Supreme Court Takes NFL Apparel Case
The Supreme Court today agreed to consider whether the NFL is violating federal antitrust law in its exclusive licensing deal with Reebok.
The court said it will hear an appeal from American Needle Inc., of Buffalo Grove, Ill., that challenges an agreement the NFL struck with Reebok International Ltd. American Needle had been one of many firms that manufactured NFL headwear until the league granted an exclusive contract to Reebok in 2001.
The NFL won the case in the federal appeals court in Chicago. But it also asked the Supreme Court to hear the case in a quest for a more sweeping decision that could put an end to what the league considers costly, frivolous antitrust lawsuits.
The case concerns whether the league is essentially a “single entity” that can act collectively or 32 distinct businesses that must be careful about running afoul of antitrust laws by working too closely together.
Other than Major League Baseball, which has an antitrust exemption dating to 1922, the other sports leagues have an intense interest in the case. The National Basketball Association and the National Hockey League both asked the court to rule in favor of the NFL.
The case will be argued late this year or early in 2010.
I’m a fan of the NFL’s product and of their business acumen. I’m not, however, a fan of their various exclusivity arrangements, such as the one that makes NFL Sunday Ticket available only to those who subscribe to DirecTV or NFL Radio available only to subscribers to Sirius (or now, by virtue of their merger, XM) satellite radio.
Antitrust law is complicated and I have no opinion on the merits of the case. If, however, the central question is whether the NFL is a “league” or 32 independent teams that happen to play one another, it’s quite obviously the former. The teams are franchises controlled by the NFL and have value only within the context of the larger League operation.
If the Court rules that the NFL is violating antitrust law in exclusive licensing of apparel to Reebok, then it strikes me that much of what we take for granted in the operation of professional sports leagues would similarly be illegal restraint of trade. For example, the NFL Draft, which forces a would-be professional football player to go to the team that selects him regardless than competing on the open market for the best offer, would seem a much more egregious violation.