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Supreme Court rules against NFL in clothing licensing anti-trust case

We often hear about how divided the U.S. Supreme Court is but in a decision handed down today, the Court was unanimous in ruling that the National Football League and its 32 member teams engaged in concerted anti-competitive behavior with regard to licensing of team logos and colors for clothing.  The Court's opinion in American Needle, Inc. v. National Football League et al., written by retiring Justice John Paul Stevens held that the NFL and its member teams violated section 1 of the Sherman Anti-Trust Act (15 U.S.C. ยง 1).

 A little background - Since 1963, the NFL teams have operated a separate corporation for the joint marketing of team-licensed clothing, memorabilia etc. called NFL Properties (NFLP).  While the NFL teams were operating in this area through NFLP, until 2000, each team made its own licensing arrangements with manufacturers of clothing.  That changed in 2000 when Reebok was given an exclusive license to produce all of the NFL team licensed merchandise.  American Needle, Inc. had been one of the non-exclusive licensees previously and was denied a new license when the exclusive arrangement with Reebok took effect.  American Needle filed suit alleging that the NFL and the member teams were engaging in concerted anti-competition behavior.  The NFL argued that it is a single business thus no such concerted action could take place.  The Supreme Court, however, found that the NFL is merely an association of the teams and that each of the 32 teams is a separate corporate entity with its own governance and decision-making.  The fact that NFLP is a single corporation did not matter as the Court recognized that the individual teams can make their own decisions and to a significant extent are in competition with each other.  This was still an organized action by 32 separate corporate entities to prevent competition in the market of NFL team clothing and memorabilia.

The Court also discussed the issue of whether it is essential for the NFL teams to work together as a unit.  The Court discussed the "Rule of Reason."  In some areas, the NFL must operate as a unit such as the logistics of putting on the the football games, making rules for competition etc. but found that this does not apply to the licensing and marketing of merchandise.

Now if you are thinking the NFL is being treated differently than Major League Baseball would be, then you would be correct.  Major League Baseball has a specific exemption from anti-trust regulation.  The NFL, NBA, NHL and other leagues do not have such an exemption.

The case will go back to lower courts for further proceedings.

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