NFL faces off-the-field challenge

The National Football League's appearance before the Supreme Court this week is shaping up as a legal Super Bowl that could affect the cost of Pittsburgh Steelers caps, Green Bay Packers jackets and possibly even stadium tickets and player salaries.

As other major sports leagues watch closely, the court will hear an appeal Wednesday by a suburban Chicago clothing manufacturer that lost a contract to make caps with NFL logos when the 32-team league signed an exclusive contract with Reebok.

The manufacturer, American Needle, claims the deal illegally thwarted competition and raised prices.

It is appealing a lower court's decision that the NFL is shielded from the usual antitrust rules barring competitors from acting collectively.

If the court sides with the NFL and rules broadly, it could give sports leagues significant bargaining power — not just in the marketing of merchandise but possibly in salary contracts with coaches and players. Even if the court rules narrowly, hundreds of millions could be at stake.

"For the court to consider a case that could have a wide-ranging impact not only on the NFL and other sports leagues is significant in itself," says Daniel Glazer, a New York lawyer who specializes in sports and licensing.

If the court issues a sweeping decision, Glazer and others say, leagues could have greater muscle in other commercial deals from concessions to player salaries.

Yet, as Glazer and other analysts note, the contemporary Supreme Court is not prone to sweeping rulings.

The Obama administration, siding partly with American Needle, has urged the court to rule that judges should review sports antitrust disputes on a case-by-case basis.

Strong interest

The stakes are evident from more than a dozen "friend of the court" briefs. Groups siding with American Needle include the National Football League Coaches Association, which is worried about losing bargaining power with individual teams. The NFL has support from the National Hockey League and National Basketball Association, which are concerned about frivolous antitrust lawsuits over valid league contracts.

The question: When can major sports leagues, consisting of many individual teams, be considered a "single entity" and exempt from antitrust law that bars separate businesses from conspiring with one another.

For the licensing of logo merchandise, American Needle says, the 32 football teams should be regarded as individual competitors, just as they are on the field.

"The NFL in this case is trying to do an end-run around the laws that ensure that popular products like NFL hats and jerseys are available at the lowest possible prices," says Washington lawyer Glen Nager for American Needle. Nager refers in his brief to a Reebok vice president's claim that "basic fitted caps that were selling for $19.99 a few years ago are now selling for $30."

Gregg Levy, a Washington lawyer representing the NFL, declined an interview request. In his brief, Levy highlighted the collective purpose of the league. "The NFL produces an entertainment product ... culminating in the Super Bowl championship game," he said, adding that member teams promote a "joint entertainment product."

Levy casts the dispute as limited to promotional activities.

Antitrust gray area

The case began after NFL Properties, through which the NFL promotes its brands, signed the exclusive contract with Reebok in 2001 and American Needle sued.

Sports leagues have long had an ambiguous place in antitrust law because they are made up of separately owned entities, yet their product arises from collective action.

The Chicago-based U.S. Court of Appeals for the 7th Circuit, whose decision backing the NFL is before the justices, touched on that when it said, "Asserting that a single football team could produce a football game is less of a legal argument than it is a Zen riddle: Who wins when a football team plays itself?"

The appeals court said the issue should be addressed not only "one league at a time," but also "one facet of a league at a time."

In American Needle's appeal, Nager stresses the higher prices consumers face when less competition exists in the making of NFL merchandise.

Levy, for the NFL, counters that the value of logos on sports paraphernalia arises only from the collective efforts of the NFL: "Consumers buy hats, shirts and other goods bearing club marks — e.g. a blue star on a silver background (the Dallas Cowboys), the letter G in a green oval (the Green Bay Packers), a turquoise dolphin wearing a football helmet (the Miami Dolphins) — not because those symbols have intrinsic value or independent appeal, but rather because they represent affiliation with an NFL team

THE Outlaw Micheal Tomsik
www.outlawsportsradio.com