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Saturday, January 16, 2010

Supreme Court and the NFL: Court Examines the Business of Football

With play-offs now underway, the National Football League also is involved in litigation over how it can license NFL team logos. The case, American Needle v NFL, is in federal court and has gone all the way to the U.S. Supreme Court.

Following oral argument last week, it was painfully clear that the nine justices on the high court do not spend much time watching football; not necessarily a bad thing. High court observers believe the Supreme Court may remand the case back to the federal district court in Chicago to clarify the issues in the suit.

The dispute arose in 2004 when the league switched companies, from American Needle to Reebok, granting the latter a non- exclusive apparel license to sell hats, jerseys and other apparel. The NFL has had a history of utilizing only one company at a time relative to apparel production. Until 2004, American Needle had the contract.

The issue on appeal is whether the NFL (and the 32-teams making up the league) is a “single entity” under the Sherman Antitrust Act, and therefore immune from that Act’s ban on monopoly-style pricing. American Needle asserts the NFL’s move to Reebok violates the anti-trust law because it is a network of separate business entities (individual teams) that have conspired to stifle competition and raise prices.

Both the trial court and the Seventh Circuit Court of Appeals sided with the league in ruling that the NFL was a “single entity” that could forge exclusive licensing deals, regardless of the effect on pricing.

Implications for the high court’s ultimate decision have less to do with headwear than with how the league could treat players’ unions and how other leagues can leverage their power as a “single entity” over their respective players. Both the NBA and the NHL have filed amicus briefs in the case.

While the nine justices may not be aware of what is at stake for teams like the New Orleans Saints and the Indianapolis Colts this weekend, at oral argument they seemed to suggest the adoption of a “rule-of-reason” inquiry, whereby each specific anti-trust challenge is tested in court. Of course, the NFL would prefer a bright line, outright immunity that would spare it the expense of future lawsuits.

The high court’s decision on the case is expected shortly. While most NFL fans will be oblivious to the outcome of the litigation, they will purchase hundreds of thousands of caps and jerseys this month and next.

Update:  05/24/2010 - As SCOTUS winds down its session, it decided American Needle v NFL in a 9-0 decision against the NFL.  Here are some links to immediate analysis of the decision from the Los Angeles Times and the SCOTUS Blog.

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Anonymous Anonymous said...

How can you discuss the ramifications of the Sherman Act on Professional Football without first discussing the concomittant Clayton Act codified subsequently in 1914; clarifying and supplementing the Sherman Act. The " 'single entity' " analysis which is cardinal to your blog; aruably the most profound of the Clayton Acts's substantive modifications to federal antitrust legislation, despite not being uniquely singular (perhaps redundantly addressing Section 1 of the Sherman Act), was clearly delineated in the Clayton Act. Moreover,the effect on the practice of "exclusive dealing" and its congruous progeny similarly restricting monopolization of industries, businesses and trade is evident. Details and differences aside, thank-you on behalf of the readers of the Oakland Press and fans of Federalism everywhere for shedding light on such a fascinating topic.

January 19, 2010 at 12:15 PM 
Blogger Nick Raymon said...

This is fascinating, and any cross-correlation adds confidence in any sub-component's reading.
I like the approach you took with this topic. It is not every day that you find a subject so to the point and enlightening.
Fight Tickets Las Vegas

November 13, 2010 at 1:46 AM 

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