Did the Supreme Court err in judgment by preventing the NFL from collectively marketing team trademarks? Although the NFL is not happy with the decision, the High Court’s determination is vital in order to promote competition in the merchandising market and it is consistent with the policies followed by a majority of professional sports leagues (with the exception of Major League Baseball) that require each team within their respective organizations to independently market their own trademarks.
In the case captioned American Needle v. NFL (Case No. 08-661), the Supreme Court unanimously concluded that every NFL team is treated separately (and not collectively) when selling branded items like jerseys and caps. The rationale behind this conclusion seeks to promote competition and to eliminate artificial barriers to entry into the merchandising/ team apparel market. The decision came out of the fact that the NFL was collectively marketing all league trademarks, despite the fact that the each team was independently owned. This conduct allowed the NFL to control the merchandising market by simply granting team licensing rights to one vendor and effectively stone-walling other vendors’ entry. For instance, currently all NFL uniforms are branded and sold by Reebok. The Supreme Court concluded that such conduct was a direct antitrust violation as it stifled competition. After this decision, it will be possible for one team’s uniforms to be branded and sold by Nike and another to be branded and sold by Under Armor.
I agree with the Court’s decision in this case. It is a known fact that NFL teams not only compete with each other on the field but off it as well for potential new fans to the exclusion of the other teams in the NFL. Likewise, competition is also apparent in the world of merchandise sales. To a firm that makes tee shirts, each NFL franchise is a competing supplier of valuable trademarks. Therefore, each team is a separate entity whose business and trademark licensing interest might not always coincide. Allowing these separate entities to act independently when it comes to licensing their trademarks, promotes competition as a greater volume of vendors are allowed to enter the market. Competition is essential in any market but it especially resonates in the world of sports. If the NFL was granted the broad authority to act collectively and grant trademark licensing rights to one vendor, then consumers would be directly harmed as it could potentially lead to increase in prices, less variety and lower access. Competition is a key part of consumer protection and I commend the Supreme Court for advocating on behalf of the consumer at large in rejecting the NFL’s request to gain a greater stronghold on the licensing/apparel market.
The Legal Correspondent 
JB, another very well written blog. Keep up the good work.
Couple quick comments: It was 88 years ago in Federal Baseball Club v. National League, 259 U.S. 200 (1922), wyhere the U.S. Supreme Court ruled that Major League Baseball was exempt from the provisions of the Sherman Antitrust Act. The unanimous ruling was guided by the statement: “the business is giving exhibitions of baseball, which are purely state affairs”. I believe that if this were ruled on today and the 1922 decision did not exist, MLB would not find such an exemption. What do you think?
With regard to your statement that competition is essential in any market, you invoke the assumption that the supply curve for a perfectly competitive industry is equal to the marginal cost curve for the monopolist. Under this set of circumstances, monopolies set price by equating marginal cost to marginal revenue, while a competitive industry sets marginal cost equal to price, enabling the competitive industry to produce a higher output at a lower price.
However, if the monopolist’s marginal cost curve is NOT identically equal to the supply curve of the competitive industry, then it is quite possible that a monopolist could produce a higher output at a lower price, a circumstance where competition is not beneficial to the consumer.
One final thought: if the NFL were granted broad authority to act collectively and grant trademark licensing rights to one vendor, then my undestanding is that prices, variety, and access would actually all stay the same, as the NFL presently had one vendor and now must change its practices. As competing firms enter this market, prices are likely to decrease, while variety and access increase as a result of this decision.
-RMS