When the American League established itself in 1901, it had already withdrawn from the "National Agreement" (a pact amongst the National League and all minor leagues that honored each other's players contracts). With better paying salaries, the American League drew 111 former National League players in it's first year. This "player war" lasted for two years. In 1903, the National and American Leagues reached an agreement. The American League was recognized as a Major League and would agree to follow the National Agreement. A new governing body, the three-man "National Commission" was created as well as a new post season championship, the "World Series."
The National Commission which consisted of both league Presidents and Cincinnati Reds owner, August Herrmann was to have the power to enforce fines, suspensions or both upon either league. Also, if both leagues claimed the service of the same player, the Chairman of the Commission (Herrmann) was given the authority to determine and declare a decision.
However, this Supreme Court of Baseball would ultimately fail in a number of areas, the most damaging being the issue of gambling in baseball. Gambling and the throwing of ballgames was generally ignored so as to avoid negative publicity to the sport. The protocol of the day was for the baseball establishment to "look the other way" or sweep a gambling incident "under the carpet."