This term, the highest court in the land has decided to weigh in on a case that’s about hats. That may sound innocuous, but what the Supreme Court decides in American Needle, Inc. v. NFL could dramatically change the playing field in professional sports business. In 2000, the NFL auctioned the exclusive rights to hat merchandise bearing the NFL logo and the logos of all its member teams to Reebok. American Needle, Inc. used to have similar rights, but found that the NFL was not renewing their license following the Reebok deal.
The company says deals that the NFL makes with companies like Reebok violate the Sherman Act, which limits monopolies and cartels. The NFL, however, is saying that they acted as a “single entity.” For the purposes of merchandising, the league isn’t a collection of team businesses coming together to drive out the competition and increase prices, but one buyer making a purchase.
If that sounds shaky, consider the special nature of a sports league. Teams compete with each other for things like TV time, players, and even fans, but in business terms teams and leagues tend to work together to sell their sport, coordinating their intellectual property.
American Needle ambitiously decided to take the NFL, Reebok, and the 32 team owners to court in 2004. The NFL won on each appeal, but American Needle persisted and eventually asked the U.S. Supreme Court to hear their case. Surprisingly, the NFL’s lawyers (and the NHL’s and the NBA’s) sent in briefs recommending that they do just that.
If the leagues and the team owners could get their status as a single entity confirmed by the highest court in the land, it would set a precedent that would give them legal grounds to do away with all sorts of competition that might hurt their profits.
Smelling a rat, the players’ and coaches’ associations of the major sports leagues have hired expensive lawyers with Supreme Court and anti-trust experience to support American Needle. Those unions would lose bargaining power if a single entity precedent is established. In a worst case scenario, salaries and free agency would drop precipitously, possibly resulting in strikes in the major sports leagues.
The NCAA and BCS get these kinds of anti-trust cases just as much, if not more, than the professional leagues; the NCAA for the restrictions they place on television markets, merchandise and player scholarships, and the BCS for their lucrative post-season bowl advertising market. A pro-NFL decision would halt future cases like these before they even start.
The Supreme Court is fairly conservative this term, and arguably pro-business. Obviously the leagues and team owners like their chances to codify their monopoly. This might give them the bigger short term profits that they seek, but it probably also means unhappier players, higher ticket and jersey prices for fans and a less enjoyable and accessible experience all around.
