Supreme Court voices resistance to NFL in antitrust case
American Needle v. NFL involves much more than an apparel licensing deal
The league says it's a 'single entity' and therefore shielded from antitrust claims
But the NFL's single-entity argument ran into skeptical questions from the justices
WASHINGTON -- To their credit, the nine U.S. Supreme Court justices didn't drop any strained football metaphors as they grilled attorneys Wednesday in a case that centered on an NFL apparel deal. That might be because they were too busy knocking down the league's Hail Mary.
As a rule, it's a bad idea to try to predict how the justices will rule based on the questions they ask during oral arguments. But after the long-awaited court date in American Needle v. NFL, the league seemed not only further from the end zone -- a declaration that the NFL's 32 teams constitute a "single entity" that is shielded from antitrust laws -- but at risk of losing the game entirely.
The case is narrowly about the NFL's 2001 decision to hand over licensing of official league hats, T-shirts, jerseys and other clothing to Reebok. For decades until then, the league cut individual contracts with multiple apparel manufacturers, including American Needle. So American Needle sued, arguing the NFL is a collection of 32 competing businesses -- the teams -- and not one single business. By choosing to deal with Reebok alone, American Needle argued, the teams had conspired to prevent competition, in violation of Section 1 of the Sherman Antitrust Act. The league won in the lower courts, which held that the NFL was a single entity at least for the purposes of apparel sales.
It was American Needle, of course, that appealed to the Supreme Court. But the NFL joined in asking the Court to take the case. In football terms, the NFL saw a hole opening in the line. After decades of defending itself against antitrust claims over various aspects of its business -- from merchandising to to franchise movement to free agency -- the NFL thought it had a chance to get from a court perceived as sympathetic to business a blanket declaration that it was a single entity exempt from antitrust laws.
That led to a flood of media coverage all with a common refrain: chaos. If the NFL wins, sports as we know them will change. Granted antitrust immunity, leagues will set uniform and inflated prices for tickets and stadium parking and beer. Unions will be crippled as leagues impose lowball salaries and restrict free agency. Dozens of licensees will be shut out as behemoths cut exclusive deals that push send jersey prices skyrocketing.
It's the media's job, and its instinct, to push hypotheticals to the extreme. But then reality sets in, and set in it did inside the Supreme Court Building on Wednesday.
The justices grilled the NFL's lawyer, Gregg Levy, on why the league deserved to be declared a single entity. They didn't seem especially football savvy; Justice Sonia Sotomayor admitted as much, while Justice Stephen Breyer changed balls with various Red Sox-Yankees analogies. And none seemed sympathetic to a central position articulated by Levy: that the NFL teams license their trademarks and logos jointly in order to better promote the league as a whole. "Well, the stated purpose is to promote the game," Justice Antonin Scalia said. "The purpose is to make money."
When Levy responded that the purpose of selling NFL merchandise is "to improve and promote the attractiveness of the game product, to get more people interested in watching the games on television, to get more people interested in buying tickets to the game," Scalia sounded dubious. "Well, I suppose that -- that could -- that issue could be tried," he said.
That was a key line, because it indicated that the court might be inclined to let the status quo rule -- that is, let lower courts decide on a case-by-case basis whether individual efforts by leagues to come together to conduct certain kinds of business are permissible. That's known as the "rule of reason," and it's how such matters have been decided for a half-century or more in professional sports.
Sotomayor didn't buy the NFL's line of reasoning, either. She told Levy that if "it is so self-evident that [the sale of] T-shirts promotes the game," then why not allow the rule of reason to apply, why seek to label the NFL a single entity? Levy replied that litigating every claim takes years and millions of dollars -- exactly what the NFL wants to avoid. Sotomayor said that she was sympathetic, but "I can very much see a counterargument that promoting T-shirts is only to make money. It doesn't really promote the game. It promotes the making of money. And once you fix prices for making money, that's a Sherman Act violation."
Levy countered that the NFL teams need to band together in business because they can't produce the product -- the games -- on their own, so the trademarks have no value on their own, either. Scalia then said that if that's the case, then the 32 franchises are worthless, too, and would be able to fix the price at which they are sold. Levy, shockingly, said yes, they could.
"So we don't even ask the question whether under the rule of reason such a thing is reasonable or justified?" Breyer replied. "Wow," said Scalia. "I thought I was reducing it to the absurd."
Now what? If the conservative and liberal judges who adopted similar lines of questioning reach the same conclusion, the court could overturn the lower-court rulings and find that the Reebok deal is subject to antitrust review. Or it could remand the case for legal discovery under the rule of reason guidelines and a trial in Chicago, where the case was filed.
But after Wednesday's arguments, there seemed to be an even more problematic possibility for the NFL: that the court not only could say that it and leagues aren't single entities, but also specify areas in which they aren't. Not only can't teams get together to sell caps, but they can't sell league-wide sponsorship or advertising deals, they can't control franchise relocation, they can't attempt, as they have done in the past, to unilaterally impose changes in labor agreements.
That would be an outcome no one was predicting. But, as the justices might say, that's why you play the game.
Stefan Fatsis is the author of A Few Seconds of Panic: A Sportswriter Plays in the NFL, a commentator on National Public Radio and a panelist on Slate.com's sports podcast "Hang Up and Listen." Follow him on Twitter @stefanfatsis or email him at email@example.com.