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Antitrust Sports Exemptions

Written by Gene Quinn
Patent Attorney & IPWatchdog Founder
Editor of the Blog
Posted: January 19, 2009 @ 12:04 am

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Many of the policies, rules and regulations of any organized sport appear upon cursory review to violate both the spirit, intent and letter of the antitrust laws. Nevertheless, many of these same policies, rules and regulation are legal and not considered to be antitrust violation. This is true because §1 of the Sherman Act does not mean what it says, always remember that. Policies, rules and regulations are upheld when they fall under one of a limited number of exemptions to the antitrust laws.

Baseball Exemption

Historically professional baseball has been exempt from the antitrust laws. Baseball’s exemption dates back to 1922 and the case of Federal Base Ball Club of Baltimore, Inc. v. National League of Professional Base Ball Clubs. Several times since that decision the exemption was revisited by the United States Supreme Court, each time the case ending with the Court refusing to disturb baseball’s absolute exemption. Baseball’s exemption became nothing more than a narrow application of stare decisis. This is true because professional football was specifically denied an exemption to antitrust immunity despite the obvious similarities between the two sports.

While the Supreme Court was unwilling to do away with baseball’s exemption, Congress has done away with some of the baseball exemption. The Curt Flood Act of 1998 (codified at 15 USC 27(a)) strips baseball of its antitrust immunity with respect to actions taken against major league players. The Act does not, however, affect such aspects of the game as relocation, league expansion, umpires and the minor leagues.

Statutory Labor Exemption

This exemption originated in the Clayton Act and can be found at 15 USC 17, 29 USC 52 and 29 USC 101-115. The labor exemption allows unions to enter into agreements that might eliminate competition from other unions and create a monopoly in the union. Businesses cannot claim this statutory labor exemption.

Non-Statutory Labor Exemption

The nonstatutory exemption was created by the Supreme Court to reconcile the conflicting policies between antitrust and labor laws, and is the crux of nearly all antitrust actions in professional sports.

Essentially, any union-management agreement (i.e., commonly referred to as a collective bargaining agreement or CBA) is exempt from the antitrust laws if the agreement: (1) primarily affects only the parties to the collective bargaining relationship; (2) deals with a matter that is the mandatory subject of collective bargaining; and (3) is the product of bona fide arm’s length bargaining.

The goal of this exemption is to foster agreement. This exemption, however, is increasingly being used by management to insulate anticompetitive policies from antitrust scrutiny. This is particularly true where management is negotiating with a weak union.

NFL Exemption

The NFL does have a very limited antitrust exemption, which can be found at 15 USC 1291 and 1292. The NFL is allowed to pool and sell a unitary video package to TV networks (15 USC 1291). The NFL is also allowed to issue blackouts of non-local games when local teams are being telecast. (15 USC 1292). Additionally, they are allowed to blackout local teams when there has not been a sellout. (15 USC 1292).

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