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American Needle Decision 9-0

2010 May 24
by Brad Humphreys

The Supreme Court ruled on the American Needle Case yesterday.  In a unanimous 9-0 decision, the court ruled that, when it comes to licensed merchandise, the NFL is composed of 32 competing firms, and is not a single entity.  The NFL did not get the anti-trust exemption it was seeking.  Under this ruling, the case goes back to the lower court with the instruction to apply the “Rule of Reason.”  Justice Stevens’ opinion is available here.

(Hat tip to Ryan Rodenberg)

3 Responses
  1. Donald A. Coffin permalink
    May 24, 2010

    Most, if not all of the comment i read about this as the case moved through the legal system was that the NFL’s practices here would be approved. Ao all I can say is “Wow.”

  2. Greg Pinelli permalink
    May 24, 2010

    I read Justice Stevens opinion and with all due respect his notion that NFL teams are real competitors on anything other than the playing field is absurd. They are far different than the “nut and bolt” makers he cites..those makers may well find others with compatible interests..just where do the Miami Dolphins go without an NFL…the Bundesliga? Or the NBA???
    NFL teams are joined at the hip..and the licensing arrangements they made were voluntary and suited a non-coerced common goal. It seems that is the essence of free association..and it’s hard sledding to unbalance that basic right with American Needles need to embroider Team goods on an individual basis. I didn’t read anything that showed me how consumers suffered under the previous licensing arrangements..or how they will benefit when American Needle becomes involved.
    If teams cannot come to this kind of common agreement and NOT be in compliance with anti-trust law…then how can they come to an agreement on how many employees a team may field (ie, players). Doesn’t that deny access to employment by individuals who travel across state lines to perform their duties..and arbitrarily punish those teams that need more players to compete successfully?

  3. Victor permalink
    May 24, 2010

    Actually Greg, the courts have pretty clearly dealt with many of the issues you raise in previous anti-trust rulings.

    First, you cite the right to free association. The Sherman Antitrust Act of 1890 clearly forbids free association if that free association leads to a conspiracy to monopolize markets and fix prices.

    Second, you are are correct that in some ways teams within sports leagues are “joined at the hip” and that all sports leagues require some level of cooperation to exist. This is where the “Rule of Reason” idea that Brad refers to comes into play. If the cooperation between teams is required for the smooth functioning of a league, then the cooperation will be allowed (i.e. common sets of playing rules, scheduling, etc.) If the cooperation is not required for unique circumstances of sports leagues, then the cooperation will not be allowed. Hard to argue that competition in sports leagues is dependent on having a single apparel supplier.

    Third, there is an important exeption to the “rule of reason” arguments which is the “non-statutory labor exemption” to anti-trust laws. Your roster size example would very likely be a violation of antitrust laws. However, if the roster sizes were agreed to during fair bargaining between the league and its union, then any potential antitrust violations are exempt from antitrust scrutiny.

    Overall, while I don’t wish to speak for my colleagues, I believe most sports economists would find this a huge win for consumers and economic efficiency. This was a good day for sports economists.

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