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It’s First Down For The NFL In The Supreme Court

Posted  October 7, 2009

Sports leagues and other joint ventures may score an antitrust victory in the Supreme Court this term that makes the Baseball Antitrust Exemption look strictly minor league.

The Supreme Court will hear the case of American Needle, Inc. v. National Football League, which concerns the NFL’s practice of licensing NFL and team logos and other intellectual property exclusively through the NFL’s wholly-owned subsidiary, NFL Properties LLC.

At issue is the extent to which joint ventures, like the NFL, can be considered “single entities” under antitrust law—as opposed to multiple, collectively-acting ball clubs—and thus not held subject to the anticonspiracy prohibitions of § 1 of the Sherman Act.  American Needle thus has the potential to be a watershed case in antitrust analysis of sports leagues and other joint ventures.

The plaintiff-appellant, American Needle, complained that the NFL violated the antitrust laws by terminating American Needle’s license for NFL headwear in favor of an exclusive license to Reebok.  On American Needle’s conspiracy claim under § 1 of the Sherman Act, the district court granted summary judgment to the NFL on the ground that the NFL acted as a single entity for purposes of licensing its intellectual property, and thus could not conspire with itself under the long-standing Supreme Court precedent of Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984).  The court also granted summary judgment on American Needle’s Sherman Act § 2 claim on the ground that even a monopolist has the right to exclusively license its intellectual property.

The U.S. Court of Appeals for the Seventh Circuit affirmed summary judgment for the NFL, using the following syllogism:  (1) the NFL “product,” i.e., the NFL regular season of 256 games, the playoffs, and (last but not least) the Super Bowl, can be produced only by the NFL, not the individual teams; (2) only the NFL can promote “the NFL product”; and therefore (3) the NFL acts as a single entity when promoting the NFL through sales of trademark-bearing goods.

In its Supreme Court brief filed on September 18, 2009, American Needle argues that separately owned and controlled entities, such as NFL teams, have been held subject to § 1 of the Sherman Act for over a century.  American Needle points to the Supreme Court’s landmark decision, NCAA v. Board of Regents, 468 U.S. 85 (1984), which held the NCAA subject to § 1 in a case involving limitation of college football broadcasts.

The U.S. Department of Justice and Federal Trade Commission have submitted a joint brief supporting American Needle, although not completely.  The government argues that joint ventures, like the NFL, sometimes act as single entities and sometimes as multiple entities—sort of a quantum theory of antitrust.  According to the government:

Single-entity treatment for the teams and the league is appropriate if, but only if, two conditions are satisfied. First, the teams and the league must have effectively merged the relevant aspects of their operations, thereby eliminating actual and potential competition among the teams and between the teams and the league in that operational sphere. Second, the challenged restraint must not significantly affect actual or potential competition among the teams or between the teams and the league outside their merged operations.

The government argues that the case should be remanded to the lower courts for a fuller analysis of NFL licensing practices under this standard.

The American Antitrust Institute and the Consumer Federation of America have also filed a joint brief in support of American Needle.

Stay tuned to Antitrust Today to see if the NFL’s touchdown stands after further review….

Tagged in: Intellectual Property Law and Antitrust, Monopolization,