Saturday, January 9, 2010

American Needle, the NFL and the Supreme Court of the United States

American Needle, the NFL and the Supreme Court of the United States

By Evan Weiner

January 9, 2010

(New York, N. Y.) -- The Supreme Court of the United States goes back to work this week and the nine justices have an interesting case on the docket.

American Needle Inc. v the NFL (Docket 08-661).

The Court is supposed to listen to arguments from American Needle attorneys and National Football League lawyers as to whether National Football League Properties, the National Football League and the 32 individual teams acted as one when the league awarded Reebok International an exclusive 10-year deal to produce hats and other headgear in 2001 in violation of Sherman Antitrust Act of 1890.

Reebok is now owned by Addidas AG.

National Football League Properties decided in 2000 that it would put the caps, hats and headgear license up for bid and would give the contract to one company. Prior to 2001, the league had an assortment of licensees for the manufacture of caps, hats and headgear with American Needle holding one of those licenses.

After Reebok won the bid, American Needle decided to file an antitrust lawsuit in Chicago against the NFL in December 2004. The NFL picked up victories on in lower level trial and appeals court but the small Buffalo Grove, Illinois-based American Needle Inc. decided to press on and take the case to the Supreme Court.

National Football League lawyers apparently have no problems arguing the case before the nine justices and basically told American Needle’s attorneys to bring it on.

The NFL has received support from the National Basketball Association and the National Hockey League. Major League Baseball, which received antitrust protection from the Supreme Court of the United States in the 1922 ruling against the Baltimore Terrapins because baseball was a game, not a business, is not involved with this particularly case.

This might be the case that the National Football League has been seeking for decades. A favorable decision by the SCOTUS would presumably give the league an antitrust blanket and allow the league to really act with monopoly powers although Congress in 1961 gave the league antitrust protection with the Sports Broadcast Act of 1961 which was signed into law by President John F. Kennedy. Congress gave football owners another gift by allowing the June 8, 1966 merger of the National Football League and the American Football League in the fall of that year which ended a bidding war for players.

President Lyndon B. Johnson gave his approval to the merger when the AFL-NFL legislation was tacked onto another bill. New Orleans ended up with a football team because of the political maneuvering by Louisiana Senator Russell Long and Representative Hale Boggs who traded a no vote on the merger in exchange for a guarantee that New Orleans would receive a team as part of political horse trading.

The fact that American Needle wants to do business with the NFL is pretty obvious. A NFL product license can bring in a sizeable check for any company. American Needle is arguing that it should be allowed to talk to each of the 32 teams not just the league and that companies like American Needle should have the opportunity to talk to say Dallas Cowboys owner Jerry Jones about a deal where presumably they can offer him more money than he could get from his 1/32 share of the revenue.

The American Needle Inc. v NFL Supreme Court battle has apparently made an awful lot of people nervous and it does not appear from those who have SCOTUS anxiety are from the NFL owners camp. The National Football League Coaches Association filed a brief with the court saying that an NFL victory could mean a salary cap for head coaches and a salary scale for assistants because the NFL would gain monopoly power.

Additionally, some are arguing that the NFL would push a TV agenda that would include the scheduling of games against High School and College contests during the High School and College football season which is presently not allowed under the terms of the Sports Broadcast Act of 1961 which would have a direct impact on attendance at High School contests across America and cut down on the TV audience of Saturday college games.

The National Football League Players Association, which is preparing strategy in collective bargaining talks with the league owners with the Collective Bargaining Agreement schedule to expire after the 2010 season, is worried that an NFL SCOTUS victory would harm the players bargaining abilities since the association has used the courts to settle labor disputes.

The Major League Baseball Players Association, the National Basketball Players Association and the National Hockey League Players Association are supporting the National Football League Players Association by filing a brief which is supporting American Needle.

The National Federation of State High School Associations wants to keep Friday Night Lights going with no NFL interference.

The Federal Trade Commission has asked the nine justices to “vacate the judgment of the U. S. Court of Appeals for the Seventh District” because the FTC is of the opinion that the league is 32 separate entities and that the league violates section 1 and section 2 of the Sherman Act.

Legal experts from various law schools, other lawyers with opinions and media pumped up experts like the Chicago-based Marc Ganis are predicting doom for fans should the National Football League win the case. (Sportswriters should do some research instead of relying on "experts" like Ganis and law professors, lazy journalism on their part) The dire consequences include even higher costs for merchandise (the cost is extremely high now for those who have not shopped) to league wide higher league mandated ticket pricing (ticket prices are extraordinarily high and in some cases come with a personal seat licensing tab for those who have not noticed) to hiring cheaper players and putting an inferior brand of football on the field (guess the experts failed to watch any Detroit Lions games over the past five years or this year’s St. Louis Rams).

The NFL and other leagues are in a powerful position not necessarily because of consumer power. Congressional acts in 1961 and 1966 backed by the signatures of President Kennedy and Johnson made the NFL a juggernaut. The Supreme Court of the United States in 1922 cemented the National and American League of baseball position as the dominant baseball force. Congress would not take up a proposed American Basketball Association-National Basketball Association merger in the early 1970s which forced the NBA to find a Washington political insider to become the league’s commissioner. Former Kennedy and Johnson staffer Lawrence O’Brien became the NBA’s head man in 1975 and by 1976, the NBA absorbed four ABA teams, Denver, Indiana, New York and San Antonio with each team paying $3.2 million to join the new league. Additionally the Uniondale, N. Y.-based New York Nets had to pay the New York Knicks $4.8 million for invading Knicks territory.

The NBA dictated terms despite not having the type of monopoly powers that Major League Baseball was granted by the 1922 SCOTUS decision.

Sports leagues are powerful but are always mindful of Congress even though Pete Rozelle during the 1986 United States Football League v National Football League antitrust suit said leagues are natural monopolies in Judge Peter K. Leisure’s court room in lower Manhattan. Rozelle was regarded as a genius but that genius label came because of powers given to his league by Congress and two Presidents. Major League Baseball, despite a 1922 antitrust exemption, had to fend off the Continental Baseball League in 1960 and the American League was forced to expand to Los Angeles and Washington in 1960 after Calvin Griffith moved his Washington Senators to Bloomington, Minnesota for fear of what Congress would do. The Continental League failed but the National League put teams in New York and Houston in 1962 because of the league and Congressional pressure.

The 1969 American League expansion came about only after Charles Finley moved his Kansas City A’s to Oakland for the 1968 season. Missouri Senator Stuart Symington applied pressure on the American League to restore a Kansas City franchise as soon as possible or baseball’s antitrust exemption would be gone. Kansas City and Seattle were granted American League franchises. Not to be outdone, National League owners added San Diego and Montreal.

In 1976, faced with an antitrust lawsuit filed by King County, Seattle and Washington over the move of the Seattle Pilots to Milwaukee in March 1970 for breach of contract, the American League expanded to Seattle and then added Toronto.

The 1991 National League expansion to Miami and Denver came as a result of political pressure on baseball from Colorado Senator Tim Wirth and Florida’s Connie Mack III. The 1995 baseball expansion to St. Petersburg, Florida and Phoenix was the result of an expiring stadium funding plan in Phoenix. Had baseball not acted by April 1, 1995, public monies for a downtown Phoenix stadium would have disappeared.

Even monopolies can not run roughshod as Major League Baseball owners learned. An arbitrator, Peter Seitz, granted players free agency on December 23, 1975 even though baseball had an antitrust exemption.

There is a lot of noise surrounding the January 13 Supreme Court session. Some “experts” suggest that the American sports landscape could be changed should the majority agree with the NFL, others think it is a simple case where a small hat company is suing the NFL because it lost business and wants a crack at talking to individual teams. The court will rule sometime this spring but will the decision change the big business of American sports?

The NFL is betting that the court will reaffirm that it is a single entity which does business for 32 affiliates. American Needle apparently just wants to have a crack at getting a slice of the NFL’s business.

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