The four major professional sports leagues have it. The insurance industry has it. Now the news media industry wants it, too: An exemption from federal antitrust laws so companies that are primarily in the business of gathering news can negotiate better terms with Facebook and Google, which increasingly dominate the business of spreading the news around.

The odds of success in the current Congress are low, but news executives should think twice about even asking. Congress never gives anything away, and putting the fortunes of the news business under the control of Washington legislators could subject the industry to far more political pressure than The Donald and his tweets ever could muster.

Here’s the background: In a Wall Street Journal op-ed this week, News Media Alliance President David Chavern said his organization’s 2,000 members need the power to negotiate joint agreements to counter FB and Google, which control 70% of the estimated $73 billion digital advertising market.

“The only way publishers can address this inexorable threat is by banding together,” Chavern wrote. “If they open a unified front to negotiate with Google and Facebook—pushing for stronger intellectual-property protections, better support for subscription models and a fair share of revenue and data—they could build a more sustainable future for the news business.”

It’s not like Congress hasn’t done this before. The Sherman Anti-Trust Act prohibits businesses from engaging in anticompetitive behavior, whether that’s individual physicians colluding on fees or chemical manufacturing giants plotting a coordinated price  increase. But ruinous competition isn’t popular, either, and Congress has occasionally stepped in to free certain industries from the full brunt of the Sherman Act.

The McCarran-Ferguson Act of 1945 gave the insurance industry limited exemption from federal antitrust laws to pool historic loss information and jointly develop policy forms. It’s been repeatedly raised by members of Congress as a potential bargaining chip, including in the latest battle over repealing the Affordable Care Act.

The Sports Broadcasting Act of 1961 gives all the major professional sports leagues limited immunity from antitrust laws to jointly negotiate broadcast contracts for their games. The law only covers free broadcast networks, although Nathaniel Grow of the University of Georgia, in a 2011 article, said the NFL in particular has faced little pushback on its cable agreements. either. Not so Major League Baseball, Grow wrote, which has virtually blanket antitrust exemption thanks to a 1922 U.S. Supreme Court decision.

“Baseball gains no practical advantage from its exemption over the other leagues with respect to its broadcasting activity,” Grow wrote. “Indeed …if anything baseball’s antitrust exemption has actually hampered MLB’s ability to enter into potentially anticompetitive broadcast agreements.”

MLB’s efforts to market packages similar to the NFL’s, for example, “were thwarted in part by Congressional threats to revoke its antitrust exemption,” Grow argues.

Major League Baseball and the minor leagues won their exemption in Federal Baseball Club of Baltimore  v. National League of Professional Baseball Clubs. That unanimous decision, written by Justice Oliver Wendell Holmes, held that the business of baseball was neither “interstate” nor “commerce,” shielding it from federal law under the now-quaint theory that Congress faced strict limits on what it could regulate.

The Supreme Court has twice affirmed the decision even as it seems increasingly out of step with the post-New Deal era symbolized by Wickard v. Filburn, which upheld a federal law prohibiting a farmer from growing grain on his own farm to feed his own cattle. In a 1972 decision upholding Federal Baseball, the court acknowledged “baseball is a business and it is engaged in interstate commerce,” but cited stare decisis and the inaction of Congress to justify leaving the exemption in place.

Critics of the exemption say it allows MLB to prohibit new franchises or the movement of existing ones, the better to finagle subsidies out of municipalities, and engage in unfair labor practices with players. But Grow disagrees with the consensus. In his article he wrote:

Congress has obtained considerable leverage over baseball throughout the years by threatening to revoke the sport’s antitrust exemption. Congress has used this power to help extract various pro-competitive concessions from MLB, benefits that would not have been directly obtained via antitrust litigation alone. Perhaps most notably, every single round of expansion in MLB historyhas been directly preceded by a Congressional threat to revoke the sport’s antitrust exemption. As a result, the Article asserts that baseball’s antitrust exemption is actually net pro-competitive, given that Congress has used the threat of revocation to pressure baseball to provide benefits outweighing its minimal anti-competitive effects.

With the news industry vigorously restricting output all by itself, by slashing payrolls and eliminating older, higher-paid employees, would an exemption from the Sherman Act help or hurt? On the one hand, it might help pump more money into flailing news operations so they could hire more journalists. But I remember well my days in the newspaper business, when publishers could kill a story with a glance. “I’ve got to live in this town,” was all one publisher had to tell me to signify my first take on certain real estate interests west of the interstate was going to be substantially toned down by the time it appeared in print.

Does the industry want Congress to hold that power instead of the local car dealer?

Categories: The Law