Supreme Court Says Antitrust Law Applies To The NFL; No Exclusive Licensing Allowed

from the good-move dept

Mon, May 24th 2010 4:58pm — Mike Masnick

Earlier this year, we mentioned the Supreme Court was reviewing a lawsuit over whether or not the NFL had the right to have an exclusive license for its apparel. A company, American Needle, who had supplied apparel to various NFL teams, sued the NFL after it had entered into a long-term exclusive contract with Reebok to handle all team apparel. American Needle claimed that this was a clear anti-trust violation, as all of the teams had colluded to exclude everyone else from the market. The NFL argued, instead, that the entire league should be viewed as a single company. Today, the Supreme Court ruled against the NFL, saying that each team should be viewed as a separate company. The case then gets sent back down to be reconsidered:

The details of this particular case are somewhat unique, in that it really only applies to situations where there are sports leagues (Major League Baseball is the only sports league that has an official exemption from Congress for antitrust issues -- though it's not clear why the different treatment). However, the decision by retiring Justice John Paul Stevens highlights the importance of competition, and the problems of letting organizations team up, just because teaming up makes better financial sense for all of those organizations:

Directly relevant to this case, the teams compete in the market for intellectual property. To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks. When each NFL team licenses its intellectual property, it is not pursuing the "common interests of the whole" league but is instead pursuing interests of each "corporation itself," Copperweld, 467 U. S., at 770; teams are acting as "separate economic actors pursuing separate economic interests," and each team therefore is a potential "independent cente[r] of decisionmaking," id., at 769. Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that "depriv[e] the marketplace of independent centers of decisionmaking," ibid., and therefore of actual or potential competition.

This makes a lot of sense. Otherwise, you could argue that any particular industry could set up an organization of which all the companies in that industry are a "member" and allow that single organization to negotiate exclusive deals, with the argument that it's "for the common interests of the whole." But, that's obviously collusion, with the intent to harm consumers. Thankfully, the Supreme Court saw through the flimsy claim that such a structure makes companies immune to antitrust law.

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Filed Under: antitrust, supreme court, trademark
Companies: american needle, nfl, reebok

14 Comments

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Quick Brown Fox, 24 May 2010 @ 5:15pm

Supreme Court Decision
Nice to see Justice Stevens got it right for a change.
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Dale Sheldon-Hess, 24 May 2010 @ 5:24pm

Hold up...
How does this work with respect to the NFL (or whoever) making an exclusive contract for video games based on their league?
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- Ed (profile), 24 May 2010 @ 5:58pm
  
  Re: Hold up...
  I don't think the NFL has an exclusive contract on purpose. There used to be several games that used the NFL Logo. It is just that EA is about the only one left that can afford the licensing fees that the NFL asks, as well as the Licensing fees from the Players Union (NFLPA) that allowqs them to use the names and likenesses of the actual players.
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  - Anonymous Coward, 24 May 2010 @ 6:00pm
    
    Re: Re: Hold up...
    No, EA has an exclusive license.
    
    Also, the NFL does have some anti-trust exemption, but they don't have the blanket exemption that baseball has.
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- nasch (profile), 25 May 2010 @ 2:37pm
  
  Re: Hold up...
  It seems like a different situation to me. You wouldn't make a "Chicago Bears" video game, you'd make an "NFL" video game. So you would have to negotiate with the NFL all together. And in that case I don't think an exclusive license would be illegal since there isn't collusion.
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exemption, 24 May 2010 @ 6:08pm

Why do anti trust exemptions exist at all?

Can anyone provide an example of an exemption that makes sense other than public utilities?

If there is an exemption from anti trust regulations, then doesn't it follow that the recipient should be regulated as a monopoly?
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pr, 24 May 2010 @ 6:08pm

Baseball no different
Because of a Supreme Court ruling long ago, (FEDERAL BASEBALL CLUB V. NATIONAL LEAGUE, 259 U. S. 200 (1922)) Major League Baseball is "not commerce", therefore exempt from anti-trust. This decision was made in a quaint time when the Federal Government didn't think they ruled everything. Subsequent rulings, more in line with modern conception of an all-powerful Federal Government with no limits, decreed that everyone one else is commerce. The NFL swung for the fences (threw a hail Mary?) trying to extend anti-trust to themselves and everyone else, instead got their heads handed to them.

The Court has said they're not going to change the not commerce ruling. It's up to Congress. It's long past time for them to fix this quirk in the law.
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PRMan, 24 May 2010 @ 6:18pm

Umm...
"This makes a lot of sense. Otherwise, you could argue that any particular industry could set up an organization of which all the companies in that industry are a "member" and allow that single organization to negotiate exclusive deals, with the argument that it's "for the common interests of the whole." But, that's obviously collusion, with the intent to harm consumers."

You mean like MPEG-LA?

Seriously the NHL had better watch out as they have signed a similar deal with Reebok.

Also, DirecTV may quickly be losing their "exclusivity" on NFL Sunday Ticket.
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Nick, 24 May 2010 @ 6:49pm

acting as a unity
Thanks for the MLB case info; I wonder relatively how much effort and cash any of these leagues put into sponsoring the teams' marketing efforts in their respective areas, and how that might change.
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Anonymous Coward, 24 May 2010 @ 7:18pm

Why would this not apply to the RIAA and MPAA as well? They allow the entertainment groups to collude in fixing entertainment pricing.
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FukEm, 24 May 2010 @ 7:39pm

No accounts, descriptions or commentary is allowed without the expressed written consent of...

Fuk em.
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Anonymous Coward, 24 May 2010 @ 11:32pm

Electronic Arts holds the exclusive rights to NFL (and a few other sports) branded video games, so it looks like that will be over with as well, which is awesome.

http://sfgate.bdc.bloomberg.wallst.com/SFChronicle/Story/Print?docId=1376-L2XIDO1A74E9-1
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Fuk Em 2, 25 May 2010 @ 5:36am

MLB Properties
I understand MLB's exemption (Congress got bought off) but I do not understand how it is extended to MLB Properties which is a separate organization (ie different corporation). MLB Properties was organized for the sole purpose of consolidating all MLB Trademarks and issuing exclusive licensing agreements. How is MLB Properties (which is not MLB) antitrust practices protected under the exemption?
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- pr, 25 May 2010 @ 6:20am
  
  Re: MLB Properties
  Good point. Baseball might not be interstate commerce, but selling shirts certainly is, whether or not they have MLB team logos on them.
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