In a closely watched case, the US Supreme Court ruled that the National Football League’s exclusive licensing agreement with Reebok violated antitrust laws, opening the door to allow individual NFL teams to independently license their trademarks.
Although the teams of the NFL formed the National Football League Property to develop, license, and market their intellectual property in 1963, the individual teams granted nonexclusive licenses to various vendors. That changed in 2000, when the NFLP entered into an exclusive 10-year deal with Reebok to manufacture and sell headwear for all 32 teams.
American Needle, a former licensee, filed suit, claiming that the deal violated the Sherman Act, the federal antitrust law. Lower courts disagreed, letting the deal stand. But in a unanimous opinion by the U.S. Supreme Court, the justices disagreed. The Court determined that although the teams operated as a single unit through the NFLP, they remained separate economic actors with independent centers of decision making.
“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. But the conduct at issue in this case is still concerted activity under the Sherman Act,” the Court said.
Recognizing that some collective decisions are necessary and appropriate, the Court limited its holding to the NFLP’s joint marketing venture. “The teams compete with one another, not only on the playing field, but to attract fans, for gate receipts, and for contracts with managerial and playing personnel. Directly relevant to this case, the teams compete in the market for intellectual property. To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks,” Justice John Paul Stevens wrote. But because each of the teams is a “substantial, independently owned, and independently managed business,” they do not have common objectives, the justices said. “Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that ‘depriv[e] the marketplace of independent centers of decision making,’ and therefore of actual or potential competition,” the Court said.
The case will continue in the lower courts, as the justices did not determine whether the NFL actually violated antitrust law. A lower court will now determine whether the League’s licensing practices actually harmed competition.
To read the decision in American Needle v. National Football League, click here.
Why it matters: The ruling’s impact will be felt far beyond the goalposts of the football field, with implications for other sports leagues as well as other industries that engage in joint ventures. While Major League Baseball has an antitrust exemption dating back to 1922, the other sports leagues – the National Basketball Association, the National Hockey League, the National Collegiate Athletic Association, NASCAR, professional tennis, and Major League Soccer – had filed an amicus brief in support of the NFL before the U.S. Supreme Court, seeking similar protection. The Court’s decision opens the door for more brands to create lucrative marketing deals with individual teams.