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MLB Pitches Around Consumers by Settling Suit, Avoiding Further Litigation on the Scope of Its Longstanding Antitrust Exemption

We’ve previously written about litigation involving the scope of Major League Baseball’s long-standing antitrust exemption.  Earlier this week, on the eve of trial, MLB settled Garber v. Office of the Commissioner of Baseball, a class action lawsuit challenging its territorial broadcasting policy.  The lead plaintiff Marc Lerner is a Mississippi resident and New York Yankee fan who was allegedly charged supracompetitive prices to watch the Yankees due to MLB’s territorial broadcast policies.  Under MLB’s policy of territorially restricting television broadcasts, consumers could only watch “out-of-market” games subject to certain limitations, including a requirement to purchase every out-of-market game, even if the consumer was only interested in following a single team.  By avoiding the bench trial, MLB avoided having to further litigate the scope of its unique “antitrust exemption” in front of Judge Scheindlin of the U.S. District Court for the Southern District of New York, who had previously expressed skepticism about the continuing viability of the exemption.

MLB’s antitrust exemption dates back nearly 100 years to the Supreme Court’s decision in Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, 259 U.S. 200, 208 (1922), in which it held that “the business of giving exhibitions of baseball” was not subject to the Sherman Act.  Since then, the decision has been progressively circumscribed, but never fully swept away.  For example, in Piazza v. Major League Baseball, 831 F. Supp. 420, 438 (E.D. Pa. 1993), the court held that baseball’s antitrust exemption is “limited to baseball’s reserve system” for controlling player contracts, and in Henderson Broad. Corp. v. Hous. Sports Asso., 541 F. Supp. 263, 265 (S.D. Tex. 1982), the court held that the antitrust exemption does not extend to a franchise’s dealings with radio broadcasters.  Judge Scheindlin had already further limited MLB’s exemption from the antitrust laws in an earlier opinion in the case.  On MLB’s motion to dismiss, she held that television broadcasting rights fell outside the contours of the exemption, and noted that “[t]he continued vitality and scope of the baseball exemption are far from clear.”  Laumann v. NHL, 56 F. Supp. 3d 280, 295 (S.D.N.Y. 2014).  In that same opinion, the court held that the rule of reason would apply to MLB’s territorial broadcasting restrictions, and called the pro-competitive effects MLB proffered “far from compelling.”  Id. at 301.

With the prospect of a full-blown trial on the competitive effects of its policies looming, MLB elected to settle, offering fans the opportunity to purchase a single-team package that covers all that team’s out-of-market games through its internet streaming service.  The price of the package is less expensive than the least expensive package previously offered, and MLB has further promised limitations on the amount of annual increases on the price of the package.  The settlement now awaits final approval from the court.