Sports And The Law: SCOTUS Grants Cert In American Needle v. NFL
Yesterday morning, the Supreme Court granted certiorari in the case American Needle v. National Football League (pdf, p.3) for purposes of determining whether the NFL clubs’ collective licensing of individual club trademarks is exempt from antitrust scrutiny under the single entity defense. The Supreme Court’s decision to hear this case was likely influenced by the fact that it marks one of just a few times that both a plaintiff and defendant have requested the Court’s review.
Earlier this month, the United States Department of Justice and the Federal Trade Commission had filed an amicus brief recommending that the Supreme Court deny certiorari. The United States had argued the Seventh Circuit’s holding in American Needle did not conflict with existing case law—a view with which most sports-antitrust scholars disagree.
For those who have not been following the American Needle case, the original plaintiff, American Needle Inc., had for more than twenty years maintained a non-exclusive license to design and manufacture headgear bearing the NFL clubs’ names and logos. Then, nine years ago, the NFL clubs decided to offer an exclusive license to American Needle’s main rival, Reebok.
Upon being foreclosed from the ability to sell NFL headgear, American Needle sued the NFL clubs in the Northern District of Illinois, contending that the new NFL licensing arrangement violated Section 1 of the Sherman Act by illegally restraining trade in the market for purchasing rights to NFL logos. The NFL clubs, in turn, responded by not only alleging that their licensing arrangement was pro-competitive under antitrust law’s Rule of Reason, but also by contending that the NFL clubs combined to form a single-entity that was entirely exempt from antitrust scrutiny. Both the district court and the Seventh Circuit Court of Appeals granted summary judgment to the NFL clubs based on the single-entity theory.
But can all 32 NFL teams act as one? Analysis after the jump.
In filing a petition for certiorari, American Needle has requested the Court to recognize that the 32 NFL clubs cannot as a matter of law combine to form a single-entity. Meanwhile, the NFL clubs want the Court to not only affirm the Seventh Circuit’s decision, but also to craft an opinion in such a way that would grant the 32 member clubs broad protection from future antitrust challenges.
In terms of existing case law, the NFL clubs seem to rely on a very broad reading of the 1984 Supreme Court case Copperweld Corp. v. Independence Tube Corp., in which the high court had held that a tubing company and its wholly-owned subsidiary comprised just one entity for antitrust purposes. American Needle, meanwhile, does not believe the Supreme Court ever intended to extend the Copperweld holding to the sports league context. Indeed, leading up to the American Needle case, courts on seven occasions had denied the NFL clubs’ attempts to extend the single-entity defense to professional sports leagues.
Only Justice Stevens remains on the Supreme Court from the 1984 Copperweld decision. In that case, Stevens formed part of the Court’s dissent, which, at the time, had not even wanted to recognize a single-entity defense for a company and its wholly-owned subsidiary. Since 1984, however, the Court has moved far to the right on most antitrust matters. Based on the Court’s current composition, it is difficult to predict which way it will ultimately decide this case.
In my mind, this case should be resolved in favor of American Needle. The more traditional reading of Copperweld does not afford the NFL clubs access to the single-entity defense. In addition, by extending the single-entity defense to NFL clubs, the Supreme Court would only provide added antitrust protection to an already highly profitable industry.
For these two reasons, I believe the Supreme Court should remand this case back to district court for a full trial on the merits. If the court ultimately upholds the NFL clubs’ joint licensing arrangement, it should be because the arrangement is found pro-competitive, and not based on some technicality.
___________________________________________________________________
Marc Edelman is a Visiting Assistant Professor at Rutgers School of Law-Camden. He will be joining the faculty of Barry Law School in Fall 2009. His bio is available here, and his publications, here. Professor Edelman’s article, Why the ‘Single Entity’ Defense Can Never Apply to NFL Clubs: A Primer on Property Rights Theory in Professional Sports, was cited by American Needle Inc. in its most recent Supreme Court brief.
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Comments
First to say who cares
1 = unsmart.
People always cry that there isn't enough law-related content on this blog, then when it shows up they don't care. Find a new profession.
Edelman, I'm gunna find you after work and smack a bitch, you hear me, EdelMAN? I gunna get you.
Gimmesome
NO ONE CARES!!!!!!!!!!!!
Its always seemed to me that any sports league should constitute a single entity and be immune from most antitrust lawsuits. NFL teams don't compete with each other for market share. The NFL competes with the MLB, NBA, NHL and other sports leagues. Its like saying that McDonalds shouldn't make coordinated decisions for its franchises.
I don't know if I agree that application of the single entity doctrine should never be available to sports leagues. After all, as the Seventh Circuit's decision recognizes, no individual NFL team (for example) can produce its primary product--NFL football--on its own. A high degree of coordination between teams is necessary; the teams in the league must, of necessity, "collude" on a whole bunch of things that we would never allow competitors to agree upon in a normal market. Thus, a sports league is in some respects more like a partnership or a joint venture than a market with 25-30 competing firms.
That said, I do think the court got it wrong in American Needle, because there is no need for such collusion in the marketing and sale of team-logo apparel and merchandise. Here, the individual teams really are competitors. The Packers can make and sell jerseys and hats without any help from the Patriots, and vice versa. I think what led the Seventh Circuit astray was that it misconceived the production of team apparel as an industry-wide promotional/advertising thing (where we often see coordination between competitors--think "Got Milk?") rather than the revenue-generating sale of products.
I don't understand what Edelman means when he implies that this case was decided on a technicality, though. The NFL won on summary judgment because American Needle was unable to come up with any evidence to prove its case according to the standard applied by the court. That's not a technicality; it's just failing to meet your burden of proof.
Also, can anybody explain to me why BOTH parties supported a cert grant in this case, while the government--in this supposedly pro-regulation administration--did not? I don't get it.
How can the NFL possibly be a single entity when you have 32 individual team owners. I know, there are some aspects of the league where there is "profit-sharing", but honestly, does anyone consider Jerry Jones to be a part owner of the Washington Redskins? Riddle me this, what aspect of the NFL structure is suggestive of the NFL being a single entity (other than its illegal collusive behaviour)?
Edelman, your number is up, friendo.
Comment removed by moderator.
5, you don't think the Yankees and the Mets compete for fans? The Cubs and White Sox? Jets and Giants?
It's transparent that teams compete in any market with multiple teams. And even between teams in different geographic areas, there are lots of reasons for teams to try to attract fans who live remotely. Merchandise sales--the subject of this case--is probably the biggest one.
5 said: Its like saying that McDonalds shouldn't make coordinated decisions for its franchises.
The difference is that McDonalds has competition (BK, Jack, etc.) that serves to keep them honest. With respect to the NFL,there are no other professional football teams/leagues to keep them honest. And I disagree that the NBA and MLB serve as competitors...
7, how about the fact that almost every major aspect of how they do business is (and must be) planned and administered by a single entity? Rules, schedules, hiring, training, and management of on-field officials . . . .
Obviously this doesn't mean we should let the individual teams collude any more than necessary, but they're a heck of a lot closer to one entity than almost any other industry.
7:
You should read some of the antitrust opinions on sports teams, but i'll boil it way down for you: the teams of the NFL are in the business of competition. That is what they are selling, collectively. They can only provide this product/entertainment by coordination.
The NFL is going to have bigger fish to fry soon enough when half the retired players try to sue the league. I'm not saying they'll win anything, but its going to be a much bigger headache for the league
It matters because sports are the only profitable industry left.
10,
For most of the country, there is no alternative team. For cities without a team, most people just end up watching different sports where they have a local interest. I lived in St. Louis, there is no basketball interest because there hasn't been a local team in a long time. The Rams were a distant second (or third) to the Cardinals since the Big Red left.
Even in NY and other major cities, when a team leaves, a lot of people just end up leaving the sport. Ask most Brooklyn Dodgers fans what they did when the Dodgers left. Most did not immediately become Yankees fans. Most of these team allegiances are ingrained since birth, and there is nothing that cheaper hats or sweatshirts can do to switch the interest of a Sox fan to the Cubs.
11,
Well, you are wrong. The MLB, NBA, etc are absolutely the competitors. People have discretionary income to spend on sports entertainment. Some people like football more (and might never go to a baseball game), but some people also like McDonalds more and would never go to BK. It’s like saying that BK doesn't have any competition for flame broiled hamburgers -- it ignores the true field of the competition.
-5
I suppose that I should know the answer to this question, but is Barry Law School accredited by the American Bar Association?
Dear ATL,
I know that substantive talk of the law is frowned upon here but care to make a post about Ashcroft v. Iqbal??
The thread would potentially be interesting between the asslobsters and actual posts on whether it will be a game changer.
18-
Ashcroft v. Iqbal won't be a game-changer, but it will lead to about 5 years worth of the circuits casting about to try to figure out what the hell the Court is talking about.
12 and 13--Just because NFL teams must coordinate game schedules doesn't give them license to collude on other business matters (e.g., team licensing). For example, the wireless cellular industry requires coordination (have you ever heard of standards organizations?) so that everyone's technology is interoperable. Hence, the base stations and switching centers made by Alcatel-Lucent, Motorola and Nokia, et al are able to interoperate with each other and communicate with iPhones, LG, Palm, Samsung and Nokia et al phones. Yet, despite this necessary technical coordination (which is much more critical than in just scheduling games) there is vigorous competition amongst the market participants which inures to the benefit of the consumer.
Under your twisted reasoning, Nokia, LG, Apple, Palm Samsung, et al, could attend a standards meeting and agree to set the price of all 3G compatible cell phones at $800. Tell me how that would pass antitrust muster?
You cannot honestly say that a $2,500 PSL and $150 per ticket for an NFL game indicates that there is competition in the professional football sports market.
You've been pwned.
20 --
I don't think that you understand the definition of pwned.
21--The term pwned implies domination or humiliation of a rival, used primarily in the Internet gaming culture to taunt an opponent who has just been soundly defeated (e.g. "You just got pwned!").
21--You've been pwned.
21-Maybe you should have put a period after the third word in your post and just ended it there...
5,16,
NFL likely does not compete w/ MLB or NBA.
Without any hard data, I will make a generalization (conjecture, really) that a SSNIP test or other market definition would indicate that consumers of the NFL product do not turn to other sports if the cost is raised.
6 --
American Needle requested cert because it obviously wanted the 7th Circuit decision reversed. The NFL requested cert because it thought that it could get the Court to formulate a broader single entity rule that would protect sports leagues from Section 1 liability for almost any type of concerted intra-league conduct. The government, even though it favors tougher antitrust enforcement, didn't want the Court to take the case because it was worried that American Needle would lose on the relatively minor (and clear-cut) issue of whether the NFL can issue an exclusive license to Reebok when the real issue is whether the NFL's joint licensing agreement should be subject to Section 1 scrutiny.
5/16 --
McDonald's franchises don't compete with each other in the same way that NFL teams do. For instance, NFL teams compete over players, coaches, front office management, etc. McDonald's franchises don't get in bidding wars over the nation's top Big Mac-making prospect. NFL teams should also arguably compete over trademark licensing agreements because the NFL doesn't distribute revenue from merchandise sales equally among the teams. Some teams' hats and jerseys are worth more than others on the open market, so why should they all be forced to enter into licensing agreements under the same terms? This is why teams like the Cowboys have sued the NFL in the past for the right to license their trademark rights individually. At the very least, this type of restraint deserves a rule of reason analysis.
25 --
What you are talking about regarding intra-league competition does not need to be covered by antitrust law. Yes, teams compete for the same players, but that competition affects the competitive balance of the league (i.e. winning), not the consumers. If anything, it makes the product more expensive for consumers by bidding up the price of the employees. A cost which the league must pass along to the fans. If McDonald’s franchises did compete for the best hamburger makers, the price of McDonald hamburgers would raise as each franchise tried to outbid each other for the best employees. For that reason, we allow McDonalds to coordinate salaries, marketing, etc. for all its franchises.
I completely disagree with you and 24 that NFL teams compete with each other for market share. Teams, by and large, have a fan base in the geographical area that they are located. NY teams have more fans buying their product (for higher prices) because they are located in areas with large populations. Not because they have done anything competitively "better." Most people pick the sport that they like the best and follow the team that is closest to their home. Or the team that their parents followed. It’s the same as picking the hamburger that you like the best and going to the location that is closest to your house. If that location closes, maybe you drive a little further to the next location, or maybe you switch restaurants entirely. Again though, fans of one team are not switching allegiances because another team's sweatshirt is slightly cheaper. But, if you get priced out of NFL tickets in your city, you might pick up tickets to the hockey game or minor league baseball instead.
20, 22, 23
You are nowhere near as smart as you think you are. Your analogy is inapplicable and makes little to no sense. There is no argument that cell phone companies are part of a single entity, whereas it is arguable that sports "franchises" are. You have pwned no one.
26--You state: "There is no argument that cell phone companies are part of a single entity, whereas it is arguable that sports "franchises" are."
Really? You believe AT&T, T-Mobile and Verizon (operators), Nokia, Ericsson, Motorola, etc. (infrastructure suppliers), Palm, Apple, LG, Samsung, HTC (handset makers) constitute a single entity?
Jesus Christ, if that's the case, then they are free to meet and set prices on everything from base stations to iPhones.
Perhaps you should read Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984)before you come onto these boards on shoot your mouth off, big boy.
26--You state: "There is no argument that cell phone companies are part of a single entity, whereas it is arguable that sports "franchises" are."
Really? You believe AT&T, T-Mobile and Verizon (operators), Nokia, Ericsson, Motorola, etc. (infrastructure suppliers), Palm, Apple, LG, Samsung, HTC (handset makers) constitute a single entity?
Jesus Christ, if that's the case, then they are free to meet and set prices on everything from base stations to iPhones.
Perhaps you should read Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984)before you come onto these boards on shoot your mouth off, big boy.
27/28
There is no argument that they are part of a single entity because clearly they are not. Try reading with context. For 20's argument to work, he would have to conclude that the cell companies could be part of a single entity in the same manner that sports franchises could be part of a single entity (i.e. the league). If you are 20, 22, or 23, I guess your nonsensical comment is par for the course.
-- 26
26/29
So, what you originally meant to say is:
There is no argument that they are NOT part of a single entity...
Your original sentence, in context, states: "There is no argument that cell phone companies ARE part of a single entity, whereas it is arguable that sports "franchises" are."
Your poorly drafted sentence clearly posits that all of the cell companies constitute a single entity (even if one disregards the preposition at the end of the sentence).
I'll accept your implied expanation that you're not skilled with the English language. Good thing we caught it here though! Bummer if youI'd turned in a Memo during your summer clerkship that concluded, for example, "Discrimination on the basis of race is legal". Just remember: Words DO matter!
OK--moving on to your last taunt: Perhaps my comments are nonsensical because, in addition to your being unable to construct a coherent sentence, you have difficulty reading. It is my experience that any law firm that eventually hires you as a clerk will require you to both understand and draft complex legal arguments. Hence, you might want to spend some extra time on improving those skills.
Perhaps we can take some TOEFL classes together. In my last post I said: "...before you come onto these boards on shoot your mouth off, big boy."
Of course, what I meant to say was "...before you come onto these boards to shoot off your mouth, big boy." But, see, I ain't gots to have good inglish skills cuz i am the assistant manager at Payless Shoe Source down on Rte 281 in Weekapa.
Cheers.
NFL will and should win.
Glad to see some law-related content on this blog, more of this please!
The phrase "there is no argument" speaks to whether there is a debate -- not the necessary conclusion of such a debate. And your double negative is not the preferred drafting of the point. It is infinitely more confusing. Don't blame me because you can't read/think. Perhaps you can get a job in the Illinois state government when you fail the bar.
Clearly clerkships are on your mind right now, so I must assume you are an unemployed law student. Are you the Harvard 2L that was recently fired from his SA position? Makes sense. You clearly think you are more clever than you are. So rework your writing sample, get a job, and talk to me when you have some experience actually drafting/winning a brief.
Oh, and you might take a reading comprehension course for a 3L elective.
26/29
There is no argument that you are a moron, but it is arguable if 30 is.
33,
Based on the context of your sentance, I think we all know what you mean.
-- 26/29/32
32, you pwned 30! Some of my favorites:
Don't blame me because you can't read/think. YES!
Perhaps you can get a job in the Illinois state government when you fail the bar. BAM!
I commend your skills. When you can't argue the merits, resort to name-calling! I declare you WINNER of the most asinine, juvenile pissing match on ATL today. Please take your victory lap!
35--
Everyone can see that although you appear to be praising me, in reality, you are mocking me and 30. I think you need to go back to third grade and learn some manners because if you think you are clever, you are not. Everyone can see that and everyone is on my side. You are correct in that I am the WINNER.
--26/29/32
Please note that 36 is not 26/29/32. I am. And I think I am now 37. From here on out, any arguments that are logical and make sense (and include an occassional mispelling)--that is me (37). If it claims to be me 26/29/32, it is not. From now on, I will use a secret phrase--potato salad---to indicate when it is me. If I do not use that phrase, then it is not me.
--37/26/29/32
Potato salad here. What I meant to say, before I was so rudely interrupted by 36 is that in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), the U.S. Supreme Court held that a corporation cannot form a combination or conspiracy in violation of Section 1 of the Sherman Act with its wholly owned subsidiary. You see, here is where it gets interesting--the court said that affiliated entities serving the single economic interest of the parent corporation are like a single entity and cannot unlawfully conspire or combine together. That is why the NFL will win. Potato salad out.
38--
I hope you are having fun spending your Tuesday evening alone, entertaining yourself with stupid ATL posts. FYI--no-one thinks they are funny. You need to get a life.
26/29/32
Maybe the Supreme Court will actually take the opportunity to fix the mistake it made in the NCAA case, holding that naked restraints on trade in a joint-venture context should be analyzed under the rule of reason. I think everyone can agree that the joint-venture area of antitrust law is particularly murky. As a matter of sound policy, if cooperation were necessary to deliver the good in question, then the rule of reason should apply. However, if cooperation is not necessary to deliver the good in question--here, headgear bearing NFL team names and logos--then it should be deemed a naked restraint on trade and held per se illegal. The collective bargaining for one apparel maker does nothing to further the goal of the joint venture, is a naked restraint on trade, and as a naked restraint on trade should be deemed illegal per se. Naked restraints on trade are harmful to competition and should be held illegal per se in any context.