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On the field, “NFL football” and “cutthroat competition” are virtually indistinguishable phrases. However, off the field, in the realm of NFL paraphernalia, Reebok was the sole “team” possessing a monopoly in the market. In 2000, the NFL signed a ten-year licensing agreement that gave Reebok the exclusive rights to manufacture and sell jerseys, hats, and other apparel and accessories designed with the respective logos of the thirty-two teams in the NFL. Under the agreement, all thirty two NFL teams agreed not to compete with each other in the licensing of such merchandise, and not to permit any licenses to be given to Reebok competitors for a period of ten years. American Needle, an apparel manufacturer that, until 2000, held licensing agreements with individual teams in the NFL, sued the NFL claiming that its agreement with Reebok violated Section 1 of the Sherman Antitrust Act , because the agreement unreasonably restrained competition.
In defending its contract with Reebok, the NFL countered that the organization was not made up of thirty-two individual businesses, but rather was a single business comprised of thirty-two teams that acted collectively, not combatatively, in competing with products of other sports and entertainment organizations, such as the MLB or the NBA. The implication of this defense, if successful, was that the NFL was exempt from the Sherman Act. The Seventh Circuit accepted the NFL’s defense, holding that because the teams act as “a single source of economic power when promoting NFL football through licensing the teams’ intellectual property,” Section 1 of the Sherman Act was not applicable to the NFL. For this reason, the NFL’s contract with Reebok did not violate anti-trust laws and was upheld.
In November 2008, American Needle filed a petition for a writ of certiorari, which was granted by the Supreme Court. In an opinion written by Justice Stevens that was handed down just this week, the Supreme Court reversed the Seventh Circuit’s holding and ruled 9-0 that the thirty-two teams in the NFL constitute separate business. In concluding that Section 1 of the Sherman Act does apply to the NFL, Stevens stated that although the teams “have common interests such as promoting the NFL brand, they are still separate, profit-maximizing entities, and their interests in licensing team trademarks are not necessarily aligned.”
On remand, the lower court will have to analyze whether the NFL’s contract with Reebok unlawfully restrains trade in violation of Section 1 of the Sherman Act. Stay tuned…
– Casey McLaughlin
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