Man in violation of privacy law

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Antitrust Law Daily, August 6, 2013

Consumer’s antitrust challenge to exclusive licensing agreement for NFL apparel survives motion to dismiss

By Jeffrey May, J.D.

A putative consumer class action can proceed against the National Football League (NFL), its member clubs, and Reebok International, Ltd. for violating federal and California state antitrust laws by entering into exclusive agreements for the manufacture of NFL-branded apparel, the federal district court in San Jose, California, has decided (Dang v. San Francisco Forty Niners, Ltd., August 2, 2013, Davila, E.). The court denied the defendants’ motion to dismiss on the grounds that the plaintiff failed to allege a proper relevant market, lacked antitrust standing, and failed to state claims upon which relief can be granted.

A complaining consumer filed the complaint, seeking to recover for an “anticompetitive overcharge” on apparel bearing an NFL team’s logo that he purchased from a sports merchandise retailer. The overcharge allegedly resulted from the NFL's decision to grant Reebok an exclusive license to manufacture NFL-branded apparel. According to the plaintiff, as a result of the agreements, competition among both the individual NFL teams and prospective licensees was stifled.

The complaining consumer brought his claims under the California antitrust laws on behalf of a class of California indirect purchasers of apparel products branded with NFL team intellectual property and under the federal antitrust laws on behalf of a nationwide class of indirect purchasers, seeking injunctive relief.

The case involves the same factual scenario and circumstances as addressed in an action brought by a former NFL vendor, American Needle, Inc., against the NFL and member teams. That dispute went up to the U.S. Supreme Court, which ruled that American Needle was entitled to proceed with its antitrust claims challenging the exclusive licensing arrangement (130 S.Ct. 2201, 2010-1 Trade Cases ¶77,019).

Relevant Market. The plaintiff proposed two antitrust relevant markets in which to consider the alleged anticompetitive activity: (1) the U.S. market for the licensing of the trademarks, logos, and other emblems of individual NFL teams for use in apparel; and (2) the U.S. retail market for apparel bearing that intellectual property of any NFL team. These markets were sufficiently pleaded at this stage in the litigation, in the court's view.

The court noted that single-brand markets typically do not constitute legally cognizable antitrust markets. However, the court rejected the defendants' contention that the plaintiff's market was a single-brand or trademark-based market.

The proposed market included several independent and competitive brands. The plaintiff alleged that the teams competed with one another for sales of apparel bearing their own intellectual property. The intramarket competition for apparel bearing logos of different NFL teams established reasonable interchangeability necessary for a relevant market.

The court also rejected the defendants' argument that the plaintiff improperly excluded apparel bearing the logos, trademarks, and other intellectual property of other sports leagues, such as Major League Baseball; colleges and universities; other entertainment providers, such as Disney; and fashion brands, such as Ralph Lauren. The plaintiff established that NFL-logo-bearing apparel was “uniquely attractive” enough so as to constitute its own relevant submarket sufficient to withstand the defendants’ motion to dismiss, according to the court.

Standing. The plaintiff sufficiently alleged antitrust standing, the court also ruled. In the two proposed relevant markets, the plaintiff alleged antitrust injury—the most critical factor in determining antitrust standing.

With respect to the second relevant market—the U.S. retail market for NFL intellectual property-bearing apparel—the plaintiff as a consumer in the retail market clearly stated that he participated in this market and that he suffered an injury in the form of an “anticompetitive overcharge” for the purchase.

The court also concluded that the plaintiff alleged an injury in the first market—the market for the licensing of NFL intellectual property for use in apparel. Although the plaintiff was not a purchaser of NFL-related licenses, he asserted that he suffered an injury because “supra-competitive royalty rates were passed on to the ultimate consumers . . . in the form of higher prices for the apparel.” According to the plaintiff, he suffered injuries in a market that was “inextricably intertwined” with the alleged relevant market. At this stage, the court agreed, noting that “an anticompetitive effect on the market for the licensing of these logos and trademarks would necessarily have an effect on the consumer retail market for that apparel bearing those logos and trademarks.” Moreover, the plaintiff alleged a price increase in the retail market for NFL-related apparel that was directly traceable to the licensing market.

The court also considered the defendants' suggestions that other factors for determining antitrust standing weighed in favor of dismissal. However, determinations on the speculative nature of the harm and the complexity of apportioning damages would be better suited upon a fuller record, in the court's view.

The defendants also argued that the plaintiffs in the American Needle case were better situated to challenge the conduct. However, the complaining consumer was entitled to proceed, because he sought redress for the premiums consumers paid on the retail market for apparel, a remedy not directly at issue in American Needle.

Finally, with respect to the defendants' contention that the plaintiff failed to state a claim upon which relief could be granted, the court concluded that the plaintiff had met the plausibility requirement of showing that the item he purchased would have been one affected by the allegedly anticompetitive agreement.

This is Case No.: 5:12-CV-5481 EJD.

Attorneys: Ralph B. Kalfayan (Krause Kalfayan Benink & Slavens) for Patrick Dang. Sonya Diane Winner (Covington & Burling LLP) for San Francisco Forty Niners, Ltd. Svetlana Michelle Berman (Latham & Watkins LLP) for Reebok International, Ltd.

Companies: National Football League; San Francisco Forty Niners, Ltd.; Reebok International, Ltd.

MainStory: TopStory Antitrust CaliforniaNews

Antitrust Law Daily

Introducing Wolters Kluwer Antitrust Law Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.

A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.