WASHINGTON – The price fans pay for a hat from their favorite football teams may change depending on the final score in a high court ruling.
The Supreme Court heard arguments Wednesday about whether an exclusive licensing agreement between the National Football League and Reebok International violates federal antitrust laws.
The case was brought by American Needle Inc.,a hat-making company in Illinois that had been licensed by the NFL teams since the 1950s. It lost the bid in 2001 when the NFL granted Reebok an exclusive 10-year contract to manufacture hats and apparel for all 32 teams.
American Needle challenged the exclusive contract and sued the NFL and Reebok.
Glen Nager,a lawyer representing American Needle,argued the 32 NFL teams operate as potential competitors and don't qualify as a single-entity business,therefore making them subject to antitrust laws.
“Each team has substantial market power,” Nager said.
Justice Stephen Breyer questioned whether individual teams have the potential for consumer competition,but talked about baseball – a sport he is more familiar with.
“I don't know a Red Sox fan who would take a Yankees sweater if you gave it away,” he said.
The NFL's lawyer,Gregg Levy,defended the organization by saying the teams rely on each other to be successful and aren't competitors in the marketplace.
He said all teams in the league belong to NFL Properties,a collective licensing venture created in 1963 that licenses logos as a promotional tool.
Justice Antonin Scalia disagreed with Levy's argument and said the purpose was not to promote the game but to make money.
“I don't think that they care whether the sale of the helmet or the T-shirt promotes the game,” he said. “They sell it to make money from the sale.”
He said that,absent the licensing agreement,each team would be trying to sell as much of its own merchandise as possible.
The NFL uses a system of profit sharing that evenly divides more than 80 percent of revenue from TV broadcasts and merchandise sales among the 32 teams.
Justice John Paul Stevens said the league's revenue sharing made the deal “procompetitive” because it helps all the teams.
As Levy continued to argue that the teams of the league work not as separate sources of power but a cohesive unit that couldn't function without the others,Justice Sonia Sotomayor interrupted.
“You are seeking through this ruling what you haven't gotten from Congress: an absolute bar to an antitrust claim,” she said. “We have a genuine concern – as Congress does – about independent entities joining together and fixing prices.”
Levy once again rebutted that,without the rest of the league,no team could succeed.
Breyer said the league has the right to say it operates as a joint venture,providing it with the opportunity to schedule games and championships,but the league could still be held liable for certain actions that restrained competition or harmed consumers.
The National Hockey League and the National Basketball Association are supporting the NFL in court. Major League Baseball already has an antitrust exemption on many issues.
Groups of coaches and players from professional sports,including the NFL,the NHL and MLB are worried that a ruling in favor of the NFL could lead to fixed salaries throughout the leagues. Currently,most players and coaches are free agents who are able to join whichever team pays the most.
The NFL won before the U.S. 7th Circuit Court of Appeals,which threw the case out. American Needle appealed.
Breyer said American Needle has a shot at proving its case. He agreed with a Justice Department lawyer who argued that the case should be sent back to a lower court to permit the company the chance to prove its antitrust claim.
A ruling on the case is expected by the end of June.