The U.S. Supreme Court announced on Monday that it will take up the question of whether the NFL and its 32 teams constitute a single entity for the purposes of entering into an exclusive deal for marketing apparel bearing the names and logos of the individual teams.
The league previously won a federal appeals court ruling that the antitrust laws were not violated by the league when it exclusively assigned the licensing rights to Reebok, based on the theory that the NFL and its teams are essentially one company.
The development is a bit surprising, given that the Supreme Court only takes in a small percentage of the cases presented to it. Also, the Supreme Court asked the United States solicitor general for an opinion as to whether the appeal should be accepted -- and the solicitor general recommended that the appeal be rejected.
And so the Supreme Court has ignored the advice that it sought.
Because other courts have found that the NFL and its member teams are not a single entity under the antitrust laws, the league asked the Court to provide a comprehensive ruling, apparently hoping that its current business-friendly leanings will result in a law-of-the-land decision that will insulate the NFL from similar challenges in the future.
But the stakes are high. If the Supreme Court rules that the league and its teams do not constitute a single entity for antitrust purposes, then all exclusive marketing arrangements likely would be scuttled.
For example, EA would likely lose exclusive rights to the team names and logos for the Madden video game -- and the league would lose the extra money that comes from exclusivity.
EA would then potentially be required to negotiate with the various teams in an effort to get all 32 to provide the license to use their names and logos.
In such an environment, teams like the Cowboys likely would want a much larger piece of the pie than is paid to teams like the Lions.
And that dynamic could pose an even bigger problem as the high-profile teams like the Cowboys negotiate their own apparel deals with the likes of Reebok, Nike, UnderArmour, and any other interested party. The rich will get richer -- and without sufficient revenue sharing the profit margin for the lower-profile teams will likely continue to shrink in a system that ties player compensation to all revenues earned by every team.
So this could end up being a big win for the league. Or, in a roundabout way, a huge win for a handful of owners.
And it could further lay the foundation for a work stoppage in 2011.