Peter Sullivan of Gibson, Dunn & Crutcher Asks 'American Needle v. NFL: What's The Big Deal?'

Peter Sullivan of Gibson, Dunn & Crutcher Asks 'American Needle v. NFL: What's The Big Deal?'

   In American Needle, Inc. v. NFL, 2010 U.S. LEXIS 4166 (U.S. May 24, 2010), the Court addressed the type of conduct falling within a "contract, combination. . . or conspiracy" in restraint of trade under Section 1 of the Sherman Act, 15 U.S.C. § 1. Because the pendulum has swung too far to one side, the Court considered its decision necessary to right the balance and bring Section 1 jurisprudence back to the original precepts articulated in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (U.S. 1984). In this Analysis, Peter Sullivan examines American Needle and comments on the case's precedential value. He writes:

     In one of the last decisions of the Court to be penned by Justice John Paul Stevens, the unanimous Court addressed a narrow question: "whether the NFL respondents are capable of engaging in a 'contract, combination. . . , or conspiracy' as defined by §1 of the Sherman Act. . . . or, as we have sometimes phrased it, whether the alleged activity by the NFL respondents 'must be viewed as that of a single enterprise for the purposes of §1.'"

     . . . .

     The Court held that the NFL teams do not posses either the unitary decision making quality or single aggregation of economic power which is characteristic of independent action. The teams compete with one another for fans, gate receipts and players, among other things, and each is a substantial enterprise which is independently owned and independently managed with "separate corporate consciousness." Recognizing that the teams have common interests in promoting football and the NFL brand, it held that these interests only serve to partially unify the economic interests of the separate teams. And with respect to intellectual property, the interests of the teams are not necessarily aligned as the teams compete. To a firm making hats, the teams constitute potentially competing suppliers. Apart from the agreement to jointly license, there is nothing to prevent each of the various teams from making its own trademark licensing decisions. As a result, decisions by the teams in licensing intellectual property jointly deprives the marketplace of competition, and does not constitute single firm conduct.

     . . . .

D. Comment

     Though any decision of the U. S. Supreme Court is noteworthy, American Needle is not precedent-setting, nor surprising. While it is true that the Court clarified the meaning of the contract, combination and conspiracy language in Section 1, its reading of the Sherman Act is but a reaffirmation of existing precedent.

     No one will dispute that the Court long ago did away with any formalistic line drawing when it comes to interpretation of Section 1 of the Sherman Act. In 1979, the Court held in Broadcast Music, Inc. v. CBS that "easy labels do not always supply ready answers."

     Equally long-established is the notion that Section 1 liability does not turn on the fact that the parties are separate legal entities. After holding that "substance, not form, should determine whether a[n) . . . entity is capable of conspiracy under §1," the Court in its 1984 decision in Copperweld held that a parent and its wholly owned subsidiary "are incapable of conspiracy with each other for purpose of §1 of the Sherman Act." Even though the parent and subsidiary may be separate legal entities, this fact was held not to be determinative. Rather, since Copperweld, a key issue in Section 1 cases has been whether the corporations are controlled by a single center of decision making and constitute a single aggregation of economic power. The lower courts have been consistent in following the dictates of Copperweld.

(footnotes and citations omitted)

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See also: The Supreme Court's American Needle Decision Refocuses The Inquiry On What Constitutes Concerted Activity