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As Adam Smith foretold in “The Wealth of Nations”, long before baseball was even invented, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.” Washingtonians must wince to read that sage warning. For nearly a century, Major League Baseball has been comfortably shielded by a Supreme Court-granted exemption from the antitrust laws. Exploiting that gift, Baltimore Orioles plutocrat Peter Angelos for years managed to thwart a D.C. franchise and now extracts extortionate conditions, including the virtual theft of the Washington Nationals’ local broadcasting rights, in return for his grudging acquiescence. The local team is handicapped in competing because Angelos’ machinations in conjunction with other team owners have deprived it of substantial revenues. Now would be an excellent time for the Supreme Court to finally reverse its 83-year sop to professional baseball. THE OUTLOOK WASN’T BRILLIANT The Supreme Court threw its wild antitrust pitch in Federal Baseball Club v. National League (1922). A member of a Federal League baseball team (in Baltimore, no less) had brought a treble-damage action under the Sherman Antitrust Act of 1890 against the National and American leagues and others. Writing for a unanimous Court, Justice Oliver Wendell Holmes Jr. produced a conclusory five-paragraph opinion, in which he absurdly insisted that “personal effort, not related to production, is not a subject of commerce.” Nothing in the language or purpose of the Sherman Act even hints at such a distinction. The act nowhere differentiates between services — e.g., law, medicine, or accounting — and traditional industrial products. Both are “commerce,” as customarily understood. Both contribute significantly to the national economy, with services contributing an ever-greater proportion of the gross national product every decade. Perhaps most telling, Chief Justice John Marshall, writing a century earlier in the landmark case of Gibbons v. Ogden (1824), held that interstate ferry service, which pivoted on “personal effort not related to production,” constituted commerce subject to congressional control. Marshall elaborated: “The mind can scarcely conceive a system for regulating commerce between nations … confined to prescribing rules for the conduct of individuals, in the actual employment of buying and selling.” Holmes was equally off-base in maintaining that professional baseball was an intrastate enterprise. Then, as now, teams are established in cities in different states to generate interstate rivalries and fan loyalties. Players and spectators cross state boundaries to conduct and attend public exhibitions. Broadcast and print news promoting fan attendance is an interstate endeavor. Without the channels of interstate commerce, the baseball leagues would have withered long ago. In the years since Federal Baseball Club, all other professional sports and other services resting on “personal effort not related to production” have been held subject to the antitrust laws. And in Goldfarb v. Virginia State Bar (1975), a unanimous Court denied a “learned profession” exemption from the Sherman Act. Chief Justice Warren Burger explained that the plain language of the Sherman Act contains no such exception and that “the exchange of … a service for money is ‘commerce’ in the most common usage of the word.” THERE SEEMED BUT LITTLE CHANCE Federal Baseball Club thus represents an egregious error in statutory interpretation. Its main defense today rests on the value of stare decisis and the willingness of Congress to leave the folly intact. But that should not be enough to shield this ill-reasoned decision. Certainly the Supreme Court has not shied from overruling precedents in other cases in which Congress clearly had the power to correct the misinterpretation by simple legislation but chose not to do so. Elsewhere in the antitrust field, for example, the Court has overruled decisions making vertical restraints and maximum-price fixing illegal per se — see Continental TV Inc. v. GTE Sylvania Inc. (1977), overruling United States v. Arnold, Schwinn & Co. (1967); and State Oil Co. v. Khan (1997), overruling Albrecht v. Herald Co. (1968). And yet, on two occasions since 1950, the high court has declined to disturb baseball’s unjustified exemption when an appellant sought to bring MLB back under the Sherman Act, “the Magna Carta of free enterprise” according to United States v. Topco Associates Inc. (1972). In Toolson v. New York Yankees Inc. (1953), a 7-2 majority balked in a per curiam opinion. The Court observed that Congress in the three decades since Federal Baseball Club had declined to enact legislation to bring baseball within the Sherman Act . Of course, such reasoning would thwart any Supreme Court from overruling a statutory precedent and thus contradicts historical practice. The Toolson Court further observed that baseball had developed for 30 years “on the understanding that it was not subject to existing antitrust legislation.” That is an equally misconceived reason not to overrule Federal Baseball Club. Note that a few years earlier, the Court had sent shock waves through the insurance industry when it held in United States v. South-Eastern Underwriters Association (1944) that insurance companies are subject to criminal prosecution under the Sherman Act. The Court was not deterred by the understanding, developed since Paul v. Virginia (1869), that insurance was beyond the commerce clause powers of Congress. The South-Eastern Underwriters decision held that Congress intended Sherman Act jurisdiction to expand with Congress’ power under the commerce clause. (Besides, Congress can write a new law when it dislikes the justices’ reading of an old statute: After South-Eastern Underwriters, it provided a limited antitrust exemption for insurers with the McCarran-Ferguson Act.) In any event, professional baseball had — and has — no reasonable expectation that Federal Baseball Club, which was already a legal relic in 1953, will not someday be overruled. Professional baseball’s interstate imprint has significantly magnified since 1922. Even by midcentury, as a dissenting Justice Harold Burton wrote in Toolson, organized baseball featured 39 interstate leagues. Radio and television revenues were soaring. Gross receipts had climbed to $32 million in 1950. The idea that all this did not constitute “commerce” was laughable. HE BADE THE GAME GO ON Twenty years later, the high court again gave Major League Baseball a pass, in Flood v. Kuhn (1972). Writing for a 5-3 majority, Justice Harry Blackmun conceded the error of Federal Baseball Club and the glaring aberration of baseball’s antitrust exemption. Nonetheless, he largely repeated the lame arguments of Toolson — namely, that an overruling would cause confusion within MLB and that Congress had by “positive inaction” endorsed the mistake. And yet Blackmun did not cite a single aspect of MLB that would distinguish it from the National Basketball Association or the National Football League, both of which thrive despite their subjection to the Sherman and Clayton acts. Moreover, the Flood Court worried most about disturbing the reserve clause in player contracts that bound players to their teams and thereby promoted stability (and depressed salaries). But an arbitrator’s decision in 1975 would later destroy the reserve clause system, and Congress in 1998 would lift MLB’s antitrust exemption as it applied to dealing with the players. Additionally, when Flood was decided, the nonstatutory labor exemption from antitrust liability was ill-defined. The Supreme Court later clarified, in Brown v. Pro Football Inc. (1996), that the Sherman Act leaves undisturbed the terms and conditions of employment subject to mandatory collective bargaining under the National Labor Relations Act. In any event, statutory interpretation pivots on the intent of the enacting Congress, which cannot be altered by the complacency of its successors. If Congress in 1890 intended a commercial enterprise like professional baseball to fall within the Sherman Act, the Supreme Court is obligated to honor that intent, not wash its hands of the matter. SOMEWHERE MEN ARE LAUGHING Major League Baseball’s antitrust exemption grows more outlandish each year. Approximately 73 million fans now attend MLB games annually. Gross revenues exceed $3.5 billion. And the World Series commands a staggering TV audience. Moreover, the Angelos-MLB conspiracy now crippling the Washington Nationals underscores the consumer harm inflicted by the exemption. Angelos fought fiercely for years to block a D.C. franchise in order to protect his Orioles from nearby competition and to inflate the value of the team. The antitrust laws should have foiled Angelos as they did NFL team owners in their attempt to prevent the Oakland Raiders from moving to Los Angeles. (The U.S. Court of Appeals for the 9th Circuit ruled against the league’s anti-competitive efforts in Los Angeles Memorial Coliseum Commission v. NFL (1984).) Instead, in an unheralded part of the Washington franchise award, MLB bowed to Angelos’ ultimatum that the new team be forced to become a minority partner in a new regional venture, the Mid-Atlantic Sports Network (MASN), controlled by Angelos, with local rights to broadcast both the Orioles and the Nationals. Angelos owns 90 percent of MASN, a stake that may fall to 67 percent over the next 30 years. Clearly, the 90-10 split favoring Angelos is a noncompetitive arrangement. The value of Baltimore’s broadcast rights is decidedly inferior to the value of Washington’s broadcast rights. The former is the 23rd-largest media market, while the latter is the eighth largest. Washington offers more than twice the number of television sets and twice the average personal income. The Nationals are guaranteed $21 million annually from MASN, but that sum is less than an offer from Comcast Sports Network, according to its executive vice president, David Cohen. (On July 27, a Maryland state judge ruled in favor of MASN and Angelos on Comcast’s breach-of-contract claim, but Comcast is likely to appeal.) Angelos has thus succeeded in depriving his baseball rival of potential revenues that would enable it to spend more on better players. Thus, the Nationals’ competitive position vis-a-vis other teams is undermined. The Angelos-MLB collusion also has the potential to harm consumers, by raising the price for fans who follow the Nationals. To show Nationals games, the cable or satellite operator will surely have to buy the entire MASN package of Nationals and Orioles games, and that higher cost will inevitably get passed along to consumers through higher basic cable rates. So what’s the game plan? The District of Columbia should bring a Sherman Act injunctive action attacking the MASN pact in the name of D.C. residents. The Supreme Court should overrule Federal Baseball Club because its adverse impact on fans and team competition is pronounced. And that overruling should not be retroactive to prevent potentially devastating treble-damage liability for past MLB antitrust violations. The national pastime is too important to be left to a frolic of Justice Holmes. Bruce Fein is a constitutional lawyer and international consultant with D.C.’s Bruce Fein & Associates and the Lichfield Group. He was associate deputy attorney general and general counsel of the Federal Communications Commission under President Ronald Reagan.

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