Playing hardball over baseball's antitrust exemption

San Jose's lawsuit against the league for blocking its bid to lure the Oakland A's raises a big question: Why should baseball have a blessing no other sport has?

Michael Hiltzik

11:19 PM EDT, July 2, 2013


The great thing about baseball is that it's a mass of imponderables. How can Josh Hamilton be paid $17 million this year and hit .223? Why is a team with a $216-million payroll sitting nearly last in its division? (I'm looking at you, Dodgers.)

And: How long will it be before the myth of Major League Baseball's unique and ironclad "antitrust exemption" gets punctured for good?

This last question is raised by the lawsuit recently filed against the league by San Jose. The city wants to build a downtown ballpark to host the Oakland Athletics, a fine team playing in a mausoleum that is less than two-thirds full on a good day.

The city complains that the league has blocked the A's relocation, relying on an old agreement placing San Jose's home county of Santa Clara within the exclusive "operating territory" of the San Francisco Giants.

San Jose's move to the courthouse puts baseball Commissioner Bud Selig in a tight spot. He can allow the A's to move, thus sparking the Giants' ire and possibly opening the door to a land rush of ballclubs looking for more lucrative homes. Or he can resist, placing the league's antitrust exemption at risk in a trial. For four years he's been promising to decide whether to allow the owners to vote on the San Jose plan, with very little visible resolution.

Previous efforts by pro sports leagues to make their teams stay put have foundered on antitrust grounds, most notably when Al Davis sued the National Football League for blocking his Oakland Raiders' planned move to Los Angeles. He won and the team moved in 1982 (only to move back north in 1995).

Baseball has been able to keep a lid on this trend by implicitly invoking its antitrust exemption. So it makes sense to consider the exemption's history. Since it sounds as complicated as the infield fly rule, we'll do so with the help of UCLA law professor Stuart Banner, whose book on the topic, "The Baseball Trust," was published this spring.

The exemption was born in a 1922 Supreme Court decision by Oliver Wendell Holmes, who found that baseball did not qualify as interstate commerce. According to the Constitution's commerce clause, therefore, the sport stood outside the reach of federal legislation such as the 1890 Sherman Antitrust Act. After all, each game took place in one location in one state — the travel needed to get from one game to the next was merely incidental. This reasoning prompted many legal scholars of the day to regard the ruling as uncharacteristically slipshod for the venerated jurist.

The court revisited the antitrust exemption in 1953, in another ruling ridiculed at the time. The fulcrum of both cases was baseball's reserve clause, which bound players to their clubs practically in perpetuity. (Both cases involved players jumping to upstart leagues — the Federal League in 1922, the Mexican League in 1953.)

The second time around the court merely punted (to mix sports metaphors). By a 7-2 vote the judges acknowledged that even if baseball was interstate commerce, Congress had not acted to apply the Sherman Antitrust Act to the sport and therefore it must have intended the exemption to apply. Both branches thus chose to perpetuate the status quo. That's where things stand today.

Still, baseball's unique status among sports leagues gives the antitrust exemption a certain fragility. No one has ever explained why baseball should have a blessing its fellow sports don't get. "If it came up today," Banner says, "it would be found that baseball certainly is interstate commerce."

Another unresolved issue is whether the exemption applies beyond the reserve clause, such as to the league's control over team relocations. Lower courts have split on the question, and baseball team owners, wisely, have shied away from placing it before the Supreme Court. That's why lawsuits challenging the exemption tend to get settled out of court, but quick.

"When it's been tested in court," says Philip L. Gregory, a lawyer representing San Jose, "the league has lost more often than it's won."

Thanks to the exemption, baseball has enjoyed a geographic stability that other leagues can only dream of. Since 1972, when the Washington Senators became the Texas Rangers, only one other baseball team has changed cities — the Montreal Expos, which became the Washington Nationals in 2005 at the league's demand. In that time there have been seven team moves in the NFL and 11 in the National Basketball Assn., which don't enjoy the exemption.

Which brings us back to San Jose and the Oakland A's. According to the city's lawsuit, the placement of Santa Clara County within the Giants' territory is a holdover from an earlier relocation proposal. In 1990, Giants' then-owner Bob Lurie considered moving to San Jose. To allow that to happen, the A's agreed to transfer their territorial rights over San Jose to the Giants.

The city now says that arrangement should have expired when the Giants elected to stay in San Francisco. But it didn't, and now it's an obstacle to the A's and San Jose reaching a glittering economic future.

For the record, Major League Baseball calls San Jose's lawsuit "an unfounded attack on the fundamental structures of a professional sports league."

One unanswered question in all this is why baseball should want to interfere with the A's move.

The team's average attendance of 22,321 is the eighth worst in the league this year, despite playing almost neck and neck with the Texas Rangers for the American League West lead. Its main problem is the awful Oakland Coliseum, a cavernous monstrosity that is the last stadium in baseball shared with a football team. The stadium makes fans feel as if they're miles from the action — when there are fans. On a bad day, it's a perfect place to be if you desire solitude.

The team's attendance ills might be alleviated by a new park, but so far only San Jose has offered it one. As a small-market team, the A's have been on the receiving end of the league's revenue-sharing arrangement, so finding them a way to stand on their own financial two feet would benefit almost all the other teams. Nor would the move necessarily inconvenience many A's fans, as the two cities are 40 miles apart; it's not like forcing Washington Senators fans to fly to Texas.

The Giants, however, might be inconvenienced right in the pocketbook, since a ballclub directly identified with the capital of Silicon Valley might pose real competition for high-tech company sponsorship and luxury box subscriptions that now come to San Francisco.

San Jose wants it known that its goal is merely to bring in the A's, not to overturn the antitrust exemption. The exemption is the city's hostage — and a precious one it is.

"Major League Baseball understands that if they gamble and take this case the distance, the courts could slap down their advantage," says Maury Brown, a veteran baseball analyst and founder of a network of sports business websites, including bizofbaseball.com. "I don't think they want to go there."

He expects the league to find a way to move the A's, perhaps by offering the Giants revenue sharing or other compensation. But how much do they deserve? After all, the A's already operate in the Giants' metropolitan area; what keeps the Giants unconcerned is that up to now they've had their rivals confined in a ballpark no one will go to. The San Jose lawsuit presents them with the prospect of real competition. Isn't that what sports is all about?

Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at mhiltzik@latimes.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @hiltzikm on Twitter.