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Unintended Consequences Of Leegin: No Antitrust Exemption For Baseball?

By Jason Hicks, Esq.

FTC Commissioner Pamela Jones Harbour wrote an interesting article about the collateral fallout of the Supreme Court's decision in Leegin. As explained here and (in more depth) here, the Leegin Court held that minimum vertical price fixing is not per se illegal, thus reversing the long-standing decision in Dr. Miles.

Commissioner Jones Harbour suggests Leegin may have the following unintended consequences:

First, Leegin potentially revitalizes the state action and Twenty-First
Amendment defenses to price fixing that had been rejected in the Midcal case;
and second, Leegin seems to remove any foundation for Justice Holmes's
exemption of major league baseball from the reach of the antitrust laws.

The Commissioner's first point is that in Midcal the Supreme Court balanced competing state and federal interests. In this particular case, the Court determined that California's interests in producer-controlled vertical minimum price fixing was less substantial than the federal policy of per se prohibition of vertical minimum price fixing. Commissioner Jones Harbour suggests that this balancing test might tip in the other direction now that there is no federal per se rule against vertical minimum price fixing:

When balancing federal verses state sovereign interests, the balance
materially shifts in favor of the states when the rule of reason, rather than a
per se standard, is applied. As state regulators and the industries they
regulate begin to appreciate the implications of Leegin, we may see a new round
of state action and constitutional issues percolating up to the Court.

The Commissioner's second point is that, given the Leegin Court's "loose regard" for stare decisis and its willingness to discard outdated antitrust cases, baseball's antitrust exemption may be the next case to be overruled. In the 1992 decision Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, Justice Holmes famously found professional baseball games to be "purely state affairs" not within the jurisdictional of the Sherman Act. Since then the Court's jurisprudence has changed such that, if decided today, the Court would not exempt professional baseball from federal antitrust laws. Although the Court has criticized the baseball exemption and called it an "aberration," the Court has twice reaffirmed Federal Baseball based on stare decisis -- leaving the issue to Congress.

(Coincidentally, lawmakers have argued that the baseball antitrust exemption gives them the right to meddle in the game and, for example, hold hearings on steroid use in baseball).

Commissioner Jones Harbour believes that Leegin may portend a successful assault on the baseball exemption: "If the Court has as loose a regard for the reliance interests of baseball club owners as it had for discount merchant investors in Leegin, stare decisis should not constrain the Court."

Although there is much to debate, both of these points are very interesting. I suspect the second issue is more likely to materialize than the first. Litigants who want to avoid outdated (but still binding) precedent will surely use Leegin to support their arguments.

Full post as published by Antitrust and Distribution Law Blog on February 12, 2008 (boomark / email).