Tennis Tour’s Demotion of Event Did Not Violate Federal Antitrust Law

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

The Association of Tennis Professionals, a non-profit corporation that operates a worldwide tour of men’s professional tennis tournaments, did not violate federal antitrust law by downgrading an event in Hamburg, Germany, to a lesser status as part of a reorganization of the tour, the U.S. Court of Appeals in Philadelphia has ruled.

The complaining owners of the tournament—the German and Qatar Tennis Federations—failed to establish a valid relevant market definition affected by the alleged conduct. A jury verdict finding against the Federations’ claims was affirmed.

The jury found that the Federations had failed to prove the ATP entered into a contract, combination, or conspiracy with any separate entity under Sec. 1 of the Sherman Act. It further found that the Federations did not establish a relevant product market under Sec. 2.

Relevant Market

The appellate court did not evaluate the jury’s finding regarding concerted action. Because the Federations did not carry their burden of proving a relevant market and this inadequacy was fatal to both claims, the appellate court stated, it did not need to decide whether the trial court’s jury instruction on the single entity defense was given in error.

The federations’ contention that insufficient Sec. 2 market proof did not establish insufficiency for purposes of a Sec. 1 claim as well was rejected by the appellate court. While inquiries into the scope of competition under Sec. 1 and Sec.2 were not necessarily the same, in this case the federations had asserted identical market definitions for both claims and the jury verdict forms posed the same question regarding proof of the relevant market for the purposes of both the Sec. 1 and Sec. 2 claims. Therefore, the jury’s conclusion that the Federations failed to prove a relevant market under Sec. 2 was equally applicable to Sec. 1 analysis, in the court’s view.

Quick-Look Analysis

The appellate court also found unavailing an additional argument by the federations that they did not need to prove a relevant market because the trial court should have told the jury to conduct a quick-look analysis, which did not require detailed market analysis. Quick look analysis was inappropriate for the alleged restraint, the court said.

Though the restraint the federations alleged was purportedly a horizontal one, for sports endeavors such as professional leagues or tennis tours ‘‘horizontal restraints on competition [were] essential if the product [was] to be available at all.’’

Because the contours of the market were not sufficiently well known or defined to permit a court to ascertain—without the aid of extensive market analysis—whether the challenged practice impaired competition, proof of relevant market was required under full-scale rule of reason analysis.

Even where anticompetitive effects were obvious, quick-look condemnation still would have been improper without assessing and rejecting the logic of proffered procompetitive justifications, the appellate court explained.

Justification

Given the justification offered by the ATP, which revolved around making the tour more competitive with other spectator sports and entertainment products though numerous modifications designed to improve the quality and consistency of its top-tier events, any presumption that quick-look analysis would suffice disappeared, the court concluded.

The application of quick-look analysis was a question of law to be determined by the court; the concept of ‘‘quick look’’ had no application to jury inquiry, the court added. Thus, the jury was properly instructed to analyze the alleged restraints under the rule of reason, and their finding that the Federations failed to prove the relevant market defeated the Sec. 1 claim.

The decision is Deutscher Tennis Bund v. ATP Tour, Inc, 2010-1 Trade Cases ¶77,080.

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