In the valedictory antitrust opinion of Justice John Paul Stevens, joined by all eight other justices, the Supreme Court held on May 24, 2010 in American Needle, Inc. v. National Football League, et al., No. 08-661 that collective licensing activities of member teams of the National Football League (NFL) constitute concerted action that is not immune from antitrust scrutiny as that of a “single entity” and therefore must be evaluated to determine whether it constitutes an unreasonable restraint of trade under Section 1 of the Sherman Act. Ending nearly two decades of victories for Sherman Act defendants at the Supreme Court, the Seventh Circuit’s affirmance of summary judgment for the NFL was reversed and the case was remanded for consideration of the conduct under the Rule of Reason.
American Needle involved a challenge by a former manufacturer of NFL teamlabeled headwear to the teams’ grant to Reebok of an exclusive license, through their licensing entity National Football League Properties (NFLP), to produce and sell trademarked headwear for all 32 teams. The defendants argued successfully below that they were incapable of conspiring in violation of Section 1 because the NFL and its teams constitute a “single entity” with respect to the challenged licensing conduct. The case arrived at the Supreme Court in a unique procedural posture: the NFL, with the potential to gain additional ground on the reach of its single-entity status, actually supported plaintiff’s petition for certiorari.
After reviewing developments in the law leading to the Court’s seminal 1984 decision in Copperweld Corp. v. Independence Tube Corp., which found a corporation and its wholly owned subsidiary incapable of conspiring in violation of the antitrust laws, Justice Stevens noted that characterizing the legal inquiry as whether the alleged conspirators constitute a “single entity” is “perhaps a misdescription” because the key is whether the alleged contract, combination or conspiracy of actors constitutes “concerted action — that is, whether it joins together separate decisionmakers.” (Slip Op. at 10.) Here, Justice Stevens wrote, “[a]lthough NFL teams have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned.” (Id. at 13.) Accordingly, the Copperweld doctrine did not apply.
The Court rejected broad immunity predicated on the necessity of collective action, noting that “even if leaguewide agreements are necessary to produce football, it does not follow that concerted activity in marketing intellectual property is necessary to produce football.” (Slip Op. at 15 n.7.) Quoting a 2008 concurrence by then-Second Circuit Judge Sotomayor in a similar case involving baseball, Major League Baseball Properties, Inc. v. Salvino, Inc., the Court cautioned against the elevation of a joint venture form over the substance of its activities: “[i]f the fact that potential competitors shared in profits or losses from a venture meant that the venture was immune from §1, then any cartel could evade the antitrust law simply by creating a ‘joint venture’ to serve as the exclusive seller of their competing products.” (Slip Op. at 17.)
In the concluding Part IV of the opinion, Justice Stevens makes it clear that the “special characteristics” of the professional football industry may provide a justification for the conduct at issue — observing that “[t]he 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.” (Slip. Op. at 18.) However, whether arguments ultimately prevail that the restraint here enables efficiencies, promotes competitive balance, is necessary to bring the products to market effectively, or is otherwise not an unreasonable restraint of trade is to be settled in overtime — on remand to the lower court.