The Antitrust Source
antitrust, American Needle, National Football League, professional sports, single entity, intraenterprise conspiracy, conspiracy
This summer, on the last regularly scheduled sitting of its October 2008 Term, the Supreme Court granted certiorari in a case that could have far-reaching consequences throughout the law of Sherman Act Section 1. In the case under review, American Needle, Inc. v. NFL, the Seventh Circuit, by unanimous panel decision, entered a striking ruling in the long-running debate over whether professional sports leagues can be “single entities” under Copperweld. The court not only said yes, but did so in what is possibly the most likely context in which the member teams could have competed with one another - the licensing of their trademarked logos to makers of sports memorabilia. The Supreme Court granted certiorari on the question whether defendant National Football League acts as a single entity as to this conduct. Among the decision’s most important consequences will be what it has to say about another recent decision, the underappreciated 2006 ruling in Texaco Inc. v. Dagher. If the Court reverses in American Needle, it may signal that Dagher is to be a narrow decision, limited to a fairly peculiar set of facts. If the Court affirms, and particularly if it does so in explicit reliance on Dagher, then American Needle could, as a practical matter, do significant damage to the enforceability of Section 1 of the Sherman Act; it could in effect immunize significant swaths of concerted conduct among competitors. It would imply that comparatively unintegrated arrangements, like trademark licensing agreements among the NFL member teams, are just as “economically integrated” as the defendants’ joint venture in Dagher. In short order we would see horizontal arrangements throughout the economy purporting to have “integrated” around some shared common purpose. Currently, no Supreme Court case gives very clear guidance as to how courts are to distinguish the actions of “integrated” joint ventures from those subject to at least rule of reason analysis under Section 1, and as will be suggested below, it is hard to imagine how those lines could be drawn. So as a worst-case scenario, the effect of affirmance of the Seventh Circuit’s decision in reliance on Dagher could be something like repeal of Section 1 as to wide-ranging horizontal conduct, other than the hardest-core, naked price fixing and market allocations.
Christopher Sagers, Dagher, American Needle, and the Evolving Antitrust Theory of the Firm: What Will Become of Section 1?, 8 The Antitrust Source 6 (August 2009)