Antitrust Law: American Needle v. NFL

In celebration of the Raven’s excellent 2009 season, and to commemorate the law that years ago caused the Colts to leave town in the middle of the night, today we discuss American Needle v NFL, argued at the Supreme Court several weeks ago. Case cite: http://caselaw.lp.findlaw.com/data2/circs/7th/074006p.pdf

The “law” here is antitrust. American Needle held a long standing contract with the NFL to produce headwear bearing NFL and NFL team logos. In 2000, the NFL decided to open bidding to make the headwear licensing exclusive, and Reebok won that bid, and thus American Needle was prohibited from making headgear bearing NFL logos. American Needle sued the NFL and Reebok, arguing that the NFL teams, which are independent corporations, conspired together in restraint of trade.

As one might suspect, American Needle lost at the District Court and in its initial appeal. In both courts, the courts held that while the NFL teams are independent, their joint action in exclusively licensing their trademarks was not “concerted action” of independent firms, but rather, permissible action of a “single” functional entity.

Unlike Major League baseball, which has statutory immunity from antitrust laws, the NFL has no such immunity. As a result, the NFL is subject to liability for violating the antitrust laws. While antitrust law is complex because the economic relationships between enterprises in commerce are complex, as a very general matter, antitrust law prohibits two competitors (and in some cases two non competitors) from engaging in a “contract, combination or conspiracy” in restraint of trade. This is known as a “Section 1” case, referring to Section 1 of the Sherman Act, because it requires that two independent parties engage in the conduct. The argument made unsuccessfully by American Needle is that by granting an exclusive license to Reebok (or anyone), each team can control retail pricing of headgear bearing its logos in a manner that they could not have controlled if there were multiple licensed manufacturers of headgear, or if each team had to license the logos separately. In addition, the argument is that Reebok conspired with the NFL because with no other competitors for authentic licensed headgear, it too can increase prices.

The moral of the story here is that when engaging in exclusive licensing of any intellectual property, antitrust law must be considered. In the vast majority of cases, Section 1 of Sherman Act the will not be implicated because a single entity will be engaging in the conduct (Section 2 would apply . . . but that is a discussion for another day). However, when two independent parties jointly and exclusively license their trademarks . . . the rule in these cases, and whatever holding the Supreme Court finally makes in this case, should be considered.

For more information on this or other antitrust law issues, please contact Mike Oliver at oliver@bowie-jensen.com.