Monday, June 29, 2009

Supreme Court to Review Ruling that NFL Licensing Pact Was Not Antitrust Conspiracy

This posting was written by John W. Arden.

Contrary to the recommendation of the FTC and the Department of Justice Antitrust Division, the U.S. Supreme Court today granted review of a Seventh Circuit ruling that the National Football League and its 32 members did not engage in an illegal antitrust conspiracy by granting an exclusive trademark license to apparel manufacturer Reebok International.

The U.S. Court of Appeals in Chicago had rejected a complaining apparel manufacturer’s Sherman Act Section 1 claim on the ground that the league and teams were acting as a single entity when collectively licensing their intellectual property through a jointly-owned licensing affiliate (American Needle Inc. v. National Football League, 2008-2 Trade Cases ¶76,259).

Intraenterprise Conspiracy

Acting as a single entity, the league and its members were incapable of conspiring among themselves under the intraenterprise conspiracy doctrine espoused in Copperweld Corp. v. Independence Tube Corp. (1984-2 Trade Cases ¶66,065), the appeals court held.

An assertion by the complaining manufacturer that the 32 teams could not be considered a single entity—because they each controlled their own intellectual property and their actions deprived the market of independent sources of economic power—was rejected by the appeals court. The teams could function only as one source of economic power when collectively producing NFL football, the court explained.

Questions for Review

In its petition for review, the complaining manufacturer asked:

(1) Whether the league and the teams were a single entity exempt from rule of reason claims under Section 1 of the Sherman Act “simply because they cooperate in the joint production of NFL football games, without regard to their competing economic interests, their ability to control their own economic decisions, or their ability to compete with each other and the league” and

(2) Whether the license agreement between the league and its members and Reebok International—under which the teams agreed to refrain from competing with each other in the licensing and sale of apparel and to refrain from granting licenses for a period of ten years—was subject to a rule of reason claim “where the teams own and control the use of their separate logos and trademarks and, but for their agreement not to, could compete with each other in the licensing and sale of Team Products.”

(American Needle, Inc. v. National Football League, Petition for a Writ of Certiorari, Docket No. 08-661, filed November 17, 2008)

Respondents’ Brief

In an unusual move, the league and its teams urged the Supreme Court to review the decision. Although the result reached by the appeals court was correct, the respondents explained, the courts of appeals were divided on the question. This division “opens the door to repeated, costly antitrust suits that burden not only the joint venture participants, but also the federal courts.”

Thus, the respondents supported the grant of certiorari “in an effort to secure a uniform rule that (i) recognizes the single-entity nature of highly integrated joint venture and (ii) obviates the uncertainty, chilling effects, and forum shopping that inevitably results from the current conflict among the circuits.”

(American Needle, Inc. v. National Football League, Brief for the NFL Respondents, No. 08-661, filed January 21, 2009).

"Friend of the Court" Brief

Subsequently, the FTC and Department of Justice Antitrust Division filed an amicus brief, urging the Supreme Court to deny review of the decision. Contrary to the respondents’ views, the joint brief concluded that the Seventh Circuit decision did not conflict with any decision of another court of appeals. Furthermore, the agencies argued that neither the petitioner nor the NFL respondents presented a question warranting review.

The respondents’ claim that “the principle implicated by the question presented is not limited to professional sports leagues” and “has important implications throughout the economy” was rebuffed by the agencies.

“[T]he somewhat idiosyncratic nature of the relationship between individual NFL teams and the league as a whole makes this case an unsuitable vehicle for resolving broader questions of the kind the NFL respondents identify,” the amicus brief concluded.

(American Needle, Inc. v. National Football League, Brief for the United States as Amicus Curiae, No. 08-661, filed May 28, 2009).

No comments: