Wednesday, August 05, 2009

LTG 07/23/09 - The NFL's blitz

From the July 23-30 issue of the Omaha CityWeekly (http://omahacityweekly.com/article/2009/07/23/law-talking-guy)

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The NFL's big game
By: Patrick Runge
Issue: July 22, 2009

The NFL has a glorious history of men in helmets succeeding on the field. But in many ways, the NFL is defined as much by the glorious history of the NFL’s men in suits succeeding in the courtroom.

In the upcoming term, the United States Supreme Court will be hearing American Needle v. National Football League. American Needle used to make NFL-licensed hats and caps. When the NFL granted an exclusive apparel license to Reebok, American Needle sued the NFL for violating Federal anti-trust statutes, claiming the NFL was conspiring to limit competition.

That lawsuit, in and of itself, wasn’t so unusual. Actions like that have been brought against sports leagues all the time. It was the response of the NFL, and the success they have had in the lower courts, that make the case more ominous.

The NFL raised the “single entity” defense, claiming that the courts should view the NFL as one entity rather than a conglomeration of different businesses. If the courts accept the NFL as a single entity, then much of the anti-trust laws would not apply. Anti-trust laws are intended to prevent conspiracies, groups working together in an attempt to prevent competition in the marketplace. If a sports league like the NFL is viewed to be a single entity, then there would be no one for them to conspire with, and the anti-trust rules would not apply.

Sports leagues, particularly the NFL, have made the “single entity” argument for many years. What’s new, though, is their success. The Seventh Circuit agreed with the NFL’s argument that it is a single entity, and threw out American Needle’s lawsuit.

That was big enough news. But American Needle appealed that decision to the Supreme Court. And the NFL agreed that the Supreme Court should accept the case.

The ramifications of the Supreme Court’s acceptance of the case are significant. The Supreme Court now has the ability to define nationwide whether the NFL is a single entity or not. If the Supreme Court agrees with the lower court and finds the NFL to be a single entity, then the NFL will have the ability to act like a single entity throughout the country.

That is a really, really big deal. Almost all of the restrictions on the power of the NFL have come from anti-trust proceedings. If the NFL can act as a single entity, there will be nothing to stop them from implementing a salary cap for players and coaches, from setting a uniform (and very high) price structure for game tickets and apparel, or from having absolute control over the broadcast distribution of their games.

In other words, if you like Thanksgiving Day games only on the NFL Network, you’ll love a pay-per-view Super Bowl.

The NFL has had success with big anti-trust suits in court before. Back in the early ‘80s, the USFL tried to form a competing football league. They filed an anti-trust lawsuit against the NFL, and won the case in 1986. Unfortunately, they were only awarded one dollar in damages. The USFL suspended operations the following summer.

Think about it. If the NFL can crush its competition out of existence by losing an anti-trust lawsuit, what do you think they’ll do if they win one?

If the NFL is successful in the American Needle case, other sports leagues will be just as emboldened. The NBA, NHL and Major League Baseball will be able to make the same argument and will attempt to avoid anti-trust rules in the same way the NFL plans to. And the NCAA will claim itself a single entity and be able to kill any attempt at forcing a college football playoff, cementing permanently the control of the money and power of postseason college football in the hands of the elite.

So, the big question is, will the NFL win? On its’ face, it seems unlikely. All 30 NFL teams have different owners, and those owners have very different economic interests. Many times, those interests compete with each other. There’s a huge fight going on right now between NFL owners as to how to divide up the television money. Big market owners think they should get the lion’s share of the revenue because they generate the most revenue. Small market teams want a more even distribution to help keep the overall league healthier.

Seriously, does that sound like a single entity? Any company whose different divisions fought amongst each other the way NFL owners do wouldn’t survive long as a company.

But the NFL wants this case before this Supreme Court for a reason. Looking at the court’s makeup, it is likely they would have four votes on their side in the bag. Long-time conservative justices Antonin Scalia and Clarence Thomas would be very likely to side with the NFL in this case. And, in more proof that elections matter, Bush-appointees John Roberts and Samuel Alito would also be likely to side with the NFL.

That means American Needle would have to run the table of the remaining five justices. While Ruth Bader Ginsberg, John Paul Stevens, and (assuming she’s confirmed) Sonia Sotomayor are likely to side with American Needle, John Breyer and Anthony Kennedy have significant pro-business leanings. If American Needle loses either of those two, the NFL and every other sports league will be exempt from anti-trust laws nationwide.

Good for the profits of sports leagues. Bad for sports fans. Really bad.

Patrick Runge has practiced law in the Omaha area since earning his degree from Creighton University in 1994. He has also written for the Omaha Pulp, Millard Avenues and UNO’s Gateway. E-mail him at thelawtalkingguy@gmail.com.

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