The NFL Is Entangled In An Antitrust Action

American NeedleThanks to a colleague and friend of mine, Hays Mathis, for letting me know that the U.S. Supreme Court asked the Solicitor General’s Office to comment on the Cert Request for the case of American Needle Inc. v. National Football League (2008 U.S. App. LEXIS 17553).

Reebok has an exclusive license with the NFL to outfit all of the NFL’s players with Reebok headwear.  The deal was struck in 2000 and will last through 2010.  American Needle brought an antitrust action against the NFL claiming that the league is in violation of the Sherman Antitrust Act for allowing its member organizations (NFL teams) to give up their licensing rights to NFL Properties.  American Needle’s claim is that NFL Properties licensing of separate team properties was a contract, combination or conspiracy in restraint of trade. The U.S. Court of Appeals, Seventh Circuit found that nothing in the Sherman Antitrust Act prohibited the NFL teams from cooperating in order to compete with other forms of entertainment.

Here is Mays Mathis’s take on the issue:

In the district and circuit levels, courts basically treated the teams as single entities operating under a common entity (the NFL), but I don’t think that holds up very well against the statute (without, of course, any working knowledge of decisional or regulatory law regarding this type of exclusive licensing arrangement).  However, an adverse decision to the NFL, while not catastrophic, would really dilute the NFL “brand” commercially and probably have two other related results:

  1. The individual teams would be indivudually responsible for their own merchandising and marketing (to an extent on the latter), and
  2. The teams would not be able to coerce each other to share the revenue from merchandising, which they do now, at least partially.  The income disparity among teams would increase as teams like the Cowboys, Bears, Steelers, etc. would draw a lot more economic interest in their logos than, say, the Seahawks and Bengals.

Not surprisingly, the NHL and the NBA have filed amicus briefs on the side of the NFL asking the court to deny cert. Of course, the MLB isn’t on an amicus brief, since they are pretty much exempt from anti-trust rules.

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  • Darren,
    Please send out a follow-up on this story. This can change the way the professional sports leagues are ran today. I really wonder is change a good thing. For the League and small market teams, I think NOT. But for American Needle, the lawsuit is money well spent. Either way, I think they come out as a winner. If they win, they MAY get a shot at doing some business with the NFL (I personally think that they would Black Ball) will keep all the teams from working with Am. Needle. The second way they will / are winning, is because of all thePUB they are getting. I have to admit, I never heard of Am. Needle before this case.

    And since Goddell is giving back most of his income, he can try to connect with our new business sire: http://www.millionaireprofitnetwork.com, and we will help him get this money back, through networking and making connections, plus some business coaching.

    DH, have a good one and please write a follow-up story on this subject.

    Corey Crowder

  • John Orbe

    I have to disagree with the sentiment that the “common entity” (single entity) treatment by the lower courts doesn’t hold up against the statute. The Court in Copperweld held that a single entity exists when there is a unity of interest between the organizations. The NFL member teams share a unity of interest in the joint promotion of NFL football by NFL Properties to better position the league to compete with other leagues and forms of entertainment. Exclusive licensing, at issue here, falls under the promotional activies of NFL Properties. Because of this unity of interest, the NFL, at leats for this purpose, should be considered a single entity. Without rambling on to much, I think the 7th Circuit was right on in their decision.

    I also wonder if this is money well spent for American Needle. If they ultimately win at the Supreme Court, this will have cost them millions. Is it worth it for such a small player in the apparel industry? I guess they could be worried all leagues will grant exclusive licenses and then they would go out of business. Still, it makes me wonder if maybe someone else is helping finance/push this litigation.

    It will definitely be interesting to see how this comes out. Especially since this is the first time a Circuit has given single entity treatment to a major professional sports league.

    – John O

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