NFL loses Supreme Court antitrust case

[efin98]

One of the ESPN legal analysts had this to say about the case... The NFL jeopardized its popularity and place when it made an unsuccessful power grab for antitrust immunity in the American Needle case. - ESPN

 

[Mike the Brit]

One of the ESPN legal analysts had this to say about the case... The NFL jeopardized its popularity and place when it made an unsuccessful power grab for antitrust immunity in the American Needle case. - ESPN

Thanks for the reference, but it's worth saying that ESPN's "legal analyst" is Gregg Easterbrook and the article is an opinionated and somewhat incoherent ramble through the terrain (surprise!)

I certainly wouldn't bet on his legal analysis. His main claim to fame in this area seems to be that he has a brother who really is an expert. Still, there are some interesting nuggets and a reference to an 80-page law review article that addresses the ins and outs of treating sports leagues as single entities.

http://hosted.law.wisc.edu/lawreview/issues/2009_4/feldman.pdf

Not for me today!

 

[DaBruinz]

One of the ESPN legal analysts had this to say about the case... The NFL jeopardized its popularity and place when it made an unsuccessful power grab for antitrust immunity in the American Needle case. - ESPN

Well, Easterbrook starts off by flopping. American Needle was the one who took this to the Supreme Court. Not the NFL...

Next, he mentions the NFL and Comcast going head to head over NFL Network. He claims that the NFL lost that. I'm not sure how the NFL lost there. Especially when it was clear that COMCAST did more lobbying than the NFL. Hell, it's well known they had Arlen Specter in their pocket, which garnered no mention here.

Another error is that Easterbrook claims that American Needle is a "small, family owned business".. Umm, American Needle is a publicly traded company under the call letters ANI..

To me, this article is a direct attack by ESPN at the NFL and the NFL Network with ESPN saying, you aren't as precious as you pretend to be. One has to wonder whether this article got the approval of the talking heads at ABC before it was published..

As for the actual political ramifications, I think Easterbrook is talking out his bung hole.

 

[DaBruinz]

Something I was thinking about is this....

Every Patriots cap I own has the Pats logo and the NFL logo on it.

I looked at the shirts I own and this is the case also.

And some of my stuff goes back 15 years. I don't have the stuff from when I was a kid anymore.

If the NFL requires that any merchandise that has a TEAM logo have the NFL logo as well because of the team's affiliation, then I don't see how the Supreme Court made it's decision unless it's saying that the NFL can't make this requirement. And if that is the case, then isn't the Supreme Court actually telling the NFL what it can and can't do with it's intellectual property (the NFL Logo)??

From one perspective, it makes sense to have more than one vendor with the ability to meet the demand for the products you are selling in case the primary isn't able to meet that demand. From another, it introduces the potential for inferior products to be on the market and the primary vendor to receive blame for said inferior products if they were produced by another vendor. Not to mention that the NFL would also take a hit for allowing inferior products to be on the market in its name.

From a business perspective, I just don't see how the Supreme Court made it's decision because I can guarantee that large corporations go to a single vendor to get items with corporate logos made for it's various divisions. And the various divisions, many times, are considered independent business units. So, I don't understand how it's any different. But then, I'm not a lawyer and I do know that what makes sense and what is "the law" are many times, not the same.


From the FAN perspective, I don't see how the Supreme Court thinks that teams are competing for my loyalty through their apparel. Maybe some people like a team because of the team colors, but my guess is that for a majority of fans (75+%), you like a team for the team and buying the productS comes second..

 

[jmt57]

Well, Easterbrook starts off by flopping. American Needle was the one who took this to the Supreme Court. Not the NFL...

Next, he mentions the NFL and Comcast going head to head over NFL Network. He claims that the NFL lost that. I'm not sure how the NFL lost there. Especially when it was clear that COMCAST did more lobbying than the NFL. Hell, it's well known they had Arlen Specter in their pocket, which garnered no mention here.

Another error is that Easterbrook claims that American Needle is a "small, family owned business".. Umm, American Needle is a publicly traded company under the call letters ANI..

To me, this article is a direct attack by ESPN at the NFL and the NFL Network with ESPN saying, you aren't as precious as you pretend to be. One has to wonder whether this article got the approval of the talking heads at ABC before it was published..

As for the actual political ramifications, I think Easterbrook is talking out his bung hole.

Consider the source.

Long before spygate he had also written about antitrust and the NFL Network - as far as i know he was the only person taking that angle. Soon after the spygate story broke, Easterbrook kept pounding that news more than any other writer; he was also the leader in bringing up the name of Matt Walsh. And after spygate he was essentially a mouthpiece for Comcast and Arlen Specter, again talking about antitrust and the NFLN - and was the first and foremost to take that approach.

If you take the time to go back and look at Easterbrook's comments over the years about the NFL, NFL Network, cable and antitrust it becomes very clear that he has long been firmly entrenched in Comcast's corner against the NFL. He is not nor has ever been an impartial observer in this debate. I wouldn't doubt that some of Easterbrook's articles back then were actually written by Comcast employees; at the very least he appears to be on their payroll.

I realize this ruling doesn't involve Comcast, but the NFL losing antitrust decisions benefits them greatly. Comcast covets the Sunday Ticket, and wants to be able to sell single games as pay-per-view events. They see certain parallels: ANI losing a bid to Reebok but being able to get back in through the courts is not all that dissimilar to Comcast losing a bid to DirecTV but using the courts and antitrust to be able to sell those NFL games to their subscribers.

 

[Synovia]

Here's what I don't get: why does MLB get this antitrust exemption when none of the others, not even NCAA, do?

Supreme Court denies NFL broad antitrust protection - NFL - CBSSports.com Football

Please, PLEASE do not turn this into a political thing.

There's no way for this not to be a political thing.

 

[Synovia]

It will be interesting how this plays out. The Sports Broadcasting Act of 1961 essentially ruled the opposite of this Supreme Court case, as they said the NFL (and other pro sports leagues) could indeed act as a single entity in negotiations. I'll be curious to see how this case proceeds. On one hand I suppose they could say the NFL can be a single entity for television, but not for other negotiations - but that doesn't make a whole lot of sense.

What if the NFL says, 'okay we will negotiate with multiple apparel firms, but still share revenues.' What then happens if just one owner (e.g., Jerry Jones or Dan Snyder) says I don't want to share those revenues; can or would he sue the NFL to allow for that to happen?

Google "Sports Broadcasting Act of 1961" and there are some interesting columns on the subject.

This doesn't affect broadcasting.

"On one hand I suppose they could say the NFL can be a single entity for television, but not for other negotiations - but that doesn't make a whole lot of sense."

Thats exactly what this ruling does, and it does make sense.

 

[Synovia]

I realize this ruling doesn't involve Comcast, but the NFL losing antitrust decisions benefits them greatly. Comcast covets the Sunday Ticket, and wants to be able to sell single games as pay-per-view events. They see certain parallels: ANI losing a bid to Reebok but being able to get back in through the courts is not all that dissimilar to Comcast losing a bid to DirecTV but using the courts and antitrust to be able to sell those NFL games to their subscribers.

I disagree that they're similar at all. The NFL doesn't have a partial anti-trust exemption with regards to uniforms/merchandise/attire. It DOES have one with regards to broadcasting.

 

[DaBruinz]

I disagree that they're similar at all. The NFL doesn't have a partial anti-trust exemption with regards to uniforms/merchandise/attire. It DOES have one with regards to broadcasting.

I am still waiting for it to be explained how the NFL Franchises compete against one another for the revenue from the Uniforms/Merchandise/attire. This is the whole crux of the matter. For them to be competing against one another, one has to prove that FANS don't purchase the Uniforms/Merchandise/Attire based on the team they root for, but based on the idea of what looks good or who made it. To me, that is utter BS. Fans don't by the products of other teams just because it might be stylish or made by Reebok instead of Nike..

 

[PatsFaninAZ]

The term "antitrust exemption" gets thrown around rather casually, but that's not really what the NFL was seeking. The plaintiff sued under section 1 of the Sherman Act, which prohibits a "conspiracy" to restrain trade. The NFL argued that it, and NFL Properties, couldn't conspire with anyone, because they were just one entity. The were trying to take advantage of prior precedent that says, for example, when the President and the Vice President of a single company talk to each other about restraining trade, they don't commit a Sherman Act violation, because they are consituents of the same entity.

That was the NFL's argument: Don't treat us like 32 teams, treat us like the President and Vice President of the same entity. The Supreme Court's analysis was not complicated. It was that each team has its own profit motive, mission, and goals. And while they may have pooled licensing and revenue sharing to NFLP, they have enough independence to trigger precisely the danger that the Sherman Act is attempting to remedy: potential competitors banding to form a joint venture.

Put more simply, the Court held that the justifications offered by the NFL -- strengthening the brand, promoting competition, etc. -- are not relevant to the question whether they are a single entity for Sherman Act purposes. They are, instead, relevant to whether the restraint on trade passes the test of reasonableness.

To those saying the NFL didn't "lose" this case because there still will be consideration whether Reebok's exclusivity passes the rule of reason, that sounds like NFL PR to me. The league now has a ruling that even when it forms a separate, distinct entity (NFLP) to license its IP jointly and revenue share its joint decisions are subject to rule of reason analysis. That's a big deal. A very big deal. And it will have an effect on everything the league attempts to do, except for the rare areas where it is permitted by statute to act unitarily (broadcasting).

 

[PatsFaninAZ]

My comments in bold.

If the NFL requires that any merchandise that has a TEAM logo have the NFL logo as well because of the team's affiliation, then I don't see how the Supreme Court made it's decision unless it's saying that the NFL can't make this requirement. And if that is the case, then isn't the Supreme Court actually telling the NFL what it can and can't do with it's intellectual property (the NFL Logo)??

I don't think the Supreme Court would say that the NFL, when deciding how to license its own intellectual property, is committing a consiracy under the Sherman Act. It is saying that when 32 teams agree to do it with their own IP, it's a conspiracy that may violate the Sherman Act

From a business perspective, I just don't see how the Supreme Court made it's decision because I can guarantee that large corporations go to a single vendor to get items with corporate logos made for it's various divisions. And the various divisions, many times, are considered independent business units. So, I don't understand how it's any different. But then, I'm not a lawyer and I do know that what makes sense and what is "the law" are many times, not the same.

The Supreme Court is saying, based on an analysis of the 32 teams and how they operate, that they are not at all like divisions of one company, but instead like 32 separate corporations that have formed a joint venture. Hard to argue with that premise, which is probably why the case was 9-0 and the NFL should have known it had no chance. The Court is saying that there may be good reasons why these 32 entities might want to restrain trade and why they should be allowed to do so -- like counterfeit products, inferior products, brand disparagement, or competitive balance. But the Court says these are not reasons to hold the NFL or NFLP is a single entity -- instead they are arguments the NFL can make about why its restraint on trade passes the rule of reasonableness.


From the FAN perspective, I don't see how the Supreme Court thinks that teams are competing for my loyalty through their apparel. Maybe some people like a team because of the team colors, but my guess is that for a majority of fans (75+%), you like a team for the team and buying the productS comes second.. Again -- not what the Court is saying. What it's saying is that the decision that a rational company makes about what to do with its intellectual property is not limited solely to economic considerations that are evened out by revenue sharing in all circumstances. I think there is no doubt that if the 32 teams were not pooling their IP, they would be making different decisions what to do with it. That's what the Supreme Court is saying.

 

[DaBruinz]

My comments in bold.

Again -- not what the Court is saying. What it's saying is that the decision that a rational company makes about what to do with its intellectual property is not limited solely to economic considerations that are evened out by revenue sharing in all circumstances. I think there is no doubt that if the 32 teams were not pooling their IP, they would be making different decisions what to do with it. That's what the Supreme Court is saying.

Go back and read what American Needle was saying and read some of the other, 3rd party, commentary. One of the main arguments by American Needle was that at least ONE NFL TEAMS competes against the rest for revenue from the Uniforms/Apparel/Merchandise. And, in doing so, makes it so that there are at least TWO Entities. Therefore, they would be subject to the Rule of Reason of the Sherman Act.

The problem, from where I sit, is that this argument doesn't hold water. Even if they were 32 different entities, fans from one team are NOT going to by stuff from another team just because of how it looks... So, how are they competing for that revenue??

And, of note, the Wisconsin Law Review article, while extremely well written, has a flaw. And a serious one. On page 887, section 7, marked Revenue Sharing, they used the Revenue Sharing Rules from the CBA that ended in 2005 in regards to how revenue sharing was determined. During the last CBA negotiations, everyone knows that things such as Parking Revenue and Concessions got added in to the mix and were not longer excluded. It was one of the reasons that the Salary Cap jumped up from $82 million in 2005 to $102 million in 2006. Because of the significantly larger amount of revenue sources that were being considered in the formula.

 

[PatsFaninAZ]

Go back and read what American Needle was saying and read some of the other, 3rd party, commentary. One of the main arguments by American Needle was that at least ONE NFL TEAMS competes against the rest for revenue from the Uniforms/Apparel/Merchandise. And, in doing so, makes it so that there are at least TWO Entities. Therefore, they would be subject to the Rule of Reason of the Sherman Act.

Interesting argument, but I agree with you it has some emperical flaws.

It's not the basis on which the Supreme Court ruled, though, nor the basis for its analysis. So, while one can disagree with some or all of the arguments American Needle made in its briefs, they won on the one that matters and unanimously. Personally, I think it's a no brainer.

The Court was saying that a company's decision what to do with it's IP is a highly nuanced decision. To take a silly but instructive example: A company in the bible belt might decide only to associate its products with certain types of vendors or apparel in order to shore up its base with its constituency and maximize profits that way, while a north eastern club may make a completely different decision. Once you accept that every single club would not always make the same decision with respect to the best approach for its own IP, how can you say they are unitary entities for purposes of section 1 of the Sherman Act? I think that's as far as the court had to go to decide the issue and it didn't really concern itself with whether the clubs compete would compete with NFLP or the league.

 

[TennesseePatriot]

It's always cool to gratuitously bring politics into a football discussion, because then you can give a political opinion about states' rights being strong when actually the federal government micro-manages the states tightly, well byond "doing what they cannot do themselves," and illegally uses withholding of funding to force the states to do things they don't want to do, but other than noting that as an aside, I have no opinion because I try to stick to football topics.

Wasn't the whole "state's rights" debate kinda settled in...1865?