The crack of a cowhide ball against a wooden bat. Clouds of chalk and dirt rising from spiked footfalls along base paths. Enough statistical data to fuel endless hours of inspired debate. All of these factors feed the poetry and the commerce of America’s Pastime. An exemption from the Sherman Act didn’t hurt either. Nor has Congress’ use of Major League Baseball’s exemption as a carrot (and a stick).
But new research by legal studies professor Nathaniel Grow suggests that the traditional scholarly view – that baseball’s antitrust exemption has had a negative effect on the industry – is vastly overstated.
Grow’s paper, “In Defense of Baseball’s Antitrust Exemption,” argues that the operations of Major League Baseball are substantially the same as those of the other major professional sports leagues, despite the fact that the other leagues are governed by antitrust law and baseball isn’t. Grow’s argument was convincing enough that he was awarded the Holmes-Cardozo Outstanding Conference Paper Award at a recent international meeting of the Academy of Legal Studies in Business.
“My intuition was that there wasn’t much difference between the four leagues because when you look at the basics there are roughly the same number of teams,” says Grow, a former associate who specialized in intellectual property and antitrust practice at Crowell & Moring, LLP, in Washington, D.C. His paper provides half a dozen counterarguments to the traditional scholarly viewpoints. “When you look at an unregulated monopoly, you expect them to reduce the production to drive up the price exorbitantly. But MLB is playing as many or more games than any other pro sports league – and when you account for the number of games, they are charging the second lowest prices to pro football. You’re not seeing the effects from this unregulated ‘evil’ monopoly.”
Grow isn’t in favor of antitrust exemptions. But he disagrees with the popular theory that, without the antitrust exemption, baseball would field more teams. “That’s just not the case because there’s precedent in other leagues like the NFL and NHL, where business groups request entrance into the league to compete – and the courts have returned decisions that they are not going to apply antitrust law to force these leagues to expand when they don’t want to.”
Grow says Congress has used the exemption status to enable Major League Baseball to behave and conduct business according to its own wishes, including expansion. “Congress has had more than 50 hearings in the past 60 years to consider changing this exemption, and they’ve been able to use those hearings as a threat to get what they want from baseball – which antitrust regulations wouldn’t have provided,” says Grow, who notes that every instance of league expansion came immediately after a congressional threat to revoke MLB’s antitrust exemption.
“The downside of the exemption is overstated,” says Grow, “because Congress has figured out a way to use the exemption as a valuable benefit to regulate baseball in another way. On the whole, it’s done more good than bad because they’ve been able to extract those benefits.”
Grow’s initial research has earned him a junior faculty grant from UGA’s Willson Center for Humanities and Arts to pursue more research related to baseball’s antitrust exemption.
“I've always found it interesting that three of the major league sports businesses in this country are regulated and one of them isn’t,” says Grow. “It’s like having an experimental group and a control group.”