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American Needle case weakens sports leagues, but the extent isn’t clear

Earlier this year, as oral arguments approached in the American Needle case, some fretted that a decision in favor of the NFL would dramatically change the landscape of professional sports.

With the decision rejecting the league’s position that the 32 NFL teams are a single entity for the purposes of apparel deals, it turns out that the decision could dramatically change the landscape of professional sports.

Though limited only to the context of transactions involving the licensing of logos and other “intellectual property,” the U.S. Supreme Court’s conclusion that an effort by the 32 franchises to come together and do business jointly potentially violates antitrust law could fuel a finding that the teams of no professional sports league may come together and make collective decisions regarding key business matters like the hiring of employees, the compensation paid to players, and rules regarding free agency and the draft.

And the parties filing such lawsuits may not only be spurned apparel companies or decertified sports unions but, say, an owner of a team who wants to move the team wherever he damn well pleases, or an owner who wants to sell the team to whomever he damn well pleases.

Or an owner who wants to hire a hotshot rookie without regard to the fact that someone else has “drafted” him, or an owner who wants to sign a kid right out of high school.

The possible contours of the eventual rules are unknown, and the final answer will be subject to the precise extent of litigation that any interested parties choose to file.

That said, the Supreme Court has acknowledged generally that limits apply; the only problem is that the Supreme Court has not endeavored to identify them.  “Football teams that need to cooperate are not trapped by antitrust law,” Justice John Paul Stevens wrote.  “The fact that NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate in the production and scheduling of games, provides a perfectly sensible justification for making a host of collective decisions.”

Justice Stevens pointed out that the Supreme Court previously has recognized “‘that the interest in maintaining a competitive balance’ among ‘athletic teams is legitimate and important.'”  Though that interest does not allow the NFL teams to make a group deal for the purposes of marketing team logos for apparel, it “may well justify a variety of collective decisions made by the teams.”

In other words, the question of whether the NFL may combine to enter into agreements must be determined on a case-by-case basis, with specific consideration of the individual rules that are under attack.  When it comes to ensuring competitive balance via the draft and free agency, the final outcome to litigation that reaches the Supreme Court could be that the league may operate collectively.  When it comes to restricting teams from moving without the approval of 24 total owners, the final outcome to litigation that reaches the Supreme Court could be that the league can’t tell owners where to put their teams.

Every potential application of the concept is subject to further litigation.  The fact that the league lost so convincingly, via a 9-0 decision, will embolden others to seize upon the American Needle precedent in the hopes of applying it in other contexts, in the same way that many fear the NFL and other sports leagues would have done if the American Needle case had gone the other way.

For the fans, the end result isn’t clear.  To the extent that more time and attention and money are devoted to resolving lawsuits, it’s not a good thing.  To the extent that the law ultimately is applied in a manner that truly ensures the achievement of competitive balance among the 32 franchises, it’s not a bad thing.

Time will tell.  And it will take a lot of time before there’s a full spectrum of clarity in this regard.

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11 Responses to “American Needle case weakens sports leagues, but the extent isn’t clear”
  1. danreichman says: May 24, 2010 5:20 PM

    Decent analysis…. However, just for one 24 hr period, please make an attempt to not end posts with the words “Time will tell.”
    Please..?

  2. NAP says: May 24, 2010 5:31 PM

    I think you’re being a bit overzealous with this particular comment, Florio:
    “And the parties filing such lawsuits may not only be spurned apparel companies or decertified sports unions but, say, an owner of a team who wants to move the team wherever he damn well pleases, or an owner who wants to sell the team to whomever he damn well pleases.”
    That would overturn the decision in NHL vs. Balsillie/Moyes, which I really doubt the Court is interested in doing, given how much is at stake there.

  3. Chusko says: May 24, 2010 5:57 PM

    “…an owner of a team who wants to move the team wherever he damn well pleases, or an owner who wants to sell the team to whomever he damn well pleases.”
    Wouldn’t that be crazy – someone who “owns” something, would be able to do what he wishes. And can’t sell it to someone in particular? Is this prohockeytalk.com?

  4. blitzburgh1 says: May 24, 2010 6:01 PM

    What does any of this have to do with Ben Roethlisberger?

  5. jimicos says: May 24, 2010 6:11 PM

    I can’t speak for everyone else, but I’m downright thrilled that the Supreme Court is making decisions about how the NFL should operate.
    This can only improve things… Right?

  6. jibfest says: May 24, 2010 7:58 PM

    I’m surprised the Democrats weren’t trying to wedge their way into how the NFL is run. They sure want to do it with Healthcare. I’m mean, that is 100% what the Healthcare Bill is about.

  7. geek says: May 24, 2010 8:19 PM

    I appreciate blitzburgh1’s point, but he has the wrong person. Isn’t this the time of year dominated by Brett Favre in the news? How does this relate to him?!
    Actually, I don’t know how much this should effect the CBA, at least directly. But of more importance to most readers here, I think it will have a dramatic effect on the ability of the league to grant a single license to a single gaming empire. Madden has taken that for granted, and has gotten worse over the years. Might the end result of the Supreme Court decision translate into competition among NFL console and computer games? That would be awesome to see a little competition again! Let the best game win…

  8. bigfog says: May 24, 2010 8:42 PM

    Again, I’m so happy you no longer practice.

  9. wxwax says: May 24, 2010 11:15 PM

    Can we shoot everyone who uses the hackneyed, meaningless expression “time will tell”?
    I mean, would that be legal?
    Because leaning on that tired phrase to close out every story is the laziest writing imaginable and is surely enough of a provocation to justify a self-defense case.

  10. xqr4 says: May 25, 2010 11:28 AM

    Funny how American Needle wasn’t complaining about having all 32 teams under one contract when it was THEM who had the monopoly contract, before losing it to Reebok.
    But now that all teams can negotiate its own deal, will American Needle be “blacklisted” by NFL teams for spoiling a good thing for owners?

  11. pfii63 says: May 25, 2010 5:19 PM

    Does this mean someone can finally break up the monopoly that EA Sports has on the NFL?

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