Court: NFL is 32 teams, not one entity

Supreme Court Rules Against NFL

WASHINGTON -- The Supreme Court rejected the National Football League's request for broad antitrust law protection Monday, saying that it must be considered 32 separate teams -- not one big business -- when selling branded items like jerseys and caps.

Clayton: Impact On All Of Sport

The Supreme Court decision to rule against the NFL and in favor of hat maker American Needle has a huge impact on not only the game of pro football, but sports in general.

Had the NFL won this case, it may have been able -- as one business entity -- to implement salaries for its players and coaches instead of having the current system of individuals bargaining for deals. The biggest impact of the ruling Monday is it could kick-start labor extension talks between the NFL Players Association and owners to prevent a lockout in 2011.

Talks have been going nowhere since the start of the year, but that's understandable. The American Needle case was a big hammer the NFL could have used if it had won. In football terms, this was a Hail Mary. Had the NFL won, it could have slowed the ever-growing labor costs affecting all sports.

The Court ruled 9-0 in favor of American Needle, which claimed the league violated antitrust laws in having a "one-entity" deal with Reebok to manufacture hats. The league had sought broader protections from antitrust law in the case.

The NFL's argument was that it was one entity instead of 32 teams. The Supreme Court ruled that strategy deprived the market of competition. What could have worked for hats could have worked against the players who help market those hats.

Antitrust lawsuits have been the benchmark of the NFLPA's ability to be a strong labor union. Baseball has broad antitrust exemptions, but the NFL has to go to court to fight for that type of leverage. Without a collective bargaining agreement, the NFL draft is considered illegal for antitrust reasons.

While this ruling doesn't mean a new labor deal could come soon, the decision on the American Needle case could help start the process moving, and fast. The NFL still has a lot of leverage in talks with the union. A positive decision on American Needle would have given the NFL a big hammer.

Now the hammer has been put away. Serious talks could begin before the end of the year.

-- John Clayton,

"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," said the retiring Justice John Paul Stevens, writing for a unanimous court.

The high court reversed a lower court ruling throwing out an antitrust suit brought against the league by one of its former hat makers, who was upset that it lost its contract for making official NFL hats to Reebok International Ltd.

American Needle, Inc. sued, claiming the league violated antitrust law because all 32 teams worked together to freeze it out of the NFL-licensed hatmaking business and gave Reebok an exclusive 10-year license.

The company lost and appealed to the Supreme Court but the NFL did as well, hoping to get broader protection from antitrust lawsuits.

American Needle's antitrust lawsuit now heads back to the lower court. The NFL said in a statement released after the ruling Monday that it was confident it would ultimately be victorious.

In its statement, the NFL noted that the Supreme Court's decision only pertained to merchandise and didn't affect "collective bargaining, which is governed by labor law."

"In today's decision, the Supreme Court recognized that 'special characteristics' of professional sports leagues, including the need for competitive balance, 'may well justify' business decisions that among independent competitors would otherwise be unlawful. The court noted that the NFL teams' shared interest in making the league successful and cooperating to produce NFL football provide 'a perfectly sensible justification for making a host of collective decisions,'" the NFL said.

Had the NFL won this case, it may have been able to -- as one business entity -- implement salaries for its players and its coaches instead of having the current system of individual players bargaining for deals. The biggest thing that came from this ruling on Monday is it could kick-start labor extension talks and prevent a lockout in 2011.

DeMaurice Smith, the NFLPA's executive director, welcomed the ruling.

"Today's Supreme Court ruling is not only a win for the players past, present and future, but a win for the fans. While the NFLPA and the players of the National Football League are pleased with the ruling, we remain focused on reaching a fair and equitable Collective Bargaining Agreement. We hope that today also marks a renewed effort by the NFL to bargain in good faith and avoid a lockout," Smith said in a statement Monday.

Major League Baseball is the only professional sports league with broad antitrust protection. The National Basketball Association, the National Hockey League, the NCAA, NASCAR, professional tennis and Major League Soccer supported the NFL in this case, hoping the high court would expand broad antitrust exemption to other sports.

But Stevens said NFL teams directly compete on many levels. Citing the two teams in this year's Super Bowl, the New Orleans Saints and the Indianapolis Colts, Stevens said that teams compete against each other "to attract fans, for gate receipts and for contracts with managerial and playing personnel."

"Directly relevant to this case, the teams compete in the market for intellectual property," Stevens said. "To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks."

American Needle was one of many companies that made NFL headgear until the league awarded an exclusive contract to Reebok. Lower courts threw out American Needle's lawsuit, holding that nothing in antitrust law prohibits NFL teams from cooperating on apparel licensing so the league can compete against other forms of entertainment.

Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that 'deprive the marketplace of independent centers of decisionmaking ... and therefore of actual or potential competition.'

-- Supreme Court Justice
John Paul Stevens

But the high court turned away that theory and sent American Needle's antitrust lawsuit back to the lower court.

"Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that 'deprive the marketplace of independent centers of decisionmaking ... and therefore of actual or potential competition,' " Stevens said.

Just because NFL teams have a single organization, the National Football League Properties, to jointly develop, license and market its logos does not mean it can escape antitrust scrutiny, Stevens said.

"If the fact that potential competitors shared in profits or losses from a venture meant that the venture was immune from" antitrust law, Stevens said, "then any cartel" could evade the antitrust law simply by creating a 'joint venture' to serve as the exclusive seller of their competing products."

The argument that NFL teams also need each other to play an NFL season also doesn't work, Stevens said. "A nut and a bolt can only operate together, but an agreement between nut and bolt manufacturers is still subject to" antitrust scrutiny, Stevens said.

The league argued that a court decision against it "would convert every league of separately owned clubs into a walking antitrust conspiracy" and bring legal challenges to any decisions that the teams make collectively like scheduling.

But Stevens disagreed.

"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," he said.

The case is American Needle v. NFL, 08-661.