April 2 (Bloomberg) -- A hundred years ago this month, baseball’s first antitrust crisis began with the holdout of Ty Cobb.
Cobb, the Detroit Tigers’ star center fielder, was paid a salary of $10,000 in 1912, when he hit .409 and won his sixth consecutive batting title. Before the 1913 season, Cobb demanded a raise to $15,000. When the team’s owner, Frank Navin, refused, Cobb announced that he was quitting baseball and heading home to Georgia.
Under the reserve clause, a standard term used in player contracts, in one form or another, since 1879, Cobb couldn’t play for any team but the Tigers.
Cobb’s holdout spurred Georgia’s congressional delegation to action. “Send me a copy of your contract,” Senator Hoke Smith wired to Cobb. Smith explained to the press that he suspected the reserve clause violated the Sherman Antitrust Act. Similar allegations had been made for years, not least by players, who saw all too clearly how the clause depressed their salaries by preventing them from selling their services to the highest bidder. But this was the first time a U.S. senator had taken an interest in the subject. Smith was soon joined by Representative Thomas Hardwick, also of Georgia, who began preparing a congressional investigation of baseball’s monopoly.
Within a few days, Cobb and Navin settled on a salary of $12,000. Cobb resumed playing, and Georgia’s politicians lost interest in the antitrust implications of his contract. The sporting press joked that the next congressional investigations would involve charges of child labor made by Christy Mathewson and demands for a minimum-wage law on the part of Honus Wagner and Smoky Joe Wood.
But antitrust law would haunt the sport for several more years. Organized baseball’s main antagonist was the Federal League. Formed as a minor league in 1913, it scrapped with the established American and National leagues from the start. Early in the 1913 season, Western Union refused to carry Federal League scores on its telegraph ticker, apparently under pressure from organized baseball. The Federal League fought back by getting Illinois Representative Thomas Gallagher to introduce a resolution calling for a House investigation of the “audacious and autocratic” baseball trust. Baseball cranked up its formidable lobbying operation -- hundreds of minor-league clubs scattered through congressional districts all over the country - - and prevented Gallagher’s resolution from coming to a vote.
At the end of the 1913 season, the Federal League’s club owners decided to become a third major league. The critical obstacle to this plan was the reserve clause, because all the best players in the country were bound to their American and National league teams.
After losing money in 1914, the Federal League filed an antitrust lawsuit in January 1915. The complaint sought the dissolution of all existing player contracts and a declaration that organized baseball was an illegal monopoly.
The Federal League filed its suit in Chicago, most likely because the senior of Chicago’s two federal-district judges, Kenesaw Mountain Landis, had a reputation as a trust-buster. Landis was famous for a 1907 case in which he imposed a fine of more than $29 million on Standard Oil (about $700 million in today’s money), the largest fine in U.S. history at the time.
Landis wasn’t just a trust-buster, however. He was also a diehard baseball fan.
Both sides wanted the case decided quickly, before the season began. They submitted evidence by the end of January, hoping that Landis would announce a decision by April. But when the season started, there was no word from Landis. Spring turned to summer, and still no decision. Every so often, a rumor would circulate that a ruling was imminent, but each time the rumor was wrong. By September, the sporting press was accusing Landis of lying down on the job. The Boston Red Sox beat the Philadelphia Phillies in the World Series in October, and Landis still hadn’t taken any action.
Finally, in January 1916, the two sides reached a settlement. The Federal League had lost so much money in 1915 that a third season was out of the question. The Federal League dropped its suit, and in return organized baseball effectively absorbed the five Federal League clubs located in cities with major-league teams. (Three Federal League clubs were left out of the settlement. Two, Kansas City and Buffalo, were almost bankrupt. The third, Baltimore, turned down the offer and filed a suit of its own, which would endure until 1922, when the Supreme Court ended it with an opinion that would become the root of baseball’s antitrust exemption.)
When the lawyers for all concerned filed into Landis’s courtroom in February 1916 for the formal termination of the Federal League’s suit, Landis explained, for the first and only time in public, why he had delayed a decision for so long. He would have ruled in the Federal League’s favor, he said, but he didn’t want to destroy the game of baseball. So he had resolved to do nothing.
Four years later, the leaders of organized baseball would make Landis their first commissioner.
(Stuart Banner is the Norman Abrams Professor of Law at UCLA and the author of “The Baseball Trust: A History of Baseball’s Antitrust Exemption.” The opinions expressed are his own.)
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