American Needle v. NFL: less than hyped

If you’ve been listening to sports radio today you’ve probably heard a number of explanations of the significance of the United States Supreme Court’s decision in American Needle v. NFL, most of them probably confusing and probably misleading.

Here was the question before the court, in simplistic form:  Is there any circumstance conceivable in which the various NFL teams could be considered to be separate entities “conspiring” together in restraint of trade in violation of the Sherman Act?

The NFL’s position was, boiled to simple form,

“No, because we are a unified whole — a sports league — and we are not to be considered separate businesses, we have to be considered for all purposes a unitary actor, 30 hearts beating as one.  Therefore any collective action by our various teams can never fall a foul — virtually — of the Sherman Act and American Needle has brought a claim upon which relief cannot be granted”. 

The NBA and virtually every other sports league known to man supported the NFL’s position as friends of the court (“amici curiae“), as a victory by the NFL could have had stunning consequential benefits for those leagues, discussed below.

But the NFL did not prevail with its “unitary parts of a collective whole” argument.  The Supreme Court’s answer to the NFL, in a resounding 9-0 ruling delivered by John Paul Stevens was, “You are wrong”.  

The Supreme Court acknowledged that there are many instances in which franchises of sports leagues similar to the NFL must act in unison and cannot therefore be considered “conspirators” within the meaning of the Sherman Act, but there are also many conceivable instances where it is unneccessary for the franchises to operate collectively and therefore individual franchises in a same sports league COULD conceivably be conspirators for the purposes of the Sherman Act. 

The court reasoned that teams within a sports league were in many respects individual businesses whose operations and goals could be their own and indeed could be in competition with other franchises within the same sports league.  To support that contention, the court rightfully cited the fact that teams themselves, not the Leagues, own logos and trademarks and stadiums.  Thus, in many ways, and under many conceivable circumstances, the teams are not necessarily “subparts of a unitary whole” like the different related companies operated under the Procter & Gamble umbrella, but are “Individual actors” in the marketplace.

The court specifically held that the operation known as “NFL Licensing” could therefore constitute a “conspiracy” under the Sherman Act.  I stress the word “could”, because the case was kicked back to the lower court for a trial to determine the much more difficult question whether in this particular instance they are. 

The whole question there will be “Does NFL Licensing constitute a conspiracy that unreasonably restrains trade?”   I cannot see how American Needle wins that one, unless the court somehow finds that NFL merchandise, in and of itself, constitutes an entire “market” rather than a competitor in the overall hat and sports merchandising industry.

What does all this mean for the NBA?

In my opinion, nothing.  In my opinion the status quo won out yesterday, as it normally does in judicial systems that trace their roots to the English Common Law, as American judicial system does. 

It was the NFL that was trying to establish something novel:  namely, it wanted to establish a precedential rule that in every instance concerted activity of various teams in a sports league cannot be considered a violation of antitrust. 

A ruling of that sort would have been newsworthy.  A ruling of that sort would have effectively removed sports leagues from the constraints of United States Antitrust law, something I always believed Congress had to do (baseball tenuously enjoys antitrust exemption as a result of the poorly reasoned — “sports cannot be considered interstate commerce” ruling in Federal Baseball League, in I believe 1921 or somewhere in that range.  That reasoning has since been laughed out-of-bounds, but precedent has allowed baseball to keep their status — until they piss Congress off enough to change it that is.  Hence the steroid hearings).

For instance, I’ve always felt that the NBA’s collective bargaining agreement was the only thing that held the draft, the age restriction, and the salary cap afloat. (Besides which, even if they did go away, it would not be the end of the world.  Many economists persuasively argue that each of the aforementioned institutions are far less vital to a “competitively balanced” sports league than many owners would have us brainwashed to believe.)

So, really, all the Supreme Court did yesterday was affirm what I already considered the governing law… that sports leagues are, in some circumstances, exempt from Antitrust, but certainly not in each and every circumstance.

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