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Minor league teams challenge baseball’s antitrust exemption

Citing the Supreme Court’s recent ruling against the National Collegiate Athletic Association, the four minor league teams swung for the fences Monday and said in a complaint the Sherman Act should apply to baseball.

STATEN ISLAND, NY (CN) — In the city where titans of baseball such as Babe Ruth and Joe DiMaggio cinched their names in the annals of baseball history, a defunct minor league team has turned to the courts in hopes of changing law surrounding the sport.

For almost 100 years, Major League Baseball has operated under an exemption to the nation’s antitrust law thanks to a U.S. Supreme Court’s decision that determined the exhibition of a baseball game did not fall under the Commerce Clause.

On Monday, the Staten Island Yankees and three other minor league baseball teams said in a lawsuit that they hope to have the U.S. Supreme Court whose chief justice once said his job was “to call balls and strikes” to make a different call than the judicial umpires of old.  

Baseball has changed, the minor league teams said, and they sense a shift in the Supreme Court due to the unanimous decision this year regarding compensation for student athletes in NCAA v. Alston. In that case, the Supreme Court found that the National Collegiate Athletic Association's rules on amateurism were not protected from antitrust scrutiny. The plaintiffs believe that, in its deliberations of that case, the Supreme Court "signaled its willingness" to reconsider the baseball exemption.

“Based on the changing market realities here, Plaintiffs believe that the Supreme Court would not apply any baseball exemption to the claims presented here,” the 33-page complaint reads. “Instead, Plaintiffs believe that this case will be vehicle that the Supreme Court will use, if presented the opportunity, to cast the baseball exemption aside.”

Last year, the Staten Island Yankees learned though social media that the New York Yankees would no longer affiliate with the minor league team.

The Staten Island Yankees, whose home park boasted a view of the upper bay of New York Harbor and the Statue of Liberty, was one of 160 minor league teams around the country. Under the Professional Baseball Agreement, the minor-league team gave 8% of its ticket sales to Major League Baseball.

In turn, the minor team would get help filling out their player and coach roster.

For baseball fans at these smaller stadiums, the minor league arrangement provides opportunity to possibly see some serious talent at work.

“Minor league games featured players with prospects for future big-league success as well as MLB players who had returned to the minor leagues for injury rehabilitation or further training,” the complaint says. “Indeed, nearly every MLB player has spent time developing his talent in one or more minor leagues — Mickey Mantle developed his Hall-of-Fame talent in Joplin, Missouri for the Joplin Miners in 1950, and Derek Jeter spent 1992 in Greensboro, North Carolina playing for the Greensboro Hornets.”

The complaint said 42 of the Staten Island Yankees’ players went on to play in the major leagues. It also supported 1,500 jobs in the New York City borough and the community benefitted from $77 million in sales because of the team’s presence.

But that changed when the MLB decided to shake up the arrangement between major and minor league teams.

The complaint says the MLB announced in September 2020 that it implemented a new system and each major league team would only align with four minor league teams. Forty teams were left out of the arrangement.

The move threatened the ousted teams’ sponsorships and their ability to recruit players and attract fans to their games.

“Now 25% of those [Minor League Baseball] teams will disappear, not because of competitive failure, but because of collective decision-making by a group of horizontal competitors seeking to restrict output and reduce their costs,” the complaint states.

At the end of 2020, the Staten Island Yankees announced it was ending operations and filing a lawsuit against the MLB and the New York Yankees, alleging the parties breached their contractual obligations.

In October, the minor league team said in a court filing it would appeal an order partially dismissing the case. And a few days ago, the judge in that case denied requests to send the matter to arbitration.

The new antitrust suit is brought by attorneys with the New York firm Weil, Gotshal & Manges as well as Berg & Androphy. The attorneys brought the suit on behalf of Norwich Sea Unicorns of Connecticut, the Oregon-based Salem-Keizer Volcanoes and the Tri-City Valleycats, based in New York, in addition to the Staten Island Yankees.

The MLB did not return requests for comment.

In a 2008 speech to the Supreme Court Historical Society, Supreme Court Associate Justice Samuel Alito said the court’s 1922 decision creating baseball’s antitrust exemption “has been pilloried pretty consistently” for the last eight decades, with some commentators wondering if the carve-out came about only because the sport was the national pastime.

“Justice Holmes’s unanimous opinion for the Court represented a fairly orthodox application of then-prevalent constitutional doctrine,” Alito said at the time.

The justice — himself a fan of the Philadelphia Phillies — noted in his speech the Supreme Court had opportunities in 1953 and 1972 to overturn the exception but declined to do so.

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