The Supreme Court rejected the NFL's request for broad antitrust law protection Monday, saying it must be considered 32 separate teams -- not one big business -- when selling branded items like jerseys and caps.
"Although NFL 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," said retiring Justice John Paul Stevens, writing for an unanimous court.
The high court reversed a lower court ruling throwing out an antitrust suit brought against the league by one of its former hat makers, who was upset that it lost its contract for making official NFL hats to Reebok International Ltd.
American Needle, Inc. sued, claiming the league violated antitrust law because all 32 teams worked together to freeze it out of the NFL-licensed hatmaking business and gave Reebok an exclusive 10-year license. The company lost and appealed to the Supreme Court, but the NFL did as well, hoping to receive broader protection from antitrust lawsuits.
"In today's decision, the Supreme Court recognized that 'special characteristics' of professional sports leagues, including the need for competitive balance, 'may well justify' business decisions that among independent competitors would otherwise be unlawful," the NFL said in a statement. "The court noted that the NFL teams' shared interest in making the league successful and cooperating to produce NFL football provide 'a perfectly sensible justification for making a host of collective decisions.' The decision will simply result in American Needle's claim being sent back to the federal district court in Chicago, where the case will resume in its early stages.
"We remain confident we will ultimately prevail because the league decision about how best to promote the NFL was reasonable, pro-competitive and entirely lawful. The Supreme Court's decision has no bearing on collective bargaining, which is governed by labor law."
Said NFLPA executive director DeMaurice Smith in a statement: "Today's Supreme Court ruling is not only a win for the players past, present and future, but a win for the fans. While the NFLPA and the players of the National Football League are pleased with the ruling, we remain focused on reaching a fair and equitable Collective Bargaining Agreement. We hope that today also marks a renewed effort by the NFL to bargain in good faith and avoid a lockout."
Major League Baseball is the only professional sports league with broad antitrust protection. The National Basketball Association, the National Hockey League, the NCAA, NASCAR, professional tennis and Major League Soccer supported the NFL in this case, hoping the high court would expand broad antitrust exemption to other sports.
But Stevens said NFL teams directly compete on many levels. Citing the two teams in this year's Super Bowl, the New Orleans Saints and the Indianapolis Colts, Stevens said that teams compete against each other "to attract fans, for gate receipts and for contracts with managerial and playing personnel."
"Directly relevant to this case, the teams compete in the market for intellectual property," Stevens said. "To a firm making hats, the Saints and the Colts are two potentially competing suppliers of valuable trademarks."
American Needle was one of many companies that made NFL headgear until the league awarded an exclusive contract to Reebok. Lower courts threw out American Needle's lawsuit, holding that nothing in antitrust law prohibits NFL teams from cooperating on apparel licensing so the league can compete against other forms of entertainment.
But the high court turned away that theory and sent American Needle's antitrust lawsuit back to the lower court.
"Decisions by NFL teams to license their separately owned trademarks collectively and to only one vendor are decisions that 'deprive the marketplace of independent centers of decisionmaking ... and therefore of actual or potential competition,'" Stevens said.
Just because NFL teams have a single organization, the National Football League Properties, to jointly develop, license and market its logos doesn't mean it can escape antitrust scrutiny, Stevens said.
"If the fact that potential competitors shared in profits or losses from a venture meant that the venture was immune from" antitrust law, Stevens said, "then any cartel" could evade the antitrust law simply by creating a 'joint venture' to serve as the exclusive seller of their competing products."
The argument that NFL teams also need each other to play an NFL season also doesn't work, Stevens said. "A nut and a bolt can only operate together, but an agreement between nut and bolt manufacturers is still subject to" antitrust scrutiny, Stevens said.
The league argued that a court decision against it "would convert every league of separately owned clubs into a walking antitrust conspiracy" and bring legal challenges to any decisions that the teams make collectively like scheduling.
But Stevens disagreed.
"The fact that NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate in the production and scheduling of games, provides a perfectly sensible justification for making a host of collective decisions," he said.
The case is American Needle v. NFL, 08-661.
The Associated Press contributed to this report.