The Solicitor General, on behalf of the Department of Justice (DOJ) and the Federal Trade Commission (FTC), filed an amicus brief this week before the Supreme Court in American Needle, Inc. v. National Football League. The brief is significant because it is one of the rare briefs in recent years that argues in favor of antitrust enforcement and does not take the defendant’s side. The brief may also signal a tougher government position on antitrust review of joint ventures. Under the Bush administration, the DOJ had consistently sided with defendants in antitrust cases in which it filed amicus briefs.
Plaintiff American Needle lost its right to manufacture National Football League (NFL) team logo hats when the NFL, through its common licensing agency NFL Properties, granted that right exclusively to Reebok. American Needle sued, claiming that because the individual teams separately own their logos, their collective agreement to award only one license exclusively to Reebok constituted a restraint of trade that violated Section 1 of the Sherman Act. The U.S. Court of Appeals for Seventh Circuit held that in promoting the NFL through licensing of their intellectual property, the NFL teams function as a “single entity” and hence are not covered by Section 1 of the Sherman Act, which addresses conduct by two or more actors. The Seventh Circuit’s ruling was an application of the Supreme Court’s 1984 decision in Copperweld v. Independence Tube, in which the Court held that a parent company and its wholly owned subsidiary were incapable of conspiring in violation of the antitrust laws.
The DOJ and FTC are asking the Court to reverse the Seventh Circuit and instead adopt a rule that would only extend the Copperweld defense to cover sports leagues if (i) the teams and league have effectively merged the part of their operations in question—in this case, licensing operations—and (ii) the challenged conduct does not impact competition among teams outside of these merged operations. This case will likely result in an important decision concerning the antitrust treatment of joint ventures and other collaborative conduct involving competitors. (American Needle, Inc. v. National Football League, No. 08-661) (Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984))