In a blow to the NFL’s increasing attempt to establish itself as a cartel, the U.S. Supreme Court overturned a lower court ruling that upheld the league’s right to execute marketing and licensing agreements as a single entity.
The Court’s ruling was prompted by a lawsuit initiated by American Needle Inc., an Illinois-based company that lost its contract to make NFL licensed hats when the league entered into an exclusive agreement with Reebok International. American Needle’s lawsuit argued that the NFL’s licensing scheme ran afoul of antitrust laws that prohibit curtailment of competition, but that argument was rejected by the federal courts. In overturning the dismissal and remanding the case back to the lower court, the Supreme Court also effectively rejected the idea that sports leagues can avoid antitrust regulations by organizing unified entities to conduct business operations.
Although 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. – Supreme Court Justice John Paul Stevens
While renewed exposure to the American Needle litigation is concern enough, the bigger blow to the NFL, and leagues like the NBA and NHL who submitted briefs in support of the NFL, is the decision now limits the latitude with which it can make unilateral decisions. Had the Supreme Court upheld the lower bench’s favorable ruling, there was some talk that the NFL would use the decision as a legal launching pad for circumventing the collective bargaining process. Instead, the NFLPA will undoubtedly use the Supreme Court’s opinion as added leverage in its pending battle with the league’s owners.
As for MLB, the ruling is not as relevant because the sport enjoys much broader antitrust exemptions. Ironically, MLB might actually benefit from the ruling it if winds up hampering the negotiating power of other sports leagues, which compete with baseball for both fan share and corporate partnerships. In the meantime, baseball gets to enjoy being on the sidelines as the NFL heads toward a potentially disastrous labor war.