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American Needle v. NFL
The Supreme Court Decision Against the NFL and its Future Impact
| May 27, 2010
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On Monday, the Supreme Court unanimously voted in favor of American Needle Inc. of Buffalo Grove, in a crucial antitrust case against the NFL. The decision rejected the NFL’s argument that it is a single business exempt from antitrust laws, and stated that it is 32 separate entities, even when it contracts apparel production as a single group. In this case, American Needle argued that the exclusive 10-year licensing contract that the NFL entered with Reebok was collusion. By appealing to the Supreme Court, the NFL hoped to gain broader antitrust law protection. Justice John Paul Stevens, however, wrote in the unanimous decision that “although NFL teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned.” Currently, the only professional sports league in the United States exempt from antitrust laws is Major League Baseball. In 1922, the Court ruled that the travel involved across state lines was incidental to the game, and there was not interstate commerce involved (since there was no revenue sharing, licensing deals, etc), which must exist for antitrust laws to apply. However, in Toolson v. New York Yankees, Inc.(1953), the Supreme Court revisited it’s decision and acknowledged that while the business of baseball was interstate commerce, the spirit of the Sherman Act provisions were really directed at monopolies and trusts, not sports, and that the league had already operated under the assumption of the exemption for decades. Subsequent cases have also acknowledged that the MLB is an anomaly, but no further cases have been brought before the Supreme Court to directly challenge the league’s status. The NFL did not fare as well as the MLB this week, and the ruling against the NFL remands the case back to the lower courts, which means that the outcome is not yet decided. While the case does mean that the NFL will not gain any additional protections, it does not necessarily mean that American Needle will be able to demonstrate that the NFL’s collusion was an unreasonable (illegal) restraint of trade. The unanimous rejection of the NFL’s case is also not the momentous victory the NFLPA has claimed since this Supreme Court decision has no real bearing on collective bargaining discussions. However, the decision does indicate that the league will not be able to disregard Section 1 of the Sherman Act when imposing labor conditions. But, perhaps the perceived loss of NFL reputation will strengthen the position of the players’ union for the upcoming contract negotiations. The league will definitely feel scrutiny to cooperate more heavily with the union in the face of this negative press, and perhaps that can ensure a hastier and friendlier bargaining process. One irony of this case is that American Needle can win and still not get a licensing contract from any team, although at least it can bid and compete for one. Incidentally, Reebok raised hat prices once they got the contract with the NFL.
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