American Needle Throws Downfield in NFL Licensing Dispute

[WSJ_law_blog]

This weekend, as you head to the parking lot of Lambeau Field–or some other storied stadium–to roast your brats, glance down at the label on your jersey. Is it made by Reebok? If so, you should know that $70 jersey is the point of contention in a suit before the Supreme Court this session and that the case could have implications far beyond who gets the NFL’s apparel license.

Matthew Futterman, who covers sports business for the Journal, kindly joins us to explain why:

American Needle, Inc. is filing papers Friday with the Court in its dispute with the NFL, which started back in 2000 when the NFL signed an exclusive apparel licensing deal with Reebok International, now a unit of Adidas AG. American Needle, which had individual licensing deals with NFL teams, sued, arguing the NFL’s exclusive deal with Reebok violated antitrust rules. The NFL holds the position that it is a single entity with 32 teams that compete with each other in football but not in business, where the teams collectively compete with other sports and forms of entertainment.

The 7th Circuit, based in Chicago, ruled in the NFL’s favor last year, prompting American Needle to appeal to the Supreme Court. Seeing a chance for a victory that could make a statement, as opposed to, say, a lucky win by a field goal, the NFL joined that request, hoping that it could get a wide-ranging ruling that could become the law of the land and exempt it from an array of potential antitrust litigation. The NHL and the NBA voiced their own support for a ruling. (Major League Baseball has an exemption from antitrust law).

As a result, there is much tension in sports labor circles.

“If the Supreme Court rules that the leagues are exempt from section one of the Sherman Antitrust [Act] for all operations, it could have a major effect,” said Jeff Kessler, counsel to the players unions for both the NFL and the NBA. “Right now, no one knows what the Supreme Court will do.”

The Sports Broadcasting Act already allows the leagues to negotiate national television deals on behalf of their teams. The unions want the court to issue a narrow ruling on how the leagues conduct their business in areas like marketing and licensing and leave labor alone.

At a meeting with reporters last month, the lead lawyer for the NFL, Jeff Pash, spoke of the American Needle case in narrow terms. He was careful not to suggest that the league is hoping a sympathetic ruling from the court could give it leverage in ongoing negotiations with the Players Association. The current CBA expires after next season and the two sides have made little progress toward a new agreement.

Additional exemptions from anti-trust laws don’t usually bode well for labor peace. “You look at the period of baseball until the passing of the Curt Flood Act in 1998, and what you kept seeing were labor stoppages,” Kessler said referring to legislation that protected baseball players under antitrust laws in labor. “Since that passed, they haven’t had any stoppages.”

Photo: AP