Judge Landis, the Federal League and Baseball’s First Antitrust Trial

Kenesaw Landis was the first commissioner of baseball. (via Chicago Tribune)

Kenesaw Landis was the first commissioner of baseball. (via Chicago Tribune)

One hundred years ago this offseason, the baseball world was transfixed on the events unfolding in a federal courtroom in Chicago, where Judge Kenesaw Mountain Landis – the future first commissioner of baseball – was hearing a case that threatened to unravel the entire structure of professional baseball. The lawsuit involved allegations by the Federal League of Professional Baseball Clubs – a rival league challenging the supremacy of the American and National Leagues in 1914 and 1915 – which contended that the two major leagues had illegally monopolized the baseball industry.

While many baseball fans are generally aware that Landis heard a case involving Major League Baseball prior to becoming the game’s first commissioner, relatively little was known about the lawsuit — until recently. In 2010, the National Baseball Hall of Fame Research Library released a trove of documents from the case, including most of the original court papers and attorney correspondence in the suit, along with a 500-page transcript of the four-day hearing held before Landis in January 1915. These materials provide valuable new insight into the legal maneuvering involved in baseball’s first major antitrust challenge (I drew upon these documents heavily in my recent book, Baseball on Trial: The Origin of Baseball’s Antitrust Exemption).

The Federal League was originally founded in 1913 as a small, six-team league based primarily in the Midwest. After a modestly successful first season in which the organization relied mostly on aging former major leaguers and local semi-pro talent, the Federal League decided to challenge the supremacy of the American and National Leagues in 1914 by declaring itself to be a third “major” league. That offseason, the league added two new teams before signing approximately 50 major league players, the most notable being Hall-of-Fame shortstop Joe Tinker.

In spite of these acquisitions, the Federal League had hoped to sign an even greater number of major leaguers for the 1914 season only to have its efforts frustrated by the other two major leagues. The American and National Leagues responded aggressively to the competition from their new rival by both stealing players back after they had signed with the Federals, and prevented other defecting players from playing for the new league by tying them up in lengthy court proceedings.

As a result, due to substantial legal fees, elevated players salaries and on-field competition, the 1914 season took a financial toll on all three major leagues. It was not particularly surprising that the leagues explored a potential peace agreement that fall. The talks ultimately fizzled, though, when several of the Federal League’s smaller market teams – Baltimore, Buffalo, Indianapolis and Kansas City – demanded that their cities receive a major league franchise as part of any deal, a concession that the American and National Leagues were simply unwilling to make.

With a settlement appearing out of reach, the Federal League opted to pursue a different course of action by filing a federal antitrust lawsuit against the two major leagues on Jan. 5, 1915. The league’s 92-page complaint levied a number of allegations against the major leagues, the essence of which was that the American and National Leagues had illegally monopolized the baseball industry by tying up all but a handful of the nation’s 10,000 professional players. This, the Federal League alleged, made it extremely difficult for a new league to form to challenge the two established leagues, since the major leagues had a stranglehold on all professional-caliber players.

In particular, the major leagues were accused of monopolizing the pool of professional talent through the reserve clause, the contractual provision in place at the time effectively tying each player to his team for the entire length of his career. (The reserve clause granted the team the automatic right to renew a player’s contract for the following season, at which time a new reserve provision would once again be inserted into the player’s contract, in effect tying him down in perpetuity.) Not only did the American and National Leagues require that the reserve clause be included in every player’s contract, but they enforced the provision by threatening to indefinitely blacklist any player that disregarded the clause by signing a contract with a different team.

The Federal League’s suit asked the court to break up this allegedly unlawful monopoly by declaring that organized baseball’s governing document – the National Agreement – was illegal and void. This request threatened to throw the baseball world into a state of chaos, rendering any coordination between the American and National Leagues (including, potentially, the World Series) unlawful. In addition, the Federals also asked the court to rule that all existing player contracts were null and void, relief that would have simultaneously made every professional player a free agent. The gravity of these requests was not lost on the baseball press, as the New York Times reported at the time that the suit was being “regarded by baseball men as a most threatening attack on organized baseball.”

One of the most remarkable aspects of the Federal League’s lawsuit was the speed with which it proceeded. Because the Federals had asked for a preliminary injunction preventing the American and National Leagues from continuing to coordinate their activities under the National Agreement, Landis scheduled a hearing for Jan. 20 – just 15 days after the case was filed – to decide whether to grant the Federal League its requested preliminary relief.

The hearing was a major event in Chicago, with more than 1,000 baseball fans reportedly showing up at the courthouse on the first day. The proceedings eventually lasted four full days, with both sides’ attorneys going back and forth arguing their case before Landis. The bulk of these arguments focused on the issue of jurisdiction, or, in other words, the court’s power to hear the case.

More specifically, the major leagues’ attorneys argued that the case should be dismissed because federal antitrust law did not apply to professional baseball. In particular, the attorneys contended that baseball did not qualify as “commerce” under the judicial definitions in place at the time, which generally limited the term to the production or sale of physical goods, not intangible amusements like baseball games. The Federal League disputed this characterization, arguing that the fact that teams paid to transport their players and equipment around the country rendered the sport commerce, and thus subjected it to the Sherman Act.

The most colorful moment of the four-day hearing came on day three, when Landis declared that any “blow at this thing called baseball … will be regarded by this court as a blow at a national institution.” Relying on abbreviated media reports, commentators have traditionally interpreted this comment as an indication that Landis was inclined to rule in favor of the American and National Leagues. Indeed, Landis was a well-known baseball enthusiast, reportedly earning a reputation as being a particularly rowdy Chicago Cubs fan during the team’s championship years of 1906-1910.

In reality, though, Landis was actually admonishing organized baseball’s attorney for attempting to draw upon the judge’s affinity for the national pastime. Before resting his argument, the major leagues’ attorney, George Wharton Pepper, made an emotional appeal to Landis based on his love of baseball. Landis responded by stating that the parties should keep “love and affection” out of the suit, and that it was well understood that any attack on the game of baseball would be “regarded by this court as a blow at a national institution.” In context, then, Landis was not equating an attack on MLB as an assault on a national institution, but instead was simply telling the parties that they need not spend any time discussing their feelings for the game of baseball generally.

Following the close of the hearing, most observers anticipated that Landis would issue a ruling within a few weeks. That ruling never came, as Landis would instead sit on the lawsuit for more than a year.

A Hardball Times Update
Goodbye for now.

In the meantime, the inter-league competition continued to take its toll on all three major leagues during the 1915 season. Given their increasingly dire financial circumstances, the three leagues once again engaged in peace negotiations that offseason, ultimately reaching a settlement agreement in December 1915. In exchange for agreeing to end its operations, the Federal League received payments of more than $450,000 from the major leagues, while two Federal League owners (Charles Weeghman and Philip Ball) were allowed to purchase existing major league clubs (the Chicago Cubs and St. Louis Browns, respectively).

The terms of the deal ultimately satisfied seven of the eight Federal League teams. The owners of the league’s Baltimore Terrapins objected to the settlement, however, on the grounds that they did not receive anything under the deal. Rather than hold up the peace process, though, the team instead decided to pursue its own antitrust litigation against the major leagues. This was the case that eventually reached the U.S. Supreme Court in 1922, establishing baseball’s antitrust exemption.

In order to finalize their settlement agreement, the parties returned to Judge Landis’s court in February 1916 to request that he formally dismiss the Federal League’s lawsuit. Landis used the opportunity to discuss why he chose to wait nearly 13 months to issue a decision in the case. He explained that he had determined that issuing a temporary injunction “would have been if not destructive, vitally injurious to” the game of baseball, harming not only the two major leagues, but the Federal League as well. As a result, since he believed that all three parties would be adversely affected by his ruling, he concluded that the best course of action was to withhold his decision in the case in order to protect the national pastime.

His decision to sit on the case for over a year has been criticized by some who believe that his failure to rule doomed the Federal League. In reality, though, the delay likely had little impact on the organization’s ultimate fate, for several reasons.

First, despite Landis’s refusal to rule, the Federal League nevertheless informally received much of the relief it was seeking in the case. Halfway through the hearing, the rival circuit limited its request for immediate relief to an order from the court preventing the major leagues from continuing to do two things:

  1. Interfering with the Federals’ players
  2. Denigrating the rival league in the press.

Even though Landis never issued such an order, the major leagues, nevertheless, largely refrained from doing both of these things during the 1915 season, undoubtedly in an effort to avoid drawing the court’s ire.

Moreover, several factors well beyond the Federal League’s control conspired to make the viability of a third major league highly questionable at best in the mid-1910s. Indeed, all three major leagues struggled mightily throughout the 1915 season due to the onset of World War I and a national economic recession. As a result, by the end of 1915, at least two of the Federal League’s teams – Buffalo and Kansas City – were effectively bankrupt. Because these external forces continued to dampen the public’s demand for professional baseball for several more years, the Federal League likely would have eventually collapsed even if Landis had issued a favorable ruling in the case.

In the 100 years since the Federal League folded, no subsequent rival league has ever seriously challenged the major leagues’ control over the professional baseball industry. Although several potential rival circuits have been proposed over the years – including, most notably, the Continental League in the early-1960s – none has developed to the point of actually competing with MLB on the playing field. And considering that MLB has already placed one or more teams in most of the nation’s major media markets, it appears unlikely that a new league will form anytime soon (historically, most rival leagues have formed when the dominant league in a sport has failed to establish a franchise in a number of large cities).

Let’s assume for the sake of argument, though, that a new rival league were to emerge at some point in the future. Could it launch an antitrust attack against MLB similar to the Federal League’s 100 years ago? After all, MLB still possesses a monopoly over the baseball industry today, at least at the highest level of professional competition.

Even though MLB may hold a monopoly over the industry, such a suit would be unlikely to succeed due to several legal impediments. Most obviously, a rival league seeking to challenge MLB’s monopoly would be confronted by baseball’s antitrust exemption (which was established by the U.S. Supreme Court in 1922, seven years after the Federal League’s suit). This doctrine alone would make it difficult, if not impossible, to win a suit like the Federal League’s today.

Moreover, merely monopolizing an industry alone does not violate the Sherman Act. Rather, in order to be declared an illegal monopoly, courts generally require that you engage in some form of “exclusionary conduct” in which you either do something illicit to drive your rivals our of business, or somehow unfairly prevent potential rivals from entering the industry in the first place.

In 1915, the Federal League could argue that MLB’s monopolization of the talent pool of professional players was a form of exclusionary conduct, as the reserve clause made it extremely difficult for a rival league to sign enough players to compete with the American and National Leagues on the playing field. Today, however, several hundred major league players become free agents every year, giving a future rival circuit ample opportunity to quickly acquire a sufficient number of players to fill out its rosters.

So a future rival league would have to point to some other form of exclusionary conduct by MLB in order to pursue a monopoly case against the league. For instance, if it turned out that MLB tried to interfere with the new league by somehow making it more difficult for the rival to acquire players, negotiate with television broadcasters, or recruit owners to the venture, then the challenger could potentially claim that MLB has formed an illegal monopoly.

But even then, there is no guarantee that such a suit would succeed. For instance, the ill-fated United States Football League famously sued the National Football League in the 1980s under the Sherman Act, alleging that the NFL was an unlawful monopoly. And while the jury did conclude that the NFL had illegally monopolized the professional football industry – in part by trying to prevent the rival league from recruiting owners and players – the jurors awarded the USFL only $1 in damages, concluding that the league likely would have collapsed regardless of the NFL’s interference.

In all likelihood, then, baseball will never see another suit quite like the one filed by the Federal League 100 years ago.

References & Resources

The original court papers for the Federal League’s lawsuit can be found at the National Archives in Chicago, as well as at the National Baseball Hall of Fame Library in Cooperstown, New York.

For additional information about the Federal League, be sure to check out:

Nathaniel Grow is an Associate Professor of Business Law and Ethics and the Yormark Family Director of the Sports Industry Workshop at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.
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Marc Schneider
8 years ago

The problem is, the settlement between MLB and the Federal League itself may have been anticompetitive, at least under our current understanding of antitrust laws. Basically, MLB bought off its competition, which I believe would not be allowed to day. (I am an antitrust lawyer for the federal government.) Whether the Federal League would have survived is another question-and one that the court would have to take into consideration- but clearly, MLB was doing everything they could to retain its monopoly. I would, in fact, argue that the NL and AL most likely engaged in collusion when the AL became recognized as a major league. Obviously, the leagues conspired to retain the reserve clause-itself a restraint of trade. The AFL/NFL merger required, as I understand, congressional sanction because it would otherwise clearly have been a violation of antitrust laws. The fact is, all of the mergers between sports leagues have been aimed at eliminating competition to the detriment of players and fans.

The issue today is not so much the ability of a new league to survive but the fact that the antitrust exemption gives MLB complete control over expansion and relocation of franchises. They simply practice market division. For example, MLB has kept the Oakland A’s from moving to San Jose by claiming that the Giants have “territorial rights” to that market. Without the antitrust exemption, that would be, at least arguably, a restraint of trade.

Marc Schneider
8 years ago

I agree, Nathaniel, that it’s not clear how courts would rule on the San Jose situation but, of course, the precludes a court even considering the matter. Moreover, IMO, the exemption encourages MLB teams to take a more extreme position that they might if there was antitrust scrutiny.

BTW, I forgot to add, this is a very interesting article. Thanks.

Joe McGrath
8 years ago

Rumor has it that at one point the judge exclaimed “They’re here to scout the Chiefs, the toughest team in the Federal League!”

Robert Zimmerman
8 years ago

Well written.

8 years ago

I always wondered why do the aging MLB players of today choose to play in foreign leagues like Japan before a league like the American Association, A league like the Federal League aimed to be from the start, it would be a nice way for cities not large enough to host MLB teams to have a taste that Minor Leagues simply can not offer. I would like to see an aging MLB vet giving his all to win a title for the Lincoln Saltdogs instead of going overseas to play in Japan. Everyone knows Minor League teams are simply for development, Independent teams it seems more team oriented and geared toward winning a real team. Its also a great place for guys who are “career” minor leaguer’s to become heroes in one city, Ian Gac is pretty much a legend in Lincoln.

8 years ago

Let’s see now, the Supreme’s rule a monopoly is not a monopoly and a corporation is a person, and some say our system of “justice” is the best the world has ever known…

Paul G.
8 years ago

Along with Buffalo and KC being essentially bankrupt, the team in Newark, New Jersey was only there because the Indianapolis team had gone bankrupt the year before. The fact that Indianapolis was the pennant winner in 1914 certainly did not help matters from a Federal League perspective. However, that Newark team was backed by a very wealthy owner and was probably going to move to New York City for the 1916 season, if there had been a 1916 season.

While the reserve clause is the legal argument that probably most applies to monopoly proceeding, from what I read the 10-day clause was considered the more legally precarious part of the player contract. It allowed the team to release the player with 10 days notice but the player had no equivalent option. Once it became clear the the FL was a real threat, those 10-day clauses started disappearing from AL and NL contracts quickly. However, the 10-day clause was more of a matter of an unfair and therefore unenforceable contract, which would allow the FL to sign anyone with the clause in his contract, rather than a monopoly concern.

Marc Schneider
8 years ago

The Reserve Clause had nothing to do with monopolization. It was a restraint of trade directed at the ML players. The Reserve Clause was a collusive scheme developed by the ML clubs to restrict player movement between teams in the AL and NL and, therefore, lower their salaries. It had no effect on monopolization claims by the Federal League because it did not prevent players from jumping to another league; the Reserve Clause only applied to keep players from changing teams within the NL or AL. As I understand, most contracts with the Reserve Clause were for one year, so that, after the contract expired, the players could sign with the Federal League. So the Reserve Clause really had no effect on the Federal League.

Marc Schneider
8 years ago

That’s interesting because, as I stated above, I don’t see how the Reserve Clause would prevent players from signing with another league. Maybe I don’t understand how the Reserve Clause functioned. Did the Reserve Clause prohibit players from signing with any baseball league after their contract expired? If courts did not enforce the Reserve Clause against the Federal League, I don’t see how it could be a means of monopolization. It seems to me an easier way to hurt the Federal League would simply have been to give the players multi-year contracts.

Marc Schneider
8 years ago

Ok, my bad. After looking it up, I see the leagues tried to enforce the Reserve Clause against other leagues-but apparently, not too successfully. If the Reserve Clause applied generally, it would certainly be a means of monopolization.

Marc Schneider
8 years ago

Thanks, Nathaniel, I will definitely check that out.