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NFL Argues: We're All One

The NFL is arguing that it's a single entity. That could change the game for the sports business.

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Shortly after he left a slot at the prestigious law firm Covington & Burling for a career in academia some 30 years ago, Gary Roberts began writing scholarly articles focusing on antitrust issues in sports.

Among his more contrarian positions was the argument that leagues be exempt from the thornier applications of antitrust law because they were single entities, more akin to corporations with subsidiaries than joint ventures between independent partners, as the courts have treated them.

Deemed single entities, the teams that make up a sports league would be allowed far greater latitude to act together in ways that might otherwise be seen as an antitrust violation: a conspiracy that yields unfair business practices. Such an interpretation, executed broadly, would turn at least three decades of precedent on its ear, giving the leagues a decided advantage in disputes with dissident owners, players unions, licensees—anyone, really, with whom they might cross swords.

Legal scholars scoffed at Roberts’ opinion. Attorneys at the players unions chastised him for coloring his analysis to favor Covington & Burling’s high-profile client, the NFL.

“Dick Berthelsen [the NFL Players Association general counsel] read me the riot act for raising such stupid arguments,” said Roberts, now dean of the law school at Indiana University’s Indianapolis campus. “Don Fehr [the former head of the MLB Players Association] laughed at me…. It’s interesting to see how the world has changed.”

Roberts concedes that most of his colleagues still don’t agree with him. What has changed, markedly, is the forum for the debate.

At 10 a.m. on January 13, the U.S. Supreme Court will hear arguments in American Needle v. NFL, a potentially game-changing case that squarely examines the “single entity” issue, a concept that the NFL, NBA, NHL, MLS, and NCAA all have argued with little success.

While the facts of the case are straightforward—a cap manufacturer says the NFL violated antitrust laws when it locked all 32 teams into an exclusive licensing deal with Reebok beginning in 2000—the legal concept upon which the court has been asked to rule is far more obtuse.

The members of a single entity—up until now, a characterization rarely extended beyond wholly owned subsidiaries—are incapable of conspiring, the court has ruled, because they are driven by a single economic power: their inseverable relationship to the parent company. If the NFL and its teams are a single entity, as the two lower courts have ruled in the American Needle case, at least in limited terms, then it can use that as a defense to argue for early dismissal in other similar antitrust suits.

As most courts have interpreted the law thus far, teams can work together, in essence conspiring, for their common benefit so long as the result is in the best interest of the consumer. If an exclusive deal with Reebok allows the league to provide a better product, or do so more efficiently, it could be allowed to sign the deal. It would be up to a judge or jury to determine if the benefit to consumers outweighed the harm to licensees who were frozen out.

That sort of discussion, known as “rule of reason,” typically allows for extensive discovery by plaintiffs that can lead to a time-consuming, and expensive, defense for the leagues. A single-entity ruling would make it more likely that a league could get some cases thrown out before the legal bills mounted.

Sports leagues almost always argue in favor of a single-entity standing, but never have they found this much traction with it. Take, for example, the fact that Major League Soccer, the league that took the concept of “single entity” beyond legal briefs and into the common parlance of the sports business, was found not to be one when it argued the point in court.

The NFL, having won on that point, wants to see how far it can extend that protection. As a result, the league took the rare step of joining American Needle in asking for a Supreme Court ruling even though it won at the appellate level.

“They want it reviewed because they think they’ll win,” Roberts said. “I think they’re counting noses.”

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