Baseball Tries An Old Saw: “Let’s not compete on wages….”

Virtually all businesses, and not least the professional sports leagues, are looking to cut costs in the era of coronavirus.  Major League Baseball has decided to cut its 2020 draft of amateur players, usually either high school seniors or college juniors, from 40 rounds to 5.  See https://www.cbssports.com/mlb/news/mlb-agrees-to-reduce-2020-draft-to-five-rounds-with-unlimited-undrafted-signings-for-20k-reports-say/.

Eliminating part or all of Baseball’s amateur draft is one thing, even if this results in economic harm to the potential draftees.  E.g. https://theathletic.com/1804221/2020/05/09/law-how-the-five-round-draft-hurts-players-and-pro-baseball-as-a-whole/.  It is another thing altogether for baseball teams to agree – outside of a collective bargaining agreement – that they won’t pay any undrafted player more than $20,000 to sign.  But that, in fact, is part of the plan reported on May 8.  E.g. https://sports.yahoo.com/report-mlb-draft-will-be-shortened-to-five-rounds-223145740.html .  (Under baseball’s pre-covid system, draftees in e.g. rounds 6 through 10 could expect signing bonuses between about $300,000 for the earlier of these rounds, and $125,000 for those in the 10^th round.)

Of course “Baseball” has its antitrust exemption, granted by the U.S. Supreme Court in 1922 in Federal Baseball Club v. National League, 259 U.S. 200.  But it was created long before “MLB” even existed, much less before it became the megabusiness it is today.  To be sure the Court has affirmed the exemption in various ways over the years, and the argument that the issue is now to Congress is oft-stated.  See https://blogs.fangraphs.com/baseballs-antitrust-exemption-a-primer/.  But it is hard to imagine a more flagrant antitrust violation – a more flagrant abuse of an exemption granted to protect a “game” – than a horizontal agreement among businesses worth billions to impose a wage cap on their potential employees with the least bargaining power.  E.g. Arizona v. Maricopa Cty. Med. Soc., 457 U.S. 332, 361 (1982).

“Major League Baseball” is a $10 billion annual business in 2020.  Its recent action could present a solid set of facts to challenge the antitrust exemption.  Baseball may be counting that no one who hopes to play in The Show would be the one to sue.

—James Savitt, Jacob Freeman