competing with and against each other: sports antitrust law · competing with and against each...

Volume II Issue I ! Fall 2012 4

Competing With and Against Each Other: Sports Antitrust Law

_________________________________

Dylan Glenn University of Michigan

__________________________________

Sports are an integral part of culture the world over. As a multi-billion dollar industry

each year men, women and children pour hard-earned dollars into team apparel and tickets to

games of their favorite sports teams. Following an exciting finish to the 2011 Major League

Baseball season, ESPN SportsCenter anchor Scott van Pelt succinctly described Americans’ love

of sports by declaring, “sports are better than anything else, always.”1 Why sports are so exciting

is because of their competitive nature. Rooting for one’s team to be the best, something that can

be clearly determined through on-field competition, drives a great emotional investment for

many people. The competition that we love so much also creates an interesting situation from a

business standpoint. Ironically enough, a business that predicates itself on competition of two

teams requires the hindrance of economic competition to ensure the value of its product. The

four major sports leagues of the United States are provided with a level of antitrust exemption

because of the nature of value creation in their business models, and the externalities and free-

rider problems they encounter. This exemption has been disputed greatly over the years,

beginning with the courts siding with the leagues or with Congress taking corrective action to

support league goals. Recently, however, in two specific examples this paper will examine, the

courts have moved to slow the league’s desire for greater bargaining power.

History and Background of Antitrust Exemptions

Three of the four major sports leagues – the National Football League, National

Basketball Association, and National Hockey League – were granted a partial antitrust

exemption in the Sports Broadcasting Act of 1961. (The other league, Major League Baseball

already had a full exemption at that point following the Federal Baseball Club of Baltimore v.

National League of Professional Baseball Club2 decision). The Act was a response by Congress

specifically to decisions of courts ruling that the NFL was violating the Sherman Antitrust Act

1Scott van Pelt, "SportsCenter 9/27/2011,"SportsCentner, ESPN. Television. 2 Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs 259 U.S. 200 (1929)

Competing With and Against Each Other


when negotiation television contract rights for all teams. Following its passage, the Act then

allowed for each of the leagues to collectively negotiate television rights. In this specific case,

Congress acted to increase the efficiency of the advertising market: with the entire league

negotiating together, the national television audience could be segmented, and advertisers would

have a better idea of who they were marketing to when they purchased time on television

networks.3

Beyond the Sports Broadcasting Act of 1961, sports antitrust issues have a long and rich

history in the courts. In early cases, the courts ruled largely in favor of sports leagues, often

expanding owners’ power over players. In Federal Baseball Club, the Supreme Court

unanimously upheld the rights of an owner over a player even after the expiration of the player’s

contract in what is known as the reserve clause. The Court also held that baseball did not

constitute interstate commerce and therefore was not subject to the Sherman Act.4 This decision

was upheld 30 years later in Toolson v. New York Yankees5, a case again pertaining to an

agreement between the MLB and the Mexican League to honor each others’ reserve clauses.

Though the dissenting opinion written by Justice Harold Burton made the case that Major

League Baseball had grown to the size where it should be subject to the Sherman Act, seven

justices ruled that because Congress had taken no action over the past 30 years, it was not the

place of the Court to overrule the previous decision.6

As for the justifications for this exemption, it starts with the value creation of sports

competition. Each professional sports team (in the case of these four leagues) is its own separate

business. However, that business alone offers little value compared to the revenues made after

coordination. NFL football or Major League Baseball or NHL hockey requires two teams

competing. Based upon this, there has to be some level of cooperation between the teams to

coordinate such a competition. Thus, if the New York Yankees and Boston Red Sox decide to

play a game of baseball against each other, there has to be a cooperation to decide in where and

when the game will take place, and under what rules the game will be played.7 In fact, while

each team is competing to be the best team each and every year, from a business standpoint they

3 Ira Horowitz, “Market Entrenchment and the Sports Broadcasting Act,” American Behavioral Scientist 21 no. 3 (January 1978):415-430. doi: 10.1177/000276427802100308 4 Federal Baseball Club, 259 U.S. at 208 5 Toolson v. New York Yankees 346 U.S. 356 (1953) 6 Toolson, 346 U.S. at 356 7 Franklin M. Fisher, Christopher Maxwell and Evan Sue Schouten, :Sports League Issues: The Relocation of the Los Angeles Rams to St. Lois,” in The Antitrust Revolution, 4th ed., ed. John E. Kwoka, Jr. and Lawrence J. White (New York: Oxford Press, 2004), 277-278.

Williams College Law Journal


benefit most from parity. This is so, because a competitive league is most attractive to fans who

want to believe their team has a chance to win a league championship. These hopeful supporters

then pay for tickets, merchandise, and tune in more often to games, raising ratings, and leading to

higher ad revenues and richer television contracts for teams. The goal of the antitrust exemption,

then, is to make sure that the teams in each league are given enough leverage to work together to

maintain this level of competition that drives their product’s value.8 Without the cooperation, as

noted, there would be no product to sell, but more importantly, problems such as free riding and

negative externalities would not be accounted for creating inefficiencies.9

Though externalities and free riding are problems most associated with public goods and

environmental policy, they are certainly issues that face sports leagues. A prime example of these

problems was illustrated in the 1995 relocation of the Los Angeles Rams to St. Louis. Under

NFL rules, the relocation of a team requires both the consent of both the League Commissioner

as well as a three-fourths majority of all teams.10 The St. Louis Convention and Visitors Center,

which had built a stadium in hopes of securing an NFL team to either move to or expand to St.

Louis, sued the NFL deeming this anticompetitive, but lost the case.11 This control over

relocations is granted because of externalities and free riding. Each NFL team benefits from the

development of the entire League. That is, if some teams in the League are making the NFL an

exciting and attractive product then all teams will benefit from fan interest. Therefore, an owner

and community that gains an NFL team, either through relocation or expansion, is also gaining

the demand for NFL football that has been created by all the other teams over the League’s

history. The facilities and people that will see benefits from this demand, in this case the St.

Louis CVC, did nothing to create this demand but are free riding off others. The solution to this

problem is to allow all to coordinate and vote on relocations and expansions, as well as

determine a fair payout to the existing teams for the demand they have created.12

Moreover, there are negative externalities that arise with relocation. First, if teams were

able to relocate freely, the geographic diversity of the league could be put in jeopardy. This is

certainly not in the best interest of the league as a large geographic area without a team will

alienate fans who would then have no team to root for and no games to easily and frequently

8 Fisher, Maxwell, and Schouten, “Sports League Issues,” 285 9 Ibid 282, 291-293 10 Ibid 292 11 Ibid 283-284 12 Ibid 291-292



attend. In addition, when a team relocates, its rival team is hurt, and would have no say on the

movement without relocation restrictions. For instance, if the Chicago Bears were to move to

Los Angeles, they could benefit greatly from the high revenues to be earned in the second most

populated city in the country. However, the Green Bay Packers, their archrival, would feel

immense negative repercussions as divisional matchups with the Bears drive their revenues and

fan involvement. Therefore, the vote of NFL teams about relocation helps to mitigate

consequences for rivals.

Negative externalities also drive justifications for cooperation outside team relocation.

The labor market for NFL players (and players in other leagues as well) is controlled through

mechanisms like a player draft for those coming into the League from college, as well as, a

salary cap for teams. Without these, the richest owners would buy up all the best players

skewing the competitive balance of the League. In doing so, NFL football would become boring

and lose its value.13 Referring back to the Sports Broadcasting Act of 1961, the act of revenue

sharing of television contracts also helps drive competitive balance. Before the passage of the

Act, each team negotiated their own television contract. This led to the most popular teams, such

as those in New York, garnering richer contracts and having more money to spend, while small

market teams were often left with no television contract at all.14 Following the Act, it was legal

for the League to collectively bargain leading to not only more money for everyone15 but a level

playing field as 75 percent of the television revenue is split equally among the teams.16

With a general understanding of the history and justifications for the antitrust exemptions

leagues enjoy, it is now best to more closely examine this issue at a case-level. Though there are

numerous examples, the most high profile of the last 20 years involve Chicago Bulls suing its

league, the NBA, and a recent case involving and NFL and not one of its teams, but rather a hat-

maker, American Needle. The two cases are linked in that they both look to capitalize on the

same precedent, Copperweld Tube Corp. v. Independence Tube Corp..17 While the NBA uses

this precedent as a way to avoid litigation from the Bulls, the NFL, conversely takes its case to

the Supreme Court, using Copperweld to try and gain a higher level of exemption than it had

ever enjoyed.

13 Ibid 290 14 Horowitz, “Market Entrenchment” 417 15 NFL television contracts increased from $6.5 million in1962 to $27.7 milion in 1967. Horowitz, “Market Entrenchment,” 218 16 Bill Briggs, “How the NFL Became America’s Game,” MSNBC.com, September 16, 2007, http://www.msnbc.msn.com/id/29764460/ns/business-sports_biz/t/how-nfl-became-americas-game. 17 Copperweld Corp v. Independent Tube Corp. 467 U.S. 752 (1984)



Case Summary – Chicago Professional Sports Limited Partnership v. National Basketball

Association18 (NBA II)

The Chicago Bulls of 1990s were a basketball dynasty. Behind players like Dennis

Rodman, Scottie Pippen, and Michael Jordan, the Bulls won an incredible six NBA titles in ten

years,19 including an NBA record 72-win season in 1995-96.20 While the team was experiencing

such great success competing against the other teams in the league, the Bulls’ ownership, the

Chicago Professional Sports Limited Partnership competed against the league in court over the

right to show Bulls’ games on WGN, a superstation.21

Prior to the 1990-91 season, an NBA team was permitted by the league to show 25 games

on superstations. The NBA then lowered this number to 20 games for the ’90-91 season, causing

the Bulls and WGN to sue to stop the rule change from taking effect. The District Court for

Northern Illinois, in a decision known as NBA I22, agreed with the Bulls that the NBA’s new rule

restricted the output of televised Bulls’ games to the market and was in violation of Section One

of the Sherman Antitrust Act. Next, the NBA appealed the decision to the Seventh Circuit Court

of Appeals, which affirmed the lower decision23 but provided for suggestions as to ways the

NBA could seek the outcome it wanted without violating law. The NBA attempted to comply

with these suggestions (which will be detailed in the next section) and then sought to impose a

superstation fee on Bulls games on WGN. The Bulls sued again saying any restriction to their

games being broadcast on WGN was a violation of the Sherman Act.

18 Chicago Professional Sports Limited Partnership and WGN Continental Broadcasting v. National Basketball Association, 874 F. Supp 870 (N.D. Ill. 1995). 19 It is worth noting that this decade included almost two full seasons without star Michael Jordan as he pursued a minor league baseball career 20 “Year-by-year History of the Chicago Bulls,” Chicago Bulls, last modified 2012 http://www.nba.com/bulls/history/Chicago_Bulls_History-24393-42.html 21 “The NBA defines a superstation as ‘any commercial over-the-air television station whose broadcast signal is received outside the local Designated Market Area…by more than five perscent of the total number of cable subscribers in the United States.’ A local television stations becomes a supsertsation by provided its signal to cable systems to operators, who then rebroadcast the locacl teleivsin station’s signal to other television markets” Alter S. Fogel, “The ‘Superstation,’ The NBA, and Antitrust: An Analysis of Chicago Professional Sports Limited Partnership v. National Basketball Association,” Rutgers Law Review 47 (Spring 1995): 1200, http://www.lexisnexis.com/lnacui2api/api/version1/getDocCui?oc=00240&hl=t&hns=t&hnsd=f&perma=true&lni=3S3V-15P0-00CW-F0PS&hv=t&csi=140725&hgn=t&secondRedirectIndicator=true. 22 Chicago Professional Sports Limited Partnership and WGN Continental Broadcasting v. National Basketball Association, 754 F. Supp 1336 (N.D. Ill. 1991) at 1339. 23 Chicago Professional Sports Limited Partnership and WGN Continental Broadcasting v. National Basketball Association, 961 F.2d 667 (7th Cir. 1992).



Arguments and Decisions

UNITED STATES DISTRICT COURT FOR NORTHERN ILLINOIS

The Bulls’ argument in this case was centered on three restraints on their broadcast on

WGN they saw as unlawful. First was a total ban on superstation broadcasts of Bulls games, the

second was the blackout restriction keeping any team from showing a game on a superstation on

the same night an NBA game was broadcast on TNT or TBS, and the third was superstation fee

proposed by the NBA. It was the feeling of the Bulls that each of these restraints on the

broadcast of their games was a blatant restraint of trade and a violation of Sherman.24

The NBA countered by attempting to prove that it had employed the suggestions of the

Appeals Court in the Bulls I case. Most notably, the NBA attempted to prove it was single-entity

because, although there are 29 separate independently owned teams, they are subsidiaries in the

production of one product, NBA basketball. The NBA looked to draw on the precedent set in the

Copperweld25 case regarding the inability of collusion between a parent company and a

subsidiary.26 To facilitate this, the NBA had all copyrights of its teams transferred from the

ownership of the individual teams only to the possession of the Association.27 Also, the NBA

transferred all broadcast rights for league games to NBC with the stipulation that the teams could

still sell their games to local television after approval of the NBA and NBC.

After taking these steps to address the specific recommendations of the Seventh Circuit

Court, the NBA looked to mount a defense against the Bulls’ claims. It did so arguing that its

restrictions on superstation broadcast were precompetitive because they were necessary for the

production of competitive basketball. The restrictions helped the NBA negotiate national

broadcast deals, which in turn fostered expansion by promoting new teams to join the league.

The NBA further moved that its superstation fee was justified due to the free-rider inefficiency it

saw. It was the League’s contention that the Bulls and WGN were free-riding on advertising by

NBC and TNT for NBA basketball outside of the Bulls’ local broadcast area. This problem

could be solved with a fee paid by WGN.28

24 Chicago Professional Sports 874 F.Supp at 847 25 Copperweld Corp v. Independent Tube Corp. 467 U.S. 752 (1984) 26 Chicago Professional Sports 874 F.Supp at 848 27 Ibid 850 28 Chicago Professional 874 F.Supp at 866



The District Court rejected the majority of the NBA’s contentions. Finding as it did in

NBA I, the Court ruled that a restriction on the amount of television superstation games to reach

the consumer was anticompetitive and violation of the Sherman Act. 29 In addition, it saw the

transfer of copyrights from the teams to the league as an example of monopoly power to limit the

distribution of a product.30 The Court also ruled that the NBA’s new deal with NBC out of scope

of the Sports Broadcasting Act of 1961 because the deal limited the number of games shown to

the national audience while the Act only permits restrictions of that kind to audiences within the

home territory of the teams competing.31 Most notably, the Court rejected the NBA’s argument

that the league was a single entity because the 29 teams in the league teams compete players,

coaches and fans. The NBA has no control over the actions of the teams and is therefore

different than the single-entity as found in Copperweld. In response to the NBA’s assertion that

the teams are the creation of the league therefore rendering it a single entity, the Court responded

by saying the league was more of creation of the teams as it can be dissolved by a three-fourths

majority vote of the teams.32 However, the Court accepted the NBA’s free-rider justification,

stating a superstation fee may be acceptable.33 After fruitless negotiations between the team and

WGN, and the NBA, the Court rejected both sides’ propositions and set the fee to the NBA

should be one half of the extra revenue from national broadcasts on WGN.34

SEVENTH CIRCUIT COURT OF APPEALS

In 1996, the Seventh Circuit of Appeals heard the case and vacated two parts of the lower

courts decision sending back the case back to the district level.35 First, the Court of Appeals

rejected the superstation fee set by the District Court, ruling that the proposed fee by the NBA

would not restrict output as the District Court had felt36 Next, the Court of Appeals vacated the

District Court’s view that the NBA was not a single entity.37 It did so stating that the League was

difficult to characterize as either a joint venture or a single entity. The Court also noted the

difficulty of classification of sports leagues as either joint ventures or single entities in past cases,

29 Ibid 862 30Ibid 851-852 31 Ibid 855 32 Ibid 848-849 33 Ibid 869 34 Weber, “Sports Law,” 255-256 35 Chicago Professional Sports Limited Partnership and WGN Continental Broadcasting v. National Basketball Association, 95 F.2d 593 (7th Cir. 1996) 601. 36 Ibid 596 37Ibid 598



saying that Copperweld did not characterize one sole way to view single entities.38 In the end, it

concluded that sports leagues should be taken one league at a time and moreover one facet at a

time regarding a single entity discussion. Finally, the court stated that the NBA’s actions

regarding broadcast rights were closer to a single firm than many firms. 39 Though the case was

sent back to the district level, the two parties ended by settling outside of court.40

Implication of the Decision

Though no decision was made by the Court of Appeals as to whether the NBA was a

joint venture or a single entity, the decision still had unintended effects as well as implications

for future cases.

First, the Court of Appeals had some unforeseen consequences to its decision regarding

the superstation fee calculation. The Court of Appeals stated that the NBA’s plan for devising a

fee, which the District Court had rejected, was not unreasonable or restrictive of output. This

appears to be a victory for the NBA. The parties’ settlement, however, had the Bulls and WGN

paying less than half of the NBA’s superstation fee for the broadcasts of the two seasons in

which the litigation was taking place. For future broadcasts, no fee would be paid, but rather

advertising revenue for national cablecasts would be split between the NBA, the Bulls, and

WGN. As the Bulls’ Lead Counsel Joel Chefitz put it, “Ironically, the Bulls are better off under

this deal than we were in court after all our trial victories over the NBA” 41

The Court of Appeals’ view on sports leagues as single entities would also have a great

effect sports antitrust issues in the courts going forward. The ruling, which comments only on

the difficulty of determining whether a league is a single entity or not rather than attempting to

make such a distinction, sets no line as to when sports leagues’ actions are considered in concert

and when they are not. This is a problem that has persisted over nearly a century of

Congressional inaction on the issue, as seen in the Supreme Court’s ruling in Toolson. Further,

because the Court ruled saying that each league should be looked at on a “league by league”

basis regarding the single entity issue, the Court of Appeals allowed for each league to attempt to 38 Ibid 598-599 39 Ibid 600 40 Lacie L. Kaiser “The flight of Singe-Entity Structured Sport Leauges,” Depaul University Journal of Sports Law and Contemporary Problems 2 (Spring 2004): 25 http://www.lexisnexis.com.proxy.lib.umich.edu/lnacui2api/api/version1/getDocCui?oc=00240&hl=t&hns=t&hnsd=f&perma=true&lni=4DPY-SMG0-01TH-N05H&hv=t&csi=274833&hgn=t&secondRedirectIndicator=true 41 David Eubank, “NBA Bulls settle in WGN Case; Ad Revenue Part of Deal,” Arizona Daily Star December 13,1996 http://www.sportsbusinessdaily.com/Daily/Issues/1996/12/13/Leagues-Governing-Bodies/NBA-BULLS-SETTLE-IN-WGN-CASE-AD-REVENUE-PART-OF-DEAL.aspx?hl=Chicago%20Bulls&sc=0



portray itself a single entity in each facet of its business. A prime example of this is found in the

National Football League’s use of the single entity defense while defending its merchandising

contracts.42

Case Summary of American Needle v. National Football League43

Influential NFL Commissioner Pete Rozelle founded National Football League Properties

in 1963. NFL Properties is owned by the 32 NFL teams and groups all team logos and

trademarks for the League’s very successful marketing and merchandising operations.44

Typically, the NFL would use this corporation to grant licenses to multiple apparel companies to

manufacture products for all 32 teams or specific teams. However, in 2001, the League moved to

grant Reebok an exclusive contract for the manufacturing of apparel such as on-field jerseys, and

notably hats.45 American Needle, an Illinois-based hat maker that had previously manufactured

hats for NFL teams saw this as a violation of Section One of the Sherman Antitrust Act by the 32

NFL teams and filed a lawsuit against the League and the teams.

Arguments and Decisions

American Needle’s chief assertion against the NFL was that each team was the owner of

its trademarks.46 The Detroit Lions, for example, hold no claim to the New Orleans Saints’ fleur-

de-lis logo just as the Saints hold no claim to the leaping lion logo featured on the Lions’

helmets. As a result, each team could then compete against one another for licenses of its

intellectual property. Because NFL Properties grouped the property rights, this competition was

eliminated and 32 sources of economic power were replaced in the market by a single one.47

The NFL’s defense in the American Needle case begins by citing this process of value creation

based on cooperation makes the League a single entity. It is the League’s contention that

without an overarching league to coordinate competition between them, the teams would have

little to offer as a product. Therefore, the teams are subsidiaries in the value creation process.

More specific to American Needle’s assertions, the League continued saying the League and

42 James A. Keyte, “American Needle Reinvigorates the Single-Entity Debate,” Antitrust, Summer 2009 48 43 American Needle v. National Football League 130 S.Ct 2201 (2010) 44 Michael MacCambridge, “A Czar is Born,” Sports Illustrated October 4, 2004, http://sportsillustrated.cnn.com/vault/article/magaize/MAG1116088/5/index.htm 45 Matt Townsend “Nike Is Awarded NFL Apparel License for 2012, Ending Reebok’s 12-Year Run.” Bloomberg.com, October 12, 2010 http://www.bloomberg.com/news/2010-10-12/nike-is-awarded-nfl-apparel-license-for-2012-ending-reebok-s-12-year-run.html 46 Keyte, “American Needle Reinvigorates” 49 47 Keyte, “American Needle Reinvigorates” 49



NFL Properties were the single economic power in this situation of licensing, not the individual

teams. It was the League’s feeling that each team, after creating the single entity of NFL

Properties to handle licensing of the whole League, was a subsidiary in the value creation

process of the League and NFLP and therefore unable to collude together.48 This argument

attempts to draw on the precedent of Copperweld in the same manner of Bulls II.

At the district court level, American Needle’s case was dismissed, giving the NFL single-

entity status when granting licenses for its intellectual property rights. It was the decision of the

Court that the teams are legally able to could designate a single company, NFL Properties, to

most effectively use their intellectual property rights.49 The Seventh Circuit Court of Appeals

reaffirmed this decision. Against the recommendation of Solicitor General Elena Kagan, the

Supreme Court then heard American Needle’s case.50 The NFL was also in favor of the High

Court hearing the case, as a favorable decision would give it the indisputable status as a single

entity for its intellectual property rights.51 However, the Supreme Court ruled unanimously in

favor of American Needle, denying the NFL single entity status and meaning its cooperative

actions were subject to Section One of the Sherman Act on a rule of reason basis.52

The Supreme Court rejected the idea that the NFL represented the sole source of

economic power because the League was not the single, central decision-maker like in the

Copperweld case.53 Rather, the Court noted the fact that each of the 32 teams is an independently

owned and operated business that competes with the other teams in labor and entertainment

markets.54 Moreover, the Court also rejected the argument that each team pooling its interest

into the separate company of NFL Properties was worthy of single entity status because doing so

would allow any group of firms to take common interests, pool them, and collude.55 Last, the

Court rejected the NFL’s initial argument that because cooperation between teams was necessary

for value creation, the League was therefore a single entity. In Justice John Paul Stevens’

opinion, he compared NFL teams and creation of NFL football to the of nut and bolt industry.

48 Nathaniel Grow “American Needle and the Future of the Single Entity Defense Under Section One of the Sherman Act,” American Business Law Journal 48 (Fall, 2011):475-476 http://www.lexisnexis.com.proxy.lib.umich.edu/lnacui2api/api/version1/getDocCui?oc=00240&hl=t&hns=t&hnsd=f&perma=true&lni=53RH-2P10-00CW-H0S9&hv=t&csi=166252&hgn=t&secondRedirectIndicator=true 49 Grow “American Needle and the Future” 470 50 Gregory J. Werden, “Initial Thoughts on the American Needle Decision,” The Antitrust Source 9 no.6 (August 2010), 3 51 Lester Munson :Antitrust Case Reaches Supreme Court,” ESPN.com, January 12, 2010, http://sports.espn.go.com/nfl/news/story?page=munson/100112 52 American Needle, 130 S. Ct at 2206-2207 53 Ibid 2212-2213 54 Ibid 2212 55 Grow “American Needle and the Future” 475-476



Though both a nut and bolt are almost useless by themselves, coordination between these

separate manufacturers would still be subject to antitrust law.56

Implications of the Decision

It may appear that the Court’s decision only pertains to one aspect of concerted action by

the League. That is, this decision is a simple rule of reason review of the NFL’s practice of

pooling intellectual property rights and granting exclusive licenses; a decision of narrow scope.57

However, this case may set a new legal precedent for a quick look58 process for defendants in

sports antitrust cases. Moreover, at the time of the case, the decision had important implications

for the League’s licensing contracts and a potential out of court settlement.

First, as James Keyte points out in his analysis of the American Needle decision, the

Court specifically remarks that because sports leagues are already granted a partial antitrust

exemption to coordinate action to effectively produce and promote their products, an in-depth

analysis of potential Sherman violations is not always necessary. This appears to leave room for

the creation of quick look for defendants in sports antitrust cases in improve efficiency.59 The

creation of quick look would obviously change the legal landscape for sports leagues and make

the American Needle decision one of great importance.

Next, the American Needle decision has an economic impact on the League especially

after recent licensing decisions that were made. The Reebok contract that started the entire case

expired at the end of the 2011 season. The NFL has since negotiated other deals to license its

League apparel for 2012 through 2016. Multiple companies were granted contracts including

Nike as the exclusive manufacturer of jerseys and fan apparel, and New Era as the exclusive

maker of official NFL hats. These exclusive deals seem to be in contrast of the Supreme Court’s

decision. Because of the decision of the Supreme Court and the contracts recently signed by the

NFL, it is likely the League will look to settle with American Needle ending the case sooner and

keeping their contracts with Nike and others from being put in jeopardy. 60

56 American Needle, 130 S. Ct at 2208 57 Werden “Initial Thoughts” 1-2 58 A “quick look” is an “antitrust device to challenge restraints that do not fall within established per se categories but have questionable precompetitive justifications…Plaintiffs allege what appears to be an inherently suspect restraint; defendants then have to come forward with plausible precompetitive justifications; if accepted, the case is kicked into the full rule of reason, but if rejected is condemned much like a per se violation” Keyte, “American Needle Reinvigorates” 51 59 Keyte, “American Needle Reinvigorates” 48 60 Associated Press,“New Deal Establishes Nike as League’s Official Uniform Provider,” NFL.com, October 10, 2010 http://www.nfl.com/news/story/09000d5d81b4559b/article/new-dea-establishes-nike-as-leagues-official-uniform-provider



Conclusions

It is indisputable that an exemption to the Sherman Antitrust Act is needed for a sports

league to be most economically viable. Without coordination, a strong brand and therefore the

best product cannot be put forth. However, where to properly draw the line on that exemption is

something certainly of dispute. Though the courts and Congress increased this coordination

power greatly through the 20th Century with decisions like Federal Baseball Club and Toolson,

and the Sports Broadcasting Act, as illustrated in the closer look taken at the NBA II and

American Needle cases, a greater consolidation of the power within the leagues is not something

the courts are in favor of. Currently, a federal judge is considering the idea that in labor

negotiations last year, NFL owners colluded to set a salary cap lower than the one agreed upon in

the new collective bargaining agreement. If a decision goes against the owners, new, tougher

questions about the validity the league’s coordination would arise. 61

61 Associated Press, “Judge Considers Collusion Lawsuit,” ESPN.com September 6, 2012 http://espn.go.com/nfl/story/_/id/8346322/federal-judge-david-doty-considers-nflpa-collusion-lawsuit-league

competing with and against each other: sports antitrust law · competing with and against each...

Documents