MLB’s “Impotent Zombie”: The Antitrust Exemption

Katherine Manz

Edited by Dillon Murti, Sahith Mocharla, and Judge Baskin

If you were asked which of the North American ‘Big Four’ sports leagues was the structural outlier, several possibilities might come to mind. Perhaps the NHL, because it’s played on ice, or MLB, the only league where seasons are contained within one calendar year. Maybe the NBA, with its distinctive draft lottery, or the NFL, which lacks a Canadian franchise. There are any number of differences between the leagues, which is why the initial question may seem ridiculous. But one legally consequential difference stands out—at once controversial, underexamined, and foundational to how the leagues operate. It’s rooted in Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, a 1922 case where the Supreme Court held that Major League Baseball (MLB) was not subject to federal antitrust law. 

Antitrust law refers to “the regulation of the concentration of economic power, particularly in regard to monopolies and other anticompetitive practices” [1]. At the federal level, this authority stems from the Sherman Antitrust Act of 1890 and its supplement, the Clayton Act of 1914, which identify and provide means of preventing anticompetitive practices. While largely dormant in practice today, these statutes were enacted to “ensure a competitive free market system” by granting the federal government the power to dissolve trusts that restrained interstate or international trade. This makes it possible to disband business coalitions and target practices that result in the singular dominance of a particular industry [2]. It was under these Acts that the owner of the collapsing Federal League’s Baltimore Terrapins filed suit against several defendants, including the National and American Leagues (which later combined to form MLB), for conspiring to destroy the Federal League and thus monopolize baseball [3]. 

Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs (1922)

The Terrapins’ owner, Ned Hanlon, pointed to buyouts as the primary factor in the Federal League’s collapse. Seven franchises had been compensated by MLB to cease operations. In some cases owners were offered the opportunity to acquire MLB franchises; the owner of the Federal League St. Louis Terriers took over the American League St. Louis Browns, while the owner of the Chicago Whales purchased the Chicago Cubs [4]. The Federal League’s star players were subsequently auctioned off to MLB clubs. 

The Terrapins’ appeal to the courts was initially successful. The district court held the defendants jointly liable under the Sherman Act, deeming that the defendants had conspired to “monopolize…part of the trade or commerce among the several States,” and imposed a fine of $80,000 [5]. This fine was tripled under the Clayton Act, totaling a judgment of $240,000, or around $3.77 million in modern dollars [6]. The court of appeals, however, held that the Sherman Act did not apply. It reasoned that MLB did not constitute interstate commerce because “the business is giving exhibitions of baseball, which are purely state affairs” [7]. The necessary travel and interstate arrangements, the court ruled, were “a mere incident, not the essential thing” [8]. The Supreme Court unanimously upheld the judgment in short order, creating what would become the basis of MLB’s antitrust exemption. 

Litigating The Reserve Clause

The Federal Baseball ruling created a multitude of problems and apparent hypocrisies, particularly as other sports leagues were forced to deal with antitrust law. In the century since, the Supreme Court has reconsidered it twice—both cases stemming from MLB’s infamous “reserve clause”—and upheld it both times.

The “reserve clause” was the most overtly monopolistic and problematic piece of the early MLB system. It “bound a player to a single team for a long period, even if the individual contracts he signed nominally covered only one season” [9]. As a result, a baseball player of the time had virtually no agency to dictate for whom he played, rendering him vulnerable to exploitation—essentially property of the team. George Earl Toolson, a pitcher for the New York Yankees AAA affiliate, was the first to challenge the clause through the antitrust exception. Toolson believed he had the talent to play in the major leagues, but the reserve clause prevented him from negotiating a contract with a non-Yankees team, which he argued fell under a restraint of interstate trade under the Sherman Act. He filed suit against MLB in 1950. 

Among other arguments, Toolson cited the substantial growth of baseball in the thirty years since Federal Baseball: fans routinely traveled across state lines to attend games, and the rapid rise of radio and television—accounting for 10.5% of league revenue—rendered state boundaries increasingly irrelevant [10]. The dissenting Justice Burton agreed, writing that, “inherently, professional baseball is intercity, intersectional, and interstate” [11]. But Toolson v. New York Yankees, Inc. (1950) would go on to set a very different standard. By a vote of 7-2, the Supreme Court held that, regardless of any modern applicability of the Sherman Act, Federal Baseball remained controlling precedent simply because Congress had not seen fit to amend the exception it granted. “If there are evils in this field which now warrant application to it of the antitrust laws, it should be by legislation,” said the Court, and washed its hands of the matter [12].

A second challenge in Flood v. Kuhn (1972) met a similar fate, but it garnered enough public attention to catalyze league reform. Curt Flood, a star center fielder for the St. Louis Cardinals, was traded to the Philadelphia Phillies in 1969 against his will. He, like Toolson, filed suit challenging the reserve clause under the Sherman Act, but also invoked the Thirteenth Amendment’s prohibition of slavery and involuntary servitude. The Court’s 5-3 opinion acknowledged the antitrust exemption as an “inconsistency,” but held once again that any change would be “a matter for legislative, not judicial, resolution” [13]. (The opinion, authored by Justice Harry Blackmun, includes a colorful history of baseball and a section simply listing ‘great’ baseball players—88 of them. It has been derided as an “ode to baseball,” rather than a judicial document [14]). Although Flood lost the suit, public sentiment was overwhelmingly in his favor, as some 88% of MLB fans agreed with him [15]. This groundswell of support encouraged the players’ association (MLBPA) to use its bargaining power, which it did by urging players to hold firm on contract terms and making significant amendments to the league’s collective bargaining agreement (CBA).

Congress unsuccessfully moved several times to remove baseball’s antitrust exemption, but it wasn’t until the Curt Flood Act of 1997, introduced two days after Flood’s death, that Major League Baseball players were explicitly covered under federal antitrust legislation [16]. While the Act expanded player rights, its carve-outs and statutory ambiguities allowed MLB to retain its special status in all other aspects, including marketing and expansion.

Modern Discourse 

MLB’s free agency—complete with soaring contracts—is the most obvious modern product of the Curt Flood Act. Less apparent, though, are the direct powers afforded to the league by its exemption. MLB controls team allocation through territorial restrictions, restricts the number of minor league affiliates of each team, and commands broadcasting rights, leading to practices such as national broadcast blackouts [17]. It reserves the right to acquire and suppress rival leagues or boycott non-player staff and may even, as decided in Sergio Miranda, et al v. Allan Selig, et al (2017), require that players sign a “uniform contract containing a reserve clause”—so long as the players are in minor leagues [18]. In essence, MLB has the power to manage its business in almost any way imaginable, provided it does not interfere with the labor rights of the major-league players themselves. 

Marc Edelman and John Holden argue in their article “Baseball’s Anticompetitive Antitrust Exemption” that these practices distort natural allocation of resources in a free market, thereby reducing the overall efficiency of MLB’s operations [19]. More pressing, though, is the damage to livelihoods these practices inflict. When MLB decreased the maximum number of minor-league affiliates from six to four, it “unilaterally terminate[d]” nearly forty minor league teams, driving them bankrupt [20]. The move culminated in a lawsuit brought by four of the minor league teams, entitled Nostalgic Partners v. Office of the Commissioner of Baseball. The plaintiffs alleged an anticompetitive horizontal agreement, with their argument centering on what they framed as the inevitable overturn of Federal Baseball [21]. Despite support from the Department of Justice, the case was dismissed, and with it went the hopes of those whose job security hung in the balance. Minor league players have also filed suits under the Sherman Act, including Daniel Concepcion, a former player alleging that MLB artificially depressed minor-league wages beneath minimum wage [22]. For every case, Federal Baseball remains an immovable stumbling block, and the response of the courts is the same: regardless of the justice or logic of the case, baseball retains its antitrust exemption—and all of its consequences.

One of the few pointed arguments for keeping Federal Baseball intact comes on the congressional level. In his essay “In Defense of Baseball’s Antitrust Exemption,” Nathaniel Grow argues that the threat of repeal provides Congress “considerable leverage over baseball,” allowing it to exact concessions not otherwise possible [23]. For instance, nearly every historical instance of MLB expansion has been preceded by that threat [24]. As a result, Grow argues, the exemption is functionally procompetitive—Congress has the power to directly encourage competition, rather than leave it to the market. However, the possession of that power doesn’t necessarily mean its proper usage. As Edelman and Holden point out, “Congress has rarely done anything substantively to rein in MLB's behavior,” instead concentrating its recent efforts on advancing off-field causes, such as ending the league’s public support of LGBTQ+ rights [25]. Congressional interests very rarely extend to the issues most directly impacted by baseball’s antitrust exemption. Thus, even as MLB remains subject to the government, it is able to exert undue influence on its minor league affiliates and players without fear of retribution. 

This public-sphere adjudication alludes to the fundamental anxieties of antitrust law, particularly concerning free-market competition. There is general consensus, domestically and internationally, that professional sporting leagues must be monopolies on some level to succeed; consolidation of the highest talent seems like the natural state of sport. The slack given to these leagues is meant to make them competitive and profitable. The issue with monopoly, though, is that only one voice prevails. With the extensive benefits that MLB reaps from its antitrust exemption, that voice need not hear the concerns of athletes, employees, minor franchises, or even the consumer—which, ironically enough, may make baseball less competitive within the media sphere at large.

Conclusion

Within three decades of Federal Baseball’s conception, Circuit Judge Jerome Frank dubbed it an “impotent zombie” [26]. Seventy-six years later, the case has continued to survive simply by existing. Will baseball ever fall under the purview of antitrust legislation? In a concurrence on Direct Marketing Association v. Brohl (2013), Judge Neil Gorsuch (then of the Tenth Circuit) compared Quill Corporation v. North Dakota (1992) to Federal Baseball, calling it a “precedential island,” surviving despite an ocean of contrary law [27]. In accordance with Gorsuch’s belief that it would “wash away with the tides of time,” Quill has since been overturned [28]. 

So MLB’s antitrust exemption has aged poorly, and perhaps did from the moment it started. When nearly every court called to uphold it acknowledges its illogicality, what kind of future does Federal Baseball really have?

The Supreme Court would clearly rather defer to the legislature, and the legislature would rather not do anything substantial. However improbable the hypothetical, though, an overturn would allow the federal government to deconglomerate the powers governing baseball. The big-market fans left without a team due to territorial constraints might get a home team, and minor-league teams and players could finally have legal footing to challenge for the same labor rights that those in other sporting leagues have had for decades. The crux of the matter is that MLB’s antitrust exemption seems to have survived a century for no reason at all. When an unjustifiable precedent causes active harm, there’s no reason it should survive a century longer.

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[1] Antitrust, Legal Information Institute, https://www.law.cornell.edu/wex/antitrust (last visited April 7, 2025).

[2] Sherman Act, 15 U.S.C. §§ 1-7 (1890).

[3] Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922). 

[4] Jeremy Lehrman, ‘The Federal Wars’ Might be the Baseball Story of the 20th Century, Medium (March 26, 2018), https://jeremylehrman.medium.com/the-federal-league-changed-baseball-forever-ff86b4b3ccf1.

[5] Sherman Act as amended by Pub. L. No. 108-237 (2004).

[6] Clayton Act as amended by Pub. L. No. 108-237 (2004). 

[7] See [3].

[8] See [3].

[9] Reserve clause, Baseball Reference, https://www.baseball-reference.com/bullpen/Reserve_clause (last visited April 7, 2025).

[10] Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953). 

[11] See [10].

[12] See [10].

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

[14] Patrick K. Thornton, Legal Decisions That Shaped Modern Baseball (McFarland & Company, 2012).

[15] Lee Lowenfish, The Imperfect Diamond: A History of Baseball’s Labor Wars (Bison Books, 2010).

[16] Curt Flood Act of 1998, Pub. L. No. 105-297 (1998).

[17] Sergio Miranda, et al v. Allan Selig, et al, No. 15-16938 (9th Cir. 2017).

[18] Marc Edelman and John T Holden, Baseball’s Anticompetitive Antitrust Exemption, Boston College Law Review, Vol. 65, Iss. 5, Pg. 1695-1753 (2024).

[19] See [17].

[20] See [17].

[21] Karen M. Lent and Anthony J. Dreyer, The current state of Major League Baseball’s antitrust exemption, REUTERS (July 20, 2023, at 9:43 AM CDT), https://www.reuters.com/legal/legalindustry/current-state-major-league-baseballs-antitrust-exemption-2023-07-20/.

[22] See [21].

[23] Nathaniel Grow, In Defense of Baseball’s Antitrust Exemption, American Business Law Journal, Vol. 49, Iss. 2, Pg. 211-273 (2012).

[24] See [23].

[25] See [17].

[26] Gardella v. Chandler, 172 F.2d 402, 410 (2nd Cir. 1949).

[27] Direct Marketing Association v. Brohl, No. 12-1175 (10th Cir. 2016).

[28] See [27].