky is falling to settle down. For one, I consider baseball about as repressive as any league without an antitrust exemption; not much more, not much less. Labor law still provides a number of protections for the fans and players. Second, there's no reason to suggest the court will rule broadly for the NFL given the large number of opinions that explicitly consider MLB's exemption a legal mistake. Finally, even if the NFL gets an antitrust exemption, if things look like they're getting out of hand, there's a legislative answer through Congress.

Depending on how the case breaks, expect Slammin' Sammy Alito or Joltin' John Paul Stevens - both huge baseball fans who understand the ins and outs of baseball's antitrust history - to write the opinion.

Matt DeTura is a third-year law student and erstwhile baseball commenter. As a legal scholar, he understands there is a civil way to resolve every dispute. That's why he blogs about men who punch each other in the face at Single Blog Takedown.


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10 Comments

Will the NFL have more benefits from antitrust exemption because the NFLPA is so weak?

The Court looked at the legislative intent of the Sherman Act and decided that Congress only made the law to deal with robber barons - not baseball owners. (Call Jeffrey Loria what you will.)

Ziiiiiiiiiiiing!

Do people liveglog these sort of proceedings?

How will this ruling help me watch Eagles games next year without a satellite dish?

@iracane

Yeah, the dude's name is CSPANick. Hiyooooooo

This piece was way too intelligent and informative for the offseason (and for this ham-and-egg website). Good job, MDT. Now scurry over to the National Gallery of Art, I hear there's a color-by-numbers of Steve Balboni that Iracane wants a copy of.

njpanick, that's Steve "bye bye" Balboni. Show some respect.

Nice work, MDT

American Needle sounds like the title of the type of HBO documentary whose end credits can't get here fast enough, because Curb is next.

Very nice explanation, MDT.

MDT is the Anderson Silva of MMA-Bloggers-who-love-baseball.

Colonel: should they get the antitrust exemption, then yes, I'd say the fact that the NFLPA is much weaker than the MLBPA might come into play. It could definitely mean a much more protracted labor dispute in 2011 when the owners are expected to lockout the players when the current CBA ends.

Regardless of the strength of the union, however, labor law is labor law - the players in any sport have the same grounds to take a case to court if they feel they're being illegally treated.

The Cliff Notes from the oral arguments this morning: the Court was skeptical of the single-entity-for-everything argument that the NFL put forward. The Court consulted the Solicitor General for an opinion, and it's basically an "everybody loses" type: the SG thinks that single entity is fine for trademark and copyright concerns (which would mean exclusive contracts such as the one ANI was challenging are fine) but not for antitrust concerns (thus preventing the NFL from gaining a full exemption).

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