By Jordan Miller; Mr. Miller is a 2010 graduate of the Texas Tech School of Law, and was a 2009 Judge K.K. Legett Fellow at the Washington Legal Foundation.
Last week in American Needle, Inc. v. NFL, the U.S. Supreme Court held that the thirty-two teams making up the National Football League were “separate economic actors” capable of competing for more than just wins and losses. Therefore, the teams’ collective trademark licensing arrangements constituted “concerted action” subject to scrutiny as a restraint of trade under section 1 the Sherman Act.
But hold the Gatorade – this game is far from over. While the court answered the question of whether the NFL is a single entity, it punted on the broader question of whether the NFL’s restraint of trade, under Rule of Reason analysis, is unreasonable. Justice Stevens, writing for a unanimous Court, left open the possibility that the NFL could return that punt for a touchdown:
Football teams that need to cooperate are not trapped by antitrust law. . . . The fact that NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate in the production and scheduling of games, provides a perfectly sensible justification for making a host of collective decisions. . . . When ‘restraints on competition are essential if the product is to be available at all,’ per se rules of illegality are inapplicable, and instead the restraint must be judged according to the flexible Rule of Reason. . . . ‘Our decision not to apply a per se rule to this case rests in large part on our recognition that a certain degree of cooperation is necessary if the type of competition that petitioner and its member institutions seek to market is to be preserved.’ 468 U.S. 85, 101. In such instances, the agreement is likely to survive the Rule of Reason. . . . And depending upon the concerted activity in question, the Rule of Reason may not require a detailed analysis; it ‘can sometimes be applied in the twinkling of an eye.’ Id. at 109.
On remand, the NFL has a decent chance of seeing that twinkle materialize. As Steven Bradbury explained here last week, the NFL could argue that the licensing arrangements are reasonable because “[n]ational consistency in NFL merchandise may enhance the image and value of the NFL brand and thereby promote the competitiveness of NFL football versus other forms of entertainment.” In short, the NFL only has to show the lower court that the anti-competitive effect of the arrangement is outweighed by the business objective of acquiring greater bargaining power when all 32 teams unite to license their trademarks.
Just think, how much fun would Madden NFL ’11 really be with only 31 teams, instead of 32?