On May 29, 1922, the United States Supreme Court rules that organized baseball did not violate antitrust laws as alleged by the Baltimore franchise of the defunct Federal League in 1915. The Supreme Court held that organized baseball is not a business, but a sport.
In January 1915, the Baltimore Terrapins of the Federal League sued the American and National Leagues, alleging that they were in violation of the Sherman Antitrust Act of 1890, which was enacted to limit monopolies in interstate commerce. The Federal League chose the U.S. District Court presided over by Judge Kenesaw Mountain Landis, who was known as a trustbuster, to hear their case. What the Federal League did not know was that Landis was also a passionate Chicago Cubs fan who was reticent to do anything that might, in his eyes, damage the sport he loved. Landis delayed hearing the case, while the Federal League struggled. They were unable to lure star players away from the American and National Leagues, and were hurt by the previously baseball-obsessed public’s preoccupation with World War I. By the end of the 1915 season, the Federal League was out of business, after less than two years of operation. Meanwhile, its lawsuit was still pending.
Judge Landis became baseball’s commissioner in 1920, and was charged with cleaning up the big leagues after the Black Sox scandal of 1919, in which the Chicago White Sox purposely lost the World Series for a payoff from gambler Arnold Rothstein. Landis handed out eight lifetime suspensions, determined to rid the game of corruption once and for all.
The U.S. Supreme Court finally ruled on the Federal League case in 1922. In his opinion, Chief Justice Oliver Wendell Holmes wrote that baseball did not constitute interstate commerce, in spite of the fact that its clubs and players crossed state lines in order to play. Justice Holmes reasoned that personal effort, not related to production, is not a subject of commerce. As baseball was the subject of interstate personal effort and not interstate commerce, the antitrust law did not apply.
Courts have since been reluctant to overrule the decision, making baseball the only professional sport in the country to enjoy an antitrust exemption. The courts have consistently held that the only way Major League Baseball would lose its antitrust exemption is if Congress were to legislate it out of existence. Understandably, Major League Baseball lobbies hard to keep its antitrust exemption. Although labor law has made inroads into baseball’s antitrust exemption with the adoption of collective bargaining, this big business is still viewed as only a "sport." As a result, Major League Baseball maintains a tight hold on its teams, preventing them from moving from one city to another; maintaining a commissioner of baseball who effectively has no independence from the owners; and generally catering to the interests of team owners and back room deals instead of creating a free market baseball economy. Although the fans may likely be the poorer for it, the "sport" continues to thrive as it gains new markets around the world.