After oral argument in the titanic battle Wednesday over the antitrust status of the National Football League, it did not seem that the NFL would have an easy touchdown in its long quest for baseball-like immunity from antitrust laws.
In fact, if there was any winner during oral arguments at the U.S. Supreme Court, it was baseball itself, as several justices confessed they are more familiar with baseball than football and lapsed into talking more about the Red Sox and the Yankees than the Patriots and the Giants. "I know baseball better," Justice Stephen Breyer confessed at one point. "I don't know enough about football," Justice Sonia Sotomayor said at another.
The case American Needle v. National Football League has been spotlighted as potentially the biggest sports case in decades, because it may impact other sports leagues and other businesses -- including Visa and MasterCard -- that can be viewed either as a single entity or a "joint venture" of its member teams or banks for antitrust purposes.
But the justices focused instead mainly on the specific facts of the NFL case before them and seemed reluctant to use it as a vehicle for major change in antitrust doctrine.
American Needle Inc., which used to make hats for NFL teams, was shut out of the business in 2000 when NFL Properties, a corporate entity created by the NFL, negotiated an exclusive contract with Reebok to make sports paraphernalia for all 32 teams in the league. American Needle sued, but the district court and the 7th U.S. Circuit Court of Appeals ruled that, for the purposes of promoting football, the teams can act as a "single entity" without running afoul of Section 1 of the Sherman Act. American Needle appealed to the high court, and the NFL told the Court it too would like to see the issue resolved.
Glen Nager of Jones Day's Washington office, arguing for American Needle, said that, under Court precedent and legislative and judicial consensus, "agreements among sports teams about whether and how they will participate in the marketplace are subject to scrutiny under the Sherman Act."
In one humorous exchange, Breyer questioned whether the NFL's arrangement with Reebok had any anti-competitive effect, since he doubted that the teams compete with each other over the sale of team hats and sweatshirts to fans who would be loyal to just one team.
Lapsing into baseball references by analogy, Breyer said, "I don' know a Red Sox fan who would take a Yankees sweatshirt if you gave it away ... I don' know where you are going to get your expert who's going to say there is competition between those two products."
Nager conceded the point, but said, "The competition is for fans." A longtime New Yorker is unlikely to be persuaded to be a Red Sox fan, he acknowledged, "but the person who is 3 years old can easily be persuaded."
To which Breyer replied, "They have very small allowances at 3 years old."
An impatient Justice Antonin Scalia soon interjected, "Mr. Nager, do I have to figure this out here? Is this issue before us here?" The only issue before the Court, Scalia said, was whether the lower court erred in deciding that the NFL was a single entity -- not the competitive impact of the arrangement.
Breyer backed off, but Justice Anthony Kennedy said exploring ancillary issues was "helpful," and he for one was still looking for answers. Kennedy's comment highlighted the discontent of several justices over not knowing important aspects of the factual background of the case, which was decided at the district court level on summary judgment, without extensive discovery. At another point Chief Justice John Roberts Jr. also suggested there are factual issues that should be resolved at trial.
Gregg Levy of Covington & Burling, representing the NFL , argued that the teams in the league must act collectively, because by themselves they cannot play a football game. "They are not independent sources of economic power, because none of them can produce the product of the venture on their own," he said. "As a result, they are a unit. They are a single entity." He said the purpose of the entity that contracted with Reebok is to promote the game of football.
Scalia challenged that assertion, claiming that the purpose of the venture is not to promote the game, but to make money -- which the teams can do independently. Each team "wants its own adherents and wants to sell its own product," Scalia said.
Sotomayor picked up on the point, stating that the collective action by the NFL teams "promotes the making of money. And once you fix prices for making money, that's a Sherman Act violation."
