You’re Outta Here! Developing precedent on group boycotts in sports

Antitrust scrutiny is hardly new to the sports sector, but in recent weeks, the intersection of the two in the U.S. has been especially active. At the end of October, a case against Major League Baseball (MLB) brought by ousted minor league affiliates was dismissed as a result of the long-standing antitrust exemption afforded to America’s Favourite Pastime (notwithstanding that an appeal is expected and the exemption continues to be criticised by Congress, the courts, and U.S. antitrust agencies). At the same time, several other sports leagues are facing similar claims of group boycotts in violation of antitrust laws to exclude players from their leagues, with professional golf and professional chess being just two examples of leagues that have recently faced allegations of anti-competitive conduct by way of group boycotts. 

Former Minor League affiliates strike out

Last week, the Southern District of New York dismissed an antitrust lawsuit filed against MLB, citing the historic antitrust exemption the league is afforded. The case was brought by four minor league baseball teams that alleged the MLB participated in a per se unlawful horizonal agreement in the form of a group boycott to decrease the number of minor league affiliates. While the decision may be a temporary victory for the MLB, it is only the latest chapter in the long-running controversy surrounding the baseball exemption.

As we have previously discussed, the MLB’s antitrust exemption dates back to 1922, when the Supreme Court of the U.S. (SCOTUS) granted the MLB an exemption from U.S. antitrust laws under the reasoning that the business of baseball was a “purely state affair[]” that was not subject to regulation by the federal government. Since then, there have been numerous attempts to overturn the exemption with minimal success. Subsequent decisions such as Toolson v. New York Yankees in 1953, Flood v. Kuhn in 1972, and even as recent as NCAA v. Alston in 2021 have consistently questioned the rationale and viability of the exemption but have failed to eliminate it. 

In its decision to dismiss the minor league affiliates’ lawsuit against the MLB, the court recognised that the plaintiffs had successfully pleaded sufficient facts under a rule of reason analysis to show that there had been an actual adverse effect on competition in the identified market due to the MLB’s actions; the MLB had effectively created a group boycott of the minor league affiliates that reduced competition in the market. Despite this narrow holding in favour of the MLB, this case shows that there is a broad basis for other challenges to group boycotts in other leagues. The U.S. Department of Justice (DOJ) also took interest in the matter, filing a statement of interest urging the court to narrowly view the MLB exemption. However, the court concluded that without further action from either Congress or SCOTUS, the exemption continues to shield the MLB from the plaintiff’s lawsuit. 

While the MLB is currently afforded a broad exemption from U.S. antitrust laws, including against the horizontal group boycott of its minor league affiliates alleged in this case, we may be in the 9th (and final, for those readers unfamiliar with baseball nomenclature) inning of the exemption’s existence. Not only are the minor league affiliates expected to appeal the District Court’s decision (which could eventually lead to the issue of the exemption appearing directly before SCOTUS), Congress has also expressed an interest in ending the exemption. In July of this year, the Senate Judiciary Committee launched an inquiry into the viability of the MLB antitrust exemption and sent a letter to league commissioner Rob Manfred seeking information about the impact the exemption has on baseball and its importance to the league. There has also been support voiced from across the political aisle to end the exemption by legislation.

Group boycotts and Sport: not just a game

Group boycott claims can play a central role in antitrust suits involving sports. While baseball is currently afforded an overarching antitrust exemption that allows the MLB to effectively shield itself from group boycott claims, such a broad exemption may not be available for long and is currently not afforded to any other sports leagues in the U.S. For those other leagues, group boycott claims are generally assessed under a rule of reason analysis which allows a court to balance the pro-competitive effects of an agreement, such as easier and more robust access to the sport for consumers, against the agreement’s anti-competitive effects, such as the limitation of output. And while the rule of reason analysis affords sports leagues more protection against group boycott claims compared to the per se standard typically used to assess these types of claims outside of sports, sports leagues should act with an awareness that, unless they are the MLB (for now), they are not immune to these types of claims under U.S. antitrust laws.

Teeing off on group boycotts

While the MLB is currently free to engage in otherwise anti-competitive group boycotts under the antitrust exemption, baseball is not the only sport where group boycott issues arise under antitrust law. Such claims are also at the centre of the PGA/LIV dispute, where plaintiffs allege that the PGA Tour “orchestrated a per se unlawful group boycott with the European Tour to deny LIV Golf access to their members.” The federal judge in that case expressed scepticism that the PGA’s actions could be considered a per se violation of the Sherman Act, since group boycott claims are usually only per se violations when they involve horizontal competitors (which the PGA Tour and the European Tour are not, as they likely serve different markets). However, she also noted that group boycotts may still be considered a violation under the more balanced rule of reason approach, which is consistent with past precedent involving group boycott claims against sports leagues. While a number of high-profile professional golfers (including Phil Mickelson) recently dropped out of the lawsuit, the case continues with LIV as a listed plaintiff and has led to a countersuit by the PGA against LIV. The DOJ has also reportedly expressed interest in the actions of the PGA Tour, initiating an investigation to examine whether the PGA Tour’s policies prohibiting members from playing in LIV Golf events violate federal antitrust law. 

Checkmate – conspiracies and expulsions

A group boycott claim is also at the centre of a lawsuit filed at the end of October involving professional chess. Rising chess star Hans Niemann is claiming that five-time world champion Magnus Carlsen, along with his company Play Magnus, conspired with the leading platform in the sport, Chess.com, to ban Niemann from playing at the highest levels of professional chess, including critical tournaments. After defeating Carlsen, Niemann alleges that the champion’s claims that Niemann was only able to beat him by cheating had defamed his name to prevent him from competing further. Chess.com has also recently announced its intent to acquire Play Magnus, further sparking claims that Carlsen and Chess.com have partnered in a group boycott to oust Niemann from the sport. 

As we await the results of these group boycott cases in U.S. sport, one thing is clear: the matchup between antitrust law and sports leagues continues to be one to watch. 

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