NFL pushes for antitrust exemption
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WASHINGTON - Standing on their own, National Football League teams would be worthless, the NFL argued yesterday to the United States Supreme Court.
The league is asking to get around antitrust laws by being classified as a "single entity," instead of 32 competing ones, in a case that concerns official NFL apparel but has caught the eye of players' unions for its potential to affect their salaries, among other things.
Though the idea of the Steelers and the Cleveland Browns being the same institution might sound odd, league attorney Gregg H. Levy argued that without the league's structure, the individual teams would not hold any economic power, and thus should not be considered separate entities.
The plaintiff in the case, American Needle Inc., was forced out of the NFL apparel business when the league entered an exclusive deal with Reebok in 2001. The suburban Chicago hat maker sued, claiming a violation of the Sherman Act, the antitrust law which bars different companies from conspiring in a way that inhibits trade.
Though a lower court ruled in the NFL's favor, it joined American Needle in asking for a Supreme Court review - as the league hoped to solidify its long-sought single-entity status.
Major League Baseball has a full antitrust exemption, granted by Congress in 1922, which has been effective in allowing the league to block teams from relocating. The NFL has a partial antitrust exemption related to its television contracts, which are negotiated by the league. Also, policies collectively bargained with a union, such as the league salary cap, are not subject to antitrust law.
The National Basketball Association, the National Hockey League, the National Collegiate Athletic Association and the Association of Tennis Professionals tour, among others, filed briefs backing the NFL.
Signaling that the case is about more than ballcaps, the justices peppered the attorneys for both sides - American Needle was represented by Glen D. Nager of Washington - with hypothetical questions that extended to a variety of areas.
Justice Antonin Scalia proposed that, if the NFL is a single entity, the league could even set the prices for the sale of its franchises. Mr. Levy agreed, prompting Justice Stephen Breyer to exclaim, "You've reduced it to the absurd."
Mr. Levy acknowledged afterward that Justice Breyer seemed to be the biggest skeptic of the NFL's argument. Justice Sonia Sotomayor also had sharp words.
"So you are seeking from this ruling what you haven't gotten from Congress - an absolute bar to antitrust claims," Justice Sotomayor said.
Mr. Levy denied the assertion, drawing a line between the production and promotion of the game. The apparel licenses have to do with how the shared product is promoted, while the game on the field would not be free from antitrust law, Mr. Levy claimed.
In promotions, as opposed to on the gridiron, the league does often resemble a single business.
The teams agreed to form National Football League Properties in 1963 to promote the game, and the teams share revenue from licensed apparel. The teams also granted the league the authority to contract with a single apparel vendor.
Mr. Nager, meanwhile, pointed out that the teams are separately owned and operated, with their own profits and losses.
The players' unions of all four major sports leagues have lined up on the side of American Needle, concerned that the NFL - or any pro sports league - could take a single entity designation much further than promotions.
"What might the owners do?" New Orleans Saints quarterback Drew Brees wrote in an op-ed in the Washington Post on Sunday.
"They could agree to end or severely restrict free agency, continue to enter into exclusive agreements that will further raise prices on merchandise, lock coaches into salary scales that don't reward them when they're promoted and set higher ticket prices (including preventing teams from competing through ticket discounts)."
Speaking to reporters after the arguments, Jeffrey Kessler, an attorney for the players' unions of the NFL, NBA, NHL and Major League Baseball, pointed to remarks by Justice Sotomayor that, in theory, teams could fix the prices salaries of secretaries. Mr. Levy allowed that such a scenario could be possible.
"We assume if he thinks that the [New York] Giants and the [New York] Jets or the [Washington] Redskins and the [Baltimore] Ravens could get together and fix the prices of their secretaries, that he thinks they could fix the prices of labor, that they can impose restrictions that would prevent good teams from getting better or take any other conduct without the antitrust laws coming into play at all," Mr. Kessler said.
"We don't think the Supreme Court will agree."
Several of the justices seemed skeptical of both sides. The NFL's argument that single-entity status would stop frivolous lawsuits seemed to resonate with Justice Anthony Kennedy, who raised the prospect that teams could sue the league if they dislike a rule change.
Mr. Nager responded that a plaintiff would have to prove that the practice inhibited competition, and rules changes are presumed to be healthy for competition.
The chamber was packed with spectators and news media, and television cameras awaited the attorneys as they left the building. Mr. Levy tried to downplay the frenzy and insist that this really is just a matter of T-shirts and hats.
"This case doesn't have anything to do with union issues," Mr. Levy told reporters. "If this case is bigger than other cases, as the question suggests, it's because of the hype of the media, not the subject of our briefs."
First Published January 14, 2010 12:00 am