MLB’s Broadcast Monopoly Status Might Be Showing Some Cracks

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You may have heard by now that a New York federal judge ruled last Friday that MLB’s antitrust exemption does not apply to broadcast rights.  The story gets its best treatment here:

Judge Rules MLB’s Antitrust Exemption Doesn’t Apply to Television Broadcast Rights

This could be a very big deal because currently, MLB controls nearly practically every aspect of the audio and video distribution of its product to the fans who live outside their favorite teams’ designated territories.  This is a right they claim by dint of the antitrust exemption they gained in the Supreme Court ruling Federal Baseball Club of Baltimore v. National League in 1922.  The exemption has long been interpreted by MLB as allowing them to prevent other concerns from delivering this audio and video content as competitors.

Now U.S. District Judge Shira Scheindlin has thrown a monkey wrench into the works by rejecting motions for summary judgements—essentially a dismissal—of a class-action suit brought by a group of fans who maintain that MLB and their constituent clubs are an “illegal cartel” that make “agreements to eliminate competition in the distribution of games over the Internet and television.”  They further contend that MLB, satellite and cable companies collude “to divide the live-game video presentation market into exclusive territories, which are protected by anticompetitive blackouts. Not only are such agreements not necessary to producing baseball contests, they are directed at reducing competition in the live-game video presentation market, involving and protecting third parties who operate only in that separate market.”  Pretty strong stuff, but it does have to be this strong out of the gate to be taken seriously.

Two weeks previosuly, 9th Circuit Court Judge Alex Kozinski wrote an opinion in the suit by the city of San Jose against MLB, for preventing the movement of the Oakland A’s franchise there, that some interpreted as being favorable for maintaining MLB’s out of market broadcast monopoly as well by defining the antitrust exemption on very broad terms, due to the decision made in the Flood v. Kuhn case in 1972 as well as “congressional acquiescence”.  But the ruling by Scheindlin flew in the face of that broad interpretation, carving out an exception for the out of market broadcast rights on the grounds that MLB had not “demonstrated that exceptional circumstances warrant the requested relief” from the class action lawsuit challenging their monopoly out of market delivery status.

What this boils down to at the moment is that there is potentially a sharp disagreement between the Circuit Court level and the District Court level as to how broadly the Antitrust Exemption can be interpreted as applying to MLB’s scope of business.  It’s possible that both these cases could end up at the Supreme Court at some point, but because the out of market broadcast suit is only at the District Court level and in fact has yet to even be certified as a class action suit, which won’t happen until later this month, we are probably looking at several years before a decision favorable to out of market consumers could be made.

The bottom line here is: don’t hold your breath while waiting for lower cost TV, radio and Internet game packages to be offered by companies competing with MLB.  But do keep your eye on what’s happening in Judge Shira Sceindlin’s court room at the Southern District of New York next month.

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