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Sunday Forum: Beware the NFL!
The league is seeking an antitrust exemption that would come at the expense of players and fans, argues attorney MARK GREENBAUM
Sunday, December 20, 2009

A small Illinois hat maker might change professional football in this country forever.

An obscure case that will come before the U.S. Supreme Court next month could radically alter the National Football League, easily America's most popular professional sports league. An overly expansive decision could adversely affect not just football, but all the leading professional sports leagues, potentially leading to the scrapping of free agency, protracted work stoppages and higher ticket prices.

The case, known as American Needle v. National Football League, involves a company, American Needle of Buffalo Grove, Ill., which had been one of many firms licensed by the NFL to make hats with team logos. After the NFL terminated its agreement and signed an exclusive contract with Reebok to make team hats, American Needle sued the NFL, alleging that the Reebok deal violated antitrust law. The case was dismissed by two lower courts.

Then, in a highly unusual move, the NFL petitioned the Supreme Court to take the case, even though the court could reverse the lower court decisions it had won. And the Supreme Court, which accepts less than 1 percent of the appeals sent to it, agreed to hear the case even though the Obama administration urged the court not to take it.

The American Needle case turns on whether the NFL should be recognized as a single entity under the law or 32 separate teams. While a seemingly mundane inquiry, this difference has great implications.

Antitrust law forbids companies from forming monopolies and conspiring to unfairly restrict competition. That means 32 teams cannot work in concert to raise prices or collude to block free agency if they are seen as separate entities. But a single entity, a single league, cannot conspire with itself. And this is precisely how the NFL wants the court to rule.

The NFL would like to expand the antitrust exemption found by the two lower courts -- dealing with the licensing of its intellectual property -- to all of the league's "core functions," contending that antitrust suits are overly burdensome and "chill" their business operations and inter-league competition. If granted, the open-ended language of the NFL's request would make the league immune to virtually any antitrust lawsuit.

In separate arguments to the court, prominent groups of antitrust experts and economists have countered that the NFL's complaints do not merit blanket legal immunity. The NFL, they contend, has thrived economically despite facing antitrust lawsuits, with most courts still highly deferential to sports leagues.

Why exactly do these technical issues matter to sports fans?

If the Supreme Court endorses the NFL's position, the league could drastically raise the price of tickets and paraphernalia, such as shirts, hats and jerseys, and could even seek exponentially higher prices to broadcast games on television and the Internet. For all intents and purposes, the NFL, which last year generated nearly $8 billion in revenue, would become a monopoly without fear of legal scrutiny. It is the fans who would pay for these changes.

A broad ruling also could shrink player salaries, with the league ultimately able to tear down the current free agency structure, one that already tilts toward the team owners.

NFL players have non-guaranteed contracts and can be cut at any time without receiving their base salary. Because players do not hold salary-arbitration rights and generally have the shortest careers of pro athletes -- about three years on average -- strikes are ineffective. This means the ability to assert antitrust violations is their biggest leverage in labor negotiations. If the NFL were given the legal recognition it seeks, the teams could collude to hold down player salaries and the players would have no recourse in the courts.

While fans will not cry over pro-athlete salaries, the abolition of free agency would have negative consequences. With the existing NFL labor agreement expiring in 2011 and a work stoppage appearing likely at that point, it would add to the unrest and possibly lead to a strike before 2011.

Giving the NFL a complete antitrust exemption could effectively break the NFL Players Association, which already is weak. More broadly, it could allow teams to put a cheaper product on the field and charge even higher prices.

The effect of a decision in favor of the NFL would reverberate throughout sports. Major League Baseball already has an antitrust exemption, but other professional leagues -- including the National Basketball Association and the National Hockey League, which have asked the Supreme Court to rule in the NFL's favor -- would quickly seek the same immunities, ultimately leading to many of the same problems. Labor unrest would bubble, strikes and lockouts would follow and the fans would suffer most of all.

The NFL has been trying for years to get wider antitrust immunity from Congress, and its support of an appeal in the American Needle case was a strategic decision to that end. The league knows that the court of Chief Justice John Roberts is decidedly pro-business and that it may never have a better chance to win single-entity status than it does right now. Given their records, at least four justices -- Mr. Roberts, Antonin Scalia, Clarence Thomas and Samuel Alito -- seem predisposed to enlarge the league's antitrust immunity.

The Supreme Court hears the case Jan. 13, with a decision expected by summer. Whatever the court finds will have a profound impact on all major professional sports, especially the football teams you watch on Sunday.

Mark Greenbaum is a Washington, D.C.-based freelance writer and attorney (markgreenbaum@ gmail.com).
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First published on December 20, 2009 at 12:00 am