Does Major League Baseball’s (MLB) farm league system violate federal antitrust laws? Not according to the 9th Circuit. As written about in this previous post from July 2016 and one from July 2015, numerous minor league baseball players filed suits against numerous major league teams claiming that the salary structure for MLB’s farm system violated the wage and hour laws because they have to work an average of 50 to 60 hours per week, but only earn less than $10,000 per year. They further alleged that the teams’ hiring and employment policies violated federal antitrust laws by restraining competition between franchises and artificially depressing minor leaguers’ salaries. At the lower court, the owners of the teams filed a motion to dismiss arguing that the business of baseball has long been exempted from antitrust restrictions. The court agreed, dismissed the case, and the players appealed.
The 9th Circuit opinion went through the long history of baseball and its relationship to antitrust statutes. The two significant antitrust statutes, the Sherman Act and the Clayton Act, were passed in 1890 and 1914 in response to concerns about monopolies among businesses across the country. In 1922, in the seminal case of Federal Baseball Club of Baltimore v. National League of Baseball Clubs, the United States Supreme Court held that the business of baseball should not come under those anti-monopoly statutes. Thirty years later, in Toolson v. New York Yankees, Inc., the Supreme Court again affirmed the exemption.
Interestingly, throughout the years, other entertainment and sports organizations have tried to get the same exemption treatment by the court, but to no avail. Traveling theater companies, professional boxing, professional football and professional basketball all unsuccessfully sought the same exemption under antitrust laws. In those cases, the Supreme Court said that it was the role of Congress, not the courts, to create additional exemptions to federal antitrust laws. This reasoning was interesting since it wasn’t Congress that created the baseball exemption, but actually the court itself! In the 1972 case of Flood v. Kuhn, the Supreme Court again affirmed the baseball antitrust exemption. In that opinion, the court noted that Congress had introduced numerous bills over the years, both for and against the baseball exemption, but none had passed. Since so much time had passed and professional baseball had developed into a major industry, the court was concerned about the consequences of overturning the exemption and again tossed the ball to Congress.
This time, Congress made the tag—for some. In 1998, Congress passed the Curt Flood Act, named after the Reds centerfielder who unsuccessfully challenged MLB’s trade policies as being in violation of antitrust statutes. The Curt Flood Act wiped out the antitrust exemption for organized major league professional teams. However, it specifically retained the antitrust exemption for anything related to the employment of minor league baseball players—-such as the ones in the suit here. As such, even though the minor league players begged the court to go against the past history of the exemption and the carve-out of minor leaguers in the statute, the 9th Circuit ultimately called their wage suit out at the plate.
While it is extremely unlikely that this decision will have any impact on employers that are not minor league baseball team owners, it is interesting to review some of the creative baserunning that past courts went through to protect America’s favorite pastime exemption.