Tuesday, March 25, 2008

Enforcement of NHL Internet Policy Not Barred on Antitrust Grounds

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The owner of the New York Rangers was properly denied a preliminary injunction blocking efforts of the National Hockey League to ban the Rangers from continuing to operate a team website independent from the NHL website, according to the U.S. Court of Appeals in New York City. The Rangers failed to demonstrate a likelihood of success or a serious question on the merits of its claim that the NHL’s Internet policy constituted a restraint of trade.

A decision of the federal court in New York City (2007-2 Trade Cases ¶75,929) was upheld in a summary order issued March 19 by the appeals court.

“Illegal Cartel”

Madison Square Garden, L.P. (MSG), the owner of the Rangers, had argued that the NHL had “become an ‘illegal cartel’ in its attempts to prevent off-ice competition between and among the NHL member clubs.” Under the NHL’s New Media Strategy, each team’s website was to be migrated onto a common technology platform, serviced by a single content management system (CMS).

Under the plan, the individual teams were responsible for supplying local content and advertising, while the league would retain space for national advertising and league news. The league saw a single CMS as an essential part of the New Media Strategy and believed that the CMS would ensure minimum quality standards and facilitate fan navigation.

MSG filed a complaint for injunctive relief in September 2007, after the NHL informed the team that it would be fined $100,000 each day that it operated its own website outside of the league platform.

“Quick Look” v. “Rule of Reason”

MSG failed to demonstrate a likelihood of success or a sufficiently serious question going to the merits of its restraint of trade claim challenging the NHL ban on independent team websites under either a “quick look” or a “rule of reason” analysis, according to the appeals court. The procompetitive benefits of the New Media Strategy precluded application of “quick look” analysis.

In light of the procompetitive justifications, the lower court properly proceeded to a full-blown rule of reason analysis and correctly determined that MSG did not show that the NHL’s website ban had an actual adverse effect on competition in the relevant market. Nor did the team demonstrate that the procompetitive benefits of the NHL’s restriction could be achieved through an alternative means that was less restrictive of competition.

Remaining Substantive Issues

The appellate court noted that there remained “substantive issues for the district court to address on the merits.” The court would have to consider “how the antitrust laws apply to the NHL as a sports league, and what the relevant market is in this case.”

The March 19, 2008, summary order in Madison Square Garden, L.P. v. National Hockey League, et al., 07 4927, will appear at 2008-1 CCH Trade Cases ¶76,079.

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