Minor League Salaries Challenged in New Antitrust Lawsuit

In the latest in a series of legal challenges to the minor league salary structure, a new federal class-action lawsuit filed on Friday alleges that Major League Baseball’s treatment of minor league baseball players runs afoul of the Sherman Antitrust Act. In Miranda v. Office of the Commissioner of Baseball, four former minor league players (Sergio Miranda, Jeff Dominguez, Jorge Padilla and Cirilo Cruz) contend that MLB teams have violated federal antitrust law by illegally conspiring to fix minor league players’ salaries at below-market rates. Still, despite the merits of the players’ claims, the suit’s odds of success are relatively low.

The Miranda suit alleges that MLB unlawfully suppresses minor league players’ salaries in a variety of ways. By subjecting North American amateur players to the first-year player draft each June, Major League Baseball prevents draftees from selling their services to the highest bidder — instead forcing them to negotiate with only a single team. MLB then artificially reduces the size of the signing bonuses that entry level players receive through its domestic and international signing bonus pool restrictions.

Once players have entered the minor leagues, their annual salaries are then largely dictated on a take-it-or-leave-it basis by their teams in accordance with MLB-imposed, minor league salary “guidelines.” And because MLB teams retain the exclusive rights to their minor league players’ services for seven years, many players go their entire careers without ever being able to sell their services in a competitive market. As a result, the suit asserts that most minor league players earn as little as $3,000 to $7,500 per year.

The Miranda suit challenges the legality of each of these restraints, effectively launching a full-frontal attack on the contractual underpinnings of baseball’s player development system. Specifically, the suit contends that by agreeing to these practices collectively, the 30 MLB teams have illegally conspired to restrain trade and monopolize the industry, in violation of the Sherman Act.

One obvious issue any antitrust suit filed against MLB must overcome, however, is the fact that the United States Supreme Court has, on three separate occasions, ruled that MLB is not subject to federal antitrust law. Recognizing this impediment, the attorneys in the Miranda suit argue that baseball’s antitrust exemption no longer has any “basis in economic reality,” and therefore should not be followed. There are several problems with this argument.

First, lower courts are, not surprisingly, extremely reluctant to overturn binding Supreme Court precedent. Indeed, unlike some of the other recent antitrust lawsuits filed against Major League Baseball, which challenge aspects of MLB’s business that have never been directly addressed by the Supreme Court (including MLB’s franchise relocation and television broadcasting practices), the Supreme Court has already specifically considered and rejected a suit challenging MLB’s treatment of minor league players in its 1953 decision in Toolson v. New York Yankees.

Setting aside the issue of binding Supreme Court precedent, however, there is another hurdle that the Miranda plaintiffs will have to overcome: the fact Congress has also shielded baseball’s minor league system from antitrust challenge. In 1998, Congress passed the Curt Flood Act, legislation that partially repealed baseball’s antitrust exemption in order to allow current MLB players to file antitrust lawsuits against the league.

The law goes on to expressly state, though, that it “does not create, permit or imply a cause of action by which to challenge under the antitrust laws… any conduct, acts, practices, or agreement … affecting employment to play baseball at the minor league level.” In other words, the Curt Flood Act says minor league players cannot file antitrust lawsuits challenging the terms of their employment (which, of course, is exactly what the Miranda suit seeks to do). This language was inserted into the bill following a vigorous lobbying campaign by minor league baseball, which wanted to ensure it would never have to defend itself against an antitrust lawsuit.

Thus, even though the attorneys are presumably prepared to litigate the Miranda case all the way to the Supreme Court, their ultimate odds of success appear to be rather low. In light of the Toolson decision, both the trial court and court of appeals will likely dismiss the case under baseball’s antitrust exemption (a process that could, nevertheless, take several years to play out). And in light of the Curt Flood Act, the chances that the Supreme Court eventually takes the case are also relatively slim (overall, the Court grants less than 1% of appeals).

But should the Supreme Court overturn baseball’s antitrust exemption — either in the Miranda case or one of the other pending antitrust suits against MLB — then this new litigation could prove quite troublesome for Major League Baseball. In prior lawsuits against the other major U.S. professional sports leagues, courts have held that many of the practices challenged in the Miranda suit violate the Sherman Act. Indeed, the only reason the NFL or the NBA can legally have a draft today — or subject their players to a rookie salary scale — is the fact the players’ unions have agreed to the restrictions as part of their collective bargaining agreements (thus shielding the practices from antitrust law).

While the Major League Baseball Players Association has agreed to many of the practices challenged in the Miranda suit, the union does not actually represent minor league players (who have never unionized themselves). Therefore, it’s unclear whether MLB would benefit from the same labor-related antitrust immunity enjoyed by the other leagues. If it does not, then several of these practices would likely be struck down under the Sherman Act for the reasons asserted in the Miranda complaint.

Ultimately, though, the Miranda suit appears unlikely to gain traction in court due to baseball’s antitrust exemption. That having been said, even if the suit fails to succeed in the courtroom, it may nevertheless help place additional pressure on MLB to improve its treatment of minor league players. In fact, many of the same practices challenged in the Miranda case are also under attack in two minimum wage lawsuits filed against MLB earlier this year (Wendy Thurm previously discussed the first of these suits here).

Considering that MLB likely will spend several million dollars defending these cases — all while incurring negative PR along the way — at some point the owners may decide their current minor league pay practices are simply more trouble than they are worth.



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Nathaniel Grow is an Associate Professor of Legal Studies at the University of Georgia's Terry College 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 the University of Georgia.


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Mark L
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Mark L

It would seem that offering minor league players a living wage would not affect the profit margin of the major league teams by more than 0.001%, and would encourage players who don’t have rich parents to stay in the game. I really don’t see any benefit to paying them such obscenely low salaries.

Steven
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Steven

If anything, you’d think they’d want their minor leaguers to at least have enough money to eat healthy during the offseason rather than eating ramen and mcdonalds while working odd jobs just to get by.

Guest
Guest
Guest

Couldn’t agree more. How is it helpful to the MLB franchises to have their A Ball players eating leftover hotdogs from the concession stands for dinner? Based on the article, it doesn’t look like anything is going to change though.

Pale Hose
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Pale Hose

Someone can correct me if I am wrong, but I thought minor league players get a food stipend in addition to salary.

Neil S
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Neil S

Just because you get a food stipend doesn’t mean you’re eating well. Unless MiLB has some totally unique system, they’re giving players cash or cheques and the players are still spending as little of that as possible on food, so that they can make $10,000 this year instead of $8,000. If you can save $20 by eating leftover hotdogs, you’re probably eating leftover hotdogs.

Eddie Jerel Ainsworth
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Eddie Jerel Ainsworth

The stipend is $7 a day in a and aa, for away games. At home players are on their own. Also, some orgs.have players stay w/host families that agree/compensated for meals. Then one needs to remember some only like food from home countries. I guess meaning they dodon’t like U S food.

an rand
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an rand

meh, the best ones already have huge signing bonuses, and we all know the “meritocracy” that results from people at the border of poverty fighting their way to success.

Guest
Guest
Guest

Even if you deem the signing bonuses “huge”, these bonuses are still artificially depressed due to the spending caps on the draft. That also doesn’t justify paying guys $3,000 a year for any job, let alone one that requires as much travel as baseball.

an rand
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an rand

point is in reply to the “teams should want this” argument, not the justice one (although my tongue-in-cheek name and meritocracy comment allude to my feelings on it).

Andrew Ryan
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Andrew Ryan

You’re right, an rand: a lack of money drives people to succeed. Clearly if we gave these people a living wage, they would lose all of their incentive to get to the majors and earn at a minimum $500,000.

E_Baseball_LI5
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E_Baseball_LI5

Ayn Rand would not have agreed with the current pay practices. She was an advocate of the free market, which MiLB at this time is definitely not.

mattsd
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mattsd

That’s right, but even offering a “living wage” would not change the antitrust violation here.

The Sherman Act doesn’t care about minimum salaries established by different regulatory schemes. It cares about unreasonable restraints on competition.

In the absence of MLB’s special treatment, it wouldn’t even matter if the players were all making 100k. MLB franchises are conspiring to fix wages and not to compete in the market for amateur players. Even Chicago school guys would probably call this a per se violation of section 1.

Dick Poser
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Dick Poser

Well you see, what we need is this highly complicated objective test, let me whip it our right here…okay well now holding the facts in this case against this 100% complete truly undoubtedly scientifically objective test we see that the business is in the right, and the ways things are is inherently efficient. No violation!

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