Thursday, January 14, 2010

American Needle v. NFL Oral Arguments 

The Supreme Court heard oral arguments in the American Needle v. National Football League case yesterday. The central issue in the case, whether or not the NFL is a "single entity" and exempt from anti-trust law, could have profound effects on the way the league does business.

Newspaper reports on the arguments suggest that the Court was not receptive to the NFL's arguments. The NFL argued that the sale of merchandise with team logos was not aimed at making profits, but instead was intended to promote the league. The New York Times coverage emphasized the skepticism of the justices. The Washington Post coverage focused more on the idea that, if the NFL wins, it could gain a blanket anti-trust exemption. Both articles clearly indicate that the tone of the arguments indicated that the court was not buying the NFL's arguments.

It typically takes several months for a decision to be issued.

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Friday, September 25, 2009

Sports Economists Weigh in on American Needle v. NFL 

Earlier this week I described the American Needle v. NFL case that will soon be argued before the Supreme Court. The most recent filing in the case is an amicus curiae brief filed by a group of sports economists (including TSE co-bloggers Berri, Coates, Fort, Szymanski and yours truly). The brief rebuts many of the arguments made by the NFL, and points out in detail exactly how a ruling in favor of the NFL will result in a loss of consumer welfare. Roger Noll was the driving force behind the brief. From the introduction:
Our principal conclusion is that economic research provides a clear basis for distinguishing between collaborative activities among members of a league that enhance economic efficiency and benefit consumers from collusive activities that are not essential for the efficient operation of a league and that benefit league members by reducing competition among teams. We believe that a ruling that any
sports league is a single entity in which teams cannot engage in anticompetitive collaboration in “core venture functions” is inconsistent with the consensus among economists about the efficient scope of league authority and the nature of competition in professional sports.

As citizens and professional economists, we have a substantial interest in fostering the appropriate use of economics in antitrust and in assuring that the economic assumptions that guide decisions in antitrust litigation do not conflict with the consensus from economics research both generally and with respect to professional team sports. The NFL Respondents highlight our interest in this matter by referring to their preferred approach to the single entity concept as “a more nuanced, economics-based approach.”
Roger Noll was the driving force behind the brief. Here is a link to the brief.

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Monday, September 21, 2009

A Gathering Storm? 

A case currently before the US Supreme Court could have a huge impact on professional sports and sports fans in North America. The case, American Needle v. NFL, started out as an innocuous antitrust case. American Needle is an apparel manufacturer that some NFL teams contracted with to produce hats, t-shirts and jerseys. In 2000, the NFL signed an exclusive contract with Reebok to provide apparel to all 32 NFL teams. American Needle sued the NFL, all the NFL teams, and Reebok for restraint of trade, and lost. Appeals ensued.

What was once a relatively minor anti-trust case has somehow made its way to the US Supreme Court. The issue before the Supreme Court is no longer a piddly restraint of trade case about who has the rights to manufacture NFL licensed merchandise. The Supreme Court will instead rule on whether or not the NFL can be considered a "single entity" in all its business functions. If the Court finds that the NFL constitutes a "single entity," the NFL would have a blanket antitrust exemption, in all cases except where the NFL would collude with other sports leagues to fix prices. Such an exemption would have consequences in input markets, affecting players and coaches, and output markets, affecting television broadcasts. It would also increase the power of the NFL and other sports leagues to extract subsidies from taxpayers for facility construction and operation. It could also affect other North American leagues - the NBA and NHL have both filed Amicus Curiae briefs. The Supreme Court will rule on this case in the upcoming 2099-2010 session.

For those interested in learning more about the case, I have set up a resource page with links to relevant filings, like the NBA and NHL briefs, and other information like blog posts. I will keep this page up to date as more information becomes available.

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Friday, August 14, 2009

MLB Postseason Ticket Pricing 

I am spending the weekend in the NYC area, so the New York Times is my local paper for the next couple of days. I came across an interesting tidbit in the NY edition of the paper this morning.

With the Yankees playing well, Bombers fans are already anticipating October baseball this fall. The Yankees will soon be releasing their postseason ticket prices, and given their track record on pricing, people are anticipating an expensive postseason. Of course, the price elasticity of demand for postseason games is very low, so teams can raise their prices quite a bit. Yankees' fans clearly understand that:

“I don’t think they will raise prices too much because of the backlash they got on the regular- season tickets,” said Michael Bahn, a season-ticket holder since 2003. “The problem is, for the playoffs, they have you over a barrel and you really want to go.”

For me, the interesting information in the article is that MLB sets guidelines (a price ceiling) for the first two rounds of postseason ticket prices. I'm no antitrust expert, but, absent the infamous MLB antitrust exemption (the gift that keeps on giving), that sounds like a per se violation of the Sherman Antitrust Act to me.

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Tuesday, March 11, 2008

Joint selling and antitrust in the Bundesliga 

The new TV contract for the Bundesliga, like many in the States and elsewhere, is a joint selling arrangement, although revenue sharing appears to be more complicated than a simple 1/N rule. This sets the stage for a massive wrangle over just what the shares will be, with redistribution from the large to small clubs being the key issue. Enter the antitrust agency:
A new lucrative television contract for the Bundesliga was criticized by Germany's anti-trust agency on Monday.

The federal office said the €3 billion (US$4.5 billion) contract will only be allowed if small clubs are awarded more money. The agency has investigated the central marketing policy of German top division clubs for several years.

"Central marketing of media rights has the same effect as controlling prices," Ralph Langhoff, an anti-trust agency official, was quoted as saying in the trade magazine Kicker.

Media mogul Leo Kirch's new company, KF 15, has offered the Bundesliga a sizable increase in television revenues with the €3 billion spread over six years.

The Bundesliga, composed of both the first and second division leagues, splits TV revenues and is regarded as more equitable than the other top European leagues in England, Spain and Italy.
So, the threat of a price fixing charge is the leverage for squeezing more money out of Bayern Munich. No wonder the German giants are playing in the B-league European competition (the UEFA Cup), rather than the Champions League. Germany's politics won't allow Bayern the funds to compete at the top level any more. And yes, Bayern are currently leading the Bundesliga and are thus likely to return to the Champions League next season. But they will do so with a revenue handicap of about €75m, if the article's figures are accurate.

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Wednesday, October 24, 2007

Sandomir on the Rangers vs. NHL Lawsuit 

We previously discussed the NY Rangers antitrust suit against the NHL, demanding that they be able to run a website independent of the other 29 teams. Like MLB and the NFL, the NHL has moved to a "unitized" internet business model. Here is NY Times sports media beat writer Richard Sandomir's take on the suit:
The rhetoric of the Rangers, and their parent, Madison Square Garden, features phrases like "unrestricted power," "illegal cartel," "seizure," "crackdown" and "blatant expropriation of team assets."

There is a Marxist twist to this. Not Karl, but Groucho. The Rangers could well have cited in their legal papers the far funnier Marx, who once said, "I wouldn’t belong to any club that would have me for a member."
Sandomir has some useful facts and analysis as well. Recommended.

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Saturday, September 29, 2007

Hockey team sues NHL 

The NHL violated antitrust laws and is acting like "an illegal cartel" by monopolizing control of team promotions, Madison Square Garden claimed in a lawsuit Friday.

MSG, which owns the New York Rangers, said it filed the suit in U.S. District Court in Manhattan because the NHL would begin fining the organization $100,000 per day starting Friday if the company did not give the league complete control over the Rangers' Web site and other promotions.

The league is seeking to control the licensing of teams for all commercial purposes and to stop teams from marketing apparel, merchandise and memorabilia, the suit said. MSG asked that a judge order the league to stop limiting team promotions, and it also wants the court to clarify the boundaries of the league's rights.

The company said the NHL had once worked with teams in a legitimate joint venture but had more recently "veered into unlawful behavior."

"By seeking to control the competitive activities of independent businesses in ways that are not necessary to the functioning of that legitimate joint venture, the NHL has become an illegal cartel," the suit said.

The NHL appears to be copying major league baseball's approach to managing team websites. Surely there are significant economies derived from MLB running astros.mlb.com, padres.mlb.com, etc. for the team. Baseball's internet operations have turned into a significant revenue generator for the league and its teams, and this revenue growth is surely not derived from restricting competition.

In 2006, Chris Isidore wrote:
One of Selig's greatest legacies might end up being MLB Advance Media, the joint Internet operations for all the clubs. Besides being a leader in things like Web casts and mobile updates for fans, Selig was able to get the owners to agree in 2000 to equally share their Internet revenue, a move that might one day be comparable to Pete Rozelle getting the NFL owners to agree to share their national television revenue.
These facts suggest to me that the NHL's website operations can be cast in a joint venture framework. MSG's real complaint could be with the manner in which the venture is produced or, more likely, how the revenues are distributed.

Both newyorkrangers.com and rangers.nhl.com claim to be the "official site of the NY Rangers." They are built from a similar template and look equally crummy, although the Rangers' own site has a "Rangers Account Manager" tool that is lacking on the league-produced page.

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