The NFL Is Entangled In An Antitrust Action
Thanks 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:
- The individual teams would be indivudually responsible for their own merchandising and marketing (to an extent on the latter), and
- 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.