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Antitrust Law And Judicial Activism

Kevin Drum discusses this LATimes article on the American Needle v. NFL antitrust case, scheduled to be argued before the Supreme Court on January 13, 2010. There are interesting antitrust issues involved in the case, but I think there are two broader aspects of the case that are particularly of note. First, for those who doubt a momentous battle between the NFL and the NFL Players Association is in the offing when their collective bargaining agreement expires, this case should disabuse them of this notion. If the NFL is declared a single entity for antitrust law purposes, it will likely take very aggressive positions in bargaining with the NFLPA. And the NFLPA may have to up the ante by going on strike. Yep, no NFL football in 2011 seems a very real possibility. More . . .

The second interesting point is how the case got to the Supreme Court. Not unusually, the loser in the lower courts, American Needle, sought Supreme court review. What is unusual is that the NFL sought Supreme Court review too:

For a time, the American Needle case seemed on its way to a rapid conclusion. The NFL won as quickly and as conclusively as anyone can win an antitrust lawsuit in the trial court and in an appeals court. But American Needle didn't give up. It filed a request for review to the U.S. Supreme Court, one of 7,500 or so such requests filed annually. The court takes only 70 or 75 cases for decision each year, and American Needle's quest seemed quixotic at best.

Then, in a stunning development, the NFL told the Supreme Court it endorsed American Needle's request for a hearing and a decision. The league's attorneys announced, in a remarkable understatement, that they "are taking the unusual step of supporting" American Needle's effort to have the case reviewed at the highest level.

The league's action was a legal bombshell. Instead of standing on its lower-court wins over American Needle, the league told the Supreme Court that it wants the justices to consider an issue far beyond the caps-and-hats contract. It wants the court to grant the NFL total immunity from all forms of antitrust scrutiny, an immunity that would then apply to the NBA, the NHL and MLB, as well.

This excerpt is not correct when it asserts that a ruling in favor of the NFL's position would give it "antitrust immunity." It would however, take away the most likely antitrust attacks on the NFL (and other sports leagues) - that they have agreed to act in concert to restrain trade in violation of Section 1 of the Sherman Act.

The Supreme Court asked the United States for its view on whether cert should be granted on the questions the NFL wanted answered. The Obama Justice Department opposed a grant of cert. But the Roberts Court wanted the case. And it has taken it (PDF):

Two questions are presented:

1. Are the NFL and its member teams a single entity that is 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?

2. Is the agreement of the NFL teams among themselves and with Reebok International, pursuant to which the teams agreed not to compete with each other in the licensing and sale of consumer headwear and clothing decorated with the teams' respective logos and trademarks, and not to permit any licenses to be granted to Reebok's competitors for a period of ten years, subject to a rule of reason claim under Section 1 of the Sherman Act, 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?

LOWER COURT CASE NUMBER: 07-4006

CERT. GRANTED 6/29/2009

The cert. grant seems to be based on circuit split. But was the alleged circuit split on the questions presented the basis of the Seventh Circuit's holding? Here's what the government argued (PDF):

The potential implications of the court of appealsí decision are problematic. The courtís reasoning could be understood to extend single-entity treatment to separately owned NFL teams with respect to their decision to collectively license their intellectual property, without regard to the possibility that the teamsí agreement would eliminate the potential for meaningful competition among them, simply because potential efficiencies are associated with collective marketing by participants in a lawful venture to produce NFL football. Neither Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), nor any other decision of this Court supports such an expansive application of the single-entity concept.

Nonetheless, this Courtís review is not warranted. The court of appeals specifically limited its holding to the facts of this case. Petitionerís asserted injury appears to flow not from any anticompetitive effects of the teamsí agreement to market their intellectual property collectively, but only from a subsequent and independent decision to contract with a single licensee. And, although some of the court of appealsí reasoning is problematic, the courtís holding does not conflict with any decision of this Court or any other circuit. Neither petitioner nor the NFL respondents have presented a question warranting review in this particular case, and the sports-league context is not a suitable one in which to address broader questions concerning the application of single-entity principles to joint ventures generally. Accordingly, the Court should deny the petition.

A modest Court, a restrained Court, would not have reached out to take this case imo. But the judicially activist Roberts Court was eager to reach out to take the case.

How activist will the Court be? The Court could issue a narrow opinion, both in terms of this particular dispute and whether the NFL is a single entity. Or it could take a broader approach, and make sweeping statements regarding antitrust law, and not just for other sports leagues.

It should make for an interesting argument on January 13 and some interesting opinions. I imagine the role of the court will be front and center in both the arguments and the opinions.

Speaking for me only

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  • Display: Sort:
    If Republicans ruin football (5.00 / 1) (#1)
    by lilburro on Mon Jan 04, 2010 at 05:06:16 PM EST
    then maybe 2010 won't be so bad for Democrats after all.

    heh (none / 0) (#2)
    by andgarden on Mon Jan 04, 2010 at 05:14:32 PM EST
    Could take that a couple different ways. (none / 0) (#3)
    by oculus on Mon Jan 04, 2010 at 05:16:08 PM EST
    Will all non-NFL-watching females vote GOP?

    Parent
    LOL (none / 0) (#4)
    by 1040su on Mon Jan 04, 2010 at 05:32:25 PM EST
    My household is in the minority!  We're backwards.  I love Football & basketball & he could care less.  He won't be voting GOP though. :)

    Parent
    Does anyone remember (none / 0) (#5)
    by Zorba on Mon Jan 04, 2010 at 05:34:33 PM EST
    the baseball players' strike of 1994-95?  I certainly do- it was supposed to have ended major league baseball altogether (according to the doomsayers).  It didn't.  I'm not a huge football fan (having grown up in St. Louis, baseball is my game; St. Louis is a huge baseball city, not so very much a football city), so I personally don't care much if they go on strike (although my son and my son-in-law would most likely disagree).  It will be interesting to see how this all "plays" out.  I do agree, BTD, that the Robert's Court is being rather "activist" in this case.  
    PS  As an interesting sidelight, current Supreme Court Justice Sonia Sotomayor was the Appeals Court justice whose injunction ended the baseball strike.  Link

    iI have a couple friends who forsake (none / 0) (#6)
    by oculus on Mon Jan 04, 2010 at 05:44:42 PM EST
    MLB after the strike cancelled the post season.  They were long time season ticket holders.

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    Which team? (none / 0) (#7)
    by Zorba on Mon Jan 04, 2010 at 05:47:11 PM EST
    Out of curiosity.  It certainly didn't seem to have hurt the attendance at St. Louis Cardinals' games.

    Parent
    Padres, who made the first round of the (none / 0) (#8)
    by oculus on Mon Jan 04, 2010 at 05:51:04 PM EST
    playoffs as NL West champs in '96 and got to WS in '98.  Followed by a couple of years getting beat out by the Cardinals in the first round.  And are now officially a loser team.

    Parent
    Oh, dear (5.00 / 1) (#9)
    by Zorba on Mon Jan 04, 2010 at 05:55:39 PM EST
    Sorry about the Padres.  :-(  But not really.

    Parent
    Don't forget (none / 0) (#15)
    by jbindc on Tue Jan 05, 2010 at 09:17:37 AM EST
    What helped after the baseball strike (especially in St. Louis) was the home run contest between Sammy Sosa and Mark McGwire.

    Parent
    You mean... (5.00 / 1) (#16)
    by kdog on Tue Jan 05, 2010 at 09:21:11 AM EST
    performance enhancing drugs helped bring  baseball back after the strike:)

    Parent
    Well, yes (none / 0) (#17)
    by jbindc on Tue Jan 05, 2010 at 09:40:18 AM EST
    But no one knew that at the time and people started watching again.

    :)

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    Everybody with half a brain knew... (none / 0) (#18)
    by kdog on Tue Jan 05, 2010 at 09:41:16 AM EST
    Selig certainly knew.

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    The players... (none / 0) (#10)
    by kdog on Mon Jan 04, 2010 at 07:05:42 PM EST
    would be crazy not to go on strike if the court issues a broad ruling in favor of the league and the league decides to wield the power.

    And I would support them...I never paid or tuned in to watch an owner sit in their luxury box.

    I might grow to love the Roberts court (none / 0) (#11)
    by Maryb2004 on Mon Jan 04, 2010 at 07:07:46 PM EST
    if they bring on a football strike.  

    "judicial activism" (none / 0) (#12)
    by diogenes on Mon Jan 04, 2010 at 10:21:59 PM EST
    If both sides of a case want the SCOTUS to hear it, then how is hearing the case a sign of a "non-restrained" court?  

    kevin drum (none / 0) (#13)
    by jharp on Mon Jan 04, 2010 at 11:47:25 PM EST
    I'm with Kevin Drum.

    "Obviously I'm confused about something, but if the NFL is a "single entity" -- i.e., the only pro football entity in America -- shouldn't that mean they're especially subject to antitrust laws, not immune from them? What am I missing here?"

    Confusion? (none / 0) (#14)
    by Abdul Abulbul Amir on Tue Jan 05, 2010 at 09:03:28 AM EST

    Whats the confusion?  The NFL is franchise operation.  Kind of like McDonalds.  The Mickey D's in Minneapolis does not compete directly with the Mickey D's in Houston.  Likewise the NFL team in Minneapolis does not compete directly with the NFL team in Houston.  However, unlike Mickey D's the NFL team in Minneapolis is very economically dependent on the existence of other athletically competitive and economically viable NFL teams.

     There are very many more non-NFL football games played every year than NFL games.  The NFL in no way controls anywhere near even a simple majority of the number of football games played each year.

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    thx (none / 0) (#19)
    by jharp on Tue Jan 05, 2010 at 12:17:32 PM EST
    Got it. Thanks.

    Parent
    Not really (none / 0) (#20)
    by jbindc on Tue Jan 05, 2010 at 01:10:40 PM EST
    And that's the argument.

    On January 13, the pro-football owners will be asking the high court to rule for the first time that the NFL is shielded from the anti-trust laws because, while its teams compete on the playing field, they function in business as a "single entity."

    If the justices were to agree, the ramifications could be significant, not just for football but all pro-sports leagues, say experts in sports law. Freed from the anti-trust laws, owners could conspire to restrict salaries for players and coaches and raise prices for everything from tickets to stocking caps.

    "For the NFL, this case is like buying a lottery ticket. If they win, it's a huge victory, with the potential to be incredibly significant," said Gabe Feldman, who teaches sport law at Tulane University. "If not, they don't lose much."

    Sports leagues have long confounded anti-trust law because they involve both competition and collaboration. The National Football League is made up of 32 independently owned teams which not only compete on the field, but also compete off the field for players, coaches and the loyalty of fans.

    But at the Supreme Court, the owners speak of the NFL as a "single unit." It "exists to produce collectively an entertainment product that no member club could produce on its own," they say.

    For much of the NFL's history, the owners controlled the players and kept salaries low. In the early 1990s, however, the players used an antitrust suit to win the right to sell their services as "free agents." This settlement agreement expires in 2011, say lawyers for the players union, along with labor agreements in Major League Baseball, the National Basketball Association and the National Hockey League.

    Lawyers for the players in the four sports say they fear the Supreme Court case could be the first step toward shifting power back to the owners.



    Parent
    Maybe so (none / 0) (#21)
    by Abdul Abulbul Amir on Tue Jan 05, 2010 at 01:33:59 PM EST

    Freed from the anti-trust laws, owners could conspire to restrict salaries for players and coaches and raise prices for everything from tickets to stocking caps.

    This sounds like so much BS.  If they could charge more for tickets or stocking caps they would already be doing it.  If they could pay players less they would.  The idea that antitrust considerations constrain ticket prices from being $1,000 a seat per game is a laugh.  

    The NFL competes for the entertainment dollar with other sports, other football leagues, movies, plays, concerts, etc., etc.

    Parent