Sports to be Ruled as Exempt from Anti-Trust?

[notyoueither]

I am approaching this from the POV of a citizen of a winter city where there is debate over future arena plans.

The arguments get trotted out about stadium financing and the benefit of sports teams to their regional homes. The problem is that an arena for commerical purposes in Edmonton or Nashville is a lot different from a stadium in New York or Los Angeles. However, one size fits all economics get applied to the debate.

[notyoueither]

http://www.nytimes.com/2010/05/25/sports/football/25needle.html

N.F.L. Fails in Its Request for Antitrust Immunity
By ADAM LIPTAK and KEN BELSON
Published: May 24, 2010

WASHINGTON — The Supreme Court on Monday unanimously rejected a request from the National Football League that it be granted broad antitrust immunity on the theory that it is a single entity rather than a collection of 32 independent teams.

“Although N.F.L. teams have common interests such as promoting the N.F.L. brand,” Justice John Paul Stevens wrote for the court, “they are still separate, profit-maximizing entities.”

The ruling did not resolve the lawsuit before the justices, brought by an apparel company after the league entered into an exclusive 10-year deal with Reebok. Before that deal, the company, American Needle, produced hats and other merchandise bearing team logos.

The court said American Needle’s claims were not barred at the outset but must rather be analyzed under a standard that antitrust lawyers call the “rule of reason” to determine whether the league’s licensing practices harmed competition.

That same standard must be applied to all antitrust challenges to collective decisions made by the league, Justice Stevens wrote, though he indicated that such challenges were likely to fail if they addressed activities at the core of what sports leagues do.

The special needs and characteristics of sports leagues, he wrote, “may well justify a variety of collective decisions made by the teams,” including “the production and scheduling of games.”

But he wrote those decisions and more routine commercial ones must be analyzed under the rule of reason.

Gabriel Feldman, the director of the sports law program at Tulane University Law School, called Monday’s ruling “a sweeping defeat for the league” that would affect “all commercial deals.”

“Every agreement they make, with a TV network, an apparel maker or a sponsor, will get scrutinized under the rule of reason,” Professor Feldman said. “When it has to do with the game itself, they will get more deference, but they will still get scrutiny.”

Greg Aiello, a spokesman for the N.F.L., said it welcomed the aspects of the decision that recognized the special attributes of sports leagues, ones that he said may protect collective decision making that would otherwise be unlawful.

“The court noted,” Mr. Aiello said in an e-mail message, “that the N.F.L. teams’ shared interest in making the league successful and cooperating to produce N.F.L. football provide ‘a perfectly sensible justification for making a host of collective decisions.’ ”

As for American Needle’s suit, Mr. Aiello said, “We remain confident we will ultimately prevail because the league decision about how best to promote the N.F.L. was reasonable, pro-competitive, and entirely lawful.”

American Needle’s president, Robert Kronenberger, acknowledged that his company had won a battle and not the war, as the Supreme Court returned the case to the lower courts.

“This is to protect competition and consumers and right a wrong,” Mr. Kronenberger said of this company’s lawsuit. “We hope to prevail, but we’ll see what happens.”

DeMaurice Smith, the executive director of the N.F.L. Players Association, said the group welcomed Monday’s ruling, calling it not only “a win for the players past, present and future, but a win for the fans.”

Mr. Aiello, of the N.F.L., said the ruling “has no bearing on collective bargaining, which is governed by labor law.”

In 2008, a unanimous three-judge panel of the United States Court of Appeals for the Seventh Circuit, in Chicago, ruled for the N.F.L. on the ground that the league is a single entity. The panel likened the legal issue to “a Zen riddle,” asking, “Who wins when a football team plays itself?”

Justice Stevens rejected that analysis in Monday’s decision, American Needle v. National Football League, No. 08-661. “The mere fact that the teams operate jointly in some sense,” he wrote, “does not mean they are immune.”

“Each of the teams is a substantial, independently owned and independently managed business,” he wrote. “The teams compete with one another, not only on the playing field, but to attract fans, for gate receipts and for contracts with managerial and playing personnel.”

And teams certainly compete, Justice Stevens went on, in the market for intellectual property. “To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks,” he wrote.

The league’s decision to license independently owned trademarks collectively to a single vendor, Justice Stevens wrote, deprived the marketplace “of actual or potential competition.”

Still, he wrote, “football teams that need to cooperate are not trapped by antitrust law.” Decisions made in order, say, to maintain a competitive balance among the teams are likely to be legitimate, he said, adding that many lawsuits may be dismissed not long after they are filed.

“Depending upon the concerted activity in question,” Justice Stevens wrote, “the rule of reason may not require a detailed analysis; it can sometimes be applied in the twinkling of an eye.”

Professor Feldman, of Tulane, said the N.F.L., which had joined American Needle in asking the Supreme Court to hear the case, was no worse off than it had been before the decision. All it lost, he said, was the ability to assert the defense that it is absolutely immune from suit as a single entity. It may still justify its actions case by case.

“I don’t think this will lead to any particular increase in litigation,” Professor Feldman added. “It’s a victory for all potential plaintiffs and players, because it gives them the ability to sue the N.F.L., but it won’t lead to a flood. This won’t open the floodgates. It will just keep the doors open.”


Ken Belson reported from New York. Judy Battista contributed reporting from Irving, Tex.