Monday, May 24, 2010

More on the Supreme Court's Ruling in American Needle v. NFL

As Nathaniel Grow just posted, the Supreme Court ruled today 9-0 to overturn the Seventh Circuit’s ruling in American Needle v. Nat’l Football League, which had held that the single-entity status of a sports league should be viewed "one league at a time" and "one facet at a time."

In a concise, 23-page opinion (PDF), the Court explained that the NFL is not a single entity because “the NFL teams do not possess either the unitary decisionmaking quality or the single aggregation of economic power characteristic of independent action.”

This reasoning is similar to that advanced by Michael McCann, Gabe Feldman and myself in recent law review articles (see here, here, and here).

The court further stated that "[i]f the fact that potential competitors shared profits or losses from a venture meant the venture was immune from [Section 1 of the Sherman Act], then any cartel could avoid antitrust law simply by creating a joint venture to serve as the exclusive seller of their competing product."

I have posted a full discussion of this ruling and its implications on Above the Law, here.

As far as the case's likely outcome upon remand, I note:

[W]hether American Needle will ultimately prevail on the merits remains far from settled. As Rutgers School of Law-Camden professor Michael Carrier noted in a recent law review article, defendants have won 221 of the past 222 cases that have involved a court’s final determination under the Rule of Reason (link to Professor Carrier’s article)

In addition, even if the NFL clubs’ licensing practices have led to some anti-competitive effects, league-wide trademark licensing might also produce some pro-competitive benefits by reducing the transaction costs of obtaining licenses to use all club logos on a single piece of merchandise (link to my law review article).