MLB Sued over 2019 Plan to Eliminate 40 Minor League Teams

Adam WellsDecember 20, 2021

Logos for the Jackson Generals and the Arizona Diamondbacks are displayed at the entrance to The Ballpark at Jackson on Tuesday, June 22, 2021, in Jackson, Tenn. When Major League Baseball stripped 40 teams of their affiliation in a drastic shakeup of the minor leagues this winter, Jackson lost the Generals, the Double-A affiliate of the Diamondbacks. (AP Photo/Mark Humphrey)
AP Photo/Mark Humphrey

One year after Major League Baseball eliminated 40 minor league teams, a lawsuit has been filed in response to that decision that challenges the league's antitrust exemption. 

Per Alex Hubbard of Law360.com, Weil Gotshal & Manges LLP and Berg & Androphy filed the lawsuit in Manhattan federal court on behalf of four minor league teams to challenge MLB's decision that was first announced in 2019. 

 "Baseball should be put on the same footing as all the other major sports and should have to deal with the ins and outs of the competition laws of the United States," Jim Quinn of Berg & Androphy told Hubbard. 

Per Tom McParland of Conduct Detrimental, the complaint argues MLB's decision to cut 25 percent of its farm teams is a "naked, horizontal agreement to cement MLB’s dominance over all professional baseball."

The teams involved in the lawsuit are former affiliates of the New York Yankees, Houston Astros, San Francisco Giants and Detroit Tigers. 

Per Hubbard, the lawsuit argues that MLB and its 30 franchises violated the Sherman Act. 

According to the Federal Trade Commission, the Sherman Act prohibits "monopolization, attempted monopolization, or conspiracy or combination to monopolize."

The act doesn't ban all restraints of trade, "only those that are unreasonable."

MLB has had antitrust exemption rights since 1922 when the United States Supreme Court ruled baseball games fall outside of federal antitrust law because they are matters only of the states in which they are played. 

Per ESPN's Joon Lee, MLB is the only one of the four major professional sports leagues in North America with an antitrust exemption. 

Nathaniel Grow of FanGraphs wrote in April that the "most significant effect" of the exemption is MLB being able to closely guard major aspects of the minor-league system:

"For example, one aspect of the minor league system that would surely be challenged if the exemption were repealed is MLB’s standard minor league pay scale. As has been highlighted in recent years via the on-going minor league wage litigation, MLB teams generally impose a rigid, uniform salary scale on their minor league prospects. Absent baseball’s exemption, this uniform salary scale would almost certainly be declared illegal under antitrust law, as it reflects an agreement between the 30 MLB teams to artificially reduce their employees’ wages that has not been agreed to via collective bargaining (since minor league players are not currently unionized)."

In October 2019, J.J. Cooper of Baseball America reported the Professional Baseball Agreement between MLB and minor league teams expired at the end of the 2020 season. 

According to Cooper, during negotiations between the two sides, MLB made a proposal to reduce the total number of minor-league clubs from 160 to 120 starting with the 2021 season: 

"At the core of the negotiations, MLB is looking to dramatically improve Minor League Baseball’s stadium facilities as well as take control over how the minor leagues are organized as far as affiliations and the geography of leagues. Those areas have been under the control of MiLB for the past 100-plus years and would lead to a dramatic restructuring of how MiLB is governed and operates."

In December 2020, the PBA deal lapsed and MLB officially dropped 40 of its minor-league affiliates across the country. 

As part of the restructuring, each MLB franchise was allowed one affiliate at each of the Triple-A, Double-A, High-A and Low-A levels. Each level of the minors was also divided into regions.