Supreme Court and the NFL: Court Examines the Business of Football

With play-offs now underway, the National Football League also is involved in litigation over how it can license NFL team logos. The case, American Needle v NFL, is in federal court and has gone all the way to the U.S. Supreme Court.

Following oral argument last week, it was painfully clear that the nine justices on the high court do not spend much time watching football; not necessarily a bad thing. High court observers believe the Supreme Court may remand the case back to the federal district court in Chicago to clarify the issues in the suit.

The dispute arose in 2004 when the league switched companies, from American Needle to Reebok, granting the latter a non- exclusive apparel license to sell hats, jerseys and other apparel. The NFL has had a history of utilizing only one company at a time relative to apparel production. Until 2004, American Needle had the contract.

The issue on appeal is whether the NFL (and the 32-teams making up the league) is a “single entity” under the Sherman Antitrust Act, and therefore immune from that Act’s ban on monopoly-style pricing. American Needle asserts the NFL’s move to Reebok violates the anti-trust law because it is a network of separate business entities (individual teams) that have conspired to stifle competition and raise prices.

Both the trial court and the Seventh Circuit Court of Appeals sided with the league in ruling that the NFL was a “single entity” that could forge exclusive licensing deals, regardless of the effect on pricing.

Implications for the high court’s ultimate decision have less to do with headwear than with how the league could treat players’ unions and how other leagues can leverage their power as a “single entity” over their respective players. Both the NBA and the NHL have filed amicus briefs in the case.

While the nine justices may not be aware of what is at stake for teams like the New Orleans Saints and the Indianapolis Colts this weekend, at oral argument they seemed to suggest the adoption of a “rule-of-reason” inquiry, whereby each specific anti-trust challenge is tested in court. Of course, the NFL would prefer a bright line, outright immunity that would spare it the expense of future lawsuits.

The high court’s decision on the case is expected shortly. While most NFL fans will be oblivious to the outcome of the litigation, they will purchase hundreds of thousands of caps and jerseys this month and next.

Update:  05/24/2010 - As SCOTUS winds down its session, it decided American Needle v NFL in a 9-0 decision against the NFL.  Here are some links to immediate analysis of the decision from the Los Angeles Times and the SCOTUS Blog."item"'>

With play-offs now underway, the National Football League also is involved in litigation over how it can license NFL team logos. The case, American Needle v NFL, is in federal court and has gone all the way to the U.S. Supreme Court.

Following oral argument last week, it was painfully clear that the nine justices on the high court do not spend much time watching football; not necessarily a bad thing. High court observers believe the Supreme Court may remand the case back to the federal district court in Chicago to clarify the issues in the suit.

The dispute arose in 2004 when the league switched companies, from American Needle to Reebok, granting the latter a non- exclusive apparel license to sell hats, jerseys and other apparel. The NFL has had a history of utilizing only one company at a time relative to apparel production. Until 2004, American Needle had the contract.

The issue on appeal is whether the NFL (and the 32-teams making up the league) is a “single entity” under the Sherman Antitrust Act, and therefore immune from that Act’s ban on monopoly-style pricing. American Needle asserts the NFL’s move to Reebok violates the anti-trust law because it is a network of separate business entities (individual teams) that have conspired to stifle competition and raise prices.

Both the trial court and the Seventh Circuit Court of Appeals sided with the league in ruling that the NFL was a “single entity” that could forge exclusive licensing deals, regardless of the effect on pricing.

Implications for the high court’s ultimate decision have less to do with headwear than with how the league could treat players’ unions and how other leagues can leverage their power as a “single entity” over their respective players. Both the NBA and the NHL have filed amicus briefs in the case.

While the nine justices may not be aware of what is at stake for teams like the New Orleans Saints and the Indianapolis Colts this weekend, at oral argument they seemed to suggest the adoption of a “rule-of-reason” inquiry, whereby each specific anti-trust challenge is tested in court. Of course, the NFL would prefer a bright line, outright immunity that would spare it the expense of future lawsuits.

The high court’s decision on the case is expected shortly. While most NFL fans will be oblivious to the outcome of the litigation, they will purchase hundreds of thousands of caps and jerseys this month and next.

Update:  05/24/2010 - As SCOTUS winds down its session, it decided American Needle v NFL in a 9-0 decision against the NFL.  Here are some links to immediate analysis of the decision from the Los Angeles Times and the SCOTUS Blog.

Posted in: Indianapolis Colts,New Orleans Saints,NFL,Reebok,Seventh Circuit Court of Appeals,Sherman Anti-Trust Act,United States Supreme Court