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.
