Supreme Court Denies NFL's Antitrust Dream

Mark Conrad in Fox Business, May 26, 2010

Media Source

The NFL made waves Tuesday by handing an upcoming Super Bowl to New Jersey, but the real action for the league played out in the courts the day before.
The Supreme Court issued a ruling this week that squashed the National Football League’s dream of obtaining the antitrust protection status that is only afforded to Major League Baseball.
The NFL’s players union is breathing a sigh of relief after the 9-0 ruling on Monday because it would have given the league a big win and likely new leverage heading into its major battle over a new Collective Bargaining Agreement.  A win for the NFL would also have given the league more power in merchandising, marketing, ticketing and other issues.
But don’t cry for the NFL. By reversing a lower court’s ruling that threw out an antitrust suit brought against the league by a former apparel maker for the NFL, American Needle, the Supreme Court simply maintained the status quo, one where the NFL is the most financially successful of the four major sports leagues.
“The NFL is going to be treated like any business entity is treated. Had the court gone the other way then it would’ve been significant,” said Mark Conrad, a sports law expert at Fordham University. “It would have given them more economic clout.”
Underscoring how closely the sports world was watching this case, the National Basketball Association, the National Hockey League, the NCAA, NASCAR, professional tennis and Major League Soccer all filed “friend of the court” briefs supporting the NFL and in hopes that MLB’s antitrust status would be expanded to other leagues.
American Needle, which previously had an agreement to sell NFL hats, sued after the league reached a deal to award all of its apparel franchises to Reebok. American Needle claimed the agreement violated antitrust law, but lower courts sided with the NFL. Reebok is part of Adidas AG (ADDYY: undefined, undefined, undefined%).
This week’s decision sends the matter back to lower courts for further litigation.
The ruling opens up the NFL and potentially other leagues to greater scrutiny when they enter into collective agreements, like the exclusive hat deal with Reebok that American Needle protested.
“More things will be subject to review and court scrutiny and that will make the leagues uncomfortable at times,” said Harvey Goldschmid, a law professor at Columbia and former commissioner at the Securities and Exchange Commission. “They obviously have to combine for lots of things, including making rules of the game. But when doing commercial things the court is saying, ‘We can look at this to make sure it’s reasonable.’ I think most things leagues do will be upheld as perfectly reasonable and there won’t be a serious challenge.”
The NFLPA cheered the decision and hailed it as a win for the fans too.
The decision "strongly affirms that the NFL must play by the same rules other businesses do,” Richard Berthelsen, general counsel of the NFLPA, said in a statement. “The Court’s decision affirms our belief that the NFL should not be allowed to operate as a monopoly to the detriment of fans, players and the government.”
Had the league prevailed, the NFLPA said the NFL would have increased ticket prices and ended or crippled free agency. “Governments would have been held hostage by a league with a Court-issued license to run wild,” the union said.
While those sentiments may be extreme, some agreed the Supreme Court decision was a victory for fans.
“It would have been a big win financially for the league, but it would have hurt the fan because they would’ve been able to corner the market” on ticketing and merchandising, said Scott Minto, director of  San Diego State University’s Sports Business MBA program.
The Supreme Court decision was handed down as the NFL’s talks over a new CBA loom in the distance.
The NFL issued a statement saying the decision “has no bearing on collective bargaining, which is governed by labor law.” For its part, the NFLPA said it remains “focused on reaching a fair and equitable” CBA and that it hopes the decision “marks a renewed effort by the NFL to bargain in good faith and avoid a lockout.”
Meir Feder, a partner at Jones Day, which represented American Needle against the NFL, said the decision has a major effect on labor negotiations.
“The fact is that if the players were just left with labor law and not antitrust law it seems clear it would have given management a significant upper hand,” said Feder.
Conrad, the expert from Fordham, said he was surprised by the fact that Monday’s decision was unanimous, which adds forcefulness to the opinion.
“It really was a blow-out,” said Conrad. “I think the book is closed. The court spoke with a pretty loud voice.”