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Interstate Baseball?

December 17, 2001

     League owners decided to eliminate two baseball franchises.  What was the response?  Of course, politicians from the areas most likely to lose franchises immediately proposed legislation to extort the league to back down. This Fairness in Antitrust in National Sports Act would have overridden part of a 1922 Supreme Court ruling exempting baseball from antitrust laws, allowing an "injured" party--such as a local government, a stadium authority, or a player--to sue for antitrust violations in the case of such franchise moves. The result would be to prevent them.

    Along with other legal maneuvers, this put owners' plans on hold. Overlooked by the discussion of that threatened bill, however, was the fact that the Supreme Court ruling which created baseball's antitrust exemption was not decided on antitrust grounds, but on whether baseball qualifies as interstate commerce.

    And the proposed law would be just one more step in the evisceration of the Constitution's commerce clause, which was intended to defend against abuses of government power.

    Justice Oliver Wendell Holmes ruled in 1922 that "exhibitions of baseball . . . are purely state affairs," involving only incidental interstate commerce. As a result, the Constitution's commerce clause ("The Congress shall have the power to regulate Commerce . . . among the several States") did not authorize congressional regulation of baseball, including antitrust regulation.
    Bringing baseball under the antitrust umbrella, even in part, expands Holmes's understanding of the reach of the commerce clause.  And it would undermine one of few remaining precedents that upholds the original meaning of the commerce clause and the restraints it placed on federal power. Since an expansive interpretation of the commerce clause is the lone constitutional justification for federal regulations over housing, banking, energy, communications, transportation, labor, the environment, etc. (why it is called "the everything clause" in law school), this would give Congress even more power over Americans' economic lives, which is cause for concern.

    The Constitution included the commerce clause because under the Articles of Confederation, states were extorting each other's residents through duties on trade crossing their borders, and they recognized that this hurt them all. (In fact, the call to the Constitutional Convention arose from a 1786 meeting of five central states to reduce internal trade barriers.)

    In The Federalist's words, it was intended as a "restraint imposed on the authority of the States," to prevent them from interfering with the trade between them (following the older meaning of regulate as "to make regular or remove impediments").  Since "the powers delegated . . . to the Federal Government, are few and defined . . . The powers reserved to the several States will extend to all the objects, which, in the ordinary course of affairs, concern the lives, liberties and prosperities of the people; and the internal order, improvement, and prosperity of the State," it was not intended to create an extensive federal power to regulate (following the more modern meaning of regulate as "to tell what to do") the minutiae of economic life.

    The court's interpretation of the commerce clause has moved far from our founders' understanding.  Rulings have progressively deleted its constraints on federal powers, to where it is now routinely cited to justify federal regulation of whatever Congress decides counts as commerce (i.e., almost everything).

    For a century, the commerce clause was solely used to overturn state restrictions on interstate commerce as unconstitutional.  But with the Interstate Commerce Act of 1887, it began to be used to support active congressional regulation of commerce.  Since then, the original commerce clause has been further undermined, with a near death blow coming in Wickard v. Filburn in 1942.

    Justice Robert Jackson's opinion in that case mushroomed the scope of the commerce clause to extend  federal power to regulate interstate commerce to the power to ban (not regulate) production (not commerce) occurring in a single state. Anything found to have a substantial effect--i.e., any business practice whatsoever--became fair game for federal regulators. The results we see in the acronyms of federal agencies all around us.

    As long as the Supreme Court upholds and extends commerce clause precedents such as Wickard v. Filburn, there is hardly any limit to the federal regulation of business beyond the need for a congressional majority (which Federalist No. 10 assures us is inconsistent with our founders' vision). Any restraining power it once exercised over the federal government will be effectively erased from the Constitution.

    The 1922 baseball exemption antitrust exemption ruling is one of the few remaining precedents adhering to the earlier, limited-government understanding of the commerce clause (in part because the erosion of the commerce clause by 1922 had progressed far less than it had a decade later).

    So while some local sports fans may support further limiting baseball's antitrust exemption as a way to keep their teams, it comes at a constitutional price that is too high.  Americans would be far better off if, instead of eroding Justice Holmes's ruling just a little bit more, we upheld his commerce clause logic, which reflected its originally accepted constitutional meaning.

Gary M. Galles is a professor of economics at Pepperdine University. Send him MAIL, and see his Mises.org Articles Archive.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

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