Supreme Court Blanks The NFL, 9 to 0

Patriots hat In a rare display of togetherness, the U.S. Supreme Court dealt the National Football League a major marketing setback, saying the NFL and its 32 teams can be sued under antitrust laws.

The case, "American Needle vs. The National Football League," deals with the NFL's decision in December 2000 to grant exclusive licenses and its 10-year contract for hats with NFL logos with Reebok International.

That caused American Needle, a licensing apparel company based in Buffalo Grove, Ill., to lose its licensing deal, and it sued. An Illinois court threw the case out, but the Supreme Court's ruling means that American Needle and other companies are now free to sue the NFL under antitrust provisions if they choose.

"It's a very narrow ruling and doesn't impact the entire licensing business," Oliver Herzfeld, chief legal officer for Beanstalk, a licensing agency based in New York, tells Marketing Daily. "But it does mean that major sports leagues cannot automatically assume that they can grant licenses for the entire league and escape exposure to antitrust claims."

Interestingly, baseball is the exception, and has been protected as a single entity since 1922, says Herzfeld. (That decision was written by Justice Oliver Wendell Holmes.)

"The fact that the NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate to produce games, provides a perfectly sensible justification for making a host of collective decisions," writes Justice John Paul Stevens in the decision, but he also says "the NFL teams do not possess either the unitary decision-making quality or the single aggregation of economic power characteristic of independent action."

"Each of them is a substantial, independently owned, independently managed business, whose 'general corporate actions are guided or determined' by 'separate corporate consciousnesses,' and whose 'objectives are' not 'common.'"

Reuters reports that of the $7.6 billion in total revenue generated in 2008 by the NFL, about $4.5 billion came from revenue sources with prices independently set by individual teams.

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