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

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

by Maureen McGuirl

In American Needle, Inc. v. NFL, 2010 U.S. LEXIS 4166 (U.S. May 24, 2010), the Supreme Court unanimously held that the National Football League's (NFL) teams and National Football League Properties (NFLP) could not be considered a single entity incapable of engaging in concerted activity within the Sherman Act's meaning. American Needle suggests that a broad range of decisions on what constitutes concerted activity will need to be revisited. In this Analysis, Maureen McGuirl examines American Needle and discusses the inquiry regarding concerted activity. She writes:

A. Legal Context Of The Ruling

     Section 1 of the Sherman Act, 15 U.S.C. § 1, prohibits contracts, combinations and conspiracies that unreasonably restrain trade. Section 1 prohibits only concerted activity and does not reach unilateral conduct. (Unilateral conduct falls within the purview of Section 2 of the Act, 15 U.S.C. § 2, which proscribes monopolization and attempted monopolization, as well as conspiracies to monopolize.) A violation of Section 1 requires proof of two elements: concerted activity and a restraint that unreasonably impairs trade.

     In a number of circumstances, antitrust defendants have argued that no concerted action is involved, rendering Section 1 inapplicable. At one time, courts treated all agreements between legally separate entities as involving concerted activity even when the separate entities were affiliated or integrated under common ownership. This treatment, often labeled the "intra-enterprise conspiracy doctrine," was questioned in a number of decisions by the Supreme Court, which finally rejected the doctrine in a 1984 decision. In Copperweld Corp. v. Independence Tube Corp. [467 U.S. 752 (U.S. 1984)], the Court held that a corporation and its wholly-owned subsidiary were incapable of conspiring with each other and should not be treated as separate entities for purposes of Section 1. (Interestingly, Justice Stevens authored the dissent in Copperweld.)

     . . . .

     In its opinion, the Supreme Court emphasized that "substance, not form, should determine whether an entity is capable of conspiring under § 1." The Court emphasized that the following does not determine whether concerted activity is present: (1) whether there are legally distinct entities, and (2) whether "two legally distinct entities have organized themselves under a single umbrella or into a structured joint venture." Rather, the Court said the question is whether or not there is a contract, combination or conspiracy among "separate economic actors pursuing separate economic interests," with the result that an agreement "'deprives the marketplace of independent centers of decisionmaking,' ... and therefore of 'diversity of entrepreneurial interests' ... and thus of actual or potential competition, ...". The Court stated that if an agreement "joins together 'independent centers of decisionmaking' ... the entities are capable of conspiring under § 1."

     Applying these facts to the NFL arrangement, the Court noted that each team was a "substantial, independently owned, and independently managed business" whose corporate actions were determined by "separate corporate consciousnesses" and whose objectives were not common. The Supreme Court noted the teams competed with one another not only on the playing field but also to attract fans, gate receipts, managers and players. Further, the Court found that the teams were "potentially competing suppliers of valuable trademarks." While noting that the NFL teams had a common interest in promoting the NFL brand, the Court noted that the teams were "still separate, profit-maximizing entities, and their interest in licensing team trademarks are not necessarily aligned." Later in its opinion, the Court noted that there did not seem to be anything that would prevent the teams from making their own decisions regarding the marketing and licensing of their individually owned intellectual property.

(footnotes omitted)

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Maureen McGuirl, a member of the New York and California bars, is in private practice in New York. A co-author of von Kalinowski, Sullivan & McGuirl, Antitrust Laws and Trade Regulation (2d ed., Matthew Bender), she has practiced in the antitrust field for thirty years.

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See also: American Needle: What's The Big Deal?