NFL Sacked by the Sherman Antitrust Act

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In a ruling that is still sending tremors across professional sports leagues, the U.S. Supreme Court rejected the National Football League's (NFL) request for antitrust law protection, finding the league to be 32 separate teams and not a single entity—when selling merchandise such as sweatshirts, hats and jerseys—and therefore could be liable for collaborative decisions under Section 1 of the Sherman Antitrust Act.

The U.S. Supreme Court's unanimous decision in American Needle, Inc. v. National Football League et al., No. 08-661, 2010 WL 2025207 (May 24, 2010), may change how professional sports leagues do business with outside vendors. The Supreme Court's ruling struck a significant blow to the longstanding joint venture between the NFL and its 32 member teams to license and market team-owned trademarks through a single entity.

The NFL is an unincorporated association of 32 separately owned professional football teams. Each team owns its own intellectual property and fights for publicity and a wide fan base. In order to develop, license and market its intellectual property, in 1963 the league formed a distinct legal entity, known as the National Football League Properties (NFLP).

The Rules of the Game

The Sherman Antitrust Act is divided into three sections. Section 1 delineates and prohibits specific means of anticompetitive conduct, while Section 2 deals with end results that are anticompetitive in nature. Therefore, these sections supplement each other in an effort to prevent businesses from violating the spirit of the Sherman Act, while technically remaining within the letter of the law. Section 3 simply extends the provisions of Section 1 to U.S. territories and the District of Columbia.

By seeking immunity to antitrust law, the NFL is looking to avoid being subject to scrutiny under Section 1 of the Sherman Act.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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