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Why NFL’s Supreme Court case is overhyped

Forbes: Many are hyping the NFL vs. American Needle Supreme Court case, which is on the docket for this week, as one that could define the NFL's antitrust status. Don't believe it.
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/ Source: Forbes

The U.S. Supreme Court will hear arguments in a case later this week that some are touting as pivotal in the business of sports.

American Needle Inc. v. the NFL, a supposed David vs. Goliath-type case that could help define the NFL's antitrust status, is on the docket for Jan. 13.

It dates back to 2004, when American Needle, an Illinois-based hat maker, brought an antitrust case against NFL, claiming the league was using its monopoly power to muscle it out of its fair share of revenue for caps it made bearing NFL logos. The NFL won the case at the trial and appellate levels, but American Needle appealed all the way to the Supreme Court.

At its core, the case is about whether the 32-team NFL can legally operate as a single business entity, as it claims, or whether it must be considered 32 separate entities, as American Needle argues, which would presumably give the company the right to ink deals with individual clubs. Players' unions across the sports landscape, along with their natural allies in the press, are sounding the alarm. If the NFL is legally considered a single entity rather than a group of 32 competitors, their argument goes:

  • It will stand as a legal monopoly powerful enough to impose a salary structure that reduces player pay and movement.
  • Merchandise prices will skyrocket as the league monopolizes the market.
  • The precedent would spread beyond the NFL to other leagues--just watch the baseball commissioners office force the Yankees to sell their YES network as MLB takes control of broadcasting.

Basically, owner and league tyranny across the sports landscape, with the freedom to gouge fans and players.

Don't believe the hype. Sports business and legal experts don't see a sea change coming should the league prevail.

"The case is very narrow as far as I'm concerned," says Los Angeles sports attorney Don Gibson, a former sports agent and president of Major League Baseball Properties. He doesn't think the issue goes much beyond American Needle management's sour grapes over being snubbed by the league.

Players may see a link to their wallets based on the fact that the unions are typically included in licensing deals. But as for the core labor issue: "teams and unions collectively determining whether a player can ply his trade and what he can make," he says, it makes little sense to think that even a strong, centralized NFL can affect that.

A victory for the NFL would likely have bigger ramifications for the owners: Lawsuits from mavericks like Jerry Jones and Al Davis over control of things like sponsorship deals and franchise movement would likely become things of the past. But in the big picture, owners like Jones and Davis have been little more than the occasional strays in a herd of cattle that follows league marching orders blindly.

As for licensing, league control makes sense, experts generally agree. Selling caps and T-shirts in the home market might be easy enough for a team to handle itself, but pushing them into other markets requires a bigger infrastructure and more marketing clout. And there's no evidence that a league-controlled operation, through which most merchandise is already sold, results in price inflation.

"That's completely market-driven," says Marc Ganis, a sports business consultant in Chicago.

From a business standpoint, the NFL, like any sports league, has always predominantly acted as a single entity. Teams compete on the field, which does mean bidding on players and coaches. But from a business standpoint, they're partners above all else. The nature of the business is symbiotic--clubs don't compete for market share a la Coke and Pepsi, they rely on each other to fill stadiums and draw TV viewers. The Dallas Cowboys may be valued at $1.7 billion (and as the league's biggest brand, the league has tolerated owner Jones doing his own thing in some respects), but without a league to play in they'd be worth zip.

"This case is about whether the league can exercise intellectual property rights however it chooses," says Ganis. "Some say it's easy to expand it to labor, but that's a stretch."

The players, meanwhile, have the perfect weapon to fight any efforts to cut salaries--it's called a union. You don't pay, we don't play.

Major League Baseball has enjoyed an antitrust exemption since the 1920s, but the players have successfully fought off attempts to curtail their earnings through a strong union that's gained free agency and salary arbitration while keeping a salary cap at arm's length. The NFL and NBA unions, by contrast, have put most of their blood and sweat into fighting off any similar antitrust exemptions for their leagues. Should American Needle lose in the Supreme Court, each can look to the MLBPA as the perfect model to adopt.