Baseball Antitrust Exemption Doesn’t|Include Television Rights, Judge Rules

MANHATTAN (CN) - Major League Baseball's and the National Hockey League's antitrust exemptions do not extend to TV broadcast rights, a federal judge ruled, refusing to dismiss a class action from fans who say broadcasters' anticompetitive rules prevent them from watching, or force them to pay more, to watch "out-of-market" games.

U.S. District Judge Shira A. Scheindlin found that the lawsuits, filed in Manhattan Federal Court in 2012 and later consolidated, have "produced sufficient evidence that a reasonable fact-finder" could find Comcast and DirecTV to be "complicit in the alleged conspiracy."

In a 59-page ruling on Aug. 8, Scheindlin allowed the lawsuit to proceed despite the leagues' attempt to invoke the antitrust exemption known as the Sports Broadcasting Act, passed by Congress in 1961. The Act created an antitrust exemption for certain types of professional sports broadcasting agreements, "particularly league-wide contracts for over-the-air broadcasts."

Scheindlin found that in Flood v. Kuhn, the U.S. Supreme Court in 1972 "expressly questioned the logic of the baseball exemption, calling it 'at best of dubious validity' and refusing to extend it to other professional sports.'"

She added that if the court were considering the question of baseball "'for the first time upon a clean slate,' it would not adopt an antitrust exemption.'"

"I therefore decline to apply the exemption to a subject that is not central to the business of baseball, and that Congress did not intent to exempt - namely baseball's contracts for television broadcast rights," Scheindlin wrote.

The consolidated lawsuits accuse the Office of the Commissioner of Baseball and various baseball and hockey teams, several sports networks, and specifically Comcast and DirecTV, of conspiring to eliminate competition over the airwaves and on the Internet to restrict programming and hang on to their regional monopolies.

The structure of the "territorial broadcasting system is largely uncontested," Scheindlin found. By agreement with their leagues, each sports club licenses its games to be aired only in certain each teams' general area, but not nationally.

What cannot be broadcast outside of a certain territory is then blacked out, in accordance with the agreements.

Fans can watch these "out-of-market" games only when certain games with broadcasters such as ESPN or Fox are contracted to be broadcast nationally.

The second way to watch "out-of-market" sporting events is through the leagues' packages for TV and the Internet, which are purchasable through Comcast and DirecTV.

However, such purchases require the buyer to pay for an entire slate of out-of-market games, whether they want them or not.

Such packages "do not show in-market games to avoid competition," Scheindlin said. "Additionally, the territorial broadcast restrictions allow each [broadcaster] to largely avoid competing with out-of-market games produced by other RSNs [regional sports networks]."

Meanwhile, Internet streaming of in-market games "remains largely unavailable to consumers," the judge said.

The leagues tried to argue that the federal Curt Flood Act reveals a "congressional consensus that sports broadcasting agreements are covered by the exemption, and that using it allows for 'league expansion, franchise location, the amateur draft and broadcast rights.'"

But Scheindlin nor persuaded, saying a "cost estimate is not persuasive evidence of congressional intent."

The judge said that an expert testifying on plaintiffs' behalf attested to the fact that consumers pay more for live games but have fewer choices available than if the restrictions were lifted. She also seemed to agree that lifting the restrictions would drop package-prices by half.

The leagues argued that the territorial restrictions maintain a competitive balance. But Scheindlin saw things both ways: "On the one hand, the restrictions protect less popular clubs from competition with more popular teams in their home" turfs, she said. "On the other hand, the system requires small market teams to refrain from broadcasting in larger, more populous markets, while big market teams forego only smaller, less populous markets.

"It is not immediately clear whether the restrictions help or harm competitive balance overall," she wrote.

She refused all four of the leagues' motions for summary judgment, and set a conference for Aug. 20 at 4:30 p.m.

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