When Baseball Meets Bidenomics
The Department of Justice is forcing MLB's antitrust exemption under the microscope.
Dear readers,
Today, we’re talking today about one of our favorite subjects: antitrust law.
Last week, we wrote about the feeling of hopelessness that our political system inspires, so this week, we’ve decided to tackle a slightly more upbeat subject — specifically, an antitrust lawsuit against Major League Baseball that’s been winding its way through the courts. The case could challenge MLB’s fundamental business model, so it’s worth keeping a close eye on. We hope you enjoy!
-Ian and Calder
Biden’s Justice Department wants to take Major League Baseball to Court
At a press conference back in March 2020, a recently-inaugurated President Joe Biden made a bold pronouncement about the future of the American economy.
“I’m going to change the paradigm,” said Biden, somewhat obscurely. “We start to reward work, not just wealth.”
Since then, pundits in Washington and beyond have been trying to make sense of what exactly Biden meant by “changing the paradigm” — and, more importantly, if he’s succeeded in doing so. But based on more recent public remarks from Biden’s key economic advisors, we now have a pretty good sense of what he meant.
Since the 1980s, the thinking on Bidenomics goes, the United States has operated under what could be called “a neoliberal economic paradigm,” premised on the notion that unbridled free markets are good and excessive government intervention in those markets is bad. This, of course, is not the way that markets have actually functioned for the last forty years, but it does sum up in broad strokes the underlying assumptions and aspirations of a dominant strand of economic thinking. The power of this paradigm is that its assumptions now seem common sensical: that inequality is a necessary and acceptable byproduct of growth; that high levels of taxation and government regulation hinder growth; and that in a market economy, the companies that come out on top will inevitably be in a position to consolidate control over those markets.
What Biden has tried to do, according to his economic advisors, is usher in a new “post-neoliberal” economic paradigm, one that takes its cues from the Keynesian model that informed the New Deal and post-war economies. Economists can debate what this paradigm means in the abstract until they’re blue in the face, but in practice, Biden’s “post-neoliberal” economic agenda has resulted in three major policy shifts: larger government investment in key markets (think the infrastructure package, the Inflation Reduction Act, and the CHIPS Act), more aggressive enforcement of labor law under an emboldened NLRB, and a renewed focus on antitrust action through the Department of Justice and the Federal Trade Commission.
This past week, that last prong of Biden’s economic agenda ran headlong into the sporting world, thanks to a lawsuit that’s been working its way through the federal court systems for the past few years. The lawsuit stems from Major League Baseball’s controversial decision in 2020 to reduce the number of minor league affiliates teams from 160 to 120, in a fairly blatant attempt to pad the league’s bottom line. In 2021, several of the teams that lost their affiliates in the reshuffle filed a lawsuit against MLB, claiming that the league’s decision ran afoul of the Sherman Antitrust Act. Last October, a judge from the U.S. District Court in Manhattan dismissed the case, citing MLB’s antitrust exemption — the legal arrangement, created by the Supreme Court in 1922, that exempts baseball from practically all legal scrutiny under antitrust law.
We should say here that we think the antitrust exemption is pretty stupid — and we’re not alone in thinking so. In recent years, the Supreme Court’s conservative bloc has also soured on the antitrust exemption. In his decision in the 2021 case NCAA v. Alston, for instance, Justice Neil Gorsuch wrote that although the court had “once dallied with something that looks a bit like an antitrust exemption for professional baseball… [it] has refused to extend Federal Baseball’s reasoning to other sports leagues — and has even acknowledged criticisms of the decision as ‘unrealistic’ and ‘inconsistent’ and “aberration[al].” In a concurrence in that same case, Justice Brett Kavanaugh practically begged for a plaintiff to bring a challenge to the antitrust exemption to the Supreme Court, writing, “Plaintiffs thus have objectively good reasons to believe that the Supreme Court would no longer apply the ‘unrealistic’ and ‘inconsistent’ and ‘aberration[al]’ baseball antitrust exemption if presented with a proper case for reconsidering it.”
All of this is, somewhat ironically, good news for the teams suing Major League Baseball. After the New York Court dismissed the case in October, the plaintiffs appealed the decision to the 2nd U.S Circuit Court of Appeal, and this week the Biden Justice Department has weighed in on their side. In a brief filed Monday and co-authored by Jonathan Kanter, Biden’s chief antitrust lawyer, the Justice Department argued that the court should follow the Supreme Court’s advice and “not extend” MLB’s antitrust exemption — meaning that judges should not summarily dismiss challenges to the league’s actions because of the antitrust exemption. Although the brief made clear the Justice Department was “not [taking] a position on whether the exemption applies” in this specific case, it did signal the Justice Department’s desire to chip away at the legal shield that protects MLB from any and all antitrust scrutiny.
The plaintiffs in this latest case have argued that they are giving Kavanaugh and the other justices exactly what they asked for — a chance to rule on MLB’s antitrust exemption. And as the plaintiffs themselves have acknowledged, their best shot at getting to the Supreme Court would require the U.S. Court of Appeals to apply the controlling precedent and rule against them, thus allowing them to appeal to the Supreme Court — the only court that actually has the authority to strike down the antitrust exemption. Whether a majority of the justices would rally behind Kavanaugh and Gorsuch’s position remains uncertain.
What is clear, however, is that MLB has found itself on the wrong side of a rapidly shifting paradigm. In today’s hyperpartisan political climate, it’s rare to find an entity that is equally despised by people across the political spectrum, but somehow, Major League Baseball has done it. The Biden administration is taking aim at the league on antitrust grounds; the Supreme Court’s conservatives take offense at its flagrant violation of free-market principles; MAGA-aligned Republicans have singled it out as a high-profile enemy in the anti-woke culture wars. If you find yourself on the wrong side of all three of these groups, you’re really in trouble.
If you’ll allow us to engage in some rank punditry for a moment, we think there’s a lesson for Democrats here as they enter the second half of Biden’s current term in the White House. With Republicans in control of the House and Democrats controlling a slim majority in the Senate, the days of passing big, ambitious parts of Biden’s economic agenda are over. But that doesn’t mean that the paradigm shift has to come grinding to a halt. If you squint, there’s room for agreement between Democrats and the more populist elements of the Republican Party on certain elements of Biden’s economic agenda, in particular those relating to trust-busting and labor protections. We’re not likely to see another IRA pass in the next two years, but if an unholy alliance of progressive Democrats, populist Republicans, and conventional Supreme Court conservatives can succeed in blowing up Major League Baseball’s naked attempts to defy regulation, we’ll be plenty satisfied.
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