In an opinion issued on Friday, Judge Scheindlin denied the summary judgment motion of MLB, the NHL, Comcast and DirectTV on antitrust claims rising out of the territorial distribution of television rights the sports leagues have arranged with regional sports networks.  Under the current system, fans are able only to watch a team’s games if it is available from their specific regional network, or if they are willing to pay for the right to watch every team’s games league-wide. Judge Scheindlin, after recounting the nearly century-long history of the “so-called ‘baseball exemption'” to the antitrust laws, formulated by the Supreme Court in Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs in 1922 and revisited several times by the Court and Congress, ruled that the exemption does not apply to territorial broadcasting restrictions.

Exceptions to the antitrust laws are to be construed narrowly.  Moreover, the Supreme Court has expressly questioned the validity and logic of the baseball exemption and declined to extend it to other sports.  I therefore decline to apply the exemption to a subject that is not central to the business of baseball, and that Congress did not intend to exempt — namely baseball’s contracts for television broadcasting rights.

Noting that “territorial divisions of a market are normally per se violations” of the antitrust laws, Judge Scheindlin nonetheless applied the rule of reason to the leagues’ arrangements because of the “necessary interdependence of the teams in the League.”  After analyzing the pro- and anti-competitive aspects of the territorial restraints, Judge Scheindlin found that:

Most of defendants’ claimed pro-competitive effects are disputable, and the overall effect on the economy is even less conclusive, especially in light of [plaintiff’s expert’s] testimony that abolishing the territorial restrictions would decrease the cost of sports programming without diminishing output.  Far from being implausible, plaintiffs’ “but-for” world is at least as likely as defendants’ prognostications. Plaintiffs have raised a genuine issue of material fact regarding the overall competitive impact of the territorial rules, foreclosing the possibility of summary judgment for the Leagues under the rule of reason.

Finally, Judge Scheindlin denied Comcast’s and DirectTV’s arguments that they could not be liable for antitrust violations as “downstream distributors who simply implement the restrictions of an upstream conspiracy through vertical agreements” and that they were not members of a “horizontal agreement” as opposed to market participants simply engaged in parallel conduct. See here for our prior posts on the case.