SCOTUS Rejects NFL’s Single Entity Argument
The magnitude of the Supreme Court’s decision in American Needle is not lost on the sports world. Articles and commentaries have flooded the internet over the last 24 hours. Although my article won’t offer any new insight on the matter, I could not claim to run a sports law blog without at least mentioning the decision. I have not written as much as I meant to on this case, but it has been widely publicized and over-analyzed enough so that most of you reading this probably know as much as, if not more than, I do.
In case you have not been paying any attention at all, I can give a brief summary. American Needle is an apparel manufacturer who produced NFL licensed headgear for over 20 years. Nine years ago, the NFL entered into an exclusive deal with Reebok granting the right for all NFL apparel and gear to Reebok, thus blocking out American Needle and any other clothing manufacturer who wished to create products using logos of the NFL or any of its member clubs. This exclusive license is only legally valid if it does not violate antitrust law – i.e. the NFL must show that it is a single entity because the NFL teams possess “either the unitary decision-making quality or the single aggregation of economic power characteristic of independent action.”
In overturning the 7th Circuit decision, the Supreme Court declared that the NFL had failed to do that.
What does this mean, going forward, for the NFL, the NFLPA, and the other professional sports leagues?
Certain consequences of this decision cannot yet be determined. The case has been sent back to be decided on its merits under a Section 1 analysis under the Sherman Act. If the NFL and American Needle do not reach a settlement prior to that, the decision may have serious implications on the licensing practices of the NFL and the other leagues.
What is known now is that the NFL is not a single entity. Marc Edelman points out that this “confirms that a collection of separate businesses that function as a cartel cannot ‘avoid antitrust law simply by creating a joint venture to serve as the exclusive seller of their competing products.’” Michael McCann, law professor at Vermont, cited Justice John Paul Stevens, who explained this further in saying that “‘each of the teams is a substantial, independently owned, and independently managed business’ that competes in the market for intellectual property. Stevens also recognized that while teams necessarily collaborate in certain ways to produce competitive football (teams must agree on game rules, for instance), such collaboration is not necessary for licensing contracts.”
Again, according to McCann, this decision helps the NFLPA because it prohibits the NFL from “unilaterally imposing labor conditions, such as regressive salary restrictions and limited free agency rights, without concern of Section 1. Instead, the league will have to collectively bargain labor conditions with the Players’ Association in order to avoid Section 1 scrutiny.”
This decision will have a ripple effect on the other sports leagues as well, particularly the NHL and NBA (though Major League Baseball should be safe as it has always enjoyed antitrust exemption). With the NFL’s arguments being rejected, the other leagues will have a very difficult precedent to overcome if they hope to achieve any exemption of their own.