Supreme Court rules against NFL in merchandising antitrust case

The Supreme Court on Monday ruled unanimously that the NFL is not a single entity, but 32 different franchises, reversing an appeals court decision.

By , Staff writer

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    New Orleans Saints fans line up to buy jerseys and other apparel ahead of the team's first playoff game of the 2007 season. The Supreme Court on Monday ruled against the NFL in an antitrust case involving merchandising.
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The National Football League is not exempt from antitrust laws governing the sale of team jerseys and hats, the US Supreme Court ruled on Monday.

In a unanimous decision, the high court said the NFL could be sued by a former apparel supplier who claims the professional football league engaged in illegal restraint of trade by granting an exclusive licensing agreement to a single supplier for the league’s 32 teams.

A federal appeals court in Chicago had ruled earlier that the NFL’s teams were acting as a single entity in the licensing agreement and, thus, the league was immune from restraint of trade allegations. The former supplier, American Needle, Inc., appealed to the Supreme Court.

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In reversing the decision by the Seventh US Circuit Court of Appeals in Chicago, Justice John Paul Stevens said the teams themselves compete, not just on the field, but also in the realm of their intellectual property and trademarks. “To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks,” he wrote.

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

The 9-0 decision sends the case back to the lower courts to examine whether the NFL’s interest in acting collectively through National Football League Properties (NFLP) in the production of jerseys, hats, and other items is in compliance with antitrust laws.

“It is a kind of line in the sand victory,” said Salil Mehra, an antitrust law expert at Temple University. The decision marks the first time a private plaintiff has prevailed in an antitrust case at the high court since 1992, he said. But the case isn’t over.

American Needle won on Monday at the high court, but when the dispute returns to the lower courts, the NFL may still win. “While [the NFL doesn’t] get immunity, they get a chance to argue that anticompetitive benefits of joint NFLP licensing outweigh anticompetitive harms,” Mr. Mehra said.

“If they lose,” he adds, “NFL faces a choice: license separately or fully merge.”

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