Photographer: Sean M. Haffey/Getty Images

Baseball Goes On Trial for Millions of Fans, Billions of Dollars

  • Case could shake up lucrative broadcast deals for MLB, pay TV
  • League's ace-in-the-hole antitrust exemption trumped by judge

It isn’t easy to be a Mets fan in Iowa. 

To watch the Amazin’s barnstorm the U.S. last year in their once-in-a-generation march to the World Series, an Iowan had to buy a jumbo package of broadcasts including hundreds of games she didn’t want -- and excluding dozens she did.

It’s no mistake. Major League Baseball and the pay television industry generally limit fans to watching their local teams on regional sports networks, such as New England Sports Network or Yankees Entertainment and Sports Network. Viewers who live outside the home territory of their favorite clubs -- about half of all fans, by one count -- have to sign up for unwieldy Internet and satellite TV subscription services like MLB.TV and Extra Innings.

MLB says the system prevents the teams in big markets from gobbling up all the TV deals and starving small-market teams, ensuring more games, more competition and more choices for fans.

Now, the league will have to defend that logic in a trial starting Tuesday in federal court in Manhattan, in which Comcast Corp. and DirecTV LLC are also among the defendants. The plaintiffs argue that MLB is illegally restraining competition by limiting the markets in which its 30 teams can make broadcast deals. 

MLB has already lost a bid to get the lawsuit thrown out on the basis of a special antitrust exemption it enjoys. If it loses the case as well, and fans everywhere can follow their favorite teams without paying for games they don’t want, it would change the way Americans watch baseball, and the industries that have grown up around their devotion. A defeat could also accelerate cord cutting, or subscriber losses, at the cable and satellite TV companies.

Risky Judge

U.S. District Judge Shira Scheindlin is overseeing the antitrust case, filed in 2012. In her only other big sports antitrust case so far, in 2004, Judge Scheindlin ruled against the National Football League and was reversed in federal appeals court by Judge Sonia Sotomayor, later appointed to the U.S. Supreme Court.

In the baseball case, for which Scheindlin has certified a class of fans as the plaintiffs, the judge in 2014 ruled that the antitrust exemption -- which MLB won in a 1922 Supreme Court decision and has cherished as a legal ace in the hole -- doesn’t extend to broadcast contracts. That should make MLB think twice about battling the lawsuit to the bitter end, some lawyers following the case said.

“Judge Scheindlin has already made her feelings really clear,” said Robert Jarvis, co-author of a textbook on baseball and the law. “She believes that baseball is violating antitrust law and that consumers have been injured. I really believe that when push comes to shove this case will settle.”

The league “seems to be fighting against a reality that’s already here,” said Galen Clavio, director of the National Sports Journalism Center at Indiana University’s Media School.

Where’s Thor?

The suit was filed along with a case against the National Hockey League, which the NHL settled in June by agreeing to provide fans with single-team packages at a discount of at least 20 percent off the bundled package for the next five years. It has already prompted changes in the way Major League Baseball does business. In court papers, the league in December disclosed that it will offer single-team packages for sale on its MLB.TV Internet streaming service starting next season, though it didn’t give prices or other details.

Baseball fans have long complained they can’t watch all the games they want to watch (it’s the plaintiffs’ expert witness who says half of fans live outside their teams’ home markets) and are forced to pay too much for the baseball they get. To them, MLB is defending a decades-old system that is outdated and anti-consumer in the Internet age.

Comcast, for example, owns regional sports networks in Chicago, Philadelphia and other cities and has spent billions of dollars for the exclusive rights to broadcast baseball games in those markets. MLB ensures that only subscribers to the Philadelphia regional sports network can see Phillies games played in the team’s territory. It does so by “blacking out,” or blocking, those games from local subscribers of MLB.TV and Extra Innings, a satellite service that sells a multi-team package.

As that Mets fan in Iowa is painfully aware, there are no major league teams based in her state, yet six teams hold broadcast rights there, three of them in the National League: the Chicago Cubs, the St. Louis Cardinals and the Milwaukee Brewers. A Mets matchup with any of those teams gets blacked out in her package. On any given evening, she could be missing young flamethrowers like Matt “the Dark Knight” Harvey, Jacob “Degrominator” deGrom, Noah “Thor” Syndergaard and Steven (nickname pending) Matz.
MLB declined to comment on the case. In court filings, Comcast and DirecTV said they are simply following the rules created by MLB that divide games into territories.

Fighting vs. Settling

The league warns that a ruling against it could further enrich the already wealthy teams and imperil the humbler ones, making the game less fair and less fun to watch.

While antitrust law encourages Coke and Pepsi to battle it out in the marketplace even if one of them perishes, a professional sports league such as MLB may coordinate to guarantee on-field competitiveness and its overall financial health, said Elai Katz, head of the antitrust law practice at New York’s Cahill Gordon & Reindel LLP.

“You don’t want all revenues to go to the Yankees and the Dodgers,” he said.

If the league forges ahead with the trial and appeals if it loses, it may be less about this particular case than about trying to knock out Scheindlin’s ruling and solidify its antitrust exemption.

Because the fans seek an order requiring MLB and the broadcasters to change the system but, Scheindlin decided, can’t seek damages, she will hear the trial herself, without a jury. It is expected to last more than two weeks. Possible witnesses include Commissioner Robert Manfred and former Commissioner Bud Selig.

The case is Garber v. Office of the Commissioner of Baseball, 12-cv-03704, U.S. District Court, Southern District of New York (Manhattan).

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