After the National Football League teams' marketing affiliate awarded Reebok International Inc. the exclusive right to distribute headwear displaying the teams' names and logos, Buffalo Grove-based American Needle Inc. cried foul.
The company, which had designed and manufactured NFL-sanctioned apparel for a generation, soon will make its antitrust case before the U.S. Supreme Court, and the business of sports may never be the same.
American Needle v. NFL will turn on one simple question: Is the NFL a single economic entity, or is each of its 32 teams, including the Chicago Bears, a separate business? If the league, its teams and its licensing agent have morphed into one entity, as both a trial court and an appellate court mistakenly have ruled, they could not have conspired with one another. And, for that reason, the NFL's contract with Reebok could not be deemed an unlawful restraint of trade.
But if the league and each of its affiliates are separate players, as American Needle persuasively argues, the exclusive deal they cut with just one vendor was an unlawful exercise of monopoly power. The teams' agreement to refrain from competing with Reebok - or with one another, by licensing their trademarks independently - was clearly anti-competitive. An agreement to restrain competition injures the consumer.
In an unexpected, high-risk, high-reward maneuver, the NFL endorsed American Needle's bid for Supreme Court review, asking the justices not only to reject the manufacturer's claim but also to grant Big Sports - including the NFL, National Basketball Assn., National Hockey League and Major League Baseball - blanket immunity from any further antitrust scrutiny.
League rules already prohibit teams from competing for national cable and Internet broadcast packages such as NBA League Pass and NHL Center Ice. If the NFL gets its way, team owners could be emboldened to single-handedly attack free agency; impose salary schedules on players, coaches and managers; restrict player movements from team to team; manipulate branded product sales, and control TV and Web-based programming. As union contracts expire, crippling strikes and lockouts could become commonplace in every major sport.
The NFL's single-entity argument is a fiction it hopes to sell to a pro-big-business court. But the league's teams, with total revenue exceeding $6.5 billion a year, are separately owned, each managed in pursuit of its own economic interests. Not one entity, but many, they have aggressively competed against one another for ticket sales, sponsors, naming rights, free-agent players, coaches and, ultimately, fans. The Supreme Court owes those fans and American Needle the common-sense finding that, in the NFL, it's every team for itself.
Marc J. Lane, a business and tax attorney and financial advisor, practices law at The Law Offices of Marc J. Lane, P.C. (www.MarcJLane.com) in Chicago.
Our November 2009 Lane Report was adapted from a column published in Crain's Chicago Business on October 5, 2009. Reprinted with permission from Crain Communication Inc., Copyright 2009.
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