Antitrust Law Daily Wrap Up, ANTITRUST NEWS: San José pitches baseball exemption challenge to Supreme Court, (Apr 17, 2015)

By Greg Hammond, J.D.

The City of San José is seeking U.S. Supreme Court review of a decision by the U.S. Court of Appeals in San Francisco, upholding the dismissal of antitrust claims challenging Major League Baseball’s franchise relocation policies on the basis of the 92-year old baseball antitrust exemption (City of San José v. Office of the Commissioner of Baseball, Dkt. 14-1252 ).

San José originally filed a federal and state antitrust complaint against Major League Baseball (MLB) in 2013 in an effort to eliminate the territorial restrictions that MLB used to keep the Oakland A’s from moving to San José. According to the city, the owners of the Oakland A’s had expressed a desire to construct a ballpark in downtown San José, but San José falls within the exclusive operating territory of the San Francisco Giants and the relocation was stalled by the MLB for years. Under MLB rules, relocation to another franchise’s territory is prohibited unless approved by at least three-quarters of MLB’s clubs. San Jose alleged that the move had been blocked by the Giants’ claim of “territorial rights” to Santa Clara County. The district court held that the antitrust suit was barred by baseball’s antitrust exemption, and the appellate court affirmed.

In its petition, filed April 15, 2015, San José presents the question: Whether professional baseball is exempt from antitrust law in matters relating to franchise relocation. Specifically, the city argued that the exemption should be abolished, because the two reasons for the exemption—reliance interest of club owners and congressional acquiescence through silence—no longer exist. Because the reserve system is “dead and gone,” San José argues club owners no longer have any reliance interest. Further, the city noted that Congress explicitly declared that it will neither acquiesce in nor reject the exemption. “The time has come for the Court to abolish the exemption it created long ago, when the facts and the legal environment were both very different,” the petition asserts.

At the very least, San José argues that the Court should clarify the scope of baseball’s antitrust exemption, noting that there is a split among courts on the scope of the exemption, including whether it applies to franchise relocation. Specifically, the city alleges that various lower courts have held that the antitrust exemption applies only to the reserve system, while other courts have found that the exemption applies to the entire “business of baseball.”

“To bar the A’s from moving is to reduce consumer welfare, for the sole benefit of a competing producer, the Giants,” the city alleges. “This is precisely the harm that antitrust law is designed to prevent.”

Attorneys: Joseph W. Cotchett (Cotchett, Pitre & McCarthy), Stuart Banner, and Richard Doyle for City of San José.

Companies: City of San José; Office of the Commissioner of Baseball

News: Antitrust