See Marc's related article "NFL's Hail Mary antitrust case stands to bruise fans" published on October 5, 2009 in Crain's Chicago Business.
The U.S. Supreme Court on Monday dashed the hopes of the National Football League for baseball-style immunity from antitrust laws, with justices ruling unanimously against the league in a dispute over NFL-licensed apparel.
The NFL defended its exclusive contract with Reebok for souvenir headwear for all the league's teams by arguing that it should be viewed as a single entity for certain purposes.
But Justice John Paul Stevens, writing for the Court, said the NFL's contract amounted to "concerted action" by separate entities that warranted scrutiny under Section 1 of the Sherman antitrust law. The ruling came in the case American Needle Inc. v. National Football League.
"To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks," Stevens wrote for the majority. Rather than acting as a single entity, he added, "The teams compete with one another, not only on the playing field, but to attract fans, for gate receipts and for contracts with managerial and playing personnel."
The ruling may have been the final antitrust decision written by retiring justice Stevens, who began his career nearly 60 years ago as an antitrust lawyer in Chicago.
The outcome may also represent something of a strategic blunder by the NFL, which had won the case below. When its adversary American Needle appealed to the Supreme Court, the NFL took the unusual step of also urging the high court to grant review in the case to resolve conflicting lower court decisions.
"The NFL may be kicking itself for joining in asking for review," said Bryan Cave antitrust expert James Smith. "They snatched defeat from the jaws of victory."
Covington & Burling partner Gregg Levy, who argued the case for the NFL, could not be reached for comment. But Jones Day partner Meir Feder, part of the American Needle legal team, declined to gloat about the NFL's strategic move.
"In fairness to them, they are a national network of teams," Feder said. "And it's not helpful to have one circuit saying one thing and other circuits saying something else" on the antitrust issue. So the NFL may have decided to "give it their best shot" in the interest of uniformity, Feder said.
American Needle, which used to make hats for NFL teams, was shut out of the business in 2000 when NFL Properties, a corporate entity created by the NFL, negotiated an exclusive contract with Reebok to make sports paraphernalia for all 32 teams in the league. American Needle sued, but the district court and the U.S. Circuit Court of Appeals for the 7th Circuit ruled that, for the purposes of promoting football, the teams can act as a "single entity" without running afoul of the Sherman Act.
Stevens' ruling left open the possibility that, at trial, under a rule-of-reason standard, the NFL could justify some kinds of cooperation. "Football teams that need to cooperate are not trapped by antitrust law," Stevens wrote.
Salil Mehra, a Temple University James E. Beasley School of Law professor and former Justice Department antitrust lawyer, said the ruling today was the "first private plaintiff victory since 1992 in an antitrust case in front of the Supreme Court."
Mehra agreed that under the decision the dispute "may still be winnable for the NFL. While they don't get an immunity, they get a chance to argue that anti-competitive benefits of joint licensing outweigh anti-competitive harms."
Matthew Cantor, an antitrust litigator at Constantine Cannon in New York, said the decision "goes beyond the NFL" and will affect other kinds of joint ventures by groups seeking to be viewed as single entities. "This is a broad affirmation of the applicability of Section 1" of the Sherman Act, he said, a part of the law that is easier for plaintiffs to prevail in than Section 2.