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From Antitrust Law Daily, April 8, 2014

Vendor’s antitrust claims over NFL collective licensing sufficient to go to jury

By Jeffrey May, J.D.

A vendor that lost its license to make hats bearing National Football League (NFL) team logos after the NFL’s licensing affiliate entered into an exclusive contract with Reebok made a sufficient showing of a less competitive market to preclude summary judgment in its antitrust action challenging the NFL teams’ collective licensing arrangement, the federal district court in Chicago has ruled. However, the court rejected the complaining vendor’s contention that its claims should be analyzed under an abbreviated, or “quick look” review, rather than a full rule of reason analysis (American Needle Inc. v. New Orleans Louisiana Saints, April 4, 2014, Coleman, S.).

The 10-year-old case is on remand from the U.S. Supreme Court. In 2010, the High Court ruled that the challenged conduct constituted concerted activity for purposes of Section 1 of the Sherman Act (130 S.Ct. 2201, 2010-1 Trade Cases ¶77,019). The Court explained that the plaintiff, American Needle, Inc., would need to challenge the licensing arrangement under a flexible rule of reason analysis, as opposed to a per se approach, if the collective action was necessary to make the product available. It left to the lower courts the application of the rule of reason to the allegations in the case.

American Needle moved for summary judgment, contending that a quick look could resolve the dispute. The district court concluded, however, that the plausibility of the defendants’ claims of procompetitive effect precluded abbreviated review. The defendants represented that “the exclusive license arrangement encouraged additional licensee commitment and had numerous procompetitive effects, including improvements in product design, quality, distribution, and coordination of styles with other apparel items.” Thus, the plaintiff’s motion for summary judgment was denied.

Market definition requirement. The defendants argued that they were entitled to summary judgment because American Needle failed to provide evidence of a proper product market that was sufficient to allow the claim to reach a jury. The court said that it was not persuaded that such evidence was required.

American Needle’s evidence would be sufficient to support a jury finding of a less competitive market following the exclusive licensing arrangement, the court found. Rejected was the defendants’ argument that, because the case involved a vertical restraint, direct proof of detrimental effects was not a substitute for relevant market analysis. “This contention ignores the Supreme Court’s holding that despite the teams’ use of NFL Properties as the single agent to implement their marketing decisions, and despite the longevity of the arrangement, the decision of each of the NFL teams to grant exclusive licenses to Reebok was horizontal action,” the court noted.

To the extent that a relevant product market definition was a necessary element of American Needle’s Sherman Act claim, the court was unpersuaded by the defendants’ suggestion that the plaintiff’s proposed market—the wholesale market for NFL trademarked hats—was too narrow. The defendants argued that NFL hats competed with various other products, including non-apparel items, hats bearing other insignia—such as the logos of teams in other sports and leagues—and hats bearing no insignia at all. The market for the hats could be viewed as a submarket distinct from other apparel and non-apparel item markets. Moreover, the market for NFL team hats could be distinguished from markets for hats bearing logos of teams from other sports, the court noted.

There also was “sufficient indication of anticompetitive effect on consumers to fall within the purview of the Sherman Act,” the court concluded, despite the proposed market’s focus on wholesale transactions rather than the consumer retail market. Lastly, the defendants’ challenges to the validity of the analysis of American Needle’s expert would not be resolved on summary judgment.

Causation. The court also dispensed with the defendants’ arguments that summary judgment was appropriate because American Needle could not show a causal link between the Reebok contract and any damage it suffered. There was sufficient evidence to permit a jury to find that American Needle could have continued as a licensee under the prior, multiple-licensee structure, and that its prospects were ended by the defendants’ concerted decision to limit the number of their licensees. Further, American Needle did not waive its claims in a document it signed in the bid process for the exclusive license, the court noted. According to the defendants, in light of the document, the defendants had no obligation to grant a license and their decision not to award a license did not give rise to any rights.

The case is No. 04-cv-7806.

Attorneys: Jeffrey M. Carey (Law Office of Jeffrey M. Carey) for American Needle, Inc. Dean Cary Kalant (Gozdecki, Del Giudice, Americus & Farkas LLP) for New Orleans Louisiana Saints. Gregg Levy (Covington & Burling) for National Football League.

Companies: American Needle, Inc.; New Orleans Louisiana Saints; National Football League; Reebok International, Ltd.

MainStory: TopStory Antitrust IllinoisNews

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