WASHINGTON — In a landmark case that will send shock waves from Washington to Winter Park, the Supreme Court today declared all 32 NFL teams to be single entities for purposes of selling branded merchandise.
The unanimous ruling, written by retiring Justice John Paul Stevens, will allow the Vikings and any other team that chooses, to reach separate merchandising contracts that are currently under exclusive license to individual suppliers. Wrote Stevens:
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.”
They compete with one another, not only on the playing field, but to attract fans, for gate receipts, and for contracts with managerial and playing personnel.
Directly relevant here, the teams are potentially competing suppliers in the market for intellectual property. When teams license such property, they are not pursuing the “common interests of the whole” league, but, instead, the interests of each “corporation itself.”
The case in question was brought by American Needle, Inc., an Illinois-based firm that used to make team hats, before the NFL consolidated its hat deals in one exclusive license to Reebok.
It’s a colossal loss for the NFL, which bet big on a winner-take-all case that the league (and many of the its opponents) thought was almost inevitable win.
Bouyed by its victories in lower courts, the NFL took the rare leap of actually joining with American Needle to petition the Supreme Court to hear the case. The league was reportedly counting on the generally pro-business Roberts Court to side with it and grant a a powerful and far-reaching anti-trust exemption.
How far-reaching? ESPN analyst Lester Munson, writing last July, likened a potential NFL victory in the case to a sports Armageddon and worried that if the league won, it would inevitably lead to things like NFL-mandated salary schedules, decreased competition leading to increased merchandising costs, neutered players’ unions and widespread strikes by said unions in a last-ditch bid to remain relevant.
But for owners, a ruling their way would be a cash cow. No surprise then, that every other sports league from Major League Baseball to Major League Soccer — and the NCAA — signed on to support the NFL’s bid.
Instead, the Armageddon cuts the other way.
While Stevens allowed that the NFL teams were allowed to work together for certain things, like scheduling and producing games, it’s conceivable that this precedent could serve as the backbone of a challenges to things like salary caps and contract severability.
Applied beyond just the NFL, this case law could also support challenges to everything from collective television licencing deals to the Bowl Championship Series.