[Note: nothing in this article should be considered to be legal advice of any sort. It is merely the recitation of an opinion held by the author about a current event.]
Okay, so I know a while ago we posted that there would not be any more politics on the site. Well, this isn't so much about partisan politics as it is about something that's happened this morning.
Today, the Supreme Court unanimously ruled in favor of American Needle, Inc. in their lawsuit against the NFL. If you're not familiar, here's a brief summary. American Needle makes hats with logos on them (they are licensed). The NFL gives Reebok exclusive rights in 2001 for making hats (among other things). American Needle sues under the Sherman Anti-Trust Act S 1 & 2, alleging that all 32 teams are acting in conspiracy to monopolize the licenses. American Needle loses. They appeal. They lose again. American Needle and the NFL both appeal to the SCOTUS, ANI seeking a reversal and the NFL seeking the coveted anti-trust exemption, possessed currently by only Major League Baseball (at least in the sports world). They bicker. Judges listen. They rule. And today, they publish.
Put legally, we have the question
"...whether an arrangement is a contract, combination, or conspiracy is different from and antecedent to the question whether it unreasonably restrains trade." American Needle, Inc. v. National Football League, 560 U.S. ____ (2010).
Put more simplier, are NFL teams able to engage in anti-trust behavior (because 32 entities are acting in concert to restrict licensing) or are they a solitary, unified business that does not compete with each other (in terms of trying to get market share, revenues, etc), but with outside leagues?
Apparently, the former. The NFL had a reasonable position, at any rate. They argued that nothing was being done differently than what happens in the NFLPA's collective bargaining agreements (I think...). Also, just because there is evidence of acting in concert doesn't make something a monopoly. In fact, there is a heightened pleading standard when it comes to anti-trust cases like these. "When allegations of parallel conduct are set out in order to make a [section] 1 claim, they must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007). Bully on American Needle for finding enough to get the case to go through.
Quickly, let's look at the fallout:
1. This is not really a pyrrhic victory for AN, but the fight is not over yet. Since the case was reserved and remanded (back to the lower court), American Needle now has to prove that the exclusive agreement unreasonably restrains trade under the Rule of Reason advocated in Standard Oil Co. of NJ v. U.S., 221 U.S. 1. Surprising though it may be to most folks, monopoly power is not in and of itself illegal, so AN still has to show they'd be harmed and that the NFL's restriction is the cause.
2. Expect to see baseball a little more cooperative when the government comes calling. This case may be enough for the government, when and if it gets pissed, to pull the anti-trust exemption MLB currently enjoys. In fact, I would think this gets removed sooner rather than later, but the trick will be finding someone with proper standing to sue.
3. This is a huge defeat for the NCAA, I think, moreso than any other organization of sports not named MLB. The NCAA, as the administrative body of the 300+ member schools of collegiate athletics, would have stood to make a pantload if they could corral the revenues generated by some schools (e.g. UF, Texas). This would essentially have locked in every college to do exactly what the NCAA says if schools cannot make money off of their own licensed gear, since it would control all of the money in college sports. Ironic, though, that this is exactly the same argument used by those who would advocate paying collegiate athletes (e.g. allowing use of their names by default in NCAA xx). While I don't think "QB #15" will be going away anytime soon, it just strikes me as funny that the big time schools didn't speak up against ruling in favor of the NFL because of how much they had to lose and, in the process, lowering the NCAA's already low credibility.
4. I agree with Deadspin's analysis that the NFL doesn't lose, so much as it just fails to win.
5. I disagree, however, with Deadspin's last point about Madden 20xx and agree more with PointofLaw's analysis on point. He says it more succinctly than I could. To quote and reprint:
Update: Deadspin suggests (h/t W.C.) that the ruling will affect exclusive deals with videogame makers. Not so. For example, the Madden series reflects not just deals for the team trademarks, but for the NFL trademarks and the NFLPA rights, which are unaffected by the ruling. Sure, Jerry Jones could individually sell the rights to a Dallas Cowboys game that doesn't mention the NFL or the other 31 teams or any of the players' names, but who is going to buy those rights? And that's before one gets to the Rule-of-Reason analysis that a videogame is much more valuable with all 32 teams' trademarks than with just 31 of them.
That's the nail in the coffin, I think.
So, why did American Needle win this case? I believe, at the heart of it, because the NFL is not centrally planned. Teams do compete within the organization against each other, for example, with free agents. The results of the games are not fixed (the NBA's are, though. BURN!). With respect to merchandising, I believe the SCOTUS was diligent in narrowly tailoring this ruling to merchandise. Though, I do also agree to an extent with this position, that some monopolistic, single-entity powers are ultimately better for the NFL (trickling down to the players also, especially with revenue distribution).
In the end, the impact of a decision for either party wouldn't have been as bad as projected, especially in light of the narrow tailoring of the decision (no pun intended). This won't be the end of sports as we know it, but don't confuse that point; a victory for the NFL would have been more impactful than the present ruling. Nor will the NFLPA et. al have vastly more power than they did before. The NFL could restructure itself to soften or completely mitigate this blow; an example might be declaring that an official Tampa Bay Bucs hat must have both the NFL shield and the TB logo.
Anyway, that's my take and sorry if not all of it makes sense. I am not a lawyer. Yet.
[Note 2: Again, nothing above constitutes legal advice or even sound reasoning.]
Bring that legal fire!
ReplyDelete--MR