The Work

January 13, 2010 2:47 PM

American Needle: Expect a Draw

Posted by Zach Lowe

We envy those who were able to observe what everyone agrees was a spirited oral argument today in American Needle v. NFL, the antitrust case against the National Football League that most sports law experts believe is the most important sports case to reach the U.S. Supreme Court in years. 

We spoke to a few of the folks who were lucky enough to snag a seat in the high court's chambers, and they all agreed that after months (or it it years?) of buildup, the winner was...well, probably neither side. The justices, eight of whom asked questions during the 70-minute session, seem inclined to find their way to a middle ground described by the third participant in today's argument: The Office of the U.S. Solicitor General. 

"The Court is very intrigued by the solicitor general's position," says Daniel Glazer, a partner at Patterson Belknap Webb & Tyler, who attended arguments today and specializes in the intellectual property aspect of sports law. 

To refresh your memory: The case concerns the question of whether the NFL and its teams should be exempt from antitrust law. The case focuses specifically on the licensing of NFL team apparel, with clothing maker American Needle arguing that the league's practice of granting a single license that allows just one company (Reebok) to produce apparel with the logos of all 32 NFL teams violates the Sherman Act.

American Needle maintains that the league's 32 teams should be considered separate businesses that compete against one another. The NFL, which enjoys an antitrust exemption only for the licensing of its broadcast rights, has claimed the teams form a so-called single entity that should be exempt from antitrust restrictions in the area of licensing.

A federal appeals court sided with the league last year, and American Needle (repped at SCOTUS today by Jones Day's Glen Nager) petitioned the high court to take the case. In an unusual move, the NFL and its lawyers at Covington & Burling also suggested the Court hear the case, and did so in hopes that the Court would rule that the league should be considered a single entity for most business purposes. 

That appears unlikely, according to Glazer and Lyle Denniston at the estimable SCOTUSblog.  Even Bradley Ruskin, Proskauer Rose partner (and thus a legal ally of the NFL and other professional sports leagues Proskauer regularly advises) concedes that the justices were "hard to read" and batted around a number of hypotheticals. Ruskin says that suggests the Court is struggling with "where you draw the line" in the case.

Ruskin, though, says he is "cautiously optimistic" about the NFL's chances, in part because the justices seemed to reject American Needle's position that the league should rarely, if ever, be granted single-entity status. Other observers agreed with Ruskin that the Court will almost certainly reject that argument.

Among the hypotheticals getting kicked around: Could two teams decide to schedule an extra game against each other without the league's permission? Could NFL teams go into the home-building business together? Are teams really competing against each other in selling jerseys? Is a fan of one team really in the market to buy merchandise linked to any of the other 31 teams? (Our favorite detail: Justice Stephen Breyer, a Boston Red Sox fan, mentioned that he would rather discuss baseball and the impossibility of a Sox fan ever purchasing New York Yankees gear, or vice versa.)

Glazer notes that the Court gave Kagan's office ten minutes to argue its position, and that the justices seemed most inclined to adopt the government's take on the issue: that courts will have to decide on a case-by-case basis whether sports leagues are entitled to antitrust exemptions for particular business activities.

"The Court is clearly struggling with the gray area here," Glazer says. While a middle-ground ruling would deny both sides a clean victory, it would be a bigger boon to the league, which could gradually litigate its way toward a broader antitrust status, Glazer says. (Ruskin wouldn't say so, but we bet he would agree.)

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NFL price fixing already is in effect. I have been selling NFL jerseys for 20 years and online for 11 years.

SLD is Sports Licensed Division of Reebok which is owned by Adidas, a German company selling NFL jerseys, hats, and apparel of which not a single item is made in the USA.

In Nov all retailers received a letter from SLD/Adidas informing us that the NFL told them to tell retailers that if they want to continue selling online they must apply to NFL for permission.

The criteria for application states that in the past year a minimum of $2,000,000 wholesale in jerseys were purchased. Obviously this cuts out everyone except and its partner sites which are all controlled by GSI Commerce, a huge corporation paying salaries of $500K+ to executives.

If retailers sell online without NFL permission, the NFL will tell Reebok/Adidas to cease shipments to these retailers, which in effect puts them out of business. Small fan shops get destroyed and rich corporate executives get richer. Customers will have no lower price options when shopping online. The NFL jersey prices will be fixed and no discounts available to consumers.

Reebok sales reps are stuck in the middle as they get no commissions from the big boys and their small accounts are threatened with closure. Reebok corporate is not fighting anything as the NFL contract is up in 3 years and they are also part of the supreme court case and being sued by American Needle.

Eliminating small retailers from selling online will give 100% contol of NFL jerseys to GSI commerce and their corporate ecommerce partners. With no online competition they can set any price they want. Customers will lose. It is exactly why anti trust laws were created.

If you want a replica San Diego Chargers Tomlinson jersey the price is ($79.99) at over 15 GSI retailers including To me this is not enhancing customer interest, price options, selection, or protecting the brand. All this does is keep prices high. If I sell it online at $68, the NFL will tell Adidas/Reebok to cease shipments to my store and deprive my customers the opportunity to buy jerseys at a discount and deprive small retailers the opportunity to service local customers with selection and price.

Howard Faber

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