The Supreme Court of the United States has ruled against the Nation Football League (NFL) in terms of specific antitrust language, which emerged from a lawsuit brought against the sports entity by apparel manufacturer American Needle.
American Needle had charged that the NFL’s exclusive apparel agreement with Reebok limited competition, violated the Sherman Act and led to higher prices for consumers. American Needle further charged that an agreement between NFL Properties (NFLP) and Reebok did not allow the company to negotiate apparel agreements with individual teams.
In its decision (PDF), authored by retiring Justice Stevens, SCOTUS unanimously reversed a lower court’s ruling, and, according to SCOTUS Blog, “cleared the way Monday for trial of a lawsuit against the joint marketing of the right to use the teams’ logos and trademarks on consumer goods.”
The decision hinged around Section 1 of the Sherman Act, which dictates, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”
In the decision, Stevens wrote “We conclude that the NFL’s licensing activities constitute concerted action that is not categorically beyond the coverage of §1 [Section 1].”
Between 1963 and 2000, NFLP granted nonexclusive licenses to a “number of vendors,” including American Needle. December of 2000 saw NFL Properties formed and a 10-year exclusive headwear deal for all 32 teams granted to Reebok. American Needle’s license was not renewed.
While the NFL had argued that “by forming NFLP, they have formed a single entity, akin to a merger, and market their NFL brands through a single outlet,” Stevens wrote, “An ongoing §1 violation cannot evade §1 scrutiny simply by giving the ongoing violation a name and label.”
A few more choice tidbits:
Although NFL teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned.
It may be, as respondents argue, that NFLP “has served as the ‘single driver’’ of the teams’ “promotional vehicle,” “‘pursu[ing] the common interests of the whole.’” But illegal restraints often are in the common interests of the parties to the restraint, at the expense of those who are not parties.
As the SCOTUS Blog further noted, “The Court also did not decide whether the NFL did in fact act illegally in this specific marketing effort.”
If, in a forthcoming trial, it is ruled that the NFL did act illegally, LawsofPlay (earlier this year) outlined a scenario of what such a ruling could mean for the videogame world:
While this could lead to more competition in the sports gaming markets, it could also lead to really wonky arrangements–imagine EA releasing an NFL game with 20 NFL teams and a dozen or so fantasy teams to round out the roster while 2K releases a game with the 12 NFL teams missing from EA’s game and a handful of its own fantasy teams.