Antitrust and Trade Regulation Alert
July 9, 2009
Authors:
A Ruling on the Field?
Kara A. Elgersma
kara.elgersma@klgates.com
202.778.9123
J. Timothy Hobbs
tim.hobbs@klgates.com
202.661.3755
K&L Gates is a global law firm with
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America, Europe, Asia and the Middle
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corporations, in addition to growth and
middle market companies,
entrepreneurs, capital market
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NFL Antitrust Case Could Change the Playing Field for
Joint Ventures
In a showdown 25 years in the making, the Supreme Court is poised to consider the
extent to which integrated joint ventures face liability under Section 1 of the
Sherman Act for conspiring to restrain trade. The Court first articulated the “singlefirm” defense to Section 1 liability in Copperweld Corp. v. Independence Tube
Corp.,1 in which the Court held that a parent company cannot conspire with its
wholly-owned subsidiary. Since then, lower courts have extended that holding to
shield other types of joint business conduct. Lower courts have taken inconsistent
views, however, of how far and under what circumstances to extend Copperweld’s
single-firm defense. Presented with a Section 1 case brought against the National
Football League (“NFL”), the Supreme Court now has an opportunity to clarify
Copperweld’s reach and resolve a longstanding tension in the case law. Companies
engaged in joint ventures should closely monitor this case and be prepared to
reconsider the level of integration and the conduct of those ventures following the
Supreme Court’s ruling.
The case now before the Court, American Needle, Inc. v. National Football League,2
involves the collective decision by all NFL teams, through NFL Properties, Inc., to
grant an exclusive 10-year license to Reebok International Ltd. to sell hats bearing
team logos. Prior to 2001, NFL Properties had granted licenses for headwear to a
number of different companies. After the NFL failed to renew its license with
American Needle, the former licensee sued the NFL for antitrust violations under
both Sections 1 and 2 of the Sherman Act. Prior to the full discovery process, based
on limited discovery relating specifically to the single-entity defense, the district
court granted summary judgment to the NFL. The trial court found that the league’s
teams, through NFL Properties, act as a single economic entity with respect to
licensing intellectual property in the promotion of NFL football and are therefore
exempt from scrutiny under Section 1 of the Sherman Act for conspiring to restrain
trade.3 The Seventh Circuit affirmed the district court’s judgment. While conceding
that the NFL teams could have competing interests regarding the licensing of their
intellectual property, the appellate court focused on the finding that “the NFL teams
share a vital economic interest in collectively promoting NFL football.” The circuit
court emphasized that the NFL teams have acted collectively for more than 40 years
in licensing their intellectual property and that American Needle had not disputed
that such collective licensing was “to promote NFL football” in competition with
other forms of entertainment. Thus, the court concluded, the NFL teams “are best
described as a single source of economic power when promoting NFL football
through licensing the teams’ intellectual property.”4 Accordingly, they must be
treated as a single economic entity incapable of conspiracy under Copperweld.
Antitrust and Trade Regulation Alert
In petitioning for review, American Needle contends
that the Seventh Circuit’s decision is a “radical
departure” from Supreme Court precedent and
decisions of other circuits that require the NFL’s
activities to be judged under the “rule of reason,”
whereby joint conduct is permissible only if
procompetitive efficiencies outweigh
anticompetitive harms.5 American Needle
characterizes the Seventh Circuit’s decision as
holding that “the NFL is a single entity simply
because they collectively produce games,” a
standard it says conflicts with longstanding
precedent. Relying heavily on Radovitch v. NFL, 6
American Needle urged that “[i]n the 50 years since
Radovitch, every appellate decision to have
considered the question has held that the NFL and
other professional sports leagues are subject to rule
of reason scrutiny under Section 1 of the Sherman
Act.”7
The NFL also urged the Court to review the case,
despite prevailing below, but asks the Court to
expressly expand the Copperweld doctrine to
insulate from review conduct involving the “core”
activities of highly integrated joint ventures, such as
the production, marketing, and sale of the joint
venture’s products.8 The NFL contends that the
question of “whether the single-entity doctrine
renders Section 1 ‘inapplicable to joint ventures’ that
involve extensive integration and interdependence”
is “squarely presented in this case.”9 In Texaco, Inc.
v. Dagher,10 the most recent Supreme Court case
applying antitrust principles to the conduct of joint
ventures, the Court considered whether it is per se
illegal price-fixing for a lawful, integrated joint
venture to set the prices of the joint venture’s
products. The Court concluded that it is not per se
illegal. Because the claimants in Texaco had not put
forth a rule of reason case, the Court specifically
declined to address an alternative argument that joint
ventures are not subject to Section 1 scrutiny at all.
According to the NFL in American Needle, the time
for the Court to address that argument is now. The
NFL urges the Court to “resolve the inconsistent
application of Section 1 to professional sports
leagues and highly integrated joint ventures.”11 The
NFL complains that the approach adopted by the
Seventh Circuit is too carefully circumscribed,
pointing to the opinion’s language stating that the
question of whether a joint venture is considered a
single entity for purposes of Section 1 is resolved
“not only ‘one league at a time,’ but also ‘one facet
of a league at a time.’” The NFL argues that this
limited holding will result in incessant litigation that
can and should be avoided.12 Not surprisingly, the
National Hockey League13 and the National
Basketball Association14 filed amicus briefs, also
urging Supreme Court review, consistent with the
positions taken by the NFL.
On invitation by the Court, the United States filed
an amicus brief, in which it was the sole voice
urging the Court to deny certiorari.15 The U.S.
attempts to characterize the Seventh Circuit’s
holding as limited to its facts and not inconsistent
with other cases, at the same time acknowledging
that it is “troubling” and “problematic.”16 The U.S.
contends that this is the wrong case for the Supreme
Court to evaluate the scope of Copperweld,
particularly because the Seventh Circuit limited its
review to NFL teams’ collective license and did not
address the broader issues raised by the NFL.
Accordingly the U.S. contends that the Court’s
decision would “do little to clarify the application to
other joint ventures of the principles announced in
Copperweld.”17 However, the Court’s decision to
grant certiorari over the objections of the U.S. could
signal that the Court is prepared to tackle these
issues.
Now that the case is pending before the Supreme
Court, the overriding question is whether the Court
will take this opportunity, as the NFL urges, to
clarify the application of Copperweld beyond
wholly-owned subsidiaries and parent companies to
integrated joint ventures, including, but not limited
to professional sports leagues. Supreme Court
guidance in this area has been lacking for years,
resulting in inconsistent applications throughout the
country. The NFL has seen an opportunity to
capitalize on the Court’s recent trend of clarifying
the boundaries of antitrust liability by seeking a
categorical rule that core joint venture functions are
shielded from Section 1 claims. Even if the Court
declines to issue a broad ruling, its decision will
likely have substantial implications for joint
ventures across the U.S. Lower courts will need to
align their opinions with any new Supreme Court
precedent on these issues.
July 9, 2009
2
Antitrust and Trade Regulation Alert
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1
467 U.S. 752, 768 (1984).
538 F.3d 736 (7th Cir. 2008), cert. granted, 77 U.S.L.W.
3326 (U.S. June 29, 2009) (No. 08-661).
3
496 F. Supp. 2d 941, 944 (N.D. Ill. 2007). The district
court also granted summary judgment for the NFL on
American Needle’s monopolization claims under Section 2
of the Sherman Act, finding that the teams, as a single
entity, can lawfully grant an exclusive license. 553 F. Supp.
2d 7901 (N.D. Ill. 2007).
4
538 F.3d at 744. The Seventh Circuit also affirmed the
district court’s grant of summary judgment for the NFL on
American Needle’s monopolization claims. Id.
5
Petition for a Writ of Certiorari, American Needle, Inc. v.
National Football League, No. 08-661 (Nov. 17, 2008).
6
352 U.S. 445 (1957).
7
Petition for a Writ of Certiorari, supra note 5.
8
Brief for the NFL Respondents, American Needle, Inc. v.
National Football League, No. 08-661 (Jan. 21, 2009).
9
Id.
10
547 U.S. 1 (2006).
11
Brief for the NFL Respondents, supra note 8.
12
Id.
13
Brief for Amicus Curiae the National Hockey League,
American Needle, Inc. v. National Football League, No. 08661 (Jan. 21, 2009).
14
Brief for Amicus Curiae the National Basketball
Association, American Needle, Inc. v. National Football
League, No. 08-661 (Jan. 21, 2009).
15
Brief for the United States as Amicus Curiae, American
Needle, Inc. v. National Football League, No. 08-661 (May
2009).
16
Id.
17
Id.
2
July 9, 2009
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