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BY AVI FRISCH
NEWJERSEYNEWSROOM.COM
The National Football League had argued to the courts that it is a single entity and that antitrust laws do not apply to its activities, particularly when it involves licensing of the intellectual property of the league's 32 teams.
Monday, the Supreme Court unanimously rejected that argument, in a challenge brought by a company that used to produce NFL licensed products, until the league made an exclusive arrangement with Reebok.
Antitrust laws prohibit concerted activities between competitors that reduce competition. The worst form of antitrust violation, the one that sometimes lands violators in prison, is for two competitors to agree to fix prices. Such agreements are unlawful on their face.
Most other agreements, including the agreement to jointly license NFL apparel are subject to what antitrust lawyers call the "Rule of Reason." In such a case, the party challenging a contract (like American Needle, the plaintiff in the NFL case) have to show with detailed economic analyses that the contract or action at issue is unreasonable and reduces competition.
Why should it matter if the league was a single entity, you ask? Well, antitrust law is also known as the law of competition (at least in other countries), and it regulates competition. An individual firm is not required to compete with itself, and therefore its actions in producing a product would not be subject to antitrust scrutiny (though its actions in dealing with competitors is subject to antitrust regulation).The Supreme Court did not rule on the ultimate question of whether the NFL violated antitrust law. Rather, it only rejected the NFL's argument that it was a single entity and therefore immune from the reach of antitrust laws. Under the NFL's reasoning, the fact that you cannot play a football game without some cooperation between the teams, means that the league is one entity.
Of course, the basic flaw in this reasoning is that each NFL team runs its own business and makes its own economic decisions. Like any business, each team has to cooperate with some other businesses to produce its product.
This does not make the league a single entity. Rather it is similar to a publisher that purchases paper, an auto manufacturer that enters into a contract for parts and virtually any other contract entered into the ordinary course of business by virtually every business on a daily basis.
Had the NFL's argument succeeded, it would have had an exemption from antitrust laws similar to that of Major League Baseball, but without the approval of Congress (Baseball's antitrust exemption was originally the result of a Supreme Court opinion in 1922, but was largely ratified by Congress in 1998).
Now the case will return to a lower court for trial, where the NFL has a chance to pull this one out. The question will be whether the contract with Reebok was unreasonable in light of its effects on competition or if there is some reason why this contract improves the product or competition to outweigh the harm to consumers.
