The Supreme Court ruled unanimously Monday that the National Football League could face an antitrust lawsuit over its exclusive apparel contract with Reebok.
The court reversed the decision of two lower courts, which had dismissed the lawsuit from American Needle, an Illinois hat-making company that sued the NFL after it made Reebok the sole distributor of hats for all 32 NFL teams. American Needle used to make hats for the NFL, but when the NFL gave Reebok exclusive rights to make hats with NFL logos in 2000, they lost their contract.
American Needle argued that the NFL was violating the Sherman Antitrust Act, which makes monopolies illegal.
The National Law Journal’s Marcia Coyle explains that the lower courts sided with the NFL’s argument that they were acting as a single entity in licensing the hat deal to Reebok.
“The lower courts ruled that the NFL and its teams, when they license the teams’ intellectual property ( for example, the trademark headwear), have so integrated their operations that they are more like a single entity than a joint venture between independently owned teams,” she said. “As a single entity, they are immune from antitrust scrutiny.”
In the opinion, which you can read here, Justice John Paul Stevens wrote that the court rejected the NFL’s claim.
“While the teams have common interests, the Court said, they are still separate profit-maximizing entities, and their interests in licensing team trademarks are not necessarily the same,” Coyle explained. “The real question is whether the agreement here is a restraint of trade so that there is no actual or potential competition. If it is, then a court has to decide whether the restraint of trade is reasonable.”
American Needle and the NFL will now have to return to district court, which will decide whether the exclusive hat deal with Reebok was an unreasonable restraint of trade, Coyle said.