In a case that may have great significance for sports leagues and other collaborations by businesses, the U.S. Supreme Court has granted certiorari in American Needle, Inc. v. National Football League. This case will likely provide important insight into whether antitrust laws will apply to a collection of individually owned businesses which seek to operate as a single entity. The case involves an allegation that the individual franchises of the National Football League violated Section 1 of the Sherman Act, the basic U.S. antitrust statute, by “conspiring” to grant an exclusive license to Reebok to sell hats and other headgear bearing the logos of NFL teams. The NFL argued Section 1 did not apply at all because its teams were operating as a “single entity” through NFL Properties, the NFL’s licensing arm. Since a single entity cannot conspire with itself, Section 1 would not apply because it only comes into play when multiple actors are involved. The United States Court of Appeals for the Seventh Circuit ruled in favor of the NFL and dismissed the plaintiff’s claims under the “single entity” defense. The plaintiff petitioned the Supreme Court for review. In an unusual move, the NFL also petitioned the Supreme Court for review, even though it had won in the Court of Appeals. The NFL asked the Supreme Court to make an even broader ruling in the hope that the Court would expand the scope of the single-entity defense.
The issue the Court must now decide is whether the unique characteristics of a sports league grant the individual franchises the protection of the single-entity defense. If the Supreme Court rules in favor of the NFL, it could represent an expansion of the single-entity defense and could have significant implications with respect to collections of individually owned businesses that wish to work together to compete in a general marketplace. The Court will likely hear the case in early 2010. (American Needle, Inc. v. National Football League, 538 F.3d 736 (7th Cir. 2008))