It appears a risky legal move by the National Football League may have backfired, and the U.S. Supreme Court will not give the popular league its long-sought antitrust exemption.
The case stems from a lawsuit brought by hat maker American Needle. The company used to make hats for the NFL but lost that right in 2000 when the league signed an exclusive merchandising deal with Reebok. American Needle sued, challenging the exclusive licensing agreement, but lost its case in court. American Needle then appealed to the Supreme Court.
But in the unusual move, the NFL also appealed even though it won the case. The league was hoping the Supreme Court would expand the lower court ruling and give the league an antitrust exemption.
The NFL claims it operates as one business, not 32 separate businesses (teams) working together, and should thus be exempt from antitrust laws. That would give it the right to negotiate one league-wide deal for licensing and marketing instead of each of the 32 teams making their own deals.
It would also allow the league to make its own decisions about relocation and sales of teams, parking, food sales at games and television restrictions without fear of lawsuits under the antitrust act. Of all the major sports leagues, only baseball enjoys such an exemption.
But it doesn't look like the NFL will joins baseball's ranks. The justices, in court today, seemed skeptical that the NFL should be considered one business. And several justices thought the American Needle case should not have been dismissed in the lower court.
Much of today’s debate centered on how closely connected apparel sales are to the league’s core functions. NFL lawyer Gregg Levy told the justices that apparel sales are a means of promoting the on- field product, an argument that Justice Antonin Scalia disparaged.
“The purpose is to make money,” Scalia said. “I don’t think that they care whether the sale of the helmet or the T-shirt promotes the game.”
Justice John Paul Stevens pointed to the league’s policy of sharing revenue from clothing sales among the 32 teams. That practice suggests that the aim is “pro-competitive,” helping the NFL compete against other leagues, Stevens said.
“You are not competing among the members of the league,” Stevens said. “You’re competing in the market that includes all sports paraphernalia.”
Even though the Court granted baseball's antitrust exemption in 1922, it routinely ignores its own precedent, and claims only Congress can award such an exemption.
“You are seeking through this ruling what you haven’t gotten from Congress -- an absolute bar to an antitrust claim,” Justice Sonia Sotomayor said.
Despite the justices' skepticism, they did not give any clear indication how they will eventually rule.